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90_HB3229
215 ILCS 5/409 from Ch. 73, par. 1021
215 ILCS 5/444 from Ch. 73, par. 1056
215 ILCS 5/444.1 from Ch. 73, par. 1056.1
215 ILCS 5/531.13 from Ch. 73, par. 1065.80-13
215 ILCS 5/408.1 rep.
215 ILCS 110/43 from Ch. 32, par. 690.43
215 ILCS 120/15 from Ch. 73, par. 1265
215 ILCS 125/5-3 from Ch. 111 1/2, par. 1411.2
215 ILCS 130/4003 from Ch. 73, par. 1504-3
Amends the Illinois Insurance Code. Imposes as of
January 1, 1998 a privilege tax on any insurance company
doing any form of business, other than accident and health,
in this State of 0.5% of the company's net taxable premium
written. Imposes as of July 1, 1998 a privilege tax on
health insurance business at the rate of 0.4% of net taxable
premium written. Amends various other insurance regulatory
Acts to provide that the privilege taxes are applicable to
insurers organized under those Acts. Effective immediately.
LRB9011168JSgcA
LRB9011168JSgcA
1 AN ACT concerning insurance company privilege taxes,
2 amending named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 409, 444, 444.1, and 531.13 as follows:
7 (215 ILCS 5/409) (from Ch. 73, par. 1021)
8 Sec. 409. Annual privilege tax payable by foreign or
9 alien companies.
10 (1) As of July 1, 1998 every health maintenance
11 organization and limited health service organization and as
12 of January 1, 1998 every other foreign or alien company doing
13 any form of an insurance business in this State, including,
14 but not limited to, risk retention groups, and excluding all
15 except fraternal benefit societies and residual market
16 entities whether incorporated or otherwise, shall pay, for
17 the privilege of doing business in this State, by renewal of
18 certificate of authority as provided in Section 114, pay to
19 the Director for deposit into the State treasury a State tax
20 equal to 0.5% 2 per cent of the net taxable premium written
21 income, together with any amounts due under Section 444,
22 except that the tax to be paid on any premium derived from
23 accident and health indemnity insurance or on insurance
24 business written by any company operating as a health
25 maintenance organization, voluntary health service plan,
26 dental service plan, or limited health service organization
27 shall be equal to 0.4% of the net taxable premium written
28 together with any amounts due under Section 444. Every
29 domestic insurance company, except a fraternal benefit
30 society, which fails to comply with all the requirements of
31 subsection (4) of this Section must pay to the Director for
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1 payment into the State Treasury a State tax equal to 2 per
2 cent of the net taxable premium income and Upon the failure
3 of any company to pay any such tax when due, the Director
4 may, by order, revoke or suspend the company's certificate of
5 authority after giving 20 days written notice to the company
6 or commence proceedings for the suspension of business in
7 this State under the procedures set forth by Section 401.1 of
8 this Code. The gross taxable premium written income shall be
9 the gross amount of premiums received on direct business
10 during the preceding calendar year on contracts covering
11 risks in this State, except premiums on annuities, premiums
12 on Medicare Part C coverage written by a certified Medicare +
13 Choice organization within the meaning of Sections 1853 and
14 1854 of the federal Balanced Budget Act of 1997, Public Law
15 105-33, premiums paid by the State for health care coverage
16 for Medicaid eligible insureds as described in Section 5-1.2
17 of the Illinois Public Aid Code, premiums on crop insurance
18 guaranteed by the federal government as provided by 7 U.S.C.
19 Section 1511, premiums on group accident and health insurance
20 written to cover only federal employees and their dependents,
21 and except premiums on group insurance contracts awarded
22 after the effective date of this amendatory Act of 1976 under
23 the State Employees Group Insurance Act of 1971, and except
24 premiums for deferred compensation plans for employees of the
25 State, units of local government or school districts. The
26 net taxable premium written income shall be the gross taxable
27 premium written income reduced only by the following:
28 (a) the amount of premiums returned thereon which
29 shall be limited to premiums returned during the
30 preceding calendar year and shall not include the return
31 of cash surrender values or death benefits on life
32 policies;
33 (b) dividends on such direct business that have
34 been paid in cash, applied in reduction of premiums or
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1 left to accumulate to the credit of policyholders or
2 annuitants. In the case of life insurance, no deduction
3 shall be made for the payment of deferred dividends paid
4 in cash to policyholders on maturing policies; dividends
5 left to accumulate to the credit of policyholders or
6 annuitants shall be included as gross taxable premium
7 written income when such dividend accumulations are
8 applied to purchase paid-up insurance or to shorten the
9 endowment or premium paying period.
