State of Illinois
92nd General Assembly
Legislation

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[ Introduced ][ Engrossed ][ House Amendment 001 ]
[ House Amendment 002 ]


92_HB1040enr

 
HB1040 Enrolled                                LRB9206171JSpc

 1        AN ACT relating to insurance.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section  5.  The  Health  Maintenance Organization Act is
 5    amended by changing Sections 2-3, 2-4,  and  2-6  and  adding
 6    Article 4.5 as follows:

 7        (215 ILCS 125/2-3) (from Ch. 111 1/2, par. 1405)
 8        Sec.  2-3.   Powers  of health maintenance organizations.
 9    The powers of a health maintenance organization include,  but
10    are not limited to the following:
11        (a)  The   purchase,   lease,  construction,  renovation,
12    operation, or maintenance of hospitals, medical facilities or
13    both, and their ancillary equipment, and such property as may
14    reasonably be required for its principal office or  for  such
15    other  purposes as may be necessary in the transaction of the
16    business of the organization.
17        (b)  The  making  of  loans  to  a  medical  group  under
18    contract with it and in furtherance of  its  program  or  the
19    making  of  loans  to a corporation or corporations under its
20    control for the purpose of acquiring or constructing  medical
21    facilities  at  hospitals  or  in  furtherance  of  a program
22    providing health care services for enrollees.
23        (c)  The  furnishing  of  health  care  services  through
24    providers which are under contract with or  employed  by  the
25    health maintenance organization.
26        (d)  The  contracting with any person for the performance
27    on  its  behalf  of  certain  functions  such  as  marketing,
28    enrollment and administration.
29        (e)  The contracting with an insurance  company  licensed
30    in this State, or with a hospital, medical, dental, vision or
31    pharmaceutical  service corporation authorized to do business
 
HB1040 Enrolled             -2-                LRB9206171JSpc
 1    in this State, for the provision of insurance, indemnity,  or
 2    reimbursement   against  the  cost  of  health  care  service
 3    provided by the health maintenance organization.
 4        (f)  The offering,  in  addition  to  basic  health  care
 5    services, of (1) health care services, (2) indemnity benefits
 6    covering out of area or emergency services, and (3) indemnity
 7    benefits  provided  through  insurers  or  hospital, medical,
 8    dental, vision, or pharmaceutical service  corporations,  and
 9    (4) health maintenance organization point-of-service benefits
10    as authorized under Article 4.5.
11        (g)  Rendering services related to the functions involved
12    in  the  operating  of  its  health  maintenance organization
13    business  including  but  not  limited  to  providing  health
14    services, data processing, accounting, or claims.
15        (g-5)  Indemnification for services provided to  a  child
16    as required under subdivision (e)(3) of Section 4-2.
17        (h)  Any other business activity reasonably complementary
18    or  supplementary  to  its  health  maintenance  organization
19    business to the extent approved by the Director.
20    (Source: P.A. 89-183, eff. 1-1-96.)

21        (215 ILCS 125/2-4) (from Ch. 111 1/2, par. 1406)
22        Sec.  2-4. Required minimum net worth; special contingent
23    reserve; deficiency; impairment.
24        (a)  A   health   maintenance   organization   issued   a
25    certificate of authority on or after the  effective  date  of
26    this  amendatory  Act  of  1987  shall  have and at all times
27    maintain net worth  of  not  less  than  $1,500,000.   As  an
28    allocation of net worth, organizations certified prior to the
29    effective  date of this amendatory Act of 1987 shall maintain
30    a special contingent reserve. The special contingent  reserve
31    for an organization certified between January 1, 1986 and the
32    effective  date of this amendatory Act of 1987 shall be equal
33    to 5% of its net earned subscription revenue for health  care
 
