1.1 A bill for an act
1.2 relating to commerce; establishing risk-based capital
1.3 requirements for health organizations; establishing
1.4 the minimum standard of valuation for health
1.5 insurance; enacting model regulations of the National
1.6 Association of Insurance Commissioners; regulating
1.7 loss revenue certifications; changing other health
1.8 plan requirements; making various securities
1.9 regulation technical changes; amending Minnesota
1.10 Statutes 2002, sections 45.027, subdivision 7a;
1.11 60A.03, subdivision 9; 60A.031, subdivision 4;
1.12 60A.129, subdivision 2; 62A.02, subdivision 2; 62C.09,
1.13 by adding a subdivision; 62D.04, subdivision 1;
1.14 62D.041, subdivision 2; 62D.042, subdivisions 1, 2;
1.15 62N.25, subdivision 6; 62N.27, subdivision 1; 62N.29;
1.16 72A.20, by adding a subdivision; proposing coding for
1.17 new law in Minnesota Statutes, chapters 60A; 62Q;
1.18 repealing Minnesota Statutes 2002, sections 62C.09,
1.19 subdivisions 3, 4; 62D.042, subdivisions 5, 6, 7;
1.20 62D.043; Minnesota Rules, part 4685.0600.
1.21 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.22 ARTICLE 1
1.23 RISK-BASED CAPITAL FOR HEALTH ORGANIZATIONS
1.24 Section 1. [60A.50] [DEFINITIONS.]
1.25 Subdivision 1. [SCOPE.] For purposes of sections 60A.50 to
1.26 60A.592 the terms in subdivisions 2 to 12 have the meanings
1.27 given them.
1.28 Subd. 2. [ADJUSTED RBC REPORT] "Adjusted RBC report" means
1.29 an RBC report which has been adjusted by the commissioner in
1.30 accordance with section 60A.51, subdivision 4.
1.31 Subd. 3. [COMMISSIONER.] "Commissioner" means the
1.32 commissioner of commerce or the commissioner of health,
1.33 whichever commissioner otherwise regulates the health
2.1 organization.
2.2 Subd. 4. [CORRECTIVE ORDER.] "Corrective order" means an
2.3 order issued by the commissioner specifying corrective actions
2.4 which the commissioner has determined are required.
2.5 Subd. 5. [DOMESTIC HEALTH ORGANIZATION.] "Domestic health
2.6 organization" means a health organization domiciled in this
2.7 state.
2.8 Subd. 6. [FOREIGN HEALTH ORGANIZATION.] "Foreign health
2.9 organization" means a health organization that is licensed to do
2.10 business in this state but is not domiciled in this state.
2.11 Subd. 7. [NAIC.] "NAIC" means the National Association of
2.12 Insurance Commissioners.
2.13 Subd. 8. [HEALTH ORGANIZATION.] "Health organization"
2.14 means an entity licensed or regulated under this chapter or
2.15 chapter 62C or 62D. This definition does not include an
2.16 organization that is licensed as either a life and health
2.17 insurer or a property and casualty insurer that is otherwise
2.18 subject to either the life or property and casualty risk-based
2.19 capital requirements.
2.20 Subd. 9. [RBC INSTRUCTIONS.] "RBC instructions" means the
2.21 RBC report including risk-based capital instructions adopted by
2.22 the NAIC, as these RBC instructions may be amended by the NAIC
2.23 from time to time in accordance with the procedures adopted by
2.24 the NAIC.
2.25 Subd. 10. [RBC LEVEL.] "RBC level" means a health
2.26 organization's company action level RBC, regulatory action level
2.27 RBC, authorized control level RBC, or mandatory control level
2.28 RBC where:
2.29 (1) "company action level RBC" means, with respect to any
2.30 health organization, the product of 2.0 and its authorized
2.31 control level RBC;
2.32 (2) "regulatory action level RBC" means the product of 1.5
2.33 and its authorized control level RBC;
2.34 (3) "authorized control level RBC" means the number
2.35 determined under the risk-based capital formula in accordance
2.36 with the RBC instructions; and
3.1 (4) "mandatory control level RBC" means the product of .70
3.2 and the authorized control level RBC.
3.3 Subd. 11. [RBC PLAN.] "RBC plan" means a comprehensive
3.4 financial plan containing the elements specified in section
3.5 60A.52, subdivision 2. If the commissioner rejects the RBC
3.6 plan, and it is revised by the health organization, with or
3.7 without the commissioner's recommendation, the plan must be
3.8 called the "revised RBC plan."
3.9 Subd. 12. [RBC REPORT.] "RBC report" means the report
3.10 required in section 60A.51.
3.11 Subd. 13. [TOTAL ADJUSTED CAPITAL.] "Total adjusted
3.12 capital" means the sum of:
3.13 (1) a health organization's statutory capital and surplus
3.14 as determined in accordance with the statutory accounting
3.15 applicable to the annual financial statements required to be
3.16 filed; and
3.17 (2) such other items, if any, as the RBC instructions may
3.18 provide.
3.19 Sec. 2. [60A.51] [RBC REPORTS.]
3.20 Subdivision 1. [SUBMISSIONS.] A domestic health
3.21 organization shall, on or before each April 1, prepare and
3.22 submit to the commissioner a report of its RBC levels as of the
3.23 end of the calendar year just ended, in a form and containing
3.24 the information required by the RBC instructions. In addition,
3.25 a domestic health organization shall file its RBC report:
3.26 (1) with the NAIC in accordance with the RBC instructions;
3.27 and
3.28 (2) with the insurance commissioner in any state in which
3.29 the health organization is authorized to do business, if the
3.30 insurance commissioner has notified the health organization of
3.31 its request in writing, in which case the health organization
3.32 shall file its RBC report not later than the later of:
3.33 (i) 15 days from the receipt of notice to file its RBC
3.34 report with that state; or
3.35 (2) the filing date.
3.36 Subd. 2. [DETERMINATION.] A health organization's RBC must
4.1 be determined in accordance with the formula set forth in the
4.2 RBC instructions. The formula must take the following into
4.3 account, and may adjust for the covariance between, determined
4.4 in each case by applying the factors in the manner set forth in
4.5 the RBC instructions:
4.6 (1) asset risk;
4.7 (2) credit risk;
4.8 (3) underwriting risk; and
4.9 (4) all other business risks and such other relevant risks
4.10 as are set forth in the RBC instructions.
4.11 Subd. 3. [ADDITIONAL CAPITAL.] An excess of capital over
4.12 the amount produced by the risk-based capital requirements
4.13 contained in the act and the formulas, schedules, and
4.14 instructions referenced in sections 60A.50 to 60A.592 is
4.15 desirable in the business of health insurance. Accordingly,
4.16 health organizations should seek to maintain capital above the
4.17 RBC levels required by sections 60A.50 to 60A.592. Additional
4.18 capital is used and useful in the insurance business and helps
4.19 to secure a health organization against various risks inherent
4.20 in, or affecting, the business of insurance and not accounted
4.21 for or only partially measured by the risk-based capital
4.22 requirements contained in sections 60A.50 to 60A.592.
4.23 Subd. 4. [ADJUSTED REPORT.] If a domestic health
4.24 organization files an RBC report that in the judgment of the
4.25 commissioner is inaccurate, then the commissioner shall adjust
4.26 the RBC report to correct the inaccuracy and shall notify the
4.27 health organization of the adjustment. The notice must contain
4.28 a statement of the reason for the adjustment. An RBC report as
4.29 so adjusted is referred to as an "adjusted RBC report."
4.30 Sec. 3. [60A.52] [COMPANY ACTION LEVEL EVENT.]
4.31 Subdivision 1. [DEFINITION.] "Company action level event"
4.32 means the following events:
4.33 (1) the filing of an RBC report by a health organization
4.34 that indicates that the health organization's total adjusted
4.35 capital is greater than or equal to its regulatory action level
4.36 RBC but less than its company action level RBC;
5.1 (2) notification by the commissioner to the health
5.2 organization of an adjusted RBC report that indicates an event
5.3 in clause (1), provided the health organization does not
5.4 challenge the adjusted RBC report under section 60A.56; or
5.5 (3) if, pursuant to section 60A.56, a health organization
5.6 challenges an adjusted RBC report that indicates the event in
5.7 clause (1), the notification by the commissioner to the health
5.8 organization that the commissioner has, after a hearing,
5.9 rejected the health organization's challenge.
5.10 Subd. 2. [RBC PLAN REQUIRED.] In the event of a company
5.11 action level event, the health organization shall prepare and
5.12 submit to the commissioner an RBC plan that:
5.13 (1) identifies the conditions that contribute to the
5.14 company action level event;
5.15 (2) contains proposals of corrective actions that the
5.16 health organization intends to take and that would be expected
5.17 to result in the elimination of the company action level event;
5.18 (3) provides projections of the health organization's
5.19 financial results in the current year and at least the two
5.20 succeeding years, both in the absence of proposed corrective
5.21 actions and giving effect to the proposed corrective actions,
5.22 including projections of statutory balance sheets, operating
5.23 income, net income, capital and surplus, and RBC levels. The
5.24 projections for both new and renewal business might include
5.25 separate projections for each major line of business and
5.26 separately identify each significant income, expense, and
5.27 benefit component;
5.28 (4) identifies the key assumptions impacting the health
5.29 organization's projections and the sensitivity of the
5.30 projections to the assumptions; and
5.31 (5) identifies the quality of, and problems associated
5.32 with, the health organization's business, including, but not
5.33 limited to, its assets, anticipated business growth and
5.34 associated surplus strain, extraordinary exposure to risk, mix
5.35 of business, and use of reinsurance, if any, in each case.
5.36 Subd. 3. [RBC PLAN SUBMISSION.] The RBC plan must be
6.1 submitted:
6.2 (1) within 45 days of the Company Action Level Event; or
6.3 (2) if the health organization challenges an adjusted RBC
6.4 report pursuant to section 60A.56, within 45 days after
6.5 notification to the health organization that the commissioner
6.6 has, after a hearing, rejected the health organization's
6.7 challenge.
6.8 Subd. 4. [RBC PLAN IMPLEMENTATION.] Within 60 days after
6.9 the submission by a health organization of an RBC plan to the
6.10 commissioner, the commissioner shall notify the health
6.11 organization whether the RBC plan must be implemented or is, in
6.12 the judgment of the commissioner, unsatisfactory. If the
6.13 commissioner determines the RBC plan is unsatisfactory, the
6.14 notification to the health organization must set forth the
6.15 reasons for the determination, and may set forth proposed
6.16 revisions which will render the RBC plan satisfactory, in the
6.17 judgment of the commissioner. Upon notification from the
6.18 commissioner, the health organization shall prepare a revised
6.19 RBC plan, which may incorporate by reference any revisions
6.20 proposed by the commissioner, and shall submit the revised RBC
6.21 plan to the commissioner:
6.22 (1) within 45 days after the notification from the
6.23 commissioner; or
6.24 (2) if the health organization challenges the notification
6.25 from the commissioner under section 60A.56, within 45 days after
6.26 a notification to the health organization that the commissioner
6.27 has, after a hearing, rejected the health organization's
6.28 challenge.
6.29 Subd. 5. [UNSATISFACTORY PLAN.] In the event of a
6.30 notification by the commissioner to a health organization that
6.31 the health organization's RBC plan or revised RBC plan is
6.32 unsatisfactory, the commissioner may, at the commissioner's
6.33 discretion, subject to the health organization's right to a
6.34 hearing under section 60A.56, specify in the notification that
6.35 the notification constitutes a regulatory action level event.
6.36 Subd. 6. [ADDITIONAL FILING.] Every domestic health
7.1 organization that files an RBC plan or revised RBC plan with the
7.2 commissioner shall file a copy of the RBC plan or revised RBC
7.3 plan with the insurance commissioner in any state in which the
7.4 health organization is authorized to do business if:
7.5 (1) the state has an RBC provision substantially similar in
7.6 section 60A.57, subdivision 1; and
7.7 (2) the insurance commissioner of that state has notified
7.8 the health organization of its request for the filing in
7.9 writing, in which case the health organization shall file a copy
7.10 of the RBC plan or revised RBC plan in that state no later than
7.11 the later of:
7.12 (i) 15 days after the receipt of notice to file a copy of
7.13 its RBC plan or revised RBC plan with the state; or
7.14 (ii) the date on which the RBC plan or revised RBC plan is
7.15 filed under subdivisions 3 and 4.
