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Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1990 

                        CHAPTER 538-S.F.No. 1940 
           An act relating to health; establishing requirements 
          for rehabilitating or liquidating a health maintenance 
          organization; specifying requirements for a health 
          maintenance organization application for a 
          certificate; establishing protections against 
          conflicts of interest; establishing requirements for a 
          guaranteeing organization; including certain 
          investments as admitted assets; requiring an expedited 
          resolution of disputes about coverage of immediately 
          and urgently needed service; allowing replacement 
          coverage by other health maintenance organizations; 
          allowing appointment of a special examiner; amending 
          Minnesota Statutes 1988, sections 60B.03, subdivision 
          2; 60B.15; 60B.17, subdivision 2, and by adding a 
          subdivision; 60B.20; 60B.25; 61A.284, by adding a 
          subdivision; 62D.02, subdivisions 3 and 15; 62D.03, 
          subdivision 4; 62D.04, subdivision 1; 62D.041, 
          subdivision 2; 62D.044; 62D.08, subdivisions 1, 2, and 
          6; 62D.11, subdivisions 1a, 4, and by adding a 
          subdivision; 62D.121, by adding a subdivision; 62D.17, 
          subdivisions 1 and 4; 62D.18, subdivision 1; 62D.211; 
          Minnesota Statutes 1989 Supplement, section 62D.121, 
          subdivision 3; Laws 1988, chapter 434, section 24; 
          proposing coding for new law in Minnesota Statutes, 
          chapters 60B; and 62D; repealing Minnesota Statutes 
          1988, sections 62D.02, subdivision 2; 62D.12, 
          subdivision 16; 62D.18, subdivisions 2, 3, and 5. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1988, section 60B.03, 
subdivision 2, is amended to read: 
    Subd. 2.  [COMMISSIONER.] "Commissioner" means the 
commissioner of commerce of the state of Minnesota and, in the 
that commissioner's absence or disability, a deputy or other 
person duly designated to act in the that commissioner's place.  
In the context of rehabilitation or liquidation of a health 
maintenance organization, "commissioner" means the commissioner 
of health of the state of Minnesota and, in that commissioner's 
absence or disability, a deputy or other person duly designated 
to act in that commissioner's place. 
    Sec. 2.  Minnesota Statutes 1988, section 60B.15, is 
amended to read: 
    60B.15 [GROUNDS FOR REHABILITATION.] 
    The commissioner may apply by verified petition to the 
district court for Ramsey county or for the county in which the 
principal office of the insurer is located for an order 
directing the commissioner to rehabilitate a domestic insurer or 
an alien insurer domiciled in this state on any one or more of 
the following grounds: 
    (1) Any ground on which the commissioner may apply for an 
order of liquidation under section 60B.20, whenever the 
commissioner believes that the insurer may be successfully 
rehabilitated without substantial increase in the risk of loss 
to creditors of the insurer, its policyholders or to the public; 
    (2) That the commissioner has reasonable cause to believe 
that there has been theft from the insurer, wrongful 
sequestration or diversion of the insurer's assets, forgery or 
fraud affecting the insurer or other illegal conduct in, by or 
with respect to the insurer, which endanger assets in an amount 
threatening insolvency of the insurer; 
    (3) That substantial and unexplained discrepancies exist 
between the insurer's records and the most recent annual report 
or other official company reports; 
    (4) That the insurer, after written demand by the 
commissioner, has failed to remove any person who in fact has 
executive authority in the insurer, whether an officer, manager, 
general agent, employee, or other person, if the person has been 
found by the commissioner after notice and hearing to be 
dishonest or untrustworthy in a way affecting the insurer's 
business such as is the basis for action under section 60A.051; 
    (5) That control of the insurer, whether by stock ownership 
or otherwise, and whether direct or indirect, is in one or more 
persons found by the commissioner after notice and hearing to be 
dishonest or untrustworthy such as is the basis for action under 
section 60A.051; 
    (6) That the insurer, after written demand by the 
commissioner, has failed within a reasonable period of time to 
terminate the employment and status and all influences on 
management of any person who in fact has executive authority in 
