HF 2258

2nd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  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.