The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 123: Nonprofit Hospital Service Corporations

• § 4511. Purposes and definition

  A corporation may be organized for the purpose of establishing, maintaining, and operating a nonprofit hospital service plan through which hospital care may be provided by a hospital maintained by a corporation organized for hospital purposes to members of the public who become subscribers to the plan under a contract that entitles each subscriber to certain hospital care. As used in this chapter, the term “hospital service corporation” includes any corporation organized under the provisions of this chapter and also any unincorporated association furnishing hospital, medical, surgical, or nursing services, or any combination of these, to subscribers or members, except as provided in section 4519 of this title. (Amended 2021, No. 105 (Adj. Sess.), § 205, eff. July 1, 2022.)

• § 4512. Powers

  (a) Such hospital service corporation shall be a nonprofit sharing corporation without capital stock. It shall be maintained and operated solely for the benefit of the subscribers thereof and shall not be authorized to pay money in lieu of hospital service. A person, partnership, association, or corporation shall not contract to furnish hospital service unless authorized so to do pursuant to the provisions of this chapter. Corporations formed under the provisions of this chapter shall have the privileges and be subject to the provisions of Title 11B as well as the applicable provisions of this chapter. In the event of a conflict between the provisions of Title 11B and the provisions of this chapter, the latter shall control.

  (b) Subject to the approval of the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate, a hospital service corporation may establish, maintain, and operate a medical service plan as defined in section 4583 of this title. The Commissioner or the Board may refuse approval if the Commissioner or the Board finds that the rates submitted are excessive, inadequate, or unfairly discriminatory, fail to protect the hospital service corporation’s solvency, or fail to meet the standards of affordability, promotion of quality care, and promotion of access pursuant to section 4062 of this title. The contracts of a hospital service corporation that operates a medical service plan under this subsection shall be governed by chapter 125 of this title to the extent that they provide for medical service benefits, and by this chapter to the extent that the contracts provide for hospital service benefits.

  (c) Subject to the approval of the Commissioner, a hospital or medical service corporation may establish, maintain, and operate, or participate in the establishment, maintenance, and operation of, health care services contracts or arrangements, including health maintenance organizations authorized pursuant to chapter 139 of this title, all of which are intended to ensure that subscriber benefits are provided at minimum cost under efficient and economical management. A health maintenance organization established, maintained, or operated under the authority of this subsection shall be organized so that its business and affairs will be managed by a governing board or committee of which a majority are members who are not providers, as those terms are defined in section 5101 of this title. Notwithstanding the foregoing, subject to the approval of the Commissioner, a hospital or medical service corporation may establish, maintain, and operate or participate in the establishment, maintenance, and operation of administrative claims processing services and related services. (Amended 1975, No. 69, § 1, eff. April 18, 1975; 1985, No. 44; 1997, No. 54, §§ 2, 3, eff. June 26, 1997; 2005, No. 36, § 20, eff. June 1, 2005; 2011, No. 48, § 15a, eff. Jan. 1, 2012; 2013, No. 79, § 5f, eff. Jan. 1, 2014.)

• § 4513. Permit to engage in business; foreign corporations

  (a) At least three-fourths of the board of directors of a corporation organized under this chapter shall be composed of subscribers and members of the public. The remainder may be providers. The subscriber members of the board shall comprise at least a majority of the board. A corporation organized under this chapter shall provide for the election of its board of directors at a publicly announced meeting. As used in this section, “provider” means any person who is a provider of hospital or medical services, or who is an employee, director, trustee, or representative of a provider of such services.

  (b) A hospital service corporation shall not enter into a contract with a subscriber until it has obtained from the Commissioner of Financial Regulation a permit so to do. A permit may be issued by the Commissioner upon the receipt of an application in form to be prescribed by the Commissioner. The application shall include a statement of the territory in which the corporation proposes to seek subscribers, the service to be rendered by it, and the rates to be charged for the service. The application shall also include a statement of the number of subscribers for hospital service. Before issuing the permit, the Commissioner may make such examination or investigation as the Commissioner deems necessary. The Commissioner may refuse the permit if the Commissioner finds that the rates submitted are excessive, inadequate, or unfairly discriminatory. A hospital service corporation organized under the laws of another state or country shall not be licensed to do business in this State except as provided by section 4520 of this title.