the insurer, whether an officer, manager, general agent, 
employee or other person if the person has refused to submit to 
lawful examination under oath by the commissioner concerning the 
affairs of the insurer, whether in this state or elsewhere; 
    (7) That after lawful written demand by the commissioner 
the insurer has failed to submit promptly any of its own 
property, books, accounts, documents, or other records, or those 
of any subsidiary or related company within the control of the 
insurer, or those of any person having executive authority in 
the insurer so far as they pertain to the insurer, to reasonable 
inspection or examination by the commissioner or an authorized 
representative.  If the insurer is unable to submit the 
property, books, accounts, documents, or other records of a 
person having executive authority in the insurer, it shall be 
excused from doing so if it promptly and effectively terminates 
the relationship of the person to the insurer; 
    (8) That without first obtaining the written consent of the 
commissioner, or if required by law, the written consent of the 
attorney general, the insurer has transferred, or attempted to 
transfer, substantially its entire property or business, or has 
entered into any transaction the effect of which is to merge, 
consolidate, or reinsure substantially its entire property or 
business of any other person; 
    (9) That the insurer or its property has been or is the 
subject of an application for the appointment of a receiver, 
trustee, custodian, conservator or sequestrator or similar 
fiduciary of the insurer or its property otherwise than as 
authorized under sections 60B.01 to 60B.61, and that such 
appointment has been made or is imminent, and that such 
appointment might divest the courts of this state of 
jurisdiction or prejudice orderly delinquency proceedings under 
sections 60B.01 to 60B.61; 
    (10) That within the previous year the insurer has 
willfully violated its charter or articles of incorporation or 
its bylaws or any applicable insurance law or regulation of any 
state, or of the federal government, or any valid order of the 
commissioner under section 60B.11 in any manner or as to any 
matter which threatens substantial injury to the insurer, its 
creditors, it policyholders or the public, or having become 
aware within the previous year of an unintentional or willful 
violation has failed to take all reasonable steps to remedy the 
situation resulting from the violation and to prevent the same 
violations in the future; 
    (11) That the directors of the insurer are deadlocked in 
the management of the insurer's affairs and that the members or 
shareholders are unable to break the deadlock and that 
irreparable injury to the insurer, its creditors, its 
policyholders, or the public is threatened by reason thereof; 
    (12) That the insurer has failed to pay for 60 days after 
due date any obligation to this state or any political 
subdivision thereof or any judgment entered in this state, 
except that such nonpayment shall not be a ground until 60 days 
after any good faith effort by the insurer to contest the 
obligation or judgment has been terminated, whether it is before 
the commissioner or in the courts; 
    (13) That the insurer has failed to file its annual report 
or other report within the time allowed by law, and after 
written demand by the commissioner has failed to give an 
adequate explanation immediately; 
    (14) That two-thirds of the board of directors, or the 
holders of a majority of the shares entitled to vote, or a 
majority of members or policyholders of an insurer subject to 
control by its members or policyholders, consent to 
rehabilitation under sections 60B.01 to 60B.61; 
    (15) That the insurer is engaging in a systematic practice 
of reaching settlements with and obtaining releases from 
policyholders or third party claimants and then unreasonably 
delaying payment of or failing to pay the agreed upon 
settlements; 
    (16) That the insurer is in such condition that the further 
transaction of business would be hazardous, financially or 
otherwise, to its policyholders, its creditors, or the public; 
    (17) That within the previous 12 months the insurer has 
systematically attempted to compromise with its creditors on the 
ground that it is financially unable to pay its claims in full.; 
    (18) In the context of a health maintenance organization, 
"insurer" when used in clauses (1) to (17) means "health 
maintenance organization."  In addition to the grounds in 
clauses (1) to (17), any one of the following constitutes 
grounds for rehabilitation of a health maintenance organization: 