10 (2) The annual privilege tax payment due from a company
11 under subsection (4) of this Section shall be reduced by the
12 excess amount, if any, by which the aggregate income taxes
13 paid by the company during the preceding calendar year under
14 subsections (a), (b), and (c) of Section 201 of the Illinois
15 Income Tax Act exceed 1.5% of the company's net taxable
16 premium written for that prior calendar year, as determined
17 under subsection (1) of this Section. No refund, credit,
18 carry forward, deduction, or other offset shall be permitted
19 for the amount, if any, by which the excess amount so
20 determined exceeds the company's liability for the privilege
21 tax determined solely under subsection (1).
22 (2) There shall be deducted from the tax thus computed,
23 but only to the extent thereof, the amount, if any, paid
24 during the preceding calendar year: (a) for the benefit of
25 organized fire departments, to cities, villages, incorporated
26 towns and fire protection districts of this State as a tax on
27 premiums received by such company in such cities, villages,
28 incorporated towns and fire protection districts, and (b) as
29 a tax to this State or any subdivision thereof on or measured
30 by net income, and (c) as a tax to this State or any
31 subdivision thereof on or measured by the value of the
32 company in excess of the value of its tangible property, and
33 (d) as a fee or charge for the valuation of life insurance
34 policies, and (e) if the company is not an Illinois domestic
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1 company, as a financial regulation fee under subsection (7)
2 of Section 408 of this Code for the examination and analysis
3 of financial condition, and the remainder shall be paid by
4 such company as its annual privilege tax, and (f) for fees
5 paid pursuant to Section 408 (1) (jj).
6 (3) If a company survives or was formed by a merger,
7 consolidation, reorganization, or reincorporation, the
8 premiums received, and amounts returned or paid, by all
9 foreign or alien companies party parties to such merger,
10 consolidation, reorganization, or reincorporation, shall, for
11 the purposes of determining the amount of the tax imposed by
12 this Section, be regarded as received, returned, or paid by
13 such surviving or new company.
14 (4) A domestic company must pay the State tax in
15 subsection (1) of this Section unless:
16 (a) it maintains its principal place of business in
17 this State; and
18 (b) it maintains in this State officers and
19 personnel knowledgeable of and responsible for the
20 company's operation, books, records, administration, and
21 annual statement; and
22 (c) it conducts in this State substantially all of
23 its underwriting, policy issuing, and serving operations
24 relating to Illinois policyholders and certificate
25 holders; and
26 (d) it complies with the provisions of Section 133
27 (2) of this Code.
28 (4) All companies subject to the provisions of this
29 Section Payments shall be due on an estimated basis for all
30 of calendar year 1969 on or before September 1, 1969.
31 Effective January 1, 1970, a company shall make an annual
32 return for the preceding calendar year on or before March 1st
33 setting forth such information on such forms as the Director
34 may reasonably require. Payments of quarterly installments
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1 of the taxpayer's total estimated tax for the current
2 calendar year shall be due on or before April 15th, June
3 15th, September 15th, and December 15th of such year, except
4 that all companies unless for the calendar year 1971, and
5 each calendar year thereafter, insurers transacting insurance
6 in this State whose annual tax for the immediately preceding
7 calendar year was less than $5,000, shall then make only an
8 annual return. Failure of a company to make the annual
9 payment, or to make the quarterly payments, if required, of
10 at least one-fourth of either (a) the total tax paid during
11 the previous calendar year or (b) 80% of the actual tax for
12 the current calendar year shall subject it to the penalty
13 provisions set forth in Section 412 of this Act. For the year
14 1998, health maintenance organizations and limited health
15 service organizations shall have estimated tax installments
16 due only on September 15th and December 15th for the tax on
17 business written after June 30, 1998, and for the year 1999
18 and thereafter, such companies shall make quarterly
19 installments of their estimated tax on the same schedule as
20 all other companies.