  (c) In connection with a rate decision, the Green Mountain Care Board may also make reasonable supplemental orders to the corporation and may attach reasonable conditions and limitations to such orders as the Board finds, on the basis of competent and substantial evidence, necessary to ensure that benefits and services are provided at minimum cost under efficient and economical management of the corporation. The Commissioner and, except as otherwise provided by 18 V.S.A. §§ 9375 and 9376, the Green Mountain Care Board, shall not set the rate of payment or reimbursement made by the corporation to any physician, hospital, or other health care provider.

  (d) The Commissioner shall permit rates for a hospital service corporation designed to enable the corporation to accumulate and maintain a reserve fund that shall from time to time during the calendar year be increased in an amount equal to at least two percent of the annual premium income of the corporation until the reserve fund is equal to at least eight percent of the annual premium income of the corporation. However, if the liabilities of the corporation exceed its assets, the Commissioner shall permit the corporation to charge rates that enable the corporation to accumulate a reserve fund at the rate of at least five percent of annual premium income of the corporation until the corporation’s assets equal its liabilities. Nothing in this subsection shall require the Commissioner to permit a corporation to accumulate a reserve fund until the law of the state of incorporation of that corporation is substantially similar to this subsection with respect to the reserve fund. (Amended 1975, No. 69, § 2, eff. April 18, 1975; 1983, No. 166 (Adj. Sess.); 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2013, No. 79, § 5g, eff. Jan. 1, 2014; 2021, No. 105 (Adj. Sess.), § 206, eff. July 1, 2022.)

• § 4514. Required contract provisions

  A contract entered into by a hospital service corporation shall be in writing, one copy of which shall be furnished to the subscriber, and shall contain the following provisions:

  (1) A statement of the amount payable to the corporation by the subscriber and the times at which and manner in which such amount is to be paid.

  (2) A statement of the nature of the services to be furnished and the period during which they will be furnished and, if there are any services to be excepted, a detailed statement of the exceptions printed as specified in section 4515 of this chapter.

  (3) A statement of the terms and conditions, if any, upon which the contract may be canceled or otherwise terminated at the option of either party.

  (4) A statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract for services.

  (5) A statement that no representation by the subscriber in an application for a contract shall avoid the contract or be used in any legal proceeding under the contract, unless the application or an exact copy of the application is included in or attached to the contract, and that no agent or representative of the corporation, other than an officer designated in the contract, is authorized to change the contract or waive any of its provisions.

  (6) A statement that if the subscriber defaults in making any payment under the contract, the subsequent acceptance of a payment by the corporation or by any of its duly authorized agents shall reinstate the contract, but, with respect to sickness and injury, only to cover such sickness as may be first manifested more than 10 days after the date of such acceptance.

  (7) A statement of the period of grace that will be allowed the subscriber for making any payment due under the contract. The grace period shall be not less than 10 days. (Amended 2021, No. 105 (Adj. Sess.), § 207, eff. July 1, 2022.)

• § 4514a. Part-time employees

  A nonprofit hospital service corporation shall not exclude part-time employees and shall offer the same insurance benefits to part-time employees as it offers to the employee groups of which the part-time employees would be members if they were full-time employees. The insurer shall offer to include the part-time employees as part of the employer’s employee group, at the full rate to be paid by the employer, at a rate prorated between the employer and the employee, or at the employee’s expense. “Part-time employee” means any employee who works a minimum of at least 17 1/2 hours per week. (Added 1989, No. 34, § 2.)

• § 4515. Form of contract

  In every such contract made, issued, or delivered in this State:

  (1) all printed portions shall be plainly printed in type of which the face is not smaller than 10 point;

  (2) there shall be a brief description of the contract on its first page and on its filing back in type of which the face is not smaller than 14 point;

  (3) the exceptions of the contract shall appear with the same prominence as the benefits to which they apply; and

  (4) if the contract contains a provision purporting to make a portion of the articles, constitution, or bylaws of the corporation a part of the contract, such portion thereof shall be set forth in full.

• § 4515a. Form and rate filing; filing fees

  Every contract or certificate form, or amendment thereof, including the rates proposed to be charged by the corporation, shall be filed with the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate, for the Commissioner’s or the Board’s approval prior to issuance or use. Prior to approval, there shall be a public comment period pursuant to section 4062 of this title. In addition, each such filing shall be accompanied by payment to the Commissioner or the Board, as appropriate, of a nonrefundable fee of $150.00 and the plain language summary of rate increases pursuant to section 4062 of this title. (Added 1985, No. 236 (Adj. Sess.), § 10; amended 1991, No. 166 (Adj. Sess.), § 10; 2011, No. 48, § 15b, eff. Jan. 1, 2012; 2013, No. 79, § 5h, eff. Jan. 1, 2014; 2021, No. 105 (Adj. Sess.), § 208, eff. July 1, 2022.)