    (a) the health maintenance organization is unable or is 
expected to be unable to meet its debts as they become due; 
    (b) grounds exist under section 62D.042, subdivision 7; 
    (c) the health maintenance organization's liabilities 
exceed the current value of its assets, exclusive of intangibles 
and, where the guaranteeing organization's financial condition 
no longer meets the requirements of sections 62D.041 and 
62D.042, exclusive of any deposits, letters of credit, or 
guarantees provided by any guaranteeing organization under 
chapter 62D; 
   (d) in addition to grounds under clause (16), within the 
last year the health maintenance organization has failed, and 
the commissioner of health expects such failure to continue in 
the future, to make comprehensive medical care adequately 
available and accessible to its enrollees and the health 
maintenance organization has not successfully implemented a plan 
of corrective action pursuant to section 62D.121, subdivision 7; 
and 
   (e) in addition to grounds under clause (16), within the 
last year the directors or officers of the health maintenance 
organization willfully violated the requirements of section 
317A.251, or having become aware within the previous year of an 
unintentional or willful violation of section 317A.251, have 
failed to take all reasonable steps to remedy the situation 
resulting from the violation and to prevent the same violation 
in the future.  
    Sec. 3.  Minnesota Statutes 1988, section 60B.17, 
subdivision 2, is amended to read: 
    Subd. 2.  [GENERAL POWER.] Subject to court approval, the 
rehabilitator may take such action as that person deems 
necessary or expedient to reform and revitalize the insurer.  
The rehabilitator shall have all the powers of the officers and 
managers, whose authority shall be suspended, except as they are 
redelegated by the rehabilitator and shall have full power to 
direct and manage, to hire and discharge employees subject to 
any contract rights they may have, and to deal with the property 
and business of the insurer. 
    The power of the rehabilitator of a health maintenance 
organization includes the power to transfer coverage obligations 
to a solvent and voluntary health maintenance organization, 
insurer, or nonprofit health service plan, and to assign 
provider contracts of the insolvent health maintenance 
organization to an assuming health maintenance organization, 
insurer, or nonprofit health service plan permitted to enter 
into such agreements.  The rehabilitator shall not be required 
to meet the notice requirements of section 62D.121.  Transferees 
of coverage obligations or provider contracts shall have no 
liability to creditors or obligees of the health maintenance 
organization except those liabilities expressly assumed. 
    Sec. 4.  Minnesota Statutes 1988, section 60B.17, is 
amended by adding a subdivision to read: 
    Subd. 8.  [PLAN OF REHABILITATION FOR A HEALTH MAINTENANCE 
ORGANIZATION.] (a) The rehabilitator of a health maintenance 
organization, after consultation with the board of directors of 
the health maintenance organization, has the sole authority to 
propose a plan of rehabilitation. 
    (b) The court shall approve a plan of rehabilitation of a 
health maintenance organization if it meets the following 
criteria: 
    (1) the plan provides for payments to lien claimants equal 
to the value of each lien claim on the date of approval of the 
plan and may provide for payment of lien claims beyond the 
effective date of the plan and beyond the original repayment 
period for the obligation underlying the claim where the plan 
provides sufficient protection for the lien claim during the 
period for such claim under the rehabilitation plan; 
    (2) the plan provides for payment in full of each prior 
class of claims before payment of the next class; 
    (3) the plan provides for payment in full of all claims for 
taxes of the United States Government, except for claims for 
interest accruing during the rehabilitation or claims for 
penalties.  The plan may provide for payment of the claims over 
any period of time up to ten years after the effective date of 
the plan; and 
    (4) the plan is fair and equitable as to each class of 
claims for which the plan does not provide full payment.  In 
determining whether the plan is fair and equitable to these 
claimants, the court shall consider the feasibility of the plan, 
the health maintenance organization's ability to generate a 
significant surplus, the health maintenance organization's need 
to expend money to change or expand its business, and the injury 
to enrollees through loss of coverage, if such a plan is not 
approved. 