HB1040 Enrolled             -3-                LRB9206171JSpc
 1    services   through   December  31st  of  the  year  in  which
 2    certified.   In  subsequent  years  such  organization  shall
 3    accumulate additions to the contingent reserve in  an  amount
 4    which  is  equal to 2% of its net earned subscription revenue
 5    for each calendar year.  For purposes of  this  Section,  net
 6    earned  subscription  revenue means premium minus reinsurance
 7    expenses.  Maintenance of  the  contingent  reserve  requires
 8    that  net  worth  equals or exceeds the contingent reserve at
 9    any balance sheet date.
10        (b)  Additional accumulations under subsection  (a)  will
11    no  longer  be  required at such time that  the total special
12    contingent reserve required by subsection  (a)  is  equal  to
13    $1,500,000.
14        (c)  A   deficiency   in   meeting  amounts  required  in
15    subsections (a),  (b), and (d) will require (1)  filing  with
16    the  Director  a  plan  for  correction  of  the  deficiency,
17    acceptable   to  the  Director  and  (2)  correction  of  the
18    deficiency within a reasonable time, not to  exceed  60  days
19    unless  an  extension  of  time,  not to exceed 60 additional
20    days, is granted by the Director. Such a deficiency  will  be
21    deemed  an  impairment, and failure to correct the deficiency
22    in the prescribed time shall be  grounds  for  suspension  or
23    revocation pursuant to subsection (h) of Section 5-5.
24        (d)  All   health   maintenance  organizations  issued  a
25    certificate of authority on or prior to December 31, 1985 and
26    regulated under this Act must have and at all times maintain,
27    prior to  December  31,  1988,  the  net  worth  and  special
28    contingent  reserve  that  was  required  for that particular
29    organization  at  the  time  it  was  certified.   All   such
30    organizations  must  have by December 31, 1988 and thereafter
31    maintain at all times, net worth of not  less  than  $300,000
32    and  a  special contingent reserve calculated and accumulated
33    in the same  manner  as  required  of  a  health  maintenance
34    organization  issued a certificate of authority on or between
 
HB1040 Enrolled             -4-                LRB9206171JSpc
 1    January 1, 1986 and the effective date of this amendatory Act
 2    of 1987.  Such calculation shall commence with the  financial
 3    reporting period first following certification.
 4        All  organizations  issued  a  certificate  of  authority
 5    between  January  1,  1986  and  the  effective  date of this
 6    amendatory Act of 1987 must have and at  all  times  maintain
 7    the  net  worth  and  special  contingent  reserve  that  was
 8    required  for that particular organization at the time it was
 9    certified.
10        (d-5)  A health maintenance organization  that  offers  a
11    point-of-service  product  must maintain minimum net worth of
12    not less than:
13             (1)  the greater of 300% of the "authorized  control
14        level"   as  defined  by  Article  IIA  of  the  Illinois
15        Insurance Code; or
16             (2)  $3,500,000   if    the    health    maintenance
17        organization's  annual  projected  out-of-plan claims are
18        less than $500,000; or
19             (3)  $4,500,000   if    the    health    maintenance
20        organization's  annual  projected  out-of-plan claims are
21        equal  to  or  greater  than  $500,000  but   less   than
22        $1,000,000; or
23             (4)  $6,000,000    if    the    health   maintenance
24        organization's annual projected  out-of-plan  claims  are
25        $1,000,000 or greater.
26        (e)  Unless   allowed   by   the   Director,   no  health
27    maintenance   organization,   officer,   director,   trustee,
28    producer, or employee of such organization may renew,  issue,
29    or  deliver, or cause to be renewed, issued or delivered, any
30    certificate, agreement,  or  contract  of  coverage  in  this
31    State,  for which a premium is charged or collected, when the
32    organization writing such coverage is insolvent or  impaired,
33    and the fact of such insolvency or impairment is known to the
34    organization,   officer,   director,  trustee,  producer,  or
 
HB1040 Enrolled             -5-                LRB9206171JSpc
 1    employee of such organization.  An organization  is  impaired
 2    when  a  deficiency exists in meeting the amounts required in
 3    subsections(a), (b), and (d) of Section 2-4.
 4        However, the existence of an impairment does not  prevent
 5    the  issuance  or  renewal  of  a  certificate,  agreement or
 6    contract when the enrollee exercises an option granted  under
 7    the plan to obtain new, renewed or converted coverage.
 8        Any  organization,  officer, director, trustee, producer,
 9    or employee of such organization  violating  this  subsection
10    shall be guilty of a Class A misdemeanor.
11    (Source: P.A. 85-20.)

