§ 5102b. Solvency protections
(a) Before issuing any certificate of authority, the Commissioner shall require that the
health maintenance organization have an initial net worth of $1,500,000.00 and shall
thereafter maintain the minimum net worth required under subsection (b) of this section.
(b) Every health maintenance organization must maintain a minimum net worth equal to the
greater of:
(1) $1,500,000.00;
(2) two percent of annual premium revenues as reported on the most recent annual financial
statement filed with the Commissioner on the first $150,000,000.00 of premium plus
one percent of annual premium on the premium in excess of $150,000,000.00;
(3) an amount equal to the sum of three months uncovered expenditures as reported on the
most recent financial statement filed with the Commissioner; or
(4) an amount equal to the sum of 10 percent of annual health care expenditures related
to its Vermont business except those paid on a capitated basis or managed hospital
payment basis as reported on the most recent financial statement filed with the Commissioner
plus four percent of annual hospital expenditures related to its Vermont business
paid on a managed hospital payment basis as reported on the most recent financial
statement filed with the Commissioner.
(c)(1) Unless otherwise provided in subdivisions (2) through (6) of this subsection, each
health maintenance organization shall deposit with the State Treasurer for the benefit
of all members of the health maintenance organization cash, securities listed by the
Securities Valuation Office of the National Association of Insurance Commissioners
or clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified
U.S. institution, approved by the Commissioner, or other security or collateral acceptable
to the Commissioner, which at all times shall have a value of not less than the greater
of $300,000.00 or 50 percent of the amount provided for in subdivision (b)(4) of this
section or such other amount as the Commissioner may require. The health maintenance
organization shall, on or before April 1 of each calendar year, calculate the amount
of the deposit required under this section and shall deposit with the State Treasurer
any additional amount required to meet the minimum required under this subsection.
(2) A health maintenance organization that is in operation on May 21, 1993 shall make
a deposit equal to one-half of the amount required by the Commissioner under this
subsection within 30 days of May 21, 1993. On or before the first day of the next
full calendar year, the health maintenance organization shall make a deposit equal
to one-half the amount required by the Commissioner under this subsection.
(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. 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 listed by the Securities
Valuation Office of the National Association of Insurance Commissioners, or any combination
of these or other security of equal amount and value. Any securities deposited under
this section shall be approved by the Commissioner before being deposited or substituted.
(5) The Commissioner may order the deposits of designated reserves to be used for the
protection of the health maintenance organization’s members and the continuation of
health care services to members of a health maintenance organization in the event
the Commissioner takes any actions under chapter 145 of this title. The Commissioner
may use the deposit for administrative costs directly attributable to the proceeding.
If the health maintenance organization is placed in receivership or liquidation, the
deposit shall be an asset subject to the provisions of chapter 145 of this title.
(6) In lieu of any other requirement of this subsection, the Commissioner may accept the
segregation for use in this State of designated reserves established by the health
maintenance organization under the laws of another jurisdiction, provided that such
reserves are found to be adequate by the Commissioner to meet the purpose of this
section and the domiciliary jurisdiction approves the commitment of such reserves
for use by the Commissioner.
(7) In lieu of any other requirement of this subsection, the Commissioner may accept any
instrument, surety, or other insurance policy found to be adequate to meet the purposes
of this section.
(d) Every contract between a health maintenance organization and a participating provider
of health care services shall be in writing and shall require that in the event the
health maintenance organization fails to pay for health care services as set forth
in the contract, the member shall not be liable to the provider for any sums owed
by the health maintenance organization.
(e) If the Commissioner determines that the premiums received by a health maintenance
organization for its Vermont members exceed $2,000,000.00 for any calendar year or
that the health maintenance organization was incorporated in a state without solvency
protections that are substantially equivalent to those offered under this chapter,
the Commissioner may order that Vermont contracts be conducted through an affiliate
or subsidiary corporation incorporated under Vermont law.
(f) The Commissioner shall require that each health maintenance organization have a plan
for handling its impairment or 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 impairment or insolvency in
an inpatient facility until their discharge or expiration of benefits. In considering
such a plan, the Commissioner may require:
(1) the health maintenance organization to procure 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 or until the member has been discharged from
inpatient facilities, whichever comes first;
(3) insolvency reserves;
(4) acceptable letters of credit; and
(5) any other arrangements to ensure that benefits are continued in accordance with this
subsection.
(g) If at any time uncovered expenditures exceed 10 percent of total health care expenditures,
the Commissioner may grant emergency rate increases and require a health maintenance
organization to build an uncovered expenditures insolvency deposit with the State
Treasurer in an amount not to exceed 120 percent of the health maintenance organization’s
outstanding liability for uncovered expenditures for members in this State, including
incurred but not reported claims. The deposit under this section shall be calculated
as of the first day of the month and maintained for the remainder of the month. The
amounts deposited under this subsection shall be in addition to the deposit required
under subsection (c) of this section.
