House Bill hb1373

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    Florida House of Representatives - 2002                HB 1373

        By Representative Negron






  1                      A bill to be entitled

  2         An act relating to solvency of insurers and

  3         health maintenance organizations; amending s.

  4         624.404, F.S.; revising a definition; amending

  5         s. 624.80, F.S.; revising a definition;

  6         amending s. 624.81, F.S.; specifying authority

  7         of the Department of Insurance relating to

  8         certain notice requirements; authorizing the

  9         department to adopt certain rules; amending s.

10         624.84, F.S.; specifying that administrative

11         review of certain orders does not operate as an

12         automatic stay of such orders; specifying that

13         certain actions are not subject to

14         administrative review; amending s. 641.26,

15         F.S.; revising certain annual report

16         requirements; amending s. 641.35, F.S.;

17         specifying inclusion of certain losses and

18         claims under liabilities of a health

19         maintenance organization under certain

20         circumstances; providing an exception; amending

21         s. 641.365, F.S.; revising limitations on

22         certain dividend payments or distributions to

23         stockholders by a health maintenance

24         organization; specifying criteria for making

25         payments, declaring dividends, or making

26         distributions; specifying criteria for

27         department approval of certain dividends or

28         distributions; providing an effective date.

29

30  Be It Enacted by the Legislature of the State of Florida:

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  1         Section 1.  Paragraph (b) of subsection (4) of section

  2  624.404, Florida Statutes, is amended to read:

  3         624.404  General eligibility of insurers for

  4  certificate of authority.--To qualify for and hold authority

  5  to transact insurance in this state, an insurer must be

  6  otherwise in compliance with this code and with its charter

  7  powers and must be an incorporated stock insurer, an

  8  incorporated mutual insurer, or a reciprocal insurer, of the

  9  same general type as may be formed as a domestic insurer under

10  this code; except that:

11         (4)

12         (b)  A "fronting company" is an authorized insurer

13  which by reinsurance or otherwise generally transfers more

14  than 50 percent to one unauthorized insurer which does not

15  meet the requirements of s. 624.610(3)(a), (b), or (c) is not

16  an approved reinsurer, or more than 75 percent to two or more

17  unauthorized insurers which do not meet the requirements of s.

18  624.610(3)(a), (b), or (c) are not approved reinsurers, of the

19  entire risk of loss on all of the insurance written by it in

20  this state, or on one or more lines of insurance, on all of

21  the business produced through one or more agents or agencies,

22  or on all of the business from a designated geographical

23  territory, without obtaining the prior approval of the

24  department.

25         Section 2.  Subsection (2) of section 624.80, Florida

26  Statutes, is amended to read:

27         624.80  Definitions.--As used in this part:

28         (2)  "Unsound condition" means that the department has

29  determined that one or more any of the following conditions

30  exist with respect to an insurer:

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  1         (a)  The insurer's required surplus, capital, or

  2  capital stock is impaired to an extent prohibited by law;

  3         (b)  The insurer continues to write new business when

  4  it has not maintained the required surplus or capital; or

  5         (c)  The insurer attempts to dissolve or liquidate

  6  without first having made provisions, satisfactory to the

  7  department, for liabilities arising from insurance policies

  8  issued by the insurer; or

  9         (d)  The insurer meets one or more of the grounds in s.

10  631.051 for the appointment of the department as receiver.

11         Section 3.  Subsections (1) and (6) of section 624.81,

12  Florida Statutes, are amended, and subsection (10) is added to

13  said section, to read:

14         624.81  Notice to comply with written requirements of

15  department; noncompliance.--

16         (1)  If the department determines that the conditions

17  set forth in subsection (2) exist, the department shall issue

18  an order placing notify the insurer in administrative

19  supervision writing of its determination, setting forth the

20  reasons giving rise to the determination, and specifying that

21  the department is applying and effectuating the provisions of

22  this part.

23         (6)  If the department and the insurer are unable to

24  agree on the provisions of the plan, the department may

25  require the insurer to take such corrective action as may be

26  reasonably necessary to remove the causes and conditions

27  giving rise to the need for administrative supervision proceed

28  under applicable provisions of this code other than the

29  provisions of this part.