12        (215 ILCS 125/2-6) (from Ch. 111 1/2, par. 1406.2)
13        Sec. 2-6.  Statutory deposits.
14        (a)  Every organization subject to the provisions of this
15    Act  shall  make  and  maintain  with  the  Director  through
16    December  30,  1993,  for  the protection of enrollees of the
17    organization, a deposit of securities  which  are  authorized
18    investments under paragraphs (1) and (2) of subsection (h) of
19    Section  3-1  having  a  fair  market value equal to at least
20    $100,000.  Effective December 31, 1993 and  through  December
21    30, 1994, the deposit shall have a fair market value at least
22    equal   to   $200,000.    Effective  December  31,  1994  and
23    thereafter, the deposit shall have a  fair  market  value  at
24    least   equal   to   $300,000.    An  organization  issued  a
25    certificate of authority on or after the  effective  date  of
26    this Amendatory Act of 1993, shall make and maintain with the
27    Director;   for   the   protection   of   enrollees   of  the
28    organization, a deposit of securities  which  are  authorized
29    investments under paragraphs (1) and (2) of subsection (h) of
30    Section  3-1  having  a  fair  market value equal to at least
31    $300,000.  The amount on deposit shall remain as an  admitted
32    asset  of  the  organization  in the determination of its net
33    worth.
 
HB1040 Enrolled             -6-                LRB9206171JSpc
 1        (b)  An  organization  that  offers  a   point-of-service
 2    product,  as  permitted  by  Article  4.5,  must  maintain an
 3    additional deposit in an amount that is  not  less  than  the
 4    greater  of  125%  of  the  organization's  annual  projected
 5    point-of-service claims or $300,000.
 6    (Source: P.A. 88-364.)

 7        (215 ILCS 125/Art. 4.5, heading new)
 8                   ARTICLE 4.5.  POINT-OF-SERVICE
 9                              PRODUCTS

10        (215 ILCS 125/4.5-1 new)
11        Sec. 4.5-1.  Point-of-service health service contracts.
12        (a)  A  health  maintenance  organization  that  offers a
13    point-of-service contract:
14             (1)  must include as in-plan  covered  services  all
15        services  required  by  law  to  be  provided by a health
16        maintenance organization;
17             (2)  must provide incentives,  which  shall  include
18        financial   incentives,  for  enrollees  to  use  in-plan
19        covered services;
20             (3)  may  not  offer  services  out-of-plan  without
21        providing those services on an in-plan basis;
22             (4)  may include  annual  out-of-pocket  limits  and
23        lifetime  maximum  benefits  allowances  for  out-of-plan
24        services  that are separate from any limits or allowances
25        applied to in-plan services;
26             (5)  may not consider emergency services, authorized
27        referral services, or non-routine services  obtained  out
28        of the service area to be point-of-service services; and
29             (6)  may   treat   as   out-of-plan  services  those
30        services that an enrollee obtains  from  a  participating
31        provider,  but for which the proper authorization was not
32        given by the health maintenance organization.
 