(h) The deposit required under subsection (g) of this section may be used only as provided
under this subsection. The Commissioner may order the deposit to be used for administrative
costs associated with administering the deposit and for the payment of claims for
uncovered expenditures of members of the Vermont portion of its business. Claims for
uncovered expenditures shall be paid from the deposit and other available assets on
a pro rata basis. The Commissioner may order partial distributions pending final distribution.
Any amount of the deposit remaining after final distribution under this section shall
be paid over to the liquidator or rehabilitator of the health maintenance organization
and may be distributed in accordance with chapter 145 of this title.
(i)(1) In the event a health maintenance organization is declared insolvent under chapter
145 of this title, the Commissioner may order all other entities licensed or authorized
under this title that participated in the enrollment process with the insolvent health
maintenance organization at a group’s last regular enrollment period to offer such
group’s members a 30-day enrollment period commencing upon the date the insolvency
is declared by a court of competent jurisdiction. Each such entity shall notify and
offer such members of the insolvent health maintenance organization the same coverages
and rates that it had offered to the members of the group at its last regular enrollment
period.
(2) If no other such entity had been offered to some groups enrolled in the insolvent
health maintenance organization, or if the Commissioner determines that all other
health maintenance organizations lack sufficient health care delivery resources to
ensure that health care services will be available and accessible to all of the group
members of the insolvent health maintenance organization, the Commissioner may allocate
equitably the insolvent health maintenance organization’s group contracts for such
groups among all health maintenance organizations that operate within a portion of
the insolvent health maintenance organization’s service area, taking into consideration
the health care delivery resources of each health maintenance organization. Each health
maintenance organization to which a group or groups are so allocated shall notify
and offer such group or groups the health maintenance organization’s existing coverage
that is most similar to each group’s coverage with the insolvent health maintenance
organization at rates determined in accordance with the successor health maintenance
organization’s existing rating methodology.
(3) The Commissioner may also allocate equitably the insolvent health maintenance organization’s
nongroup members who are unable to obtain other coverage among all health maintenance
organizations that operate within a portion of the insolvent health maintenance organization’s
service area, taking into consideration the health care delivery resources of each
such health maintenance organization. Each health maintenance organization to which
nongroup members are allocated shall notify and offer such nongroup members the health
maintenance organization’s existing coverage for individual or conversion coverage
as determined by the type of coverage held in the insolvent health maintenance organization
but at rates determined in accordance with the successor health maintenance organization’s
existing rating methodology. Successor health maintenance organizations that do not
offer direct nongroup enrollment may aggregate all of the allocated nongroup members
into one group for rating and coverage purposes. Coverage made available under this
subsection shall be effective on the date the insolvency is declared.
(j) Any rehabilitation, liquidation, or conservation of a health maintenance organization
shall be deemed to be the rehabilitation, liquidation, or conservation of an insurance
company and shall be conducted under the supervision of the Commissioner pursuant
to chapter 145 of this title.
(k)(1) Whenever the Commissioner determines that the financial condition of any health maintenance
organization is such that its continued operation might be hazardous to its members,
creditors, or the general public, or that it has violated any provision of this chapter,
the Commissioner may, after notice and hearing, order the health maintenance organization
to take such action as may be reasonably necessary to rectify such condition or violation,
including one or more of the following:
(A) reduce the total amount of present and potential liability for benefits through reinsurance
or other method approved by the Commissioner;
(B) reduce the volume of new business accepted;
(C) suspend or limit the writing of new business for a period of time;
(D) increase the health maintenance organization’s capital and surplus by contribution;
or
(E) take such other steps as the Commissioner may deem appropriate under the circumstances.
(2) If the Commissioner finds that member protection requires emergency action, the Commissioner
may summarily order the health maintenance organization to take any action described
in subdivision (1) of this subsection, provided that notice and hearing is issued
as soon as practicable after such action is taken.
(l) The Commissioner shall adopt rules that establish solvency standards for provider-sponsored
networks, including provider-sponsored organizations, for the Medicare Advantage program,
as described in 42 U.S.C. § 1395w-21, in conformance with the solvency standards established by the Secretary of Health
and Human Services under 42 U.S.C. § 1395w-26. Provider-sponsored networks shall be licensed under this chapter to offer a Medicare
Advantage plan by complying with the solvency rules adopted under this subsection;
except that a provider-sponsored network that offers any health plan other than or
in addition to a Medicare Advantage plan shall comply with the solvency standards
of this chapter instead of those adopted specifically for Medicare Advantage plans
under this subsection. A provider-sponsored network licensed under this chapter shall
not be required to offer any insurance product apart from Medicare Advantage. As used
in this subsection, “provider-sponsored network” or “provider-sponsored organization”
shall have the same definition as in 42 U.S.C. § 1395w-25(d).
(m) The Commissioner may enter into contracts with the Secretary of Health and Human Services
for the administration of the Medicare Advantage program. (Added 1993, No. 30, § 7, eff. May 21, 1993; amended 1997, No. 159 (Adj. Sess.), § 4, eff. April 29, 1998; 2005, No. 36, § 18, eff. June 1, 2005.)