Protection against insolvency
See bold text below:
A. Health maintenance organizations shall be subject to the following net worth requirements:
(1) before any certificate of authority is issued to a health maintenance organization, it shall have an initial net worth of one million five hundred thousand dollars ($1,500,000) and shall thereafter maintain the minimum net worth required under Paragraph (2) of this subsection;
(2) except as provided in Paragraphs (3) and (4) of this subsection, every health maintenance organization shall maintain a minimum net worth equal to the greater of:
(a) one million dollars ($1,000,000);
(b) two percent of annual premium revenues as reported on the most recent annual financial statement filed with the superintendent on the first one hundred fifty million dollars ($150,000,000) of premium revenues and one percent of annual premium on the premium in excess of one hundred fifty million dollars ($150,000,000);
(c) an amount equal to the sum of three months uncovered health care expenditures as reported on the most recent financial statement filed with the superintendent; or
(d) an amount equal to the sum of: 1) eight percent of annual health care expenditures for enrollees under prepaid contracts except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the superintendent; and 2) four percent of annual hospital expenditures for enrollees under prepaid contracts paid on a capitated basis and a managed hospital payment basis as reported on the most recent financial statement filed with the superintendent;
(3) a health maintenance organization licensed before the effective date of Chapter 59A, Article 46 NMSA 1978 [January 1, 1994] shall maintain a minimum net worth of:
(a) twenty-five percent of the amount required by Paragraph (2) of this subsection by December 31, 1994;
(b) fifty percent of the amount required by Paragraph (2) of this subsection by December 31, 1995;
(c) seventy-five percent of the amount required by Paragraph (2) of this subsection by December 31, 1996; and
(d) one hundred percent of the amount required by Paragraph (2) of this subsection by December 31, 1997; and
(4) in determining net worth for the purposes of Paragraph (3) of this subsection:
(a) no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the superintendent and any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated;
(b) the interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses;
(c) any debt incurred by a surplus note meeting the requirements of Section 59A-34-23 NMSA 1978, and otherwise acceptable to the superintendent, shall not be considered a liability and shall be recorded as equity; and
(d) preferred stock shall not be considered debt.
B. Health maintenance organizations shall be subject to the following deposit requirements:
(1) unless otherwise provided below, each health maintenance organization shall deposit with the superintendent or, at the discretion of the superintendent, with any organization or trustee acceptable to him through which a custodial or controlled account is utilized, cash, securities or any combination of these or other measures that are acceptable to him that at all times shall have a value of not less than three hundred thousand dollars ($300,000);
(2) a health maintenance organization that is in operation on the effective date of this section [January 1, 1994] shall make a deposit equal to one hundred fifty thousand dollars ($150,000) and, in the second year, the amount of the additional deposit for a health maintenance organization that is in operation on the effective date of this section shall be equal to one hundred fifty thousand dollars ($150,000), for a total of three hundred thousand dollars ($300,000);
(3) the deposit shall be an admitted asset of the health maintenance organization in the determination of net worth;
(4) all income from deposits shall be an asset of the organization, but a health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities or any combination of these or other assets of equal amount and value;
(5) any securities deposited pursuant to the provisions of this subsection shall be approved by the superintendent before being deposited or substituted;
(6) the deposit shall be used to protect the interests of the health maintenance organization’s enrollees and to assure continuation of health care services to enrollees of a health maintenance organization that is in rehabilitation or conservation;
(7) the superintendent may use a deposit made pursuant to the provisions of this subsection for administrative costs directly attributable to a receivership or liquidation, and if the health maintenance organization is placed in receivership or liquidation, the deposit shall be an asset subject to the provisions of the applicable liquidation law; and
(8) the superintendent may reduce or eliminate the deposit requirement if the health maintenance organization deposits with the state treasurer, insurance superintendent or other official body of the state or jurisdiction of domicile for the protection of all subscribers and enrollees, wherever located, of such health maintenance organization, cash, acceptable securities or surety, and delivers to the superintendent a certificate to such effect, duly authenticated by the appropriate state official holding the deposit.
C. Every health maintenance organization shall include when determining liabilities an amount estimated in the aggregate to provide for:
(1) any unearned premium;
(2) the payment of all claims for health care expenditures that have been incurred, whether reported or unreported, which are unpaid and for which the health maintenance organization is or may be liable;
(3) the expense of adjustment or settlement of the claims described in Paragraph (2) of this subsection; and
(4) contract liabilities for continuation of coverage or conversion rights not covered by future premiums or hold harmless agreements.
D. Liabilities described in Subsection C of this section shall be computed in accordance with regulations adopted by the superintendent upon reasonable consideration of the ascertained experience and character of the health maintenance organization.
E. Every contract between a health maintenance organization and a participating provider of health care services shall be in writing and shall set forth that in the event the health maintenance organization fails to pay for health care services as set forth in the contract, the subscriber or enrollee shall not be liable to the provider for any sums owed by the health maintenance organization. In the event that the participating provider contract has not been reduced to writing or the contract fails to contain the required prohibition, the participating provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the health maintenance organization. No participating provider or agent, trustee or assignee thereof, may maintain any action at law against a subscriber or enrollee to collect sums owed by the health maintenance organization.
F. The superintendent shall require that each health maintenance organization have a plan for handling insolvency that allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of insolvency in an inpatient facility until their discharge or expiration of benefits. In considering the plan, the superintendent may require:
(1) insurance to cover the expenses to be paid for continued benefits after an insolvency;
(2) provisions in provider contracts that obligate the provider to provide services for the duration of the period after the health maintenance organization’s insolvency for which premium payment has been made and until the enrollees’ discharge from inpatient facilities;
(3) insolvency reserves;
(4) acceptable letters of credit; or
(5) any other arrangements to assure that benefits are continued as specified above.
G. An agreement to provide health care services between a provider and a health maintenance organization shall require that if the provider terminates the agreement, the provider shall give the organization at least sixty days’ advance notice of termination.
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