    (c) The plan may provide for transfer of the health 
maintenance contracts and liquidation of the health maintenance 
organization. 
    (d) The court's approval of a plan of rehabilitation 
discharges the health maintenance organization from all claims 
except to the extent provided in the plan. 
    Sec. 5.  [60B.171] [USE, SALE, OR TRANSFER OF ASSETS DURING 
REHABILITATION.] 
    Subdivision 1.  [REHABILITATOR AUTHORITY TO USE, SELL, 
TRANSFER ASSETS.] In addition to the powers of the rehabilitator 
provided in this chapter, during rehabilitation of a health 
maintenance organization, the rehabilitator may use, sell, or 
transfer assets as provided in this section. 
    Subd. 2.  [ORDINARY COURSE OF BUSINESS.] (a) The 
rehabilitator may use, sell, or transfer assets in which a 
person has a lien, which are not cash or cash equivalents, in 
the ordinary course of business without approval of the court, 
except that the rehabilitator must provide sufficient protection 
for that lien unless the lienholder consents. 
    (b) The rehabilitator may use, sell, or transfer cash or 
cash equivalents in which any person has a lien in the ordinary 
course of business only if: 
    (1) each person who has a lien in the assets consents; or 
     (2) after notice and a hearing, the court finds that the 
rehabilitator has or will provide the person who has a lien with 
sufficient protection for that lien. 
    Subd. 3.  [OUT OF THE ORDINARY COURSE OF BUSINESS.] (a) The 
rehabilitator may use, sell, or transfer assets in which any 
person has a lien out of the ordinary course of business with 
court approval where: 
    (1) the person that has a lien consents; or 
    (2) the rehabilitator provides sufficient protection for 
that lien.  Sufficient protection includes, but is not limited 
to, equivalent substitute collateral or payments in the amount 
approximately equal to decrease in value or amount of collateral.
    (b) Any sale or transfer shall be free and clear of all 
lien interests, if: 
    (1) all persons with liens in the assets to be sold or 
transferred consent to the sale or transfer; 
    (2) the consideration for the sale or transfer exceeds the 
total amount of all liens in the assets to be transferred; 
    (3) the rehabilitator provides sufficient protection for 
all lien claims in the assets; or 
    (4) other law permits a sale or transfer free and clear of 
any lien.  
    Sec. 6.  [60B.181] [NOTICE REGARDING REHABILITATION OR 
LIQUIDATION PROCEEDING.] 
    In an insolvency proceeding against a health maintenance 
organization, at the time the rehabilitator or liquidator gives 
notice to creditors and enrollees according to section 60B.26, 
the rehabilitator or liquidator shall also give notice that any 
interested party may request in writing notice of subsequent 
actions or hearings in the proceeding.  After the initial 
notice, the rehabilitator or liquidator may give notice only to 
those with a direct stake in any action or hearing and to those 
who have requested notice in writing.  However, the 
rehabilitator or liquidator must give all claimants who timely 
file proofs of claims notice of any plan of rehabilitation or 
liquidation. 
    Sec. 7.  [60B.191] [CLAIMS REGARDING REHABILITATION AND 
LIQUIDATION OF HEALTH MAINTENANCE ORGANIZATIONS.] 
    Subdivision 1.  [PRIORITY OF CLAIMS.] The rehabilitator or 
liquidator of a health maintenance organization shall, in lieu 
of the classification otherwise provided in this chapter, 
classify all approved claims into the following classes: 
    (1) claims for ordinary and necessary expenses of operating 
and administering the health maintenance organization during 
rehabilitation or liquidation proceeding.  Administrative 
expenses of a rehabilitation proceeding shall constitute 
administrative expenses of the liquidation proceeding; 
    (2) claims of the United States government for unpaid 
taxes; 
    (3) claims by persons employed by the health maintenance 
organization for services rendered within the four months before 
the initiation of any insolvency proceeding, up to $1,000.  