• § 4516. Annual report to Commissioner

  Annually, on or before March 1, a hospital service corporation shall file with the Commissioner of Financial Regulation a statement sworn to by the president and treasurer of the corporation showing its condition on December 31. The statement shall be in such form and contain such matters as the Commissioner shall prescribe. To qualify for the tax exemption set forth in section 4518 of this title, the statement shall include a certification that the hospital service corporation operates on a nonprofit basis for the purpose of providing an adequate hospital service plan to individuals of the State, both groups and nongroups, without discrimination based on age, gender, geographic area, industry, and medical history, except as allowed by subdivisions 4080g(b)(7)(B)(ii) and 4080g(c)(8)(B)(ii) of this title and by 33 V.S.A. § 1811(f)(2)(B). (Amended 1989, No. 225 (Adj. Sess.), § 25; 1991, No. 52, § 3, eff. June 6, 1991; 1995, No. 180 (Adj. Sess.), § 38; 2005, No. 191 (Adj. Sess.), § 52; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2019, No. 103 (Adj. Sess.), § 23; 2021, No. 105 (Adj. Sess.), § 209, eff. July 1, 2022.)

• § 4517. Investments

  Funds of a hospital service corporation may be invested in any prudent investment as permitted for an insurance company formed under chapter 101 of this title. The corporation shall file and obtain the Commissioner’s prior approval of its investment guidelines. Any amendments to the investment guidelines must be approved by the Commissioner prior to use. (Amended 1997, No. 54, § 4, eff. June 26, 1997.)

• § 4518. Tax exemption

  A hospital service corporation shall be exempt from all forms of taxation except the health care claims tax assessed pursuant to 32 V.S.A. § 10402. (Amended 2003, No. 70 (Adj. Sess.), § 3, eff. March 1, 2004; 2019, No. 6, § 67, eff. April 22, 2019.)

• § 4519. Application of chapter

  (a) Hospital service corporations or associations formed prior to April 7, 1939 may continue their existence and may fulfill their contracts and enter into new contracts as now written, including provisions in their contracts for medical, surgical, and nursing as well as hospital services, provided that such contracts written after July 1, 1939 shall be subject to the approval of the Commissioner of Financial Regulation as provided in section 4513 of this title.

  (b) Except as set forth in subsection (a) of this section, a hospital service plan as described in this chapter shall not be established, maintained, or operated by an unincorporated association. All hospital service corporations organized after April 7, 1939 and their contracts shall be subject to the provisions of this chapter. (Amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 210, eff. July 1, 2022.)

• § 4520. Reciprocal provisions

  A corporation organized under the laws of another state or country that, except as to state of organization, is a hospital service corporation as defined by section 4511 of this title, and that the Commissioner finds has fully complied with the laws of such other state or country, shall be entitled to do business within this State, subject to the provisions of this chapter, after obtaining a license as provided by section 4513 of this title. But such corporation organized under the laws of another state or country shall not be entitled to such license or to do business in this State unless such other state or country grants substantially similar rights and privileges to hospital service corporations organized under the laws of this State. The Commissioner shall determine whether rights and privileges granted by other states or countries are substantially similar to those granted by this State, and his or her determination shall be final.

• § 4521. Effect on liability under workers’ compensation law

  The provisions of this chapter or any contract for hospital service shall in no way affect the liability of an employer under the provisions of the workers’ compensation law. (Amended 1981, No. 165 (Adj. Sess.), § 1.)

• § 4522. Exempt organizations

  Fraternal benefit societies and life or accident insurance companies are not affected by this chapter.

• § 4523. Change in control; material transactions; redomestication; establishment or acquisition of control of insurance company subsidiary

  (a)(1) No corporation permitted to engage in business under this chapter shall merge or consolidate with; sell, transfer, or exchange more than a 10-percent interest in the corporation or its assets to; sell, transfer, or exchange more than 10 percent of its subscribers to; or otherwise transfer or commit more than a 10-percent interest in itself to, any other person, whether accomplished through one transaction or a series of transactions, without the Commissioner’s prior written approval.

  (2) No corporation permitted to engage in business under this chapter shall transfer its domicile to any other state or jurisdiction without the prior written approval of the Commissioner.

