Public Act 096-1509
 
HB5018 EnrolledLRB096 18816 RPM 34202 b

    AN ACT concerning insurance.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Health Maintenance Organization Act is
amended by changing Section 6-8 as follows:
 
    (215 ILCS 125/6-8)  (from Ch. 111 1/2, par. 1418.8)
    Sec. 6-8. Powers and duties of the Association. In addition
to the powers and duties enumerated in other Sections of this
Article, the Association shall have the powers set forth in
this Section.
    (1) If a domestic organization is an impaired organization,
the Association may, subject to any conditions imposed by the
Association other than those which impair the contractual
obligations of the impaired organization, and approved by the
impaired organization and the Director:
        (a) guarantee, assume, or reinsure, or cause to be
    guaranteed, assumed or reinsured, any or all of the covered
    health care plan certificates of covered persons of the
    impaired organization;
        (b) provide such monies, pledges, notes, guarantees,
    or other means as are proper to effectuate paragraph (a),
    and assure payment of the contractual obligations of the
    impaired organization pending action under paragraph (a);
    and
        (c) loan money to the impaired organization.
    (2) If a domestic, foreign, or alien organization is an
insolvent organization, the Association shall, subject to the
approval of the Director:
        (a) guarantee, assume, indemnify or reinsure or cause
    to be guaranteed, assumed, indemnified or reinsured the
    covered health care plan benefits of covered persons of the
    insolvent organization; however, in the event that the
    Director of Healthcare and Family Services (formerly
    Director of the Department of Public Aid) assigns
    individuals that are recipients of public aid from an
    insolvent organization to another organization, the
    Director of Healthcare and Family Services shall, before
    fixing the rates to be paid by the Department of Healthcare
    and Family Services to the transferee organization on
    account of such individuals, consult with the Director of
    the Department of Insurance as to the reasonableness of
    such rates in light of the health care needs of such
    individuals and the costs of providing health care services
    to such individuals;
        (b) assure payment of the contractual obligations of
    the insolvent organization to covered persons;
        (c) make payments to providers of health care, or
    indemnity payments to covered persons, so as to assure the
    continued payment of benefits substantially similar to
    those provided for under covered health care plan
    certificate issued by the insolvent organization to
    covered persons; and
        (d) provide such monies, pledges, notes, guaranties,
    or other means as are reasonably necessary to discharge
    such duties.
    This subsection (2) shall not apply when the Director has
determined that the foreign or alien organization's
domiciliary jurisdiction or state of entry provides, by
statute, protection substantially similar to that provided by
this Article for residents of this State and such protection
will be provided in a timely manner.
    (3) There shall be no liability on the part of and no cause
of action shall arise against the Association or against any
transferee from the Association in connection with the transfer
by reinsurance or otherwise of all or any part of an impaired
or insolvent organization's business by reason of any action
taken or any failure to take any action by the impaired or
insolvent organization at any time.
    (4) If the Association fails to act within a reasonable
period of time as provided in subsection (2) of this Section
with respect to an insolvent organization, the Director shall
have the powers and duties of the Association under this
Article with regard to such insolvent organization.
    (5) The Association or its designated representatives may
render assistance and advice to the Director, upon his request,
concerning rehabilitation, payment of claims, continuations of
coverage, or the performance of other contractual obligations
of any impaired or insolvent organization.
    (6) The Association has standing to appear before any court
concerning all matters germane to the powers and duties of the
Association, including, but not limited to, proposals for
reinsuring or guaranteeing the covered health care plan
certificates of the impaired or insolvent organization and the
determination of the covered health care plan certificates and
contractual obligations.
    (7) (a) Any person receiving benefits under this Article is
deemed to have assigned the rights under the covered health
care plan certificates to the Association to the extent of the
benefits received because of this Article whether the benefits
are payments of contractual obligations or continuation of
coverage. The Association may require an assignment to it of
such rights by any payee, enrollee or beneficiary as a
condition precedent to the receipt of any rights or benefits
conferred by this Article upon such person. The Association is
subrogated to these rights against the assets of any insolvent
organization and against any other party who may be liable to
such payee, enrollee or beneficiary.