21 (5) In addition to the authority specifically granted
22 under Article XXV of this Code, the Director shall have such
23 authority to promulgate rules and establish forms as may be
24 reasonably necessary for purposes of determining the
25 allocation of Illinois corporate income taxes paid under
26 subsections (a), (b), and (c) of Section 201 of the Illinois
27 Income Tax Act amongst members of a unitary business group
28 that files an Illinois corporate income tax return on a
29 unitary basis, for purposes of regulating the amendment of
30 tax returns, and for purposes of enforcing the provisions of
31 Article XXV of this Code. The Director shall also have
32 authority to waive or abate the tax imposed by this Section
33 if in his opinion the company's solvency and ability to meet
34 its insured obligations would be immediately threatened by
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1 payment of the tax due.
2 (Source: P.A. 86-753; 87-108.)
3 (215 ILCS 5/444) (from Ch. 73, par. 1056)
4 Sec. 444. Retaliation.
5 (1) Whenever the existing or future laws of any other
6 state or country shall require of companies incorporated or
7 organized under the laws of this State as a condition
8 precedent to their doing business in such other state or
9 country, compliance with laws, rules, regulations and
10 prohibitions more onerous or burdensome than the rules and
11 regulations imposed by this State on foreign or alien
12 companies, or shall require any deposit of securities or
13 other obligations in such state or country, for the
14 protection of policyholders or otherwise or require of such
15 companies or agents thereof or brokers the payment of
16 penalties, fees, charges or taxes greater than the penalties,
17 fees, charges or taxes required in the aggregate for like
18 purposes by this Code or any other law of this State, of
19 foreign or alien companies, agents thereof or brokers, then
20 such laws, rules, regulations and prohibitions of said other
21 state or country shall apply to companies incorporated or
22 organized under the laws of such state or country doing
23 business in this State, and all such companies, agents
24 thereof, or brokers doing business in this State, shall be
25 required to make deposits, pay penalties, fees, charges and
26 taxes, in amounts equal to those required in the aggregate
27 for like purposes of Illinois companies doing business in
28 such state or country, agents thereof or brokers. Whenever
29 any other state or country shall refuse to permit any
30 insurance company incorporated or organized under the laws of
31 this State to transact business according to its usual plan
32 in such other state or country, the director may, if
33 satisfied that such company of this State is solvent,
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1 properly managed, and can operate legally under the laws of
2 such other state or country, forthwith suspend or cancel the
3 license of every insurance company doing business in this
4 State which is incorporated or organized under the laws of
5 such other state or country to the extent that it insures in
6 this State against any of the risks or hazards which are
7 sought to be insured against by the company of this State in
8 such other state or country.
9 (2) The term "taxes, fees, and charges" used in this
10 Section shall not include any assessments of the Illinois
11 Life and Health Insurance Guaranty Association, any
12 assessments of the Illinois Insurance Guaranty Fund, any
13 assessments of the Illinois Health Maintenance Organization
14 Guaranty Association, any assessments, fees, charges, or
15 taxes under any Illinois laws effecting workers' compensation
16 insurance or occupational disease insurance, the Illinois
17 Automobile Plan, the Illinois FAIR Plan, the Illinois
18 Comprehensive Health Insurance Plan, or the Illinois Mine
19 Subsidence Insurance Fund. No such assessments, payments,
20 fees, taxes, or charges and no such assessments, payments,
21 fees, taxes, or charges enacted by this or any other
22 jurisdiction for like or comparable purposes shall be
23 included in the calculation of the retaliatory tax of any
24 company; except that for the period through March 1, 2002,
25 any tax offset allowed under Section 531.13 of this Code, but
26 not applied to reduce a taxpayer's liability for the Illinois
27 corporate income tax, may be included in the calculation of
28 the retaliatory tax, and after March 1, 2002, no such offset
29 shall be included in the calculation of retaliatory taxes.