30         (10)  The department may adopt rules consistent with

31  the National Association of Insurance Commissioners' 1997

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  1  "Model Regulation to Define Standards and Commissioner's

  2  Authority for Companies Deemed to Be in Hazardous Financial

  3  Condition," which are necessary to implement the provisions of

  4  this part.

  5         Section 4.  Section 624.84, Florida Statutes, is

  6  amended to read:

  7         624.84  Review and stay of action.--Review under s.

  8  120.57 of an order placing an insurer in administrative

  9  supervision does not operate as an automatic stay of the

10  order. During the period of supervision, the actions taken or

11  proposed to be taken by the supervisor are not subject to

12  review under chapter 120. During the period of supervision,

13  the insurer may contest an action taken or proposed to be

14  taken by the supervisor, specifying the manner wherein the

15  action complained of would not result in improving the

16  condition of the insurer, and the request shall stay the

17  action specified pending reconsideration of the action by the

18  department. If upon reconsideration the action of the

19  department is upheld, the stay shall be lifted.  Denial of the

20  insurer's request upon reconsideration entitles the insurer to

21  request a proceeding under ss. 120.569 and 120.57.

22         Section 5.  Paragraph (f) of subsection (1) and

23  subsections (3) and (8) of section 641.26, Florida Statutes,

24  are amended to read:

25         641.26  Annual report.--

26         (1)  Every health maintenance organization shall,

27  annually within 3 months after the end of its fiscal year, or

28  within an extension of time therefor as the department, for

29  good cause, may grant, in a form prescribed by the department,

30  file a report with the department, verified by the oath of two

31  officers of the organization or, if not a corporation, of two

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  1  persons who are principal managing directors of the affairs of

  2  the organization, properly notarized, showing its condition on

  3  the last day of the immediately preceding reporting period.

  4  Such report shall include:

  5         (f)  An actuarial certification that:

  6         1.  The health maintenance organization is actuarially

  7  sound, which certification shall consider the rates, benefits,

  8  and expenses of, and any other funds available for the payment

  9  of obligations of, the organization.

10         2.  The rates being charged or to be charged are

11  actuarially adequate to the end of the period for which rates

12  have been guaranteed.

13         3.  Incurred but not reported claims and claims

14  reported but not fully paid have been adequately provided for.

15         4.  The health maintenance organization has adequately

16  provided for all obligations required by s. 641.35(3)(a).

17         (3)  Every health maintenance organization shall file

18  quarterly, for the first three calendar quarters of each year

19  within 45 days after each of its quarterly reporting periods,

20  an unaudited financial statement of the organization as

21  described in paragraphs (1)(a) and (b). The statement for the

22  quarter ending March 31 shall be filed on or before May 15,

23  the statement for the quarter ending June 30 shall be filed on

24  or before August 15, and the statement for the quarter ending

25  September 30 shall be filed on or before November 15. The

26  quarterly report shall be verified by the oath of two officers

27  of the organization, properly notarized.

28         (8)  Each health maintenance organization shall file

29  one copy of its annual statement convention blank in

30  electronic form, along with such additional filings as

31  prescribed by the department for the preceding calendar year

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  1  or quarter, with the National Association of Insurance

  2  Commissioners.  Each health maintenance organization shall pay

  3  fees assessed by the National Association of Insurance

  4  Commissioners to the department a reasonable fee to cover

  5  costs associated with the filing and analysis of the documents

  6  by the National Association of Insurance Commissioners.