Employee claimants shall not be entitled to any lien claim or 
other claim under chapter 514; 
    (4) claims by all providers for health care goods and 
services to the extent covered under a health maintenance 
contract between enrollees and the health maintenance 
organization, and claims by enrollees for coverage under a 
health maintenance contract with the health maintenance 
organization; 
    (5) claims which are not secured by any perfected lien or 
security interest in assets of the health maintenance 
organization and which are not otherwise classified; or 
    (6) claims subordinated under this chapter, chapter 62D, or 
by agreement with the health maintenance organization or the 
commissioner of health. 
    Subd. 2.  [CLAIMS FOR MALPRACTICE.] As to a health 
maintenance organization, a claim shall be classified as an 
unsecured claim if it is made by an enrollee, a parent or 
guardian of an enrollee, or a person seeking contribution based 
on injuries to an enrollee, for damages of any type related to 
death or bodily illness or injury based on improper provisions 
or failure to provide health care goods or services by a health 
maintenance organization and its employees, or a provider and 
its employees to an enrollee of the health maintenance 
organization.  However, a claimant who has secured a judgment or 
settlement shall receive any insurance proceeds received by the 
health maintenance organization based on the claims or the 
medical care provided to the enrollee, other than reinsurance 
payable because the aggregate value of services to an enrollee 
exceeds a certain amount, less any expenses, including 
reasonable attorneys' fees the health maintenance organization 
incurred in defending the claim or prosecuting its claim against 
the insurer.  This section does not expand the liability of 
health maintenance organizations on bodily injury to enrollees. 
   Sec. 8.  [60B.193] [LIABILITY OF ENROLLEES.] 
    Upon any Minnesota state district court's order of 
rehabilitation or liquidation of a health maintenance 
organization under this chapter, all providers of health care 
goods or services to enrollees of the health maintenance 
organization, regardless of whether they have a written contract 
with the health maintenance organization, are prohibited from 
attempting to collect or collecting payment for authorized 
referrals from any enrollee of the health maintenance 
organization for goods or services to the extent the health 
maintenance organization is obligated to cover the goods and 
services under a health maintenance contract with the enrollee.  
A provider's only recourse is to file a claim against the health 
maintenance organization in the insolvency proceeding and to 
receive payment in the proceeding.  
    Sec. 9.  Minnesota Statutes 1988, section 60B.20, is 
amended to read: 
    60B.20 [GROUNDS FOR LIQUIDATION.] 
    The commissioner may apply by verified petition to the 
district court for Ramsey county or for the county in which the 
principal office of the insurer is located for an order to 
liquidate a domestic insurer or an alien insurer domiciled in 
this state on any one or more of the following grounds: 
    (1) Any ground on which the commissioner may apply for an 
order of rehabilitation under section 60B.15, whenever the 
commissioner believes that attempts to rehabilitate the insurer 
would substantially increase the risk of loss to its creditors, 
its policyholders, or the public, or would be futile, or that 
rehabilitation would serve no useful purpose; 
    (2) That the insurer is or is about to become insolvent; 
    (3) That the insurer has not transacted the business for 
which it was organized or incorporated during the previous 12 
months or has transacted only a token such business during that 
period, although authorized to do so throughout that period, or 
that more than 12 months after incorporation it has failed to 
become authorized to do the business for which it was organized 
or incorporated; 
    (4) That the insurer has commenced, or within the previous 
year has attempted to commence, voluntary dissolution or 
liquidation otherwise than as provided in section 60B.04, 
subdivision 3 in the case of a solvent insurer; 
    (5) That the insurer has concealed records or assets from 
the commissioner or improperly removed them from the 
jurisdiction, or the commissioner believes that the insurer is 
about to do so; 