30 (3) The term "taxes, fees, or charges" in subsection (1)
31 of this Section shall include: the taxes, fees, or charges
32 collected under State law and referenced within Article XXV,
33 exclusive of any item referenced by subsection (2) of this
34 Section; the Illinois corporate income taxes imposed under
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1 subsections (a), (b), and (c) of Section 201 of the Illinois
2 Income Tax Act; taxes, fees, and charges of other states or
3 countries imposed for purposes like those of the taxes, fees,
4 and charges specified in Article XXV of this Code; and any
5 tax, fee, or charge required as a sales, ad valorem, use,
6 occupation, franchise, privilege, or licensing tax for
7 conducting the business of insurance, whether calculated as a
8 percentage of income, gross receipts, premium, or otherwise.
9 (4) Nothing contained in this Section or Section 409 or
10 Section 444.1 is intended to authorize or expand any power of
11 local governmental units or municipalities to impose taxes,
12 fees, or charges.
13 (Source: Laws 1941, vol. 1, p. 837.)
14 (215 ILCS 5/444.1) (from Ch. 73, par. 1056.1)
15 Sec. 444.1. Payment of retaliatory taxes.
16 (1) Every foreign or alien company doing insurance
17 business in this State shall pay the Director the retaliatory
18 tax determined in accordance with Section 444.
19 (2) The Director may order that Payments of such tax
20 shall be due on an estimated basis for the 1982 calendar year
21 as provided in Section 409 on or before April 15, June 15,
22 September 15, and December 15. For the 1983 calendar year,
23 and each calendar year thereafter, the Director may order
24 that payments of quarterly installments of the total
25 estimated tax shall be due and payable on or before April 15,
26 June 15, September 15 and December 15 pursuant to this
27 Section, and such payments shall be in lieu of retaliatory
28 tax payments otherwise required by Section 409. For the 1983
29 calendar year, and each calendar year thereafter, The
30 taxpayer shall make only an annual return on or before March
31 1st each year, if the annual retaliatory and privilege tax of
32 the company for the preceding calendar year was less than
33 $5,000. Effective January 1, 1983, a company shall make an
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1 annual return for the preceding calendar year on or before
2 March 1 setting forth such information on such forms as the
3 Director may reasonably require.
4 (3) Any tax payment made under this Section and any tax
5 returns prepared in compliance with Section 410 shall give
6 full consideration to the impact of any future reduction in
7 or elimination of a taxpayer's liability under Section 409,
8 whether such reduction or elimination is due to an operation
9 of law or an Act of the General Assembly.
10 (4) Any foreign or alien taxpayer who makes, under
11 protest, a tax payment required by Section 409 shall, at the
12 time of payment, file a retaliatory tax return sufficient to
13 disclose the full amount of retaliatory taxes which would be
14 due and owing for the tax period in question if the protest
15 were upheld. Notwithstanding the provisions of the State
16 Officers and Employees Money Disposition Act "An Act in
17 relation to the payment and disposition of moneys received by
18 officers and employees of the State of Illinois by virtue of
19 their office or employment", approved June 9, 1911, as now or
20 hereafter amended, or any other laws of this State, the
21 protested payment, to the extent of the retaliatory tax so
22 disclosed, shall be deposited directly in the General Revenue
23 Fund; and the balance of the payment, if any, shall be
24 deposited in a protest account pursuant to the provisions of
25 the aforesaid Act, as now or hereafter amended.
26 (5) The failure of a company to make quarterly payments,
27 if required, equal to at least one-fourth of either the total
28 tax paid during the preceding calendar year or 80% of the
29 actual tax for the current calendar year, whichever is
30 greater, shall subject it to the penalty provisions set forth
31 in Section 412 of this Code.
32 (Source: P.A. 82-767.)