7.16 Sec. 4. [60A.53] [REGULATORY ACTION LEVEL EVENT.]
7.17 Subdivision 1. [DEFINITION.] "Regulatory action level
7.18 event" means, with respect to a health organization, any of the
7.19 following events:
7.20 (1) the filing of an RBC report by the health organization
7.21 that indicates that the health organization's total adjusted
7.22 capital is greater than or equal to its authorized control level
7.23 RBC but less than its regulatory action level RBC;
7.24 (2) notification by the commissioner to a health
7.25 organization of an adjusted RBC report that indicates the event
7.26 in clause (1), provided the health organization does not
7.27 challenge the adjusted RBC report under section 60A.56;
7.28 (3) if, pursuant to section 60A.56, the health organization
7.29 challenges an adjusted RBC report that indicates the event in
7.30 clause (1), the notification by the commissioner to the health
7.31 organization that the commissioner has, after a hearing,
7.32 rejected the health organization's challenge;
7.33 (4) the failure of the health organization to file an RBC
7.34 report by the filing date, unless the health organization has
7.35 provided an explanation for the failure that is satisfactory to
7.36 the commissioner and has cured the failure within ten days after
8.1 the filing date;
8.2 (5) the failure of the health organization to submit an RBC
8.3 plan to the commissioner within the time period set forth in
8.4 section 60A.52, subdivision 3;
8.5 (6) notification by the commissioner to the health
8.6 organization that:
8.7 (i) the RBC plan or revised RBC plan submitted by the
8.8 health organization is, in the judgment of the commissioner,
8.9 unsatisfactory; and
8.10 (ii) notification constitutes a regulatory action level
8.11 event with respect to the health organization, provided the
8.12 health organization has not challenged the determination under
8.13 section 60A.56;
8.14 (7) if, pursuant to section 60A.56, the health organization
8.15 challenges a determination by the commissioner under clause (6),
8.16 the notification by the commissioner to the health organization
8.17 that the commissioner has, after a hearing, rejected the
8.18 challenge;
8.19 (8) notification by the commissioner to the health
8.20 organization that the health organization has failed to adhere
8.21 to its RBC plan or revised RBC plan, but only if the failure has
8.22 a substantial adverse effect on the ability of the health
8.23 organization to eliminate the company action level event in
8.24 accordance with its RBC plan or revised RBC plan and the
8.25 commissioner has so stated in the notification, provided the
8.26 health organization has not challenged the determination under
8.27 section 60A.50; or
8.28 (9) if, pursuant to section 60A.56, the health organization
8.29 challenges a determination by the commissioner under clause (8),
8.30 the notification by the commissioner to the health organization
8.31 that the commissioner has, after a hearing, rejected the
8.32 challenge.
8.33 Subd. 2. [COMMISSIONER'S DUTIES.] In the event of a
8.34 regulatory action level event the commissioner shall:
8.35 (1) require the health organization to prepare and submit
8.36 an RBC plan or, if applicable, a revised RBC plan;
9.1 (2) perform any examination or analysis the commissioner
9.2 considers necessary of the assets, liabilities, and operations
9.3 of the health organization, including a review of its RBC plan
9.4 or revised RBC plan; and
9.5 (3) after the examination or analysis, issue a corrective
9.6 order specifying the corrective actions the commissioner
9.7 determines are required.
9.8 Subd. 3. [CORRECTIVE ACTIONS.] In determining corrective
9.9 actions, the commissioner may take into account factors the
9.10 commissioner considers relevant with respect to the health
9.11 organization based upon the commissioner's examination or
9.12 analysis of the assets, liabilities, and operations of the
9.13 health organization, including, but not limited to, the results
9.14 of any sensitivity tests undertaken pursuant to the RBC
9.15 instructions. The RBC plan or revised RBC plan must be
9.16 submitted:
9.17 (1) within 45 days after the occurrence of the regulatory
9.18 action level event;
9.19 (2) if the health organization challenges an adjusted RBC
9.20 report pursuant to section 60A.56 and the challenge is not
9.21 frivolous in the judgment of the commissioner within 45 days
9.22 after the notification to the health organization that the
9.23 commissioner has, after a hearing, rejected the health
9.24 organization's challenge; or
9.25 (3) if the health organization challenges a revised RBC
9.26 plan pursuant to section 60A.56 and the challenge is not
9.27 frivolous in the judgment of the commissioner, within 45 days
9.28 after the notification to the health organization that the
9.29 commissioner has, after a hearing, rejected the health
9.30 organization's challenge.
9.31 Subd. 4. [CONSULTANTS.] The commissioner may retain
9.32 actuaries and investment experts and other consultants as may be
9.33 necessary in the judgment of the commissioner to review the
9.34 health organization's RBC plan or revised RBC plan, examine or
9.35 analyze the assets, liabilities, and operations, including
9.36 contractual relationships, of the health organization and
10.1 formulate the corrective order with respect to the health
10.2 organization. The fees, costs, and expenses relating to
10.3 consultants must be borne by the affected health organization or
10.4 such other party as directed by the commissioner.
10.5 Sec. 5. [60A.54] [AUTHORIZED CONTROL LEVEL EVENT.]
10.6 Subdivision 1. [DEFINITION.] "Authorized control level
10.7 event" means any of the following events:
10.8 (1) the filing of an RBC report by the health organization
10.9 that indicates that the health organization's total adjusted
10.10 capital is greater than or equal to its mandatory control level
10.11 RBC but less than its authorized control level RBC;
10.12 (2) the notification by the commissioner to the health
10.13 organization of an adjusted RBC report that indicates the event
10.14 in clause (1), provided the health organization does not
10.15 challenge the adjusted RBC report under section 60A.56;
10.16 (3) if, pursuant to section 60A.56, the health organization
10.17 challenges an adjusted RBC report that indicates the event in
10.18 clause (1), notification by the commissioner to the health
10.19 organization that the commissioner has, after a hearing,
10.20 rejected the health organization's challenge;
10.21 (4) the failure of the health organization to respond, in a
10.22 manner satisfactory to the commissioner, to a corrective order,
10.23 provided the health organization has not challenged the
10.24 corrective order under section 60A.56; or
10.25 (5) if the health organization has challenged a corrective
10.26 order under section 60A.56 and the commissioner has, after a
10.27 hearing, rejected the challenge or modified the corrective
10.28 order, the failure of the health organization to respond, in a
10.29 manner satisfactory to the commissioner, to the corrective order
10.30 subsequent to rejection or modification by the commissioner.
10.31 Subd. 2. [COMMISSIONER'S DUTIES.] In the event of an
10.32 authorized control level event with respect to a health
10.33 organization, the commissioner shall:
10.34 (1) take such actions as are required under section 60A.53
10.35 regarding a health organization with respect to which a
10.36 regulatory action level event has occurred; or
11.1 (2) if the commissioner considers it to be in the best
11.2 interests of the policyholders and creditors of the health
11.3 organization and of the public, take such actions as are
11.4 necessary to cause the health organization to be placed under
11.5 regulatory control under chapter 60B. In the event the
11.6 commissioner takes such actions, the authorized control level
11.7 event is considered sufficient grounds for the commissioner to
11.8 take action under chapter 60B, and the commissioner shall have
11.9 the rights, powers, and duties with respect to the health
11.10 organization as are set forth in chapter 60B. In the event the
11.11 commissioner takes actions under this clause pursuant to an
11.12 adjusted RBC report, the health organization is entitled to the
11.13 protections afforded health organizations under sections 60B.11
11.14 and 60B.13 pertaining to summary proceedings.
11.15 Sec. 6. [60A.55] [MANDATORY CONTROL LEVEL EVENT.]
11.16 Subdivision 1. [DEFINITION.] "Mandatory control level
11.17 event" means any of the following events:
11.18 (1) the filing of an RBC report which indicates that the
11.19 health organization's total adjusted capital is less than its
11.20 mandatory control level RBC;
11.21 (2) notification by the commissioner to the health
11.22 organization of an adjusted RBC report that indicates the event
11.23 in clause (1), provided the health organization does not
11.24 challenge the adjusted RBC report under section 60A.56; or
11.25 (3) if, pursuant to section 60A.56, the health organization
11.26 challenges an adjusted RBC report that indicates the event in
11.27 clause (1), notification by the commissioner to the health
11.28 organization that the commissioner has, after a hearing,
11.29 rejected the health organization's challenge.
11.30 Subd. 2. [COMMISSIONER'S DUTIES.] (a) In the event of a
11.31 mandatory control level event, the commissioner shall take such
11.32 actions as are necessary to place the health organization under
11.33 regulatory control under section 60B.13. In that event, the
11.34 mandatory control level event is considered sufficient grounds
11.35 for the commissioner to take action under section 60B.13, and
11.36 the commissioner shall have the rights, powers, and duties with
12.1 respect to the health organization as are set forth in section
12.2 60B.13. If the commissioner takes actions pursuant to an
12.3 adjusted RBC report, the health organization is entitled to the
12.4 protections of sections 60B.11 and 60B.13 pertaining to summary
12.5 proceedings.
12.6 (b) Notwithstanding paragraph (a), the commissioner may
12.7 forego action for up to 90 days after the mandatory control
12.8 level event if the commissioner finds there is a reasonable
12.9 expectation that the mandatory control level event may be
12.10 eliminated within the 90-day period.
12.11 Sec. 7. [60A.56] [HEARINGS.]
12.12 Upon the occurrence of any of the following events, the
12.13 health organization has the right to a confidential departmental
12.14 hearing, on a record, at which the health organization may
12.15 challenge any determination or action by the commissioner. The
12.16 health organization shall notify the commissioner of its request
12.17 for a hearing within five days after the notification by the
12.18 commissioner under clause (1), (2), (3), or (4). Upon receipt
12.19 of the health organization's request for a hearing, the
12.20 commissioner shall set a date for the hearing, which must be no
12.21 less than ten nor more than 30 days after the date of the health
12.22 organization's request. The events include:
12.23 (1) notification to a health organization by the
12.24 commissioner of an adjusted RBC report;
12.25 (2) notification to a health organization by the
12.26 commissioner that:
12.27 (i) the health organization's RBC plan or revised RBC plan
12.28 is unsatisfactory; and
12.29 (ii) notification constitutes a regulatory action level
12.30 event with respect to the health organization;
12.31 (3) notification to a health organization by the
12.32 commissioner that the health organization has failed to adhere
12.33 to its RBC plan or revised RBC plan and that the failure has a
12.34 substantial adverse effect on the ability of the health
12.35 organization to eliminate the company action level event with
12.36 respect to the health organization in accordance with its RBC
13.1 plan or revised RBC plan; or
13.2 (4) notification to a health organization by the
13.3 commissioner of a corrective order with respect to the health
13.4 organization.
13.5 Sec. 8. [60A.57] [ACCESS TO AND USE OF RBC INFORMATION.]
13.6 Subdivision 1. [CONFIDENTIALITY; PROHIBITION ON
13.7 ANNOUNCEMENTS.] Section 60A.67, subdivisions 1 and 2, apply to
13.8 sections 60A.50 to 60A.592.
13.9 Subd. 2. [PROHIBITION FOR RATE MAKING OR PREMIUM SETTING.]
13.10 The RBC instructions, RBC reports, adjusted RBC reports, RBC
13.11 plans, and revised RBC plans are intended solely for use by the
13.12 commissioner in monitoring the solvency of health organizations
13.13 and the need for possible corrective action with respect to
13.14 health organizations and shall not be used by the commissioner
13.15 for rate making nor considered or introduced as evidence in any
13.16 rate proceeding nor used by the commissioner to calculate or
13.17 derive any elements of an appropriate premium level or rate of
13.18 return for any line of insurance that a health organization or
13.19 any affiliate is authorized to write.
13.20 Sec. 9. [60A.58] [SUPPLEMENTAL PROVISIONS.]
13.21 Subdivision 1. [EFFECT.] Sections 60A.50 to 60A.592 are
13.22 supplemental to any other provisions of the laws of this state,
13.23 and must not preclude or limit any other powers or duties of the
13.24 commissioner under such laws, including, but not limited to,
13.25 chapter 60B and sections 62D.041, 62D.042, 62D.18, and 62D.181.
13.26 Subd. 2. [EXEMPTION.] The commissioner may exempt from the
13.27 application of sections 60A.50 to 60A.592 a domestic health
13.28 organization that:
13.29 (1) writes direct business only in this state;
13.30 (2) assumes no reinsurance in excess of five percent of
13.31 direct premium written; and
13.32 (3) writes direct annual premiums for comprehensive medical
13.33 business of $2,000,000 or less.