HB1040 Enrolled             -7-                LRB9206171JSpc
 1        (b)  A  health  maintenance   organization   offering   a
 2    point-of-service  contract is subject to all of the following
 3    limitations:
 4             (1)  The health  maintenance  organization  may  not
 5        expend in any calendar quarter more than 20% of its total
 6        expenditures  for all its members for out-of-plan covered
 7        services.
 8             (2)  If the amount specified in  item  (1)  of  this
 9        subsection  is  exceeded  by  2% in a quarter, the health
10        maintenance organization must effect compliance with item
11        (1) of this  subsection  by  the  end  of  the  following
12        quarter.
13             (3)  If compliance with the amount specified in item
14        (1)  of this subsection is not demonstrated in the health
15        maintenance organization's  next  quarterly  report,  the
16        health   maintenance   organization  may  not  offer  the
17        point-of-service contract to new groups  or  include  the
18        point-of-service  option  in  the  renewal of an existing
19        group until compliance with the amount specified in  item
20        (1) of this subsection is demonstrated or until otherwise
21        allowed by the Director.
22             (4)  A   health  maintenance  organization  failing,
23        without just cause, to comply with the provisions of this
24        subsection shall be required, after notice  and  hearing,
25        to  pay a penalty of $250 for each day out of compliance,
26        to be recovered by the Director.  Any  penalty  recovered
27        shall be paid into the General Revenue Fund. The Director
28        may   reduce   the  penalty  if  the  health  maintenance
29        organization  demonstrates  to  the  Director  that   the
30        imposition  of  the  penalty would constitute a financial
31        hardship to the health maintenance organization.
32        (c)  A health  maintenance  organization  that  offers  a
33    point-of-service product must do all of the following:
34             (1)  File  a quarterly financial statement detailing
 
HB1040 Enrolled             -8-                LRB9206171JSpc
 1        compliance with the requirements of subsection (b).
 2             (2)  Track out-of-plan, point-of-service utilization
 3        separately   from   in-plan   or    non-point-of-service,
 4        out-of-plan  emergency  care,  referral  care, and urgent
 5        care out of the service area utilization.
 6             (3)  Record out-of-plan utilization in a manner that
 7        will permit such utilization and cost  reporting  as  the
 8        Director may, by rule, require.
 9             (4)  Demonstrate to the Director's satisfaction that
10        the  health  maintenance  organization  has  the  fiscal,
11        administrative,  and  marketing  capacity  to control its
12        point-of-service enrollment, utilization, and costs so as
13        not to jeopardize the financial security  of  the  health
14        maintenance organization.
15             (5)  Maintain,  in  addition  to  any  other deposit
16        required under this Act, the deposit required by  Section
17        2-6.
18             (6)  Maintain   cash   and   cash   equivalents   of
19        sufficient  amount  to  fully  liquidate 10 days' average
20        claim payments, subject to review by the Director.
21             (7)  Maintain   and   file   with   the    Director,
22        reinsurance   coverage  protecting  against  catastrophic
23        losses  on  out  of  network  point-of-service  services.
24        Deductibles may not exceed $100,000 per covered life  per
25        year,  and  the  portion  of  risk retained by the health
26        maintenance  organization  once  deductibles  have   been
27        satisfied  may not exceed 20%. Reinsurance must be placed
28        with  licensed  authorized  reinsurers  qualified  to  do
29        business in this State.
30        (d)  A health maintenance organization may  not  issue  a
31    point-of-service contract until it has filed and had approved
32    by  the Director a plan to comply with the provisions of this
33    Section.  The compliance plan must,  at  a  minimum,  include
34    provisions   demonstrating   that   the   health  maintenance
 
HB1040 Enrolled             -9-                LRB9206171JSpc
 1    organization will do all of the following:
 2             (1)  Design the benefit  levels  and  conditions  of
 3        coverage  for  in-plan  covered  services and out-of-plan
 4        covered services as required by this Article.
 5             (2)  Provide  or  arrange  for  the   provision   of
 6        adequate systems to:
 7                  (A)  process and pay claims for all out-of-plan
 8             covered services;
 9                  (B)  meet the requirements for point-of-service
10             contracts   set   forth  in  this  Section  and  any
11             additional requirements that may be set forth by the
12             Director; and
13                  (C)  generate accurate data and  financial  and
14             regulatory  reports  on  a  timely basis so that the
15             Department of  Insurance  can  evaluate  the  health
16             maintenance   organization's   experience  with  the
17             point-of-service  contract  and  monitor  compliance
18             with point-of-service contract provisions.
19             (3)  Comply with the requirements of subsections (b)
20        and (c).

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