33 (215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
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1 Sec. 531.13. Tax offset. In the event the aggregate
2 Class A, B and C assessments for all member insurers do not
3 exceed $3,000,000 in any one calendar year, no member insurer
4 shall receive a tax offset. However, for in any one calendar
5 year beginning on or before January 1, 1997 in which the
6 total of such assessments exceeds $3,000,000, the amount in
7 excess of $3,000,000 shall be subject to a tax offset to the
8 extent of 20% of the amount of such assessment for each of
9 the five calendar years following the year in which such
10 assessment was paid and each member insurer may offset the
11 proportionate amount of such excess paid by the insurer
12 against its liabilities for the tax imposed by subsections
13 (a) and (b) of Section 201 of the "Illinois Income Tax Act.
14 The provisions of this Section shall expire and be given no
15 effect on and after January 1, 2002", for the tax imposed by
16 Section 409 of the "Illinois Insurance Code", and for the
17 fees imposed by Section 408.1 of the "Illinois Insurance
18 Code".
19 (Source: P.A. 84-221.)
20 (215 ILCS 5/408.1 rep.)
21 Section 10. The Illinois Insurance Code is amended by
22 repealing Section 408.1.
23 Section 15. The Dental Service Plan Act is amended by
24 changing Section 43 as follows:
25 (215 ILCS 110/43) (from Ch. 32, par. 690.43)
26 Sec. 43. Every dental service plan corporation organized
27 hereunder shall be operated and conducted not-for-profit and
28 shall be deemed a charitable and benevolent corporation, and
29 all of its funds and property shall be exempt from every
30 State, county, district, municipal and school tax or
31 assessment, and all other taxes and license fees, from the
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1 payment of which charitable and benevolent corporations or
2 institutions are now or may hereafter be exempt. This
3 exemption shall not prevail against fees and charges imposed
4 by Sections 408, and 408.2, 409, 444, and 444.1 of the
5 Illinois Insurance Code. The laws of this state applicable to
6 the merger, dissolution and liquidation of domestic
7 not-for-profit corporations and in respect to the rights,
8 classification and meetings of members, the selection,
9 change, duties and powers of corporate officers, and the
10 filing of annual reports by domestic not-for-profit
11 corporations shall be applicable to corporations organized
12 under this act to the extent the same are not inconsistent
13 with the provisions of this act. Wherever in any such laws
14 reference is made to "Directors" of such not-for-profit
15 corporations, such statutory provisions shall be deemed to
16 apply to the trustees of corporations organized under this
17 act, and wherever the office of the Secretary of State is
18 mentioned in such an act, such provisions shall be deemed to
19 refer to and designate the Director of Insurance when applied
20 to corporations organized hereunder.
21 (Source: P.A. 84-989.)
22 Section 20. The Farm Mutual Insurance Company Act of
23 1986 is amended by changing Section 15 as follows:
24 (215 ILCS 120/15) (from Ch. 73, par. 1265)
25 Sec. 15. Application of law. Companies subject to this
26 Act shall be subject to the provisions of Article X (Merger)
27 and Article XXV of the Illinois Insurance Code but shall not
28 be subject to any other provisions of the Illinois Insurance
29 Code unless specifically enumerated therein.
30 (Source: P.A. 84-1431.)
31 Section 25. The Health Maintenance Organization Act is
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1 amended by changing Section 5-3 as follows:
2 (215 ILCS 125/5-3) (from Ch. 111 1/2, par. 1411.2)
3 (Text of Section before amendment by P.A. 90-372)
4 Sec. 5-3. Insurance Code provisions.
5 (a) Health Maintenance Organizations shall be subject to
6 the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
7 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
8 154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356t, 367i,
9 401, 401.1, 402, 403, 403A, 408, 408.2, 409, and 412, 444,
10 and 444.1, paragraph (c) of subsection (2) of Section 367,
11 and Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and
12 XXVI of the Illinois Insurance Code.
13 (b) For purposes of the Illinois Insurance Code, except
14 for Sections 444 and 444.1 and Articles XIII and XIII 1/2,
15 Health Maintenance Organizations in the following categories
16 are deemed to be "domestic companies":