13.34 Sec. 10. [60A.59] [FOREIGN HEALTH ORGANIZATIONS.]
13.35 Subdivision 1. [RBC REPORT.] (a) A foreign health
13.36 organization shall, upon the written request of the
14.1 commissioner, submit to the commissioner an RBC report as of the
14.2 end of the calendar year just ended the later of:
14.3 (1) the date an RBC report would be required to be filed by
14.4 a domestic health organization under sections 60A.50 to 60A.592;
14.5 or
14.6 (2) 15 days after the request is received by the foreign
14.7 health organization.
14.8 (b) A foreign health organization shall, at the written
14.9 request of the commissioner, promptly submit to the commissioner
14.10 a copy of any RBC plan that is filed with the insurance
14.11 commissioner of any other state.
14.12 Subd. 2. [RBC PLAN.] In the event of a company action
14.13 level event, regulatory action level event, or authorized
14.14 control level event with respect to a foreign health
14.15 organization as determined under the RBC statute applicable in
14.16 the state of domicile of the health organization or, if no RBC
14.17 statute is in force in that state, under sections 60A.50 to
14.18 60A.592, if the insurance commissioner of the state of domicile
14.19 of the foreign health organization fails to require the foreign
14.20 health organization to file an RBC plan in the manner specified
14.21 under that state's RBC statute or, if no RBC statute is in force
14.22 in that state, under section 60A.52, the commissioner may
14.23 require the foreign health organization to file an RBC plan with
14.24 the commissioner. In such event, the failure of the foreign
14.25 health organization to file an RBC plan with the commissioner
14.26 shall be grounds to order the health organization to cease and
14.27 desist from writing new insurance business in this state. This
14.28 section does not limit the commissioner's authority to require a
14.29 foreign insurer to file a copy of the risk-based capital plan
14.30 submitted to the commissioner in the state of domicile.
14.31 Subd. 3. [LIQUIDATION OF PROPERTY.] In the event of a
14.32 mandatory control level event with respect to a foreign health
14.33 organization, if no domiciliary receiver has been appointed with
14.34 respect to the foreign health organization under the
14.35 rehabilitation and liquidation statute applicable in the state
14.36 of domicile of the foreign health organization, the commissioner
15.1 may make application to the district court permitted under
15.2 chapter 60B with respect to the liquidation of property of
15.3 foreign health organizations found in this state, and the
15.4 occurrence of the mandatory control level event shall be
15.5 considered adequate grounds for the application.
15.6 Sec. 11. [60A.591] [IMMUNITY.]
15.7 There is no liability on the part of, and no cause of
15.8 action arises against, the commissioner or the department or its
15.9 employees or agents for any action taken by them in the
15.10 performance of their powers and duties under sections 60A.50 to
15.11 60A.592.
15.12 Sec. 12. [60A.592] [NOTICES.]
15.13 All notices by the commissioner to a health organization
15.14 that may result in regulatory action under sections 60A.50 to
15.15 60A.592 are effective upon dispatch if transmitted by registered
15.16 or certified mail, or in the case of any other transmission are
15.17 effective upon the health organization's receipt of notice.
15.18 ARTICLE 2
15.19 MINIMUM STANDARD OF VALUATION FOR
15.20 HEALTH INSURANCE
15.21 Section 1. [60A.70] [PURPOSE AND SCOPE.]
15.22 Sections 60A.70 to 60A.78 apply to all individual and group
15.23 accident and health insurance coverages as defined in section
15.24 60A.06, subdivision 1, paragraph (5)(a), including single
15.25 premium credit disability insurance. Other credit insurance is
15.26 not subject to sections 60A.70 to 60A.78.
15.27 When an insurer determines that adequacy of its health
15.28 insurance reserves requires reserves in excess of the minimum
15.29 standards specified in sections 60A.70 to 60A.78, the increased
15.30 reserves must be held and must be considered the minimum
15.31 reserves for that insurer.
15.32 With respect to any block of contracts, or with respect to
15.33 an insurer's health business as a whole, a prospective gross
15.34 premium valuation is the ultimate test of reserve adequacy as of
15.35 a given valuation date. The prospective gross premium valuation
15.36 must take into account, for contracts in force, in a claims
16.1 status, or in a continuation of benefits status on the valuation
16.2 date, the present value as of the valuation date of: all
16.3 expected benefits unpaid, all expected expenses unpaid, and all
16.4 unearned or expected premiums, adjusted for future premium
16.5 increases reasonably expected to be put into effect.
16.6 The prospective gross premium valuation must be performed
16.7 whenever a significant doubt exists as to reserve adequacy with
16.8 respect to any major block of contracts, or with respect to the
16.9 insurer's health business as a whole. In the event inadequacy
16.10 is found to exist, immediate loss recognition must be made and
16.11 the reserves restored to adequacy. Adequate reserves, inclusive
16.12 of claim, premium, and contract reserves, if any, must be held
16.13 with respect to all contracts, regardless of whether contract
16.14 reserves are required for such contracts under sections 60A.70
16.15 to 60A.78.
16.16 Whenever minimum reserves, as defined in sections 60A.70 to
16.17 60A.78, exceed reserve requirements as determined by a
16.18 prospective gross premium valuation, such minimum reserves
16.19 remain the minimum requirement under sections 60A.70 to 60A.78.
16.20 Sec. 2. [60A.71] [GLOSSARY OF TECHNICAL TERMS USED.]
16.21 Subdivision 1. [SCOPE.] As used in sections 60A.70 to
16.22 60A.78, the terms in subdivisions 2 to 21 have the meaning given
16.23 them.
16.24 Subd. 2. [ANNUAL CLAIM COST.] "Annual claim cost" means
16.25 the net annual cost per unit of benefit before the addition of
16.26 expenses, including claim settlement expenses, and a margin for
16.27 profit or contingencies. For example, the annual claim cost for
16.28 a $100 monthly disability benefit, for a maximum disability
16.29 benefit period of one year, with an elimination period of one
16.30 week, with respect to a male at age 35, in a certain occupation
16.31 might be $12, while the gross premium for this benefit might be
16.32 $18. The additional $6 would cover expenses and profit or
16.33 contingencies.
16.34 Subd. 3. [CLAIMS ACCRUED.] "Claims accrued" means that
16.35 portion of claims incurred on or prior to the valuation date
16.36 which result in liability of the insurer for the payment of
17.1 benefits for medical services which have been rendered on or
17.2 before the valuation date, and for the payment of benefits for
17.3 days of hospitalization and days of disability which have
17.4 occurred on or prior to the valuation date, which the insurer
17.5 has not paid as of the valuation date, but for which it is
17.6 liable, and will have to pay after the valuation date. This
17.7 liability is sometimes referred to as a liability for "accrued"
17.8 benefits. A claim reserve, which represents an estimate of this
17.9 accrued claim liability, must be established.
17.10 Subd. 4. [CLAIMS REPORTED.] "Claims reported" means when
17.11 an insurer has been informed that a claim has been incurred, if
17.12 the date reported is on or before the valuation date, the claim
17.13 is considered as a reported claim for annual statement purposes.
17.14 Subd. 5. [CLAIMS UNACCRUED.] "Claims unaccrued" means that
17.15 portion of claims incurred on or before the valuation date which
17.16 result in liability of the insurer for the payment of benefits
17.17 for medical services expected to be rendered after the valuation
17.18 date, and for benefits expected to be payable for days of
17.19 hospitalization and days of disability occurring after the
17.20 valuation date. This liability is sometimes referred to as a
17.21 liability for unaccrued benefits. A claim reserve, which
17.22 represents an estimate of the unaccrued claim payments expected
17.23 to be made (which may or may not be discounted with interest)
17.24 must be established.
17.25 Subd. 6. [CLAIMS UNREPORTED.] "Claims unreported" means
17.26 when an insurer has not been informed, on or before the
17.27 valuation date, concerning a claim that has been incurred on or
17.28 prior to the valuation date, the claim is considered as an
17.29 unreported claim for annual statement purposes.
17.30 Subd. 7. [DATE OF DISABLEMENT.] "Date of disablement"
17.31 means the earliest date the insured is considered as being
17.32 disabled under the definition of disability in the contract,
17.33 based on a doctor's evaluation or other evidence. Normally this
17.34 date will coincide with the start of any elimination period.
17.35 Subd. 8. [ELIMINATION PERIOD.] "Elimination period" means
17.36 a specified number of days, weeks, or months starting at the
18.1 beginning of each period of loss, during which no benefits are
18.2 payable.
18.3 Subd. 9. [GROSS PREMIUM.] "Gross premium" means the amount
18.4 of premium charged by the insurer. It includes the net premium
18.5 (based on claim-cost) for the risk, together with any loading
18.6 for expenses, profit, or contingencies.
18.7 Subd. 10. [GROUP INSURANCE.] "Group insurance" means the
18.8 term group insurance includes blanket insurance and franchise
18.9 insurance and any other forms of group insurance.
18.10 Subd. 11. [LEVEL PREMIUM.] "Level premium" means a premium
18.11 calculated to remain unchanged throughout either the lifetime of
18.12 the policy, or for some shorter projected period of years. The
18.13 premium need not be guaranteed; in which case, although it is
18.14 calculated to remain level, it may be changed if any of the
18.15 assumptions on which it was based are revised at a later time.
18.16 Generally, the annual claim costs are expected to increase
18.17 each year and the insurer, instead of charging premiums that
18.18 correspondingly increase each year, charges a premium calculated
18.19 to remain level for a period of years or for the lifetime of the
18.20 contract. In this case, the benefit portion of the premium is
18.21 more than needed to provide for the cost of benefits during the
18.22 earlier years of the policy and less than the actual cost in the
18.23 later years. The building of a prospective contract reserve is
18.24 a natural result of level premiums.
18.25 Subd. 12. [LONG-TERM CARE INSURANCE.] "Long-term care
18.26 insurance" means a qualified long-term care insurance policy or
18.27 rider as defined in section 62S.01, subdivision 18, and a
18.28 nonqualified long-term insurance policy or rider as defined in
18.29 section 62A.46, subdivision 2.
18.30 Subd. 13. [MODAL PREMIUM.] "Modal premium" refers to the
18.31 premium paid on a contract based on a premium term which could
18.32 be annual, semiannual, quarterly, monthly, or weekly. Thus if
18.33 the annual premium is $100 and if, instead, monthly premiums of
18.34 $9 are paid then the modal premium is $9.
18.35 Subd. 14. [NEGATIVE RESERVE.] "Negative reserve" means
18.36 normally the terminal reserve is a positive value. However, if
19.1 the values of the benefits are decreasing with advancing age or
19.2 duration it could be a negative value, called a negative reserve.
19.3 Subd. 15. [PRELIMINARY TERM RESERVE METHOD.] "Preliminary
19.4 term reserve method" means that under this method of valuation
19.5 the valuation net premium for each year falling within the
19.6 preliminary term period is exactly sufficient to cover the
19.7 expected incurred claims of that year, so that the terminal
19.8 reserves will be zero at the end of the year. As of the end of
19.9 the preliminary term period, a new constant valuation net
19.10 premium (or stream of changing valuation premiums) becomes
19.11 applicable such that the present value of all such premiums is
19.12 equal to the present value of all claims expected to be incurred
19.13 following the end of the preliminary term period.
19.14 Subd. 16. [PRESENT VALUE OF AMOUNTS NOT YET DUE ON
19.15 CLAIMS.] "Present value of amounts not yet due on claims" means
19.16 the reserve for "claims unaccrued" which may be discounted at
19.17 interest.
19.18 Subd. 17. [RATING BLOCK.] "Rating block" means a grouping
19.19 of contracts determined by the valuation actuary based on common
19.20 characteristics, such as a policy form or forms having similar
19.21 benefit designs.
19.22 Subd. 18. [RESERVE.] "Reserve" includes all items of
19.23 benefit liability, whether in the nature of incurred claim
19.24 liability or in the nature of contract liability relating to
19.25 future periods of coverage, and whether the liability is accrued
19.26 or unaccrued.
19.27 An insurer under its contracts promises benefits, which
19.28 result in:
19.29 (a) claims which have been incurred, that is, for which the
19.30 insurer has become obligated to make payment, on or prior to the
19.31 valuation date. On these claims, payments expected to be made
19.32 after the valuation date for accrued and unaccrued benefits are
19.33 liabilities of the insurer which should be provided for by
19.34 establishing claim reserves; or
19.35 (b) claims which are expected to be incurred after the
19.36 valuation date. Any present liability of the insurer for these
20.1 future claims should be provided for by the establishment of
20.2 contract reserves and unearned premium reserves.