  7         Section 6.  Paragraph (a) of subsection (3) of section

  8  641.35, Florida Statutes, is amended to read:

  9         641.35  Assets, liabilities, and investments.--

10         (3)  LIABILITIES.--In any determination of the

11  financial condition of a health maintenance organization,

12  liabilities to be charged against its assets shall include:

13         (a)  The amount, estimated consistently with the

14  provisions of this part, necessary to pay all of its unpaid

15  losses and claims incurred for or on behalf of a subscriber,

16  on or prior to the end of the reporting period, whether

17  reported or unreported, including contract and premium

18  deficiency reserves. If a health maintenance organization,

19  through a capitation or other contractual arrangement,

20  transfers to any entity other than this state, the United

21  States, or an agency thereof or to an insurer or health

22  maintenance organization authorized in this state the

23  obligation to pay any provider for any claim arising from

24  services provided to or for the benefit of any subscriber, for

25  purposes of determining the financial condition of the health

26  maintenance organization, the liabilities of the health

27  maintenance organization under this section shall include the

28  amount of those losses and claims to the extent that the

29  provider has not received payment therefor, unless obligations

30  under such contracts are secured by a financial instrument

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  1  acceptable to the department which assures full payment of

  2  those claims.

  3

  4  The department, upon determining that a health maintenance

  5  organization has failed to report liabilities that should have

  6  been reported, shall require a corrected report which reflects

  7  the proper liabilities to be submitted by the organization to

  8  the department within 10 working days of receipt of written

  9  notification.

10         Section 7.  Subsections (1) and (2) of section 641.365,

11  Florida Statutes, are amended to read:

12         641.365  Dividends.--

13         (1)(a)  A health maintenance organization shall not pay

14  any dividend or distribute cash or other property to

15  stockholders except out of that part of its available and

16  accumulated surplus funds which is derived from realized net

17  operating profits on its business and net realized capital

18  gains.  Dividend payments or distributions to stockholders

19  shall not exceed 10 percent of such surplus in any one year

20  unless otherwise approved by the department.  In addition to

21  such limited payments, a health maintenance organization may

22  make dividend payments or distributions out of the health

23  maintenance organization's entire net operating profits and

24  realized net capital gains derived during the immediately

25  preceding calendar or fiscal year, as applicable.

26         (b)  In no event shall a health maintenance

27  organization pay or declare any dividend or distribute cash or

28  other property to or on behalf of any stockholder if,

29  immediately before or after such distribution, the health

30  maintenance organization's available and accumulated surplus

31  funds, which are derived from realized net operating profits

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  1  on its business and net realized gains, are or would be less

  2  than zero.

  3         (c)  A health maintenance organization may make

  4  dividend payments or distributions to stockholders without the

  5  prior written approval of the department when:

  6         1.  The dividend is equal to or less than the greater

  7  of:

  8         a.  Ten percent of the health maintenance

  9  organization's accumulated surplus funds which are derived

10  from realized net operating profits on its business and net

11  realized capital gains as of the immediate preceding calendar

12  year; or

13         b.  The health maintenance organization's entire net

14  operating profit and realized net capital gains derived during

15  the immediately preceding calendar year.

16         2.  The health maintenance organization will have

17  surplus equal to or exceeding 115 percent of the minimum

18  required statutory surplus after the dividend or distribution

19  is made.

20         3.  The health maintenance organization has filed a

21  notice with the department at least 30 days prior to the

22  dividend payment or distribution, or such shorter period of

23  time as approved by the department on a case-by-case basis.

24         4.  The notice includes a certification by an officer

25  of the health maintenance organization attesting that after

26  payment of the dividend or distribution the health maintenance

27  organization will have at least 115 percent of required

28  statutory surplus.

29         (2)  The department shall not approve a dividend or

30  distribution in excess of the maximum amount allowed in

31  subsection (1) unless it determines that the distribution or

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  1  dividend would not jeopardize the financial condition of the

  2  health maintenance organization, considering:

  3         (a)  The liquidity, quality, and diversification of the

  4  health maintenance organization's assets and the effect on its

  5  ability to meet its obligations.

  6         (b)  Any reduction of investment portfolio and

  7  investment income.

  8         (c)  Industrywide financial conditions.

  9         (d)  Prior dividend distributions of the health

10  maintenance organization.

11         (e)  Whether the dividend is only a pass-through

12  dividend from a subsidiary of the health maintenance

13  organization.

14         Section 8.  This act shall take effect October 1, 2002.

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17                          HOUSE SUMMARY

18
      Revises various provisions relating to Department of
19    Insurance administration of solvency provisions as
      applied to insurers or health maintenance organizations.
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