17 (1) a corporation authorized under the Medical
18 Service Plan Act, the Dental Service Plan Act, the
19 Pharmaceutical Service Plan Act, or the Voluntary Health
20 Services Plans Plan Act, or the Nonprofit Health Care
21 Service Plan Act;
22 (2) a corporation organized under the laws of this
23 State; or
24 (3) a corporation organized under the laws of
25 another state, 30% or more of the enrollees of which are
26 residents of this State, except a corporation subject to
27 substantially the same requirements in its state of
28 organization as is a "domestic company" under Article
29 VIII 1/2 of the Illinois Insurance Code.
30 (c) In considering the merger, consolidation, or other
31 acquisition of control of a Health Maintenance Organization
32 pursuant to Article VIII 1/2 of the Illinois Insurance Code,
33 (1) the Director shall give primary consideration
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1 to the continuation of benefits to enrollees and the
2 financial conditions of the acquired Health Maintenance
3 Organization after the merger, consolidation, or other
4 acquisition of control takes effect;
5 (2)(i) the criteria specified in subsection (1)(b)
6 of Section 131.8 of the Illinois Insurance Code shall not
7 apply and (ii) the Director, in making his determination
8 with respect to the merger, consolidation, or other
9 acquisition of control, need not take into account the
10 effect on competition of the merger, consolidation, or
11 other acquisition of control;
12 (3) the Director shall have the power to require
13 the following information:
14 (A) certification by an independent actuary of
15 the adequacy of the reserves of the Health
16 Maintenance Organization sought to be acquired;
17 (B) pro forma financial statements reflecting
18 the combined balance sheets of the acquiring company
19 and the Health Maintenance Organization sought to be
20 acquired as of the end of the preceding year and as
21 of a date 90 days prior to the acquisition, as well
22 as pro forma financial statements reflecting
23 projected combined operation for a period of 2
24 years;
25 (C) a pro forma business plan detailing an
26 acquiring party's plans with respect to the
27 operation of the Health Maintenance Organization
28 sought to be acquired for a period of not less than
29 3 years; and
30 (D) such other information as the Director
31 shall require.
32 (d) The provisions of Article VIII 1/2 of the Illinois
33 Insurance Code and this Section 5-3 shall apply to the sale
34 by any health maintenance organization of greater than 10% of
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1 its enrollee population (including without limitation the
2 health maintenance organization's right, title, and interest
3 in and to its health care certificates).
4 (e) In considering any management contract or service
5 agreement subject to Section 141.1 of the Illinois Insurance
6 Code, the Director (i) shall, in addition to the criteria
7 specified in Section 141.2 of the Illinois Insurance Code,
8 take into account the effect of the management contract or
9 service agreement on the continuation of benefits to
10 enrollees and the financial condition of the health
11 maintenance organization to be managed or serviced, and (ii)
12 need not take into account the effect of the management
13 contract or service agreement on competition.
14 (f) Except for small employer groups as defined in the
15 Small Employer Rating, Renewability and Portability Health
16 Insurance Act and except for medicare supplement policies as
17 defined in Section 363 of the Illinois Insurance Code, a
18 Health Maintenance Organization may by contract agree with a
19 group or other enrollment unit to effect refunds or charge
20 additional premiums under the following terms and conditions:
21 (i) the amount of, and other terms and conditions
22 with respect to, the refund or additional premium are set
23 forth in the group or enrollment unit contract agreed in
24 advance of the period for which a refund is to be paid or
25 additional premium is to be charged (which period shall
26 not be less than one year); and
27 (ii) the amount of the refund or additional premium
28 shall not exceed 20% of the Health Maintenance
29 Organization's profitable or unprofitable experience with
30 respect to the group or other enrollment unit for the
31 period (and, for purposes of a refund or additional
32 premium, the profitable or unprofitable experience shall
33 be calculated taking into account a pro rata share of the
34 Health Maintenance Organization's administrative and
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1 marketing expenses, but shall not include any refund to
2 be made or additional premium to be paid pursuant to this
3 subsection (f)). The Health Maintenance Organization and
4 the group or enrollment unit may agree that the
5 profitable or unprofitable experience may be calculated
6 taking into account the refund period and the immediately
7 preceding 2 plan years.