20.3 Subd. 19. [TERMINAL RESERVE.] "Terminal reserve" means the
20.4 reserve at the end of a contract year, and is defined as the
20.5 present value of benefits expected to be incurred after that
20.6 contract year minus the present value of future valuation net
20.7 premiums.
20.8 Subd. 20. [UNEARNED PREMIUM RESERVE.] "Unearned premium
20.9 reserve" means that portion of the premium paid or due to the
20.10 insurer which is applicable to the period of coverage extending
20.11 beyond the valuation date. Thus if an annual premium of $120
20.12 was paid on November 1, $20 would be earned as of December 31
20.13 and the remaining $100 would be unearned. The unearned premium
20.14 reserve could be on a gross basis as in this example, or on a
20.15 valuation net premium basis.
20.16 Subd. 21. [VALUATION NET MODAL PREMIUM.] "Valuation net
20.17 modal premium" means the modal fraction of the valuation net
20.18 annual premium that corresponds to the gross modal premium in
20.19 effect on any contract to which contract reserves apply. Thus
20.20 if the mode of payment in effect is quarterly, the valuation net
20.21 modal premium is the quarterly equivalent of the valuation net
20.22 annual premium.
20.23 Sec. 3. [60A.72] [CATEGORIES OF RESERVES.]
20.24 The following sections set forth minimum standards for
20.25 three categories of health insurance reserves:
20.26 (1) section 60A.73, claim reserves;
20.27 (2) section 60A.74, premium reserves; and
20.28 (3) section 60A.75, contract reserves.
20.29 Adequacy of an insurer's health insurance reserves is to be
20.30 determined on the basis of all three categories combined.
20.31 However, sections 60A.70 to 60A.78 emphasize the importance of
20.32 determining appropriate reserves for each of the three
20.33 categories separately.
20.34 Sec. 4. [60A.73] [CLAIM RESERVES.]
20.35 Subdivision 1. [GENERALLY.] (a) Claim reserves are
20.36 required for all incurred but unpaid claims on all health
21.1 insurance policies.
21.2 (b) Appropriate claim expense reserves are required with
21.3 respect to the estimated expense of settlement of all incurred
21.4 but unpaid claims.
21.5 (c) Claim reserves for prior valuation years are to be
21.6 tested for adequacy and reasonableness along the lines of claim
21.7 runoff schedules in accordance with the statutory financial
21.8 statement including consideration of any residual unpaid
21.9 liability.
21.10 Subd. 2. [MINIMUM STANDARDS FOR CLAIM RESERVES FOR
21.11 DISABILITY INCOME.] (a) The maximum interest rate for claim
21.12 reserves is specified in section 60A.78.
21.13 (b) Minimum standards with respect to morbidity are those
21.14 specified in section 60A.78, except that, at the option of the
21.15 insurer:
21.16 (1) for claims with a duration from date of disablement of
21.17 less than two years, reserves may be based on the insurer's
21.18 experience, if such experience is considered credible, or upon
21.19 other assumptions designed to place a sound value on the
21.20 liabilities; and
21.21 (2) for group disability income claims with a duration from
21.22 date of disablement of more than two years but less than five
21.23 years, reserves may, with the approval of the commissioner, be
21.24 based on the insurer's experience for which the insurer
21.25 maintains underwriting and claim administration control. The
21.26 request for approval of a plan of modification to the reserve
21.27 basis must include:
21.28 (i) an analysis of the credibility of the experience;
21.29 (ii) a description of how all of the insurer's experience
21.30 is proposed to be used in setting reserves;
21.31 (iii) a description and quantification of the margins to be
21.32 included;
21.33 (iv) a summary of the financial impact that the proposed
21.34 plan of modification would have had on the insurer's last filed
21.35 annual statement;
21.36 (v) a copy of the approval of the proposed plan of
22.1 modification by the commissioner of the state of domicile; and
22.2 (vi) any other information deemed necessary by the
22.3 commissioner.
22.4 (c) For contracts with an elimination period, the duration
22.5 of disablement must be measured as dating from the time that
22.6 benefits would have begun to accrue had there been no
22.7 elimination period.
22.8 Subd. 3. [MINIMUM STANDARDS FOR CLAIM RESERVES FOR ALL
22.9 OTHER BENEFITS.] (a) The maximum interest rate for claim
22.10 reserves is specified in section 60A.78.
22.11 (b) The reserve must be based on the insurer's experience,
22.12 if the experience is considered credible, or upon other
22.13 assumptions designed to place a sound value on the liabilities.
22.14 Subd. 4. [CLAIM RESERVE METHODS GENERALLY.] A generally
22.15 accepted actuarial reserving method or other reasonable method
22.16 if the method is approved by the commissioner before the
22.17 statement date, or a combination of methods as described in this
22.18 section, may be used to estimate all claim liabilities. The
22.19 methods used for estimating liabilities generally may be
22.20 aggregate methods, or various reserve items may be separately
22.21 valued. Approximations based on groupings and averages may also
22.22 be employed. Adequacy of the claim reserves, however, must be
22.23 determined in the aggregate.
22.24 Sec. 5. [60A.74] [PREMIUM RESERVES.]
22.25 Subdivision 1. [GENERALLY.] (a) Unearned premium reserves
22.26 are required for all contracts with respect to the period of
22.27 coverage for which premiums, other than premiums paid in
22.28 advance, have been paid beyond the date of valuation.
22.29 (b) If premiums due and unpaid are carried as an asset, the
22.30 premiums must be treated as premiums in force, subject to
22.31 unearned premium reserve determination. The value of unpaid
22.32 commissions, premium taxes, and the cost of collection
22.33 associated with due and unpaid premiums must be carried as an
22.34 offsetting liability.
22.35 (c) The gross premiums paid in advance for a period of
22.36 coverage beginning after the next premium due date which follows
23.1 the date of valuation may be appropriately discounted to the
23.2 valuation date and must be held either as a separate liability
23.3 or as an addition to the unearned premium reserve which would
23.4 otherwise be required as a minimum.
23.5 Subd. 2. [MINIMUM STANDARDS FOR UNEARNED PREMIUM
23.6 RESERVES.] (a) The minimum unearned premium reserve with respect
23.7 to a contract is the pro rata unearned modal premium that
23.8 applies to the premium period beyond the valuation date, with
23.9 the premium determined on the basis of:
23.10 (1) the valuation net modal premium on the contract reserve
23.11 basis applying to the contract; or
23.12 (2) the gross modal premium for the contract if no contract
23.13 reserve applies.
23.14 (b) However, in no event may the sum of the unearned
23.15 premium and contract reserves for all contracts of the insurer
23.16 subject to contract reserve requirements be less than the gross
23.17 modal unearned premium reserve on all such contracts, as of the
23.18 date of valuation. The reserve must never be less than the
23.19 expected claims for the period beyond the valuation date
23.20 represented by the unearned premium reserve, to the extent not
23.21 provided for elsewhere.
23.22 Subd. 3. [PREMIUM RESERVE METHODS GENERALLY.] The insurer
23.23 may employ suitable approximations and estimates, including, but
23.24 not limited to, groupings, averages, and aggregate estimation,
23.25 in computing premium reserves. Approximations or estimates
23.26 should be tested periodically to determine the continuing
23.27 adequacy and reliability.
23.28 Sec. 6. [60A.75] [CONTRACT RESERVES REQUIRED.]
23.29 (a) Contract reserves are required, unless otherwise
23.30 specified in paragraph (b) for:
23.31 (1) all individual and group contracts with which level
23.32 premiums are used; or
23.33 (2) all individual and group contracts with respect to
23.34 which, due to the gross premium pricing structure at issue, the
23.35 value of the future benefits at any time exceeds the value of
23.36 any appropriate future valuation net premiums at that time.
24.1 This evaluation may be applied on a rating block basis if the
24.2 total premiums for the block were developed to support the total
24.3 risk assumed and expected expenses for the block each year, and
24.4 a qualified actuary certifies the premium development. The
24.5 actuary must state in the certification that premiums for the
24.6 rating block were developed such that each year's premium was
24.7 intended to cover that year's costs without any prefunding. If
24.8 the premium is also intended to recover costs for any prior
24.9 years, the actuary must also disclose the reasons for and
24.10 magnitude of the recovery. The values specified in this clause
24.11 must be determined on the basis specified in section 60A.76,
24.12 subdivisions 1 to 4.
24.13 (b) Contracts not requiring a contract reserve are:
24.14 (1) contracts that cannot be continued after one year from
24.15 issue; or
24.16 (2) contracts already in force on the effective date of
24.17 sections 60A.70 to 60A.78 for which no contract reserve was
24.18 required under the immediately preceding standards.
24.19 (c) The contract reserve is in addition to claim reserves
24.20 and premium reserves.
24.21 (d) The methods and procedures for contract reserves must
24.22 be consistent with those for claim reserves for a contract, or
24.23 else appropriate adjustment must be made when necessary to
24.24 assure provision for the aggregate liability. The definition of
24.25 the date of incurral must be the same in both determinations.
24.26 Sec. 7. [60A.76] [MINIMUM STANDARDS FOR CONTRACT
24.27 RESERVES.]
24.28 Subdivision 1. [BASIS.] (a) Minimum standards with respect
24.29 to morbidity are those set forth in section 60A.78. Valuation
24.30 net premiums used under each contract must have a structure
24.31 consistent with the gross premium structure at issue of the
24.32 contract as this relates to advancing age of insured, contract
24.33 duration, and period for which gross premiums have been
24.34 calculated.
24.35 Contracts for which tabular morbidity standards are not
24.36 specified in section 60A.78 must be valued using tables
25.1 established for reserve purposes by a qualified actuary and
25.2 acceptable to the commissioner. The morbidity tables must
25.3 contain a pattern of incurred claims cost that reflects the
25.4 underlying morbidity and must not be constructed for the primary
25.5 purpose of minimizing reserves.
25.6 (b) The maximum interest rate is specified in section
25.7 60A.78.
25.8 (c) Termination rates used in the computation of reserves
25.9 must be on the basis of a mortality table as specified in
25.10 section 60A.78 except as noted in clauses (1) to (3):
25.11 (1) under contracts for which premium rates are not
25.12 guaranteed, and where the effects of insurer underwriting are
25.13 specifically used by policy duration in the valuation morbidity
25.14 standard or for return of premium or other deferred cash
25.15 benefits, total termination rates may be used at ages and
25.16 durations where these exceed specified mortality table rates,
25.17 but not in excess of the lesser of:
25.18 (i) 80 percent of the total termination rate used in the
25.19 calculation of the gross premiums; or
25.20 (ii) eight percent;
25.21 (2) for long-term care individual policies or group
25.22 certificates issued after January 1, 1997, the contract reserve
25.23 may be established on a basis of separate:
25.24 (i) mortality as specified in section 60A.78; and
25.25 (ii) terminations other than mortality, where the
25.26 terminations are not to exceed:
25.27 A. for policy years one through four, the lesser of 80
25.28 percent of the voluntary lapse rate used in the calculation of
25.29 gross premiums and eight percent;
25.30 B. for policy years five and later, the lesser of 100
25.31 percent of the voluntary lapse rate used in the calculation of
25.32 gross premiums and four percent;
25.33 (3) where a morbidity standard specified in section 60A.78
25.34 is on an aggregate basis, the morbidity standard may be adjusted
25.35 to reflect the effect of insurer underwriting by policy duration.
25.36 The adjustments must be appropriate to the underwriting and be
26.1 acceptable to the commissioner.
26.2 Subd. 2. [RESERVE METHOD.] (a) For insurance, except
26.3 long-term care and return of premium or other deferred cash
26.4 benefits, the minimum reserve is the reserve calculated on the
26.5 two-year full preliminary term method; that is, under which the
26.6 terminal reserve is zero at the first and also the second
26.7 contract anniversary.
26.8 (b) For long-term care insurance, the minimum reserve is
26.9 the reserve calculated as follows:
26.10 (1) for individual policies and group certificates issued
26.11 on or before December 31, 1991, reserves calculated on the
26.12 two-year full preliminary term methods;
26.13 (2) for individual policies and group certificates issued
26.14 on or after January 1, 1992, reserves calculated on the one-year
26.15 full preliminary term method.