    (6) That the insurer does not satisfy the requirements that 
would be applicable if it were seeking initial authorization in 
this state to do the business for which it was organized or 
incorporated, except for: 
    (a) (i) Requirements that are intended to apply only at the 
time the initial authorization to do business is obtained, and 
not thereafter; and 
    (b) (ii) Requirements that are expressly made inapplicable 
by the laws establishing the requirements; 
    (7) That the holders of two-thirds of the shares entitled 
to vote, or two-thirds of the members or policyholders entitled 
to vote in an insurer controlled by its members or 
policyholders, have consented to a petition.; 
    (8) In the context of a health maintenance organization, 
"insurer" when used in clauses (1) to (7) means "health 
maintenance organization."  In addition to the grounds in 
clauses (1) to (7), any one of the following constitutes grounds 
for liquidation of a health maintenance organization: 
    (i) the health maintenance organization is unable or is 
expected to be unable to meet its debts as they become due; 
    (ii) grounds exist under section 62D.042, subdivision 7; 
    (iii) the health maintenance organization's liabilities 
exceed the current value of its assets, exclusive of intangibles 
and, where the guaranteeing organization's financial condition 
no longer meets the requirements of sections 62D.041 and 
62D.042, exclusive of any deposits, letters of credit, or 
guarantees provided by any guaranteeing organization under 
chapter 62D; 
    (iv) within the last year the health maintenance 
organization has failed, and the commissioner of health expects 
failure to continue in the future, to make comprehensive medical 
care adequately available and accessible to its enrollees and 
the health maintenance organization has not successfully 
implemented a plan of corrective action pursuant to section 
62D.121, subdivision 7; and 
    (v) within the last year the directors or officers of the 
health maintenance organization willfully violated the 
requirements of section 317A.251, or having become aware within 
the previous year of an unintentional or willful violation of 
section 317A.251, have failed to take all reasonable steps to 
remedy the situation resulting from the violation and to prevent 
the same violation in the future. 
    Sec. 10.  Minnesota Statutes 1988, section 60B.25, is 
amended to read: 
    60B.25 [POWERS OF LIQUIDATOR.] 
    The liquidator shall report to the court monthly, or at 
other intervals specified by the court, on the progress of the 
liquidation in whatever detail the court orders.  The liquidator 
shall coordinate having an interest in the liquidation and shall 
submit a report detailing how coordination will be achieved to 
the court for its approval within 30 days following appointment, 
or within the time which the court, in its discretion, may 
establish.  Subject to the court's control, the liquidator may: 
    (1) Appoint a special deputy to act under sections 60B.01 
to 60B.61 and determine the deputy's compensation. The special 
deputy shall have all powers of the liquidator granted by this 
section.  The special deputy shall serve at the pleasure of the 
liquidator. 
    (2) Appoint or engage employees and agents, actuaries, 
accountants, appraisers, consultants, and other personnel deemed 
necessary to assist in the liquidation without regard to chapter 
14. 
    (3) Fix the compensation of persons under clause (2), 
subject to the control of the court. 
    (4) Defray all expenses of taking possession of, 
conserving, conducting, liquidating, disposing of, or otherwise 
dealing with the business and property of the insurer.  If the 
property of the insurer does not contain sufficient cash or 
liquid assets to defray the costs incurred, the liquidator may 
advance the costs so incurred out of the appropriation made to 
the department of commerce.  Any amounts so paid shall be deemed 
expense of administration and shall be repaid for the credit of 
the department of commerce out of the first available money of 
the insurer. 
    (5) Hold hearings, subpoena witnesses and compel their 
attendance, administer oaths, examine any person under oath and 
compel any person to subscribe to testimony after it has been 
correctly reduced to writing, and in connection therewith 
require the production of any books, papers, records, or other 
documents which the liquidator deems relevant to the inquiry. 