8 The Health Maintenance Organization shall include a
9 statement in the evidence of coverage issued to each enrollee
10 describing the possibility of a refund or additional premium,
11 and upon request of any group or enrollment unit, provide to
12 the group or enrollment unit a description of the method used
13 to calculate (1) the Health Maintenance Organization's
14 profitable experience with respect to the group or enrollment
15 unit and the resulting refund to the group or enrollment unit
16 or (2) the Health Maintenance Organization's unprofitable
17 experience with respect to the group or enrollment unit and
18 the resulting additional premium to be paid by the group or
19 enrollment unit.
20 In no event shall the Illinois Health Maintenance
21 Organization Guaranty Association be liable to pay any
22 contractual obligation of an insolvent organization to pay
23 any refund authorized under this Section.
24 (Source: P.A. 89-90, eff. 6-30-95; 90-25, eff. 1-1-98;
25 90-177, eff. 7-23-97; revised 11-21-97.)
26 (Text of Section after amendment by P.A. 90-372)
27 Sec. 5-3. Insurance Code provisions.
28 (a) Health Maintenance Organizations shall be subject to
29 the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
30 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
31 154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356t, 367i,
32 401, 401.1, 402, 403, 403A, 408, 408.2, 409, and 412, 444,
33 and 444.1, paragraph (c) of subsection (2) of Section 367,
34 and Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and
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1 XXVI of the Illinois Insurance Code.
2 (b) For purposes of the Illinois Insurance Code, except
3 for Sections 444 and 444.1 and Articles XIII and XIII 1/2,
4 Health Maintenance Organizations in the following categories
5 are deemed to be "domestic companies":
6 (1) a corporation authorized under the Medical
7 Service Plan Act, the Dental Service Plan Act or, the
8 Voluntary Health Services Plans Plan Act, or the
9 Nonprofit Health Care Service Plan Act;
10 (2) a corporation organized under the laws of this
11 State; or
12 (3) a corporation organized under the laws of
13 another state, 30% or more of the enrollees of which are
14 residents of this State, except a corporation subject to
15 substantially the same requirements in its state of
16 organization as is a "domestic company" under Article
17 VIII 1/2 of the Illinois Insurance Code.
18 (c) In considering the merger, consolidation, or other
19 acquisition of control of a Health Maintenance Organization
20 pursuant to Article VIII 1/2 of the Illinois Insurance Code,
21 (1) the Director shall give primary consideration
22 to the continuation of benefits to enrollees and the
23 financial conditions of the acquired Health Maintenance
24 Organization after the merger, consolidation, or other
25 acquisition of control takes effect;
26 (2)(i) the criteria specified in subsection (1)(b)
27 of Section 131.8 of the Illinois Insurance Code shall not
28 apply and (ii) the Director, in making his determination
29 with respect to the merger, consolidation, or other
30 acquisition of control, need not take into account the
31 effect on competition of the merger, consolidation, or
32 other acquisition of control;
33 (3) the Director shall have the power to require
34 the following information:
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1 (A) certification by an independent actuary of
2 the adequacy of the reserves of the Health
3 Maintenance Organization sought to be acquired;
4 (B) pro forma financial statements reflecting
5 the combined balance sheets of the acquiring company
6 and the Health Maintenance Organization sought to be
7 acquired as of the end of the preceding year and as
8 of a date 90 days prior to the acquisition, as well
9 as pro forma financial statements reflecting
10 projected combined operation for a period of 2
11 years;
12 (C) a pro forma business plan detailing an
13 acquiring party's plans with respect to the
14 operation of the Health Maintenance Organization
15 sought to be acquired for a period of not less than
16 3 years; and
17 (D) such other information as the Director
18 shall require.
19 (d) The provisions of Article VIII 1/2 of the Illinois
20 Insurance Code and this Section 5-3 shall apply to the sale
21 by any health maintenance organization of greater than 10% of
22 its enrollee population (including without limitation the
23 health maintenance organization's right, title, and interest
24 in and to its health care certificates).
25 (e) In considering any management contract or service
26 agreement subject to Section 141.1 of the Illinois Insurance
27 Code, the Director (i) shall, in addition to the criteria
28 specified in Section 141.2 of the Illinois Insurance Code,
29 take into account the effect of the management contract or
30 service agreement on the continuation of benefits to
31 enrollees and the financial condition of the health
32 maintenance organization to be managed or serviced, and (ii)
33 need not take into account the effect of the management
34 contract or service agreement on competition.