26.16 (c) For return of premium or other deferred cash benefits,
26.17 the minimum reserve is the reserve calculated as follows:
26.18 (1) on the one-year preliminary term method if the benefits
26.19 are provided at any time before the 20th anniversary;
26.20 (2) on the two-year preliminary term method if the benefits
26.21 are only provided on or after the 20th anniversary.
26.22 The preliminary term method may be applied only in relation
26.23 to the date of issue of a contract. Reserve adjustments
26.24 introduced later, as a result of rate increases, revisions in
26.25 assumptions, for example projected inflation rates, or for other
26.26 reasons, are to be applied immediately as of the effective date
26.27 of adoption of the adjusted basis.
26.28 Subd. 3. [NEGATIVE RESERVES.] Negative reserves on any
26.29 benefit may be offset against positive reserves for other
26.30 benefits in the same contract, but the total contract reserve
26.31 with respect to all benefits combined may not be less than zero.
26.32 Subd. 4. [NONFORFEITURE BENEFITS FOR LONG-TERM CARE
26.33 INSURANCE.] The contract reserve on a policy basis must not be
26.34 less than the net single premium for the nonforfeiture benefits
26.35 at the appropriate policy duration, where the net single premium
26.36 is computed according to the specifications in this section.
27.1 While the consideration for nonforfeiture benefits in this
27.2 section is specific to long-term care insurance, similar
27.3 consideration may be applicable for other lines of business.
27.4 Subd. 5. [ALTERNATIVE VALUATION METHODS AND ASSUMPTIONS
27.5 GENERALLY.] Provided the contract reserve on all contracts to
27.6 which an alternative method or basis is applied is not less in
27.7 the aggregate than the amount determined according to the
27.8 applicable standards specified in this section, an insurer may
27.9 use any reasonable assumptions as to interest rates, termination
27.10 and mortality rates, and rates of morbidity or other contingency.
27.11 Also, subject to the preceding condition, the insurer may employ
27.12 methods other than the methods stated in this section in
27.13 determining a sound value of its liabilities under such
27.14 contracts, including, but not limited to, the following: the
27.15 net level premium method; the one-year full preliminary term
27.16 method; prospective valuation on the basis of actual gross
27.17 premiums with reasonable allowance for future expenses; the use
27.18 of approximations such as those involving age groupings,
27.19 groupings of several years of issue, average amounts of
27.20 indemnity, and grouping of similar contract forms; the
27.21 computation of the reserve for one contract benefit as a
27.22 percentage of, or by other relation to, the aggregate contract
27.23 reserves exclusive of the benefit or benefits so valued; and the
27.24 use of a composite annual claim cost for all or any combination
27.25 of the benefits included in the contracts valued.
27.26 Subd. 6. [TEST FOR ADEQUACY AND REASONABLENESS OF CONTRACT
27.27 RESERVES.] Annually, an appropriate review must be made of the
27.28 insurer's prospective contract liabilities on contracts valued
27.29 by tabular reserves, to determine the continuing adequacy and
27.30 reasonableness of the tabular reserves giving consideration to
27.31 future gross premiums. The insurer shall make appropriate
27.32 increments to such tabular reserves if such tests indicate that
27.33 the basis of such reserves is no longer adequate; subject,
27.34 however, to the minimum standards of section 60A.76,
27.35 subdivisions 1 to 4.
27.36 In the event a company has a contract or a group of related
28.1 similar contracts for which future gross premiums will be
28.2 restricted by contract, department rule, or for other reasons,
28.3 such that the future gross premiums reduced by expenses for
28.4 administration, commissions, and taxes will be insufficient to
28.5 cover future claims, the company shall establish contract
28.6 reserves for such shortfall in the aggregate.
28.7 Sec. 8. [60A.77] [REINSURANCE.]
28.8 Increases to or credits against reserves carried, arising
28.9 because of reinsurance assumed or reinsurance ceded, must be
28.10 determined in a manner consistent with sections 60A.70 to 60A.78
28.11 and with all applicable provisions of the reinsurance contracts
28.12 which affect the insurer's liabilities.
28.13 Sec. 9. [60A.78] [SPECIFIC STANDARDS FOR MORBIDITY,
28.14 INTEREST, AND MORTALITY.]
28.15 Subdivision 1. [MORBIDITY.] A. Minimum morbidity
28.16 standards for valuation of specified individual contract health
28.17 insurance benefits are as follows:
28.18 (1) Disability Income Benefits Due to Accident or Sickness.
28.19 (a) Contract Reserves:
28.20 Contracts issued on or after January 1, 2004:
28.21 The 1985 Commissioners Individual Disability Tables A
28.22 (85CIDA); or
28.23 The 1985 Commissioners Individual Disability Tables B
28.24 (85CIDB).
28.25 Each insurer shall elect, with respect to all individual
28.26 contracts issued in any one statement year, whether it will use
28.27 Tables A or Tables B as the minimum standard. The insurer may,
28.28 however, elect to use the other tables with respect to any
28.29 subsequent statement year.
28.30 (b) Claim Reserves:
28.31 (i) For claims incurred on or after January 1, 2004:
28.32 The 1985 Commissioners Individual Disability Table A
28.33 (85CIDA) with claim termination rates multiplied by the
28.34 following adjustment factors:
28.35 Adjusted
28.36 Duration Adjustment Termination
28.37 Factor Rates*
29.2 Week 1 0.366 0.04831
29.3 2 0.366 0.04172
29.4 3 0.366 0.04063
29.5 4 0.366 0.04355
29.6 5 0.365 0.04088
29.7 6 0.365 0.04271
29.8 7 0.365 0.04380
29.9 8 0.365 0.04344
29.10 9 0.370 0.04292
29.11 10 0.370 0.04107
29.12 11 0.370 0.03848
29.13 12 0.370 0.03478
29.14 13 0.370 0.03034
29.16 Month 4 0.391 0.08758
29.17 5 0.371 0.07346
29.18 6 0.435 0.07531
29.19 7 0.500 0.07245
29.20 8 0.564 0.06655
29.21 9 0.613 0.05520
29.22 10 0.663 0.04705
29.23 11 0.712 0.04486
29.24 12 0.756 0.04309
29.25 13 0.800 0.04080
29.26 14 0.844 0.03882
29.27 15 0.888 0.03730
29.28 16 0.932 0.03448
29.29 17 0.976 0.03026
29.30 18 1.020 0.02856
29.31 19 1.049 0.02518
29.32 20 1.078 0.02264
29.33 21 1.107 0.02104
29.34 22 1.136 0.01932
29.35 23 1.165 0.01865
29.36 24 1.195 0.01792
30.2 Year 3 1.369 0.16839
30.3 4 1.204 0.10114
30.4 5 1.199 0.07434
30.5 6 and later 1.000 **
30.6 *The adjusted termination rates derived from the
30.7 application of the adjustment factors to the DTS Valuation Table
30.8 termination rates shown in exhibits 3a, 3b, 3c, 4, and 5
30.9 (Transactions of the Society of Actuaries (TSA) XXXVII, pages
30.10 457-463) is displayed. The adjustment factors for age,
30.11 elimination period, class, sex, and cause displayed in exhibits
30.12 3a, 3b, 3c, and 4 should be applied to the adjusted termination
30.13 rates shown in this table.
30.14 **Applicable DTS Valuation Table duration rate from
30.15 exhibits 3c and 4 (TSA XXXVII, pages 462-463).
30.16 The 85CIDA table so adjusted for the computation of claim
30.17 reserves shall be known as 85CIDC (The 1985 Commissioners
30.18 Individual Disability Table C).
30.19 (2) Hospital Benefits, Surgical Benefits, and Maternity
30.20 Benefits (Scheduled benefits or fixed time period benefits only).
30.21 (a) Contract Reserves.
30.22 Contracts issued on or after January 1, 1982:
30.23 The 1974 Medical Expense Tables, Table A, Transactions of
30.24 the Society of Actuaries, Volume XXX, page 63. Refer to the
30.25 paper (in the same volume, page 9) to which this table is
30.26 appended, including its discussions, for methods of adjustment
30.27 for benefits not directly valued in Table A: "Development of
30.28 the 1974 Medical Expense Benefits," Houghton and Wolf.
30.29 (b) Claim Reserves:
30.30 No specific standard. See (6).
30.31 (3) Cancer Expense Benefits (Scheduled benefits or fixed
30.32 time period benefits only).
30.33 (a) Contract Reserves:
30.34 Contracts issued on or after January 1, 2004:
30.35 The 1985 NAIC Cancer Claim Cost Tables.
30.36 (b) Claim Reserves:
31.1 No specific standard. See (6).
31.2 (4) Accidental Death Benefits.
31.3 (a) Contract Reserves:
31.4 Contracts issued on or after January 1, 2004:
31.5 The 1959 Accidental Death Benefits Table.
31.6 (b) Claim Reserves:
31.7 Actual amount incurred.
31.8 (5) Single Premium Credit Disability.
31.9 (a) Contract Reserves:
31.10 (i) For contracts issued on or after January 1, 2004:
31.11 (I) For plans having less than a 30-day elimination period,
31.12 the 1985 Commissioners Individual Disability Table A (85CIDA)
31.13 with claim incidence rates increased by 12 percent.
31.14 (ii)(II) For plans having a 30-day and greater elimination
31.15 period, the 85CIDA for a 14-day elimination period with the
31.16 adjustment in item (I).
31.17 (b) Claim Reserves:
31.18 Claim reserves are to be determined as provided in section
31.19 60A.73.
31.20 (6) Other Individual Contract Benefits.
31.21 (a) Contract Reserves:
31.22 For all other individual contract benefits, morbidity
31.23 assumptions are to be determined as provided in section 60A.75.
31.24 (b) Claim Reserves:
31.25 For all benefits other than disability, claim reserves are
31.26 to be determined as provided in section 60A.73.
31.27 B. Minimum morbidity standards for valuation of specified
31.28 group contract health insurance benefits are as follows:
31.29 (1) Disability Income Benefits Due to Accident or Sickness.
31.30 (a) Contract Reserves:
31.31 Contracts issued on or after January 1, 2004:
31.32 The 1987 Commissioners Group Disability Income Table
31.33 (87CGDT).
31.34 (b) Claim Reserves:
31.35 For claims incurred on or after January 1, 2004:
31.36 The 1987 Commissioners Group Disability Income Table
32.1 (87CGDT);
32.2 (2) Single Premium Credit Disability
32.3 (a) Contract Reserves:
32.4 (i) For contracts issued on or after January 1, 2004:
32.5 (I) For plans having less than a 30-day elimination period,
32.6 the 1985 Commissioners Individual Disability Table A (85CIDA)
32.7 with claim incidence rates increased by 12 percent.
32.8 (ii)(II) For plans having a 30-day and greater elimination
32.9 period, the 85CIDA for a 14-day elimination period with the
32.10 adjustment in item (I).
32.11 (b) Claim Reserves:
32.12 Claim reserves are to be determined as provided in section
32.13 60A.73.
32.14 (3) Other Group Contract Benefits.
32.15 (a) Contract Reserves:
32.16 For all other group contract benefits, morbidity
32.17 assumptions are to be determined as provided in section 60A.75.
32.18 (b) Claim Reserves:
32.19 For all benefits other than disability, claim reserves are
32.20 to be determined as provided in section 60A.73.
32.21 Subd. 2. [INTEREST.] A. For contract reserves the maximum
32.22 interest rate is the maximum rate permitted by law in the
32.23 valuation of whole life insurance issued on the same date as the
32.24 health insurance contract.
32.25 B. For claim reserves on policies that require contract
32.26 reserves, the maximum interest rate is the maximum rate
32.27 permitted by law in the valuation of whole life insurance issued
32.28 on the same date as the claim incurred date.
32.29 C. For claim reserves on policies not requiring contract
32.30 reserves, the maximum interest rate is the maximum rate
32.31 permitted by law in the valuation of single premium immediate
32.32 annuities issued on the same date as the claim incurred date,
32.33 reduced by 100 basis points.
32.34 Subd. 3. [MORTALITY.] A. For individual long-term care
32.35 insurance policies or group long-term care insurance
32.36 certificates issued on or after January 1, 2004, the mortality
33.1 basis used must be the 1983 Group Annuity Mortality Table
33.2 without projection.
33.3 B. Other mortality tables adopted by the NAIC and adopted
33.4 by the commissioner may be used in the calculation of the
33.5 minimum reserves if appropriate for the type of benefits and if
33.6 approved by the commissioner. The request for approval must
33.7 include the proposed mortality table and the reason that the
33.8 standard specified in subsection A is inappropriate.