    (b) The subrogation rights of the Association under this
subsection have the same priority against the assets of the
insolvent organization as that possessed by the person entitled
to receive benefits under this Article.
    (8) (a) The contractual obligations of the insolvent
organization for which the Association becomes or may become
liable are as great as but no greater than the contractual
obligations of the insolvent organization would have been in
the absence of an insolvency unless such obligations are
reduced as permitted by subsection (3), but the aggregate
liability of the Association shall not exceed $500,000 $300,000
with respect to any one natural person.
    (b) Furthermore, the Association shall not be required to
pay, and shall have no liability to, any provider of health
care services to an enrollee:
        (i) if such provider, or his or its affiliates or
    members of his immediate family, at any time within the one
    year prior to the date of the issuance of the first order,
    by a court of competent jurisdiction, of conservation,
    rehabilitation or liquidation pertaining to the health
    maintenance organization:
            (A) was a securityholder of such organization (but
        excluding any securityholder holding an equity
        interest of 5% or less);
            (B) exercised control over the organization by
        means such as serving as an officer or director,
        through a management agreement or as a principal member
        of a not-for-profit organization;
            (C) had a representative serving by virtue of or
        his or her official position as a representative of
        such provider on the board of any entity which
        exercised control over the organization;
            (D) received provider payments made by such
        organization pursuant to a contract which was not a
        product of arms-length bargaining; or
            (E) received distributions other than for
        physician services from a not-for-profit organization
        on account of such provider's status as a member of
        such organization.
        For purposes of this subparagraph (i), the terms
    "affiliate," "person," "control" and "securityholder"
    shall have the meanings ascribed to such terms in Section
    131.1 of the Illinois Insurance Code; or
        (ii) if and to the extent such a provider has agreed by
    contract not to seek payment from the enrollee for services
    provided to such enrollee or if, and to the extent, as a
    matter of law such provider may not seek payment from the
    enrollee for services provided to such enrollee; or .
        (iii) related to any policy, contract, or certificate
    providing any hospital, medical, prescription drug, or
    other health care benefits pursuant to Part C or Part D of
    Subchapter XVIII, Chapter 7 of Title 42 of the United
    States Code (commonly known as Medicare Part C & D) or any
    regulations issued pursuant thereto; or
        (iv) for any portion of a policy, contract, or
    certificate to the extent that the assessments required by
    this Article with respect to the policy or contract are
    preempted or otherwise not permitted by federal or State
    law; or
        (v) for any obligation that does not arise under the
    express written terms of the policy or contract issued by
    the organization to the contract owner or policy owner,
    including without limitation:
            (A) claims based on marketing materials;
            (B) claims based on side letters, riders, or other
        documents that were issued by the insurer without
        meeting applicable policy form filing or approval
        requirements;
            (C) misrepresentations of or regarding policy
        benefits;
            (D) extra-contractual claims; or
            (E) claims for penalties or consequential or
        incidental damages.
    (c) In no event shall the Association be required to pay
any provider participating in the insolvent organization any
amount for in-plan services rendered by such provider prior to
the insolvency of the organization in excess of (1) the amount
provided by a capitation contract between a physician provider
and the insolvent organization for such services; or (2) the
amounts provided by contract between a hospital provider and
the Department of Healthcare and Family Services (formerly
Department of Public Aid) for similar services to recipients of
public aid; or (3) in the event neither (1) nor (2) above is
applicable, then the amounts paid under the Medicare area
prevailing rate for the area where the services were provided,
or if no such rate exists with respect to such services, then
80% of the usual and customary rates established by the Health
Insurance Association of America. The payments required to be
made by the Association under this Section shall constitute
full and complete payment for such provider services to the
enrollee.
    (d) The Association shall not be required to pay more than
an aggregate of $300,000 for any organization which is declared
to be insolvent prior to July 1, 1987, and such funds shall be
distributed first to enrollees who are not public aid
recipients pursuant to a plan recommended by the Association
and approved by the Director and the court having jurisdiction
over the liquidation.