  (3) A corporation permitted to engage in business under this chapter shall obtain the Commissioner’s written approval prior to establishing or acquiring control of a for-profit or nonprofit entity that is authorized to engage in the business of insurance under chapter 101 or 139 of this title or the insurance law of any other U.S. jurisdiction. As used in subdivision, “control” shall have the same meaning as in subdivision 3681(3) of this title. In addition to any other investment limitations established pursuant to this title, investments in entities authorized to engage in the business of insurance under chapter 101 or 139 of this title or the insurance law of any other U.S. jurisdiction shall be limited to 25 percent of total assets of the nonprofit hospital services corporation in the aggregate; provided, however, that this limitation shall exclude investments in existence on May 1, 2004.

  (b) A corporation shall make application to the Commissioner for approval of any transaction set forth in subsection (a) of this section describing in detail the proposed transaction and identifying the parties involved. The Commissioner may require the filing of additional information as the Commissioner finds necessary or appropriate for the full consideration of the application. The applicant shall establish to the Commissioner’s satisfaction that the transaction meets the general good of the State. To the extent applicable in the circumstances, the Commissioner shall consider, but is not limited to, the following factors in the general good determination:

  (1) whether, after the transaction, the corporation continues to satisfy the requirements for a permit to do business under this chapter;

  (2) whether the effect of the transaction would be to substantially lessen competition in health insurance in this State or tend to create a monopoly in health insurance in this State;

  (3) whether the financial condition of any acquiring or acquired party is such as might jeopardize the financial stability of the corporation, or prejudice the interest of its subscribers;

  (4) whether the transaction contemplates the liquidation of the corporation or any other material change in its business or corporate structure or management that would be unfair or unreasonable to its subscribers or not in the public interest;

  (5) whether the competence, experience, and integrity of those persons who would control the operation of the new entity or the acquiring or acquired party are such that it would not be in the interest of the public to permit the transaction;

  (6) whether the transaction will promote cost-effective, high-quality health care in the State; and

  (7) such other factors as the Commissioner deems relevant to the transaction.

  (c) The Commissioner shall investigate and hold at least one public hearing on the application. The public hearing shall be held within 30 days of the filing of a complete application with the Commissioner, and at least 20 days’ notice thereof shall be given by the Commissioner to the person filing the application and the Office of the Attorney General. The applicant shall give seven days’ notice to any person as ordered by the Commissioner. The Commissioner may order such public notice as may be deemed necessary for full consideration of the transaction. The Commissioner shall make a determination within 30 days after the conclusion of such hearing. If a determination of general good is made, the Commissioner shall give the corporation a certificate to that effect. In the event of conflict between the provisions of section 3305 or 3683 of this title and the provisions of this section, the provisions of this section shall control.

  (d) The Commissioner may consider the review or portion of a review of the transaction by the insurance department of another state, district, or territory of the United States, if the Commissioner finds that the review or portion of review conducted by the other jurisdiction is substantially similar in nature and scope as a review or portion of review under this section.

  (e) Any corporation permitted to engage in business under this chapter may, upon the approval of the Commissioner under subsections (a) and (b) of this section, and in compliance with such conditions as may be imposed by the Commissioner, transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction, and upon such a transfer shall cease to be a domestic corporation and its corporate or other legal existence in this State shall cease upon the filing of proof of such redomestication with the Secretary of State and upon payment to the Secretary of State of a filing fee in the amount of $100.00. Such corporation shall be permitted to do business in this State under this chapter as a foreign corporation, upon compliance with the qualification requirements for foreign corporations under section 4520 of this title. The Commissioner may require any corporation redomesticating under this section to form an adequately capitalized affiliate or subsidiary corporation under this chapter, whenever the Commissioner determines that such a requirement is in the best interests of members or subscribers and will promote the general good of the State.

  (f) A for-profit or not-for-profit entity established or acquired with the Commissioner’s approval granted under this section shall be governed by the provisions of chapter 101 or 139 of this title, as applicable, and not the provisions of this chapter, other than this section.

  (g) Nothing in this section shall be construed to limit any common law authority of the Attorney General with respect to a nonprofit health care conversion; nor shall this section be construed to limit the application of Title 11B to any transaction reviewable under this section.

  (h) Any application filed with the Commissioner under this section shall be accompanied by a fee of $10.00. (Added 1997, No. 54, § 5, eff. June 26, 1997; amended 2003, No. 163 (Adj. Sess.), § 41, eff. June 10, 2004; 2021, No. 105 (Adj. Sess.), § 211, eff. July 1, 2022.)