33.9 C. For single premium credit insurance using the 85CIDA
33.10 table, no separate mortality must be assumed.
33.11 ARTICLE 3
33.12 MISCELLANEOUS
33.13 Section 1. Minnesota Statutes 2002, section 60A.129,
33.14 subdivision 2, is amended to read:
33.15 Subd. 2. [LOSS RESERVE CERTIFICATION.] (a) Each domestic
33.16 company engaged in providing the types of coverage described in
33.17 section 60A.06, subdivision 1, clause (1), (2), (3), (5)(b),
33.18 (6), (8), (9), (10), (11), (12), (13), or (14), must have its
33.19 loss reserves certified by a qualified actuary. The company
33.20 must file the certification with the commissioner within 30 days
33.21 of completion of the certification, but not later than June 1.
33.22 The actuary providing the certification may be an employee of
33.23 the company but the commissioner may still require an
33.24 independent actuarial certification as described in subdivision
33.25 1. This subdivision does not apply to township mutual
33.26 companies, or to other domestic insurers having less than
33.27 $1,000,000 of premiums written in any year and fewer than 1,000
33.28 policyholders. The commissioner may allow an exception to the
33.29 stand alone certification where it can be demonstrated that a
33.30 company in a group has a pooling or 100 percent reinsurance
33.31 agreement used in a group which substantially affects the
33.32 solvency and integrity of the reserves of the company, or where
33.33 it is only the parent company of a group which is licensed to do
33.34 business in Minnesota. If these circumstances exist, the
33.35 company may file a written request with the commissioner for an
33.36 exception. Companies writing reinsurance alone are not exempt
34.1 from this requirement. The certification must contain the
34.2 following statement: "In my opinion, the reserves described in
34.3 this certification are consistent with reserves computed in
34.4 accordance with standards and principles established by the
34.5 Actuarial Standards Board and are fairly stated."
34.6 (b) Each foreign company engaged in providing the types of
34.7 coverage described in section 60A.06, subdivision 1, clause (1),
34.8 (2), (3), (5)(b), (6), (8), (9), (10), (11), (12), (13), or
34.9 (14), required by this section to file an annual audited
34.10 financial report, whose total net earned premium for Schedule P,
34.11 Part 1A to Part 1H plus Part 1R, (Schedule P, Part 1A to Part 1H
34.12 plus Part 1R, Column 4, current year premiums earned, from the
34.13 company's most currently filed annual statement) is equal to
34.14 one-third or more of the company's total net earned premium
34.15 (Underwriting and Investment Exhibit, Part 2, Column 4, total
34.16 line, of the annual statement) must have a reserve certification
34.17 by a qualified actuary at least every three years. In the year
34.18 that the certification is due, the company must file the
34.19 certification with the commissioner within 30 days of completion
34.20 of the certification, but not later than June 1. The actuary
34.21 providing the certification must not may be an employee of the
34.22 company. Companies writing reinsurance alone are not exempt
34.23 from this requirement. The certification must contain the
34.24 following statement: "The loss reserves and loss expense
34.25 reserves have been examined and found to be calculated in
34.26 accordance with generally accepted actuarial principles and
34.27 practices and are fairly stated."
34.28 (c) Each company providing life and/or health insurance
34.29 coverages described in section 60A.06, subdivision 1, clause (4)
34.30 or (5)(a), required by this section to file an audited annual
34.31 financial report, whose premiums and annuity considerations (net
34.32 of reinsurance) from accident and health equal one-third or more
34.33 of the company's total premiums and annuity considerations (net
34.34 of reinsurance), as reported in the summary of operations, must
34.35 have its aggregate reserve for accident and health policies and
34.36 liability for policy and contract claims for accident and health
35.1 certified by a qualified actuary at least once every three
35.2 years. The actuary providing the certification must not be an
35.3 employee of the company. Companies writing reinsurance alone
35.4 are not exempt from this requirement. The certification must
35.5 contain the following statement: "The policy and contract
35.6 claims reserves for accident and health have been examined and
35.7 found to be calculated in accordance with generally accepted
35.8 actuarial principles and practices and are fairly stated."
35.9 Sec. 2. Minnesota Statutes 2002, section 62A.02,
35.10 subdivision 2, is amended to read:
35.11 Subd. 2. [APPROVAL.] (a) The health plan form shall not be
35.12 issued, nor shall any application, rider, endorsement, or rate
35.13 be used in connection with it, until the expiration of 60 days
35.14 after it has been filed unless the commissioner approves it
35.15 before that time.
35.16 (b) Notwithstanding paragraph (a), a health plan form or a
35.17 rate, filed with respect to a policy of accident and sickness
35.18 insurance as defined in section 62A.01 by an insurer licensed
35.19 under chapter 60A, may be used on or after the date of filing
35.20 with the commissioner. Health plan forms and rates that are not
35.21 approved or disapproved within the 60-day time period are deemed
35.22 approved. This paragraph does not apply to Medicare-related
35.23 coverage as defined in section 62A.31, subdivision 3, paragraph
35.24 (q).
35.25 Sec. 3. Minnesota Statutes 2002, section 62C.09, is
35.26 amended by adding a subdivision to read:
35.27 Subd. 5. [RISK-BASED CAPITAL REQUIREMENT.] A service plan
35.28 corporation is subject to regulation of its financial solvency
35.29 under sections 60A.50 to 60A.592.
35.30 Sec. 4. Minnesota Statutes 2002, section 62D.04,
35.31 subdivision 1, is amended to read:
35.32 Subdivision 1. [APPLICATION REVIEW.] Upon receipt of an
35.33 application for a certificate of authority, the commissioner of
35.34 health shall determine whether the applicant for a certificate
35.35 of authority has:
35.36 (a) demonstrated the willingness and potential ability to
36.1 assure that health care services will be provided in such a
36.2 manner as to enhance and assure both the availability and
36.3 accessibility of adequate personnel and facilities;
36.4 (b) arrangements for an ongoing evaluation of the quality
36.5 of health care;
36.6 (c) a procedure to develop, compile, evaluate, and report
36.7 statistics relating to the cost of its operations, the pattern
36.8 of utilization of its services, the quality, availability and
36.9 accessibility of its services, and such other matters as may be
36.10 reasonably required by regulation of the commissioner of health;
36.11 (d) reasonable provisions for emergency and out of area
36.12 health care services;
36.13 (e) demonstrated that it is financially responsible and may
36.14 reasonably be expected to meet its obligations to enrollees and
36.15 prospective enrollees. In making this determination, the
36.16 commissioner of health shall require the amounts amount of
36.17 initial net worth and working capital required in section
36.18 62D.042, compliance with the risk-based capital standards under
36.19 sections 60A.50 to 60A.592, the deposit required in section
36.20 62D.041, and in addition shall consider:
36.21 (1) the financial soundness of its arrangements for health
36.22 care services and the proposed schedule of charges used in
36.23 connection therewith;
36.24 (2) arrangements which will guarantee for a reasonable
36.25 period of time the continued availability or payment of the cost
36.26 of health care services in the event of discontinuance of the
36.27 health maintenance organization; and
36.28 (3) agreements with providers for the provision of health
36.29 care services;
36.30 (f) demonstrated that it will assume full financial risk on
36.31 a prospective basis for the provision of comprehensive health
36.32 maintenance services, including hospital care; provided,
36.33 however, that the requirement in this paragraph shall not
36.34 prohibit the following:
36.35 (1) a health maintenance organization from obtaining
36.36 insurance or making other arrangements (i) for the cost of
37.1 providing to any enrollee comprehensive health maintenance
37.2 services, the aggregate value of which exceeds $5,000 in any
37.3 year, (ii) for the cost of providing comprehensive health care
37.4 services to its members on a nonelective emergency basis, or
37.5 while they are outside the area served by the organization, or
37.6 (iii) for not more than 95 percent of the amount by which the
37.7 health maintenance organization's costs for any of its fiscal
37.8 years exceed 105 percent of its income for such fiscal years;
37.9 and
37.10 (2) a health maintenance organization from having a
37.11 provision in a group health maintenance contract allowing an
37.12 adjustment of premiums paid based upon the actual health
37.13 services utilization of the enrollees covered under the
37.14 contract, except that at no time during the life of the contract
37.15 shall the contract holder fully self-insure the financial risk
37.16 of health care services delivered under the contract. Risk
37.17 sharing arrangements shall be subject to the requirements of
37.18 sections 62D.01 to 62D.30;
37.19 (g) demonstrated that it has made provisions for and
37.20 adopted a conflict of interest policy applicable to all members
37.21 of the board of directors and the principal officers of the
37.22 health maintenance organization. The conflict of interest
37.23 policy shall include the procedures described in section
37.24 317A.255, subdivisions 1 and 2. However, the commissioner is
37.25 not precluded from finding that a particular transaction is an
37.26 unreasonable expense as described in section 62D.19 even if the
37.27 directors follow the required procedures; and
37.28 (h) otherwise met the requirements of sections 62D.01 to
37.29 62D.30.
37.30 Sec. 5. Minnesota Statutes 2002, section 62D.041,
37.31 subdivision 2, is amended to read:
37.32 Subd. 2. [REQUIRED DEPOSIT.] Each health maintenance
37.33 organization shall deposit with any organization or trustee
37.34 acceptable to the commissioner through which a custodial or
37.35 controlled account is utilized, bankable funds in the amount
37.36 required in this section. The commissioner may allow a health
38.1 maintenance organization's deposit requirement to be funded by a
38.2 guaranteeing an organization, as defined in section
38.3 62D.043 approved by the commissioner.
38.4 Sec. 6. Minnesota Statutes 2002, section 62D.042,
38.5 subdivision 1, is amended to read:
38.6 Subdivision 1. [DEFINITIONS DEFINITION.] (a) For purposes
38.7 of this section, "guaranteeing organization" means an
38.8 organization that has agreed to make necessary contributions or
38.9 advancements to the health maintenance organization to maintain
38.10 the health maintenance organization's statutorily required net
38.11 worth.
38.12 (b) For this section, "working capital" means current
38.13 assets minus current liabilities.
38.14 (c) For purposes of this section, if a health maintenance
38.15 organization offers supplemental benefits as described in
38.16 section 62D.05, subdivision 6, "expenses" does not include any
38.17 expenses attributable to the supplemental benefit.
38.18 Sec. 7. Minnesota Statutes 2002, section 62D.042,
38.19 subdivision 2, is amended to read:
38.20 Subd. 2. [INITIAL NET WORTH REQUIREMENTS REQUIREMENT.] (a)
38.21 Beginning organizations shall maintain net worth of at least
38.22 8-1/3 percent of the sum of all expenses expected to be incurred
38.23 in the 12 months following the date the certificate of authority
38.24 is granted, or $1,500,000, whichever is greater.
38.25 (b) After the first full calendar year of operation,
38.26 organizations shall maintain net worth of at least 8-1/3 percent
38.27 and at most 25 percent of the sum of all expenses incurred
38.28 during the most recent calendar year, but in no case shall net
38.29 worth fall below $1,000,000.
38.30 (c) Notwithstanding paragraphs (a) and (b), any health
38.31 maintenance organization owned by a political subdivision of
38.32 this state, which has a higher than average percentage of
38.33 enrollees who are enrolled in medical assistance or general
38.34 assistance medical care, may exceed the maximum net worth limits
38.35 provided in paragraphs (a) and (b), with the advance approval of
38.36 the commissioner.
39.1 Sec. 8. Minnesota Statutes 2002, section 62N.25,
39.2 subdivision 6, is amended to read:
39.3 Subd. 6. [SOLVENCY.] A community integrated service
39.4 network is exempt from the deposit, reserve, and solvency
39.5 requirements specified in sections 62D.041, 62D.042, 62D.043,
39.6 and 62D.044 and shall comply instead with sections 62N.27 to
39.7 62N.32. To the extent that there are analogous definitions or
39.8 procedures in chapter 62D or in rules promulgated thereunder,
39.9 the commissioner shall follow those existing provisions rather
39.10 than adopting a contrary approach or interpretation.
39.11 Sec. 9. Minnesota Statutes 2002, section 62N.27,
39.12 subdivision 1, is amended to read:
39.13 Subdivision 1. [APPLICABILITY.] For purposes of sections
39.14 62N.27 to 62N.32, the terms defined in this section have the
39.15 meanings given. Other terms used in those sections have the
39.16 meanings given in sections 62D.041, 62D.042, 62D.043, and
39.17 62D.044.