    (9) The Association may:
        (a) Enter into such contracts as are necessary or
    proper to carry out the provisions and purposes of this
    Article.
        (b) Sue or be sued, including taking any legal actions
    necessary or proper for recovery of any unpaid assessments
    under Section 6-9. The Association shall not be liable for
    punitive or exemplary damages.
        (c) Borrow money to effect the purposes of this
    Article. Any notes or other evidence of indebtedness of the
    Association not in default are legal investments for
    domestic organizations and may be carried as admitted
    assets.
        (d) Employ or retain such persons as are necessary to
    handle the financial transactions of the Association, and
    to perform such other functions as become necessary or
    proper under this Article.
        (e) Negotiate and contract with any liquidator,
    rehabilitator, conservator, or ancillary receiver to carry
    out the powers and duties of the Association.
        (f) Take such legal action as may be necessary to avoid
    payment of improper claims.
        (g) Exercise, for the purposes of this Article and to
    the extent approved by the Director, the powers of a
    domestic organization, but in no case may the Association
    issue evidence of coverage other than that issued to
    perform the contractual obligations of the impaired or
    insolvent organization.
        (h) Exercise all the rights of the Director under
    Section 193(4) of the Illinois Insurance Code with respect
    to covered health care plan certificates after the
    association becomes obligated by statute.
        (i) Request information from a person seeking coverage
    from the Association in order to aid the Association in
    determining its obligations under this Article with
    respect to the person and the person shall promptly comply
    with the request.
        (j) Take other necessary or appropriate action to
    discharge its duties and obligations under this Article or
    to exercise its powers under this Article.
    (10) The obligations of the Association under this Article
shall not relieve any reinsurer, insurer or other person of its
obligations to the insolvent organization (or its conservator,
rehabilitator, liquidator or similar official) or its
enrollees, including without limitation any reinsurer, insurer
or other person liable to the insolvent insurer (or its
conservator, rehabilitator, liquidator or similar official) or
its enrollees under any contract of reinsurance, any contract
providing stop loss coverage or similar coverage or any health
care contract. With respect to covered health care plan
certificates for which the Association becomes obligated after
an entry of an order of liquidation or rehabilitation, the
Association may elect to succeed to the rights of the insolvent
organization arising after the date of the order of liquidation
or rehabilitation under any contract of reinsurance, any
contract providing stop loss coverage or similar coverages or
any health care service contract to which the insolvent
organization was a party, on the terms set forth under such
contract, to the extent that such contract provides coverage
for health care services provided after the date of the order
of liquidation or rehabilitation. As a condition to making this
election, the Association must pay premiums for coverage
relating to periods after the date of the order of liquidation
or rehabilitation.
    (11) The Association shall be entitled to collect premiums
due under or with respect to covered health care certificates
for a period from the date on which the domestic, foreign, or
alien organization became an insolvent organization until the
Association no longer has obligations under subsection (2) of
this Section with respect to such certificates. The
Association's obligations under subsection (2) of this Section
with respect to any covered health care plan certificates shall
terminate in the event that all such premiums due under or with
respect to such covered health care plan certificates are not
paid to the Association (i) within 30 days of the Association's
demand therefor, or (ii) in the event that such certificates
provide for a longer grace period for payment of premiums after
notice of non-payment or demand therefor, within the lesser of
(A) the period provided for in such certificates or (B) 60
days.
    (12) The Board of Directors of the Association shall have
discretion and may exercise reasonable business judgment to
determine the means by which the Association is to provide the
benefits of this Article in an economical and efficient manner.
    (13) Where the Association has arranged or offered to
provide the benefits of this Article to a covered person under
a plan or arrangement that fulfills the Association's
obligations under this Article, the person shall not be
entitled to benefits from the Association in addition to or
other than those provided under the plan or arrangement.
    (14) Venue in a suit against the Association arising under
the Article shall be in Cook County. The Association shall not
be required to give any appeal bond in an appeal that relates
to a cause of action arising under this Article.
(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10;
revised 9-16-10.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 1/27/2011