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1 (f) Except for small employer groups as defined in the
2 Small Employer Rating, Renewability and Portability Health
3 Insurance Act and except for medicare supplement policies as
4 defined in Section 363 of the Illinois Insurance Code, a
5 Health Maintenance Organization may by contract agree with a
6 group or other enrollment unit to effect refunds or charge
7 additional premiums under the following terms and conditions:
8 (i) the amount of, and other terms and conditions
9 with respect to, the refund or additional premium are set
10 forth in the group or enrollment unit contract agreed in
11 advance of the period for which a refund is to be paid or
12 additional premium is to be charged (which period shall
13 not be less than one year); and
14 (ii) the amount of the refund or additional premium
15 shall not exceed 20% of the Health Maintenance
16 Organization's profitable or unprofitable experience with
17 respect to the group or other enrollment unit for the
18 period (and, for purposes of a refund or additional
19 premium, the profitable or unprofitable experience shall
20 be calculated taking into account a pro rata share of the
21 Health Maintenance Organization's administrative and
22 marketing expenses, but shall not include any refund to
23 be made or additional premium to be paid pursuant to this
24 subsection (f)). The Health Maintenance Organization and
25 the group or enrollment unit may agree that the
26 profitable or unprofitable experience may be calculated
27 taking into account the refund period and the immediately
28 preceding 2 plan years.
29 The Health Maintenance Organization shall include a
30 statement in the evidence of coverage issued to each enrollee
31 describing the possibility of a refund or additional premium,
32 and upon request of any group or enrollment unit, provide to
33 the group or enrollment unit a description of the method used
34 to calculate (1) the Health Maintenance Organization's
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1 profitable experience with respect to the group or enrollment
2 unit and the resulting refund to the group or enrollment unit
3 or (2) the Health Maintenance Organization's unprofitable
4 experience with respect to the group or enrollment unit and
5 the resulting additional premium to be paid by the group or
6 enrollment unit.
7 In no event shall the Illinois Health Maintenance
8 Organization Guaranty Association be liable to pay any
9 contractual obligation of an insolvent organization to pay
10 any refund authorized under this Section.
11 (Source: P.A. 89-90, eff. 6-30-95; 90-25, eff. 1-1-98;
12 90-177, eff. 7-23-97; 90-372, eff. 7-1-98; revised 11-21-97.)
13 Section 30. The Limited Health Service Organization Act
14 is amended by changing Section 4003 as follows:
15 (215 ILCS 130/4003) (from Ch. 73, par. 1504-3)
16 Sec. 4003. Illinois Insurance Code provisions. Limited
17 health service organizations shall be subject to the
18 provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
19 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
20 154.6, 154.7, 154.8, 155.04, 355.2, 356v, 356t, 401, 401.1,
21 402, 403, 403A, 408, 408.2, 409, and 412, 444, and 444.1 and
22 Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and
23 XXVI of the Illinois Insurance Code. For purposes of the
24 Illinois Insurance Code, except for Sections 444 and 444.1,
25 and Articles XIII and XIII 1/2, limited health service
26 organizations in the following categories are deemed to be
27 domestic companies:
28 (1) a corporation under the laws of this State; or
29 (2) a corporation organized under the laws of
30 another state, 30% of more of the enrollees of which are
31 residents of this State, except a corporation subject to
32 substantially the same requirements in its state of
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1 organization as is a domestic company under Article VIII
2 1/2 of the Illinois Insurance Code.
3 (Source: P.A. 90-25, eff. 1-1-98; revised 10-14-97.)
4 Section 95. No acceleration or delay. Where this Act
5 makes changes in a statute that is represented in this Act by
6 text that is not yet or no longer in effect (for example, a
7 Section represented by multiple versions), the use of that
8 text does not accelerate or delay the taking effect of (i)
9 the changes made by this Act or (ii) provisions derived from
10 any other Public Act.
11 Section 99. Effective date. This Act takes effect upon
12 becoming law.