39.18 Sec. 10. Minnesota Statutes 2002, section 62N.29, is
39.19 amended to read:
39.20 62N.29 [GUARANTEEING ORGANIZATION.]
39.21 Subdivision 1. [USE OF GUARANTEEING ORGANIZATION.] (a) A
39.22 community network may satisfy its net worth and deposit
39.23 requirements, in whole or in part, through the use of one or
39.24 more guaranteeing organizations, with the approval of the
39.25 commissioner, under the conditions permitted in chapter 62D this
39.26 section. If the guaranteeing organization is used only to
39.27 satisfy the deposit requirement, the requirements of this
39.28 section do not apply to the guaranteeing organization.
39.29 (b) For purposes of this section, a "guaranteeing
39.30 organization" means an organization that has agreed to assume
39.31 the responsibility for the obligation of the community network's
39.32 net worth requirement.
39.33 (c) Governmental entities, such as counties, may serve as
39.34 guaranteeing organizations subject to the requirements of
39.35 chapter 62D this section.
39.36 Subd. 2. [RESPONSIBILITIES OF GUARANTEEING ORGANIZATION.]
40.1 Upon an order of rehabilitation or liquidation, a guaranteeing
40.2 organization shall transfer funds to the commissioner in the
40.3 amount necessary to satisfy the net worth requirement.
40.4 Subd. 3. [REQUIREMENTS FOR GUARANTEEING ORGANIZATION.] (a)
40.5 A community network's net worth requirement may be guaranteed
40.6 provided that the guaranteeing organization:
40.7 (1) transfers into a restricted asset account cash or
40.8 securities permitted by section 61A.28, subdivisions 2, 5, and
40.9 6, in an amount necessary to satisfy the net worth requirement.
40.10 Restricted asset accounts shall be considered admitted assets
40.11 for the purpose of determining whether a guaranteeing
40.12 organization is maintaining sufficient net worth. Permitted
40.13 securities shall not be transferred to the restricted asset
40.14 account in excess of the limits applied to the community
40.15 network, unless approved by the commissioner in advance;
40.16 (2) designates the restricted asset account specifically
40.17 for the purpose of funding the community network's net worth
40.18 requirement;
40.19 (3) maintains positive working capital subsequent to
40.20 establishing the restricted asset account, if applicable;
40.21 (4) maintains net worth, retained earnings, or surplus in
40.22 an amount in excess of the amount of the restricted asset
40.23 account, if applicable, and allows the guaranteeing organization:
40.24 (i) to remain a solvent business organization, which shall
40.25 be evaluated on the basis of the guaranteeing organization's
40.26 continued ability to meet its maturing obligations without
40.27 selling substantially all its operating assets and paying debts
40.28 when due; and
40.29 (ii) to be in compliance with any state or federal
40.30 statutory net worth, surplus, or reserve requirements applicable
40.31 to that organization or lesser requirements agreed to by the
40.32 commissioner; and
40.33 (5) fulfills requirements of clauses (1) to (4) by April 1
40.34 of each year.
40.35 (b) The commissioner may require the guaranteeing
40.36 organization to complete the requirements of paragraph (a) more
41.1 frequently if the amount necessary to satisfy the net worth
41.2 requirement increases during the year.
41.3 Subd. 4. [EXCEPTIONS TO REQUIREMENTS.] When a guaranteeing
41.4 organization is a governmental entity, subdivision 3 is not
41.5 applicable. The commissioner may consider factors which provide
41.6 evidence that the governmental entity is a financially reliable
41.7 guaranteeing organization. Similarly, when a guaranteeing
41.8 organization is a Minnesota-licensed health maintenance
41.9 organization, health service plan corporation, or insurer,
41.10 subdivision 3, paragraphs (1) and (2), are not applicable.
41.11 Subd. 5. [AMOUNTS NEEDED TO MEET NET WORTH REQUIREMENTS.]
41.12 The amount necessary for a guaranteeing organization to satisfy
41.13 the community network's net worth requirement is the lesser of:
41.14 (1) an amount needed to bring the community network's net
41.15 worth to the amount required by section 62N.28; or
41.16 (2) an amount agreed to by the guaranteeing organization.
41.17 Subd. 6. [CONSOLIDATED CALCULATIONS FOR GUARANTEED
41.18 COMMUNITY NETWORKS.] (a) If a guaranteeing organization
41.19 guarantees one or more community networks, the guaranteeing
41.20 organization may calculate the amount necessary to satisfy the
41.21 community networks' net worth requirements on a consolidated
41.22 basis.
41.23 (b) Liabilities of the community network to the
41.24 guaranteeing organization must be subordinated in the same
41.25 manner as preferred ownership claims under section 60B.44,
41.26 subdivision 10.
41.27 Subd. 7. [AGREEMENT BETWEEN GUARANTEEING ORGANIZATION AND
41.28 COMMUNITY NETWORK.] A written agreement between the guaranteeing
41.29 organization and the community network must include the
41.30 commissioner as a party and include the following provisions:
41.31 (1) any or all of the funds needed to satisfy the community
41.32 network's net worth requirement shall be transferred,
41.33 unconditionally and upon demand, according to subdivision 2;
41.34 (2) the arrangement shall not terminate for any reason
41.35 without the commissioner being notified of the termination at
41.36 least nine months in advance. The arrangement may terminate
42.1 earlier if net worth requirements will be satisfied under other
42.2 arrangements, as approved by the commissioner;
42.3 (3) the guaranteeing organization shall pay or reimburse
42.4 the commissioner for all costs and expenses, including
42.5 reasonable attorney fees and costs, incurred by the commissioner
42.6 in connection with the protection, defense, or enforcement of
42.7 the guarantee;
42.8 (4) the guaranteeing organization shall waive all defenses
42.9 and claims it may have or the community network may have
42.10 pertaining to the guarantee including, but not limited to,
42.11 waiver, release, res judicata, statute of frauds, lack of
42.12 authority, usury, illegality;
42.13 (5) the guaranteeing organization waives present demand for
42.14 payment, notice of dishonor or nonpayment and protest, and the
42.15 commissioner shall not be required to first resort for payment
42.16 to other sources or other means before enforcing the guarantee;
42.17 (6) the guarantee may not be waived, modified, amended,
42.18 terminated, released, or otherwise changed except as provided by
42.19 the guarantee agreement, and as provided by applicable statutes;
42.20 (7) the guaranteeing organization waives its rights under
42.21 the Federal Bankruptcy Code, United States Code, title 11,
42.22 section 303, to initiate involuntary proceedings against the
42.23 community network and agrees to submit to the jurisdiction of
42.24 the commissioner and Minnesota state courts in any
42.25 rehabilitation or liquidation of the community network;
42.26 (8) the guarantee shall be governed by and construed and
42.27 enforced according to the laws of the state of Minnesota; and
42.28 (9) the guarantee must be approved by the commissioner.
42.29 Subd. 8. [SUBMISSION OF GUARANTEEING ORGANIZATION'S
42.30 FINANCIAL STATEMENTS.] The community network shall submit to the
42.31 commissioner the guaranteeing organization's audited financial
42.32 statements annually by April 1 or at a different date if agreed
42.33 to by the commissioner. The community network shall also
42.34 provide other relevant financial information regarding a
42.35 guaranteeing organization as may be requested by the
42.36 commissioner.
43.1 Subd. 9. [PERFORMANCE AS GUARANTEEING ORGANIZATION
43.2 VOLUNTARY.] No provider may be compelled to serve as a
43.3 guaranteeing organization.
43.4 Subd. 10. [GUARANTOR STATUS IN REHABILITATION OR
43.5 LIQUIDATION.] Any or all of the funds in excess of the amounts
43.6 needed to satisfy the community network's obligations as of the
43.7 date of an order of liquidation or rehabilitation shall be
43.8 returned to the guaranteeing organization in the same manner as
43.9 preferred ownership claims under section 60B.44, subdivision 10.
43.10 Sec. 11. [62Q.37] [AUDITS CONDUCTED BY A NATIONALLY
43.11 RECOGNIZED INDEPENDENT ORGANIZATION.]
43.12 Subdivision 1. [APPLICABILITY.] This section applies only
43.13 to
43.14 (1) a nonprofit health service plan corporation operating
43.15 under chapter 62C;
43.16 (2) a health maintenance organization operating under
43.17 chapter 62D;
43.18 (3) a community integrated service network operating under
43.19 chapter 62N; and
43.20 (4) managed care organizations operating under chapter
43.21 256B, 256D, or 256L.
43.22 Subd. 2. [DEFINITIONS.] For purposes of this section, the
43.23 following terms have the meanings given.
43.24 (a) "Commissioner" means the commissioner of health for
43.25 purposes of regulating health maintenance organizations and
43.26 community integrated service networks; the commissioner of
43.27 commerce for purposes of regulating nonprofit health service
43.28 plan corporations; or the commissioner of human services for the
43.29 purpose of contracting with managed care organizations serving
43.30 persons enrolled in programs under chapter 256B, 256D, or 256L.
43.31 (b) "Health plan company" means a nonprofit health service
43.32 plan corporation operating under chapter 62C; a health
43.33 maintenance organization operating under chapter 62D; a
43.34 community integrated service network operating under chapter
43.35 62N; or a managed care organization operating under chapter
43.36 256B, 256D, or 256L.
44.1 (c) "Nationally recognized independent organization" means
44.2 an organization that sets specific national standards governing
44.3 health care quality assurance processes, utilization review,
44.4 provider credentialing, marketing, and other topics covered by
44.5 this chapter and other chapters and audits and provides
44.6 accreditation to those health plan companies that meet those
44.7 standards. The American Accreditation Health Care Commission
44.8 (URAC), the National Committee for Quality Assurance (NCQA), and
44.9 the Joint Commission on Accreditation of Healthcare
44.10 Organizations (JCAHO) are, at a minimum, defined as nationally
44.11 recognized independent organizations; and the Centers for
44.12 Medicare and Medicaid Services for purposes of reviews or audits
44.13 conducted of health plan companies under Part C of Title XVIII
44.14 of the Social Security Act or under section 1876 of the Social
44.15 Security Act.
44.16 (d) "Performance standard" means those standards relating
44.17 to quality management and improvement, access and availability
44.18 of service, utilization review, provider selection, provider
44.19 credentialing, marketing, member rights and responsibilities,
44.20 complaints, appeals, grievance systems, enrollee information and
44.21 materials, enrollment and disenrollment, subcontractual
44.22 relationships and delegation, confidentiality, continuity and
44.23 coordination of care, assurance of adequate capacity and
44.24 services, coverage and authorization of services, practice
44.25 guidelines, health information systems, and financial solvency.
44.26 Subd. 3. [AUDITS.] (a) The commissioner may conduct
44.27 routine audits and investigations as prescribed under the
44.28 commissioner's respective state authorizing statutes. If a
44.29 nationally recognized independent organization has conducted an
44.30 audit of the health plan company using audit procedures that are
44.31 comparable to or more stringent than the commissioner's audit
44.32 procedures:
44.33 (1) the commissioner may accept the independent audit and
44.34 require no further audit if the results of the independent audit
44.35 show that the performance standard being audited meets or
44.36 exceeds state standards;
45.1 (2) the commissioner may accept the independent audit and
45.2 limit further auditing if the results of the independent audit
45.3 show that the performance standard being audited partially meets
45.4 state standards;
45.5 (3) the health plan company must demonstrate to the
45.6 commissioner that the nationally recognized independent
45.7 organization that conducted the audit is qualified and that the
45.8 results of the audit demonstrate that the particular performance
45.9 standard partially or fully meets state standards; and
45.10 (4) if the commissioner has partially or fully accepted an
45.11 independent audit of the performance standard, the commissioner
45.12 may use the finding of a deficiency with regard to statutes or
45.13 rules by an independent audit as the basis for a targeted audit
45.14 or enforcement action.
45.15 (b) If a health plan company has formally delegated
45.16 activities that are required under either state law or contract
45.17 to another organization that has undergone an audit by a
45.18 nationally recognized independent organization, that health plan
45.19 company may use the nationally recognized accrediting body's
45.20 determination on its own behalf under this section.
45.21 Subd. 4. [DISCLOSURE OF NATIONAL STANDARDS AND
45.22 REPORTS.] The health plan company shall:
45.23 (1) request that the nationally recognized independent
45.24 organization provide to the commissioner a copy of the current
45.25 nationally recognized independent organization's standards upon
45.26 which the acceptable accreditation status has been granted; and
45.27 (2) shall provide to the commissioner a copy of the most
45.28 current final audit report issued by the nationally recognized
45.29 independent organization.
