Section 26-A3506. PROTECTION AGAINST INSOLVENCY - NET WORTH AND DEPOSIT REQUIREMENTS, LIABILITIES, AND HOLD HARMLESS

 

3506.1An HMO shall have an initial net worth of one million five hundred thousand dollars ($ 1,500,000) prior to the issuance of the certificate of authority.

 

3506.2After the issuance of the certificate of authority an HMO shall maintain a minimum net worth equal to the greater of:

 

(a)One million dollars ($ 1,000,000);

 

(b)Two percent (2%) of the annual dues revenues as reported on the most recent annual statement filed with the Commissioner on the first one hundred fifty million dollars ($ 150,000,000) of dues plus one percent (1%) of the annual dues in excess of one hundred fifty million dollars ($ 150,000,000);

 

(c)An amount equal to the sum of three (3) months uncovered health care expenditures as reported on the most recent financial statement filed with the Commissioner; or

 

(d)An amount equal to the sum of:

 

(1)eight percent (8%) of annual health care expenditures except those paid on a capitated basis or a managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner; and

 

(2)four percent (4%) of annual hospital expenditures paid on a managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner.

 

3506.3In determining minimum net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the Commissioner. An interest obligation relating to the repayment of subordinated debt must be similariy subordinated. The interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses. A debt incurred by a note meeting the requirements of section 13 of the Act, D.C. Code § 35-4512, and otherwise acceptable to the Commissioner shall not be considered a liability and shall be recorded as equity.

 

3506.4An HMO shall deposit with the Commissioner or, at the discretion of the Commissioner, with any organization or trustee acceptable to the Commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these items or other measures that are acceptable to the Commissioner which at all times shall have a value of not less than three hundred thousand dollars ($ 300,000).

 

3506.5The deposit shall be considered an admitted asset of the HMO for purposes of determining its net worth.

 

3506.6All income from deposits shall be an asset of the HMO.

 

3506.7An HMO that has made a deposit of securities may withdraw the deposit or any part thereof, after making a substitute deposit of cash, securities, or any combination of these or other measures of equal amount and value.

 

3506.8All securities must be approved by the Commissioner before being deposited or substituted.

 

3506.9The deposit shall be used to offset administrative costs directly related to receivership or liquidation and shall be considered an asset for purposes of liquidation.

 

3506.10The HMO's deposit requirement may be reduced or eliminated by the Commissioner if the HMO makes a deposit for the protection of all enrollees with the Commissioner, District treasurer or other District official body, or with the jurisdiction of the HMO's domicile. The deposit shall consist of cash, acceptable securities, or surety and the HMO shall deliver a certificate to that effect to the Commissioner. The certificate shall be authenticated by the regulatory authority of the HMO's domiciliary, or by the appropriate District official holding the deposit.

 

3506.11Every HMO shall, when determining liabilities, include an estimated amount in the aggregate to provide for any unearned dues and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which the organization is or may be liable, and to provide for the expense of adjustment or settlement of such claims. Such liabilities may be computed in accordance with generally accepted accounting principles.

 

3506.12Every contract between an HMO and participating provider of health care services shall be in writing and shall provide that in the event an HMO fails to pay for health care services as set forth in the contract, the enrollee will not be liable to the provider for any sums owed by the HMO.

 

3506.13In the event that the participating provider contract is not in writing or the contract fails to include the prohibition described in subsection 3506.12, the participating provider shall not collect or attempt to collect from the enrollee sums owed by an HMO.

 

3506.14No action at law can be brought by the participating provider, agent, trustee or assignee against the enrollee to collect sums owed by the HMO.

 

3506.15An HMO shall have an insolvency plan which allows for the continuation of benefits for the duration of the contract period for which premiums have been paid and continuation benefits to members who are confined on the date of insolvency in an inpatient facility until their discharge or expiration of benefits.

 

3506.16The Commissioner may require the following item(s) when considering an HMO's insolvency plan:

 

(a)Insurance to cover the expenses to be paid for continued benefits after insolvency;

 

(b)Provisions in provider contracts that obligate the provider to provide services for the duration of the period after an HMO's insolvency for which premium payment has been made and until the enrollee's discharge from inpatient facilities;

 

(c)Insolvency reserves;

 

(d)Acceptable letters of credit; and

 

(e)Any other arrangements that to assure a continuation of benefits.

 

source

Final Rulemaking published at 46 DCR 7291(September 17, 1999).