45.30 Subd. 5. [ACCREDITATION NOT REQUIRED.] Nothing in this
45.31 section requires a health plan company to seek an acceptable
45.32 accreditation status from a nationally recognized independent
45.33 organization.
45.34 Subd. 6. [CONTINUED AUTHORITY.] Nothing in this section
45.35 precludes the commissioner from conducting audits and
45.36 investigations, or requesting data as granted under the
46.1 commissioner's respective state authorizing statutes.
46.2 Subd. 7. [HUMAN SERVICES.] The commissioner of human
46.3 services shall implement this section in a manner that is
46.4 consistent with applicable federal laws and regulations.
46.5 Subd. 8. [CONFIDENTIALITY.] Any documents provided to the
46.6 commissioner related to the audit report that may be accepted
46.7 under this section are private data on individuals pursuant to
46.8 chapter 13 and may only be released as permitted under section
46.9 60A.03, subdivision 9.
46.10 Sec. 12. Minnesota Statutes 2002, section 72A.20, is
46.11 amended by adding a subdivision to read:
46.12 Subd. 37. [ELECTRONIC TRANSMISSION OF REQUIRED
46.13 INFORMATION.] A health carrier, as defined in section 62A.011,
46.14 subdivision 2, is not in violation of this chapter for
46.15 electronically transmitting or electronically making available
46.16 information otherwise required to be delivered in writing under
46.17 chapters 62A to 62Q and 72A to an enrollee as defined in section
46.18 62Q.01, subdivision 2a, and with the requirements of those
46.19 chapters if the following conditions are met:
46.20 (1) the health carrier informs the enrollee that electronic
46.21 transmission or access is available and, at the discretion of
46.22 the health carrier, the enrollee is given one of the following
46.23 options:
46.24 (i) electronic transmission or access will occur only if
46.25 the enrollee affirmatively requests to the health carrier that
46.26 the required information be electronically transmitted or
46.27 available and a record of that request is retained by the health
46.28 carrier; or
46.29 (ii) electronic transmission or access will automatically
46.30 occur if the enrollee has not opted out of that manner of
46.31 transmission by request to the health carrier and requested that
46.32 the information be provided in writing. If the enrollee opts
46.33 out of electronic transmission, a record of that request must be
46.34 retained by the health carrier;
46.35 (2) the enrollee is allowed to withdraw the request at any
46.36 time;
47.1 (3) if the information transmitted electronically contains
47.2 individually identifiable data, it must be transmitted to a
47.3 secured mailbox. If the information made available
47.4 electronically contains individually identifiable data, it must
47.5 be made available at a password-protected secured Web site;
47.6 (4) the enrollee is provided a customer service number on
47.7 the enrollee's member card that may be called to request a
47.8 written copy of the document; and
47.9 (5) the electronic transmission or electronic availability
47.10 meets all other requirements of this chapter including, but not
47.11 limited to, size of the typeface and any required time frames
47.12 for distribution.
47.13 Sec. 13. [REVISOR INSTRUCTION.]
47.14 The revisor of statutes shall change the heading of
47.15 Minnesota Statutes, section 62D.042, to read "INITIAL NET WORTH
47.16 REQUIREMENT."
47.17 Sec. 14. [REPEALER.]
47.18 (a) Minnesota Statutes 2002, sections 62C.09, subdivisions
47.19 3 and 4; 62D.042, subdivisions 5, 6, and 7; and 62D.043, are
47.20 repealed.
47.21 (b) Minnesota Rules, part 4685.0600, is repealed.
47.22 ARTICLE 4
47.23 SECURITIES REGULATION TECHNICAL CHANGES
47.24 Section 1. Minnesota Statutes 2002, section 45.027,
47.25 subdivision 7a, is amended to read:
47.26 Subd. 7a. [AUTHORIZED DISCLOSURES OF INFORMATION AND
47.27 DATA.] (a) The commissioner may release and disclose any active
47.28 or inactive investigative information and data on licensees to
47.29 any national securities exchange or national securities
47.30 association registered under the Securities Exchange Act of 1934
47.31 when necessary for the requesting agency in initiating,
47.32 furthering, or completing an investigation.
47.33 (b) The commissioner may release any active or inactive
47.34 investigative data relating to the conduct of the business of
47.35 insurance to the Office of the Comptroller of the Currency or
47.36 the Office of Thrift Supervision in order to facilitate the
48.1 initiation, furtherance, or completion of the investigation.
48.2 Sec. 2. Minnesota Statutes 2002, section 60A.03,
48.3 subdivision 9, is amended to read:
48.4 Subd. 9. [CONFIDENTIALITY OF INFORMATION.] The
48.5 commissioner may not be required to divulge any information
48.6 obtained in the course of the supervision of insurance
48.7 companies, or the examination of insurance companies, including
48.8 examination related correspondence and workpapers, until the
48.9 examination report is finally accepted and issued by the
48.10 commissioner, and then only in the form of the final public
48.11 report of examinations. Nothing contained in this subdivision
48.12 prevents or shall be construed as prohibiting the commissioner
48.13 from disclosing the content of this information to the insurance
48.14 department of another state or, the National Association of
48.15 Insurance Commissioners, or any national securities association
48.16 registered under the Securities Exchange Act of 1934, if the
48.17 recipient of the information agrees in writing to hold it as
48.18 nonpublic data as defined in section 13.02, in a manner
48.19 consistent with this subdivision. This subdivision does not
48.20 apply to the extent the commissioner is required or permitted by
48.21 law, or ordered by a court of law to testify or produce evidence
48.22 in a civil or criminal proceeding. For purposes of this
48.23 subdivision, a subpoena is not an order of a court of law.
48.24 Sec. 3. Minnesota Statutes 2002, section 60A.031,
48.25 subdivision 4, is amended to read:
48.26 Subd. 4. [EXAMINATION REPORT; FOREIGN AND DOMESTIC
48.27 COMPANIES.] (a) The commissioner shall make a full and true
48.28 report of every examination conducted pursuant to this chapter,
48.29 which shall include (1) a statement of findings of fact relating
48.30 to the financial status and other matters ascertained from the
48.31 books, papers, records, documents, and other evidence obtained
48.32 by investigation and examination or ascertained from the
48.33 testimony of officers, agents, or other persons examined under
48.34 oath concerning the business, affairs, assets, obligations,
48.35 ability to fulfill obligations, and compliance with all the
48.36 provisions of the law of the company, applicant, organization,
49.1 or person subject to this chapter and (2) a summary of important
49.2 points noted in the report, conclusions, recommendations and
49.3 suggestions as may reasonably be warranted from the facts so
49.4 ascertained in the examinations. The report of examination
49.5 shall be verified by the oath of the examiner in charge thereof,
49.6 and shall be prima facie evidence in any action or proceedings
49.7 in the name of the state against the company, applicant,
49.8 organization, or person upon the facts stated therein.
49.9 (b) No later than 60 days following completion of the
49.10 examination, the examiner in charge shall file with the
49.11 department a verified written report of examination under oath.
49.12 Upon receipt of the verified report, the department shall
49.13 transmit the report to the company examined, together with a
49.14 notice which provides the company examined with a reasonable
49.15 opportunity of not more than 30 days to make a written
49.16 submission or rebuttal with respect to matters contained in the
49.17 examination report.
49.18 (c) Within 30 days of the end of the period allowed for the
49.19 receipt of written submissions or rebuttals, the commissioner
49.20 shall fully consider and review the report, together with the
49.21 written submissions or rebuttals and the relevant portions of
49.22 the examiner's workpapers and enter an order:
49.23 (1) adopting the examination report as filed or with
49.24 modification or corrections. If the examination report reveals
49.25 that the company is operating in violation of any law, rule, or
49.26 prior order of the commissioner, the commissioner may order the
49.27 company to take any action the commissioner considers necessary
49.28 and appropriate to cure the violation;
49.29 (2) rejecting the examination report with directions to the
49.30 examiners to reopen the examination for purposes of obtaining
49.31 additional data, documentation, or information, and refiling the
49.32 report as required under paragraph (b); or
49.33 (3) calling for an investigatory hearing with no less than
49.34 20 days' notice to the company for purposes of obtaining
49.35 additional documentation, data, information, and testimony.
49.36 (d)(1) All orders entered under paragraph (c), clause (1),
50.1 must be accompanied by findings and conclusions resulting from
50.2 the commissioner's consideration and review of the examination
50.3 report, relevant examiner workpapers, and any written
50.4 submissions or rebuttals. The order is a final administrative
50.5 decision and may be appealed as provided under chapter 14. The
50.6 order must be served upon the company by certified mail,
50.7 together with a copy of the adopted examination report. Within
50.8 30 days of the issuance of the adopted report, the company shall
50.9 file affidavits executed by each of its directors stating under
50.10 oath that they have received a copy of the adopted report and
50.11 related orders.
50.12 (2) A hearing conducted under paragraph (c), clause (3), by
50.13 the commissioner or authorized representative, must be conducted
50.14 as a nonadversarial confidential investigatory proceeding as
50.15 necessary for the resolution of inconsistencies, discrepancies,
50.16 or disputed issues apparent upon the face of the filed
50.17 examination report or raised by or as a result of the
50.18 commissioner's review of relevant workpapers or by the written
50.19 submission or rebuttal of the company. Within 20 days of the
50.20 conclusion of the hearing, the commissioner shall enter an order
50.21 as required under paragraph (c), clause (1).
50.22 (3) The commissioner shall not appoint an examiner as an
50.23 authorized representative to conduct the hearing. The hearing
50.24 must proceed expeditiously. Discovery by the company is limited
50.25 to the examiner's workpapers which tend to substantiate
50.26 assertions in a written submission or rebuttal. The
50.27 commissioner or the commissioner's representative may issue
50.28 subpoenas for the attendance of witnesses or the production of
50.29 documents considered relevant to the investigation whether under
50.30 the control of the department, the company, or other persons.
50.31 The documents produced must be included in the record.
50.32 Testimony taken by the commissioner or the commissioner's
50.33 representative must be under oath and preserved for the record.
50.34 This section does not require the department to disclose
50.35 information or records which would indicate or show the
50.36 existence or content of an investigation or activity of a
51.1 criminal justice agency.
51.2 (4) The hearing must proceed with the commissioner or the
51.3 commissioner's representative posing questions to the persons
51.4 subpoenaed. Thereafter, the company and the department may
51.5 present testimony relevant to the investigation.
51.6 Cross-examination may be conducted only by the commissioner or
51.7 the commissioner's representative. The company and the
51.8 department shall be permitted to make closing statements and may
51.9 be represented by counsel of their choice.
51.10 (e)(1) Upon the adoption of the examination report under
51.11 paragraph (c), clause (1), the commissioner shall continue to
51.12 hold the content of the examination report as private and
51.13 confidential information for a period of 30 days except as
51.14 otherwise provided in paragraph (b). Thereafter, the
51.15 commissioner may open the report for public inspection if a
51.16 court of competent jurisdiction has not stayed its publication.
51.17 (2) Nothing contained in this subdivision prevents or shall
51.18 be construed as prohibiting the commissioner from disclosing the
51.19 content of an examination report, preliminary examination report
51.20 or results, or any matter relating to the reports, to the
51.21 Commerce Department or the insurance department of another state
51.22 or country, or to law enforcement officials of this or another
51.23 state or agency of the federal government at any time, if the
51.24 agency or office receiving the report or matters relating to the
51.25 report agrees in writing to hold it confidential and in a manner
51.26 consistent with this subdivision.
51.27 (3) If the commissioner determines that regulatory action
51.28 is appropriate as a result of an examination, the commissioner
51.29 may initiate proceedings or actions as provided by law.
51.30 (f) All working papers, recorded information, documents and
51.31 copies thereof produced by, obtained by, or disclosed to the
51.32 commissioner or any other person in the course of an examination
51.33 made under this subdivision must be given confidential treatment
51.34 and are not subject to subpoena and may not be made public by
51.35 the commissioner or any other person, except to the extent
51.36 provided in paragraph (e). Access may also be granted to the
52.1 National Association of Insurance Commissioners and any national
52.2 securities association registered under the Securities Exchange
52.3 Act of 1934. The parties must agree in writing prior to
52.4 receiving the information to provide to it the same confidential
52.5 treatment as required by this section, unless the prior written
52.6 consent of the company to which it pertains has been obtained.
52.7 Sec. 4. [EFFECTIVE DATE.]
52.8 Sections 1 to 3 are effective the day following final
52.9 enactment.