    (6) Collect all debts and moneys due and claims belonging 
to the insurer, wherever located, and for this purpose institute 
timely action in other jurisdictions, in order to forestall 
garnishment and attachment proceedings against such debts; do 
such other acts as are necessary or expedient to collect, 
conserve, or protect its assets or property, including sell, 
compound, compromise, or assign for purposes of collection, upon 
such terms and conditions as the liquidator deems best, any bad 
or doubtful debts; and pursue any creditor's remedies available 
to enforce claims. 
    (7) Conduct public and private sales of the property of the 
insurer in a manner prescribed by the court. 
    (8) Use assets of the estate to transfer coverage 
obligations to a solvent assuming insurer, if the transfer can 
be arranged without prejudice to applicable priorities under 
section 60B.44. 
    (9) Acquire, hypothecate, encumber, lease, improve, sell, 
transfer, abandon, or otherwise dispose of or deal with any 
property of the insurer at its market value or upon such terms 
and conditions as are fair and reasonable, except that no 
transaction involving property the market value of which exceeds 
$10,000 shall be concluded without express permission of the 
court.  The liquidator may also execute, acknowledge, and 
deliver any deeds, assignments, releases, and other instruments 
necessary or proper to effectuate any sale of property or other 
transaction in connection with the liquidation.  In cases where 
real property sold by the liquidator is located other than in 
the county where the liquidation is pending, the liquidator 
shall cause to be filed with the county recorder for the county 
in which the property is located a certified copy of the order 
of appointment. 
    (10) Borrow money on the security of the insurer's assets 
or without security and execute and deliver all documents 
necessary to that transaction for the purpose of facilitating 
the liquidation. 
    (11) Enter into such contracts as are necessary to carry 
out the order to liquidate, and affirm or disavow any contracts 
to which the insurer is a party. 
    (12) Continue to prosecute and institute in the name of the 
insurer or in the liquidator's own name any suits and other 
legal proceedings, in this state or elsewhere, and abandon the 
prosecution of claims the liquidator deems unprofitable to 
pursue further.  If the insurer is dissolved under section 
60B.23, the liquidator may apply to any court in this state or 
elsewhere for leave to be substituted for the insurer as 
plaintiff. 
    (13) Prosecute any action which may exist in behalf of the 
creditors, members, policyholders, or shareholders of the 
insurer against any officer of the insurer, or any other person. 
    (14) Remove any records and property of the insurer to the 
offices of the commissioner or to such other place as is 
convenient for the purposes of efficient and orderly execution 
of the liquidation. 
    (15) Deposit in one or more banks in this state such sums 
as are required for meeting current administration expenses and 
dividend distributions. 
    (16) Deposit with the state board of investment for 
investment pursuant to section 11A.24, all sums not currently 
needed, unless the court orders otherwise. 
    (17) File any necessary documents for record in the office 
of any county recorder or record office in this state or 
elsewhere where property of the insurer is located. 
    (18) Assert all defenses available to the insurer as 
against third persons, including statutes of limitations, 
statutes of frauds, and the defense of usury.  A waiver of any 
defense by the insurer after a petition for liquidation has been 
filed shall not bind the liquidator. 
    (19) Exercise and enforce all the rights, remedies, and 
powers of any creditor, shareholder, policyholder, or member, 
including any power to avoid any transfer or lien that may be 
given by law and that is not included within sections 60B.30 and 
60B.32. 
    (20) Intervene in any proceeding wherever instituted that 
might lead to the appointment of a receiver or trustee, and act 
as the receiver or trustee whenever the appointment is offered. 
    (21) Enter into agreements with any receiver or 
commissioner of any other state relating to the rehabilitation, 
liquidation, conservation, or dissolution of an insurer doing 
business in both states. 
    (22) Exercise all powers now held or hereafter conferred 
upon receivers by the laws of this state not inconsistent with 
sections 60B.01 to 60B.61. 
    (23) The enumeration in this section of the powers and 
authority of the liquidator is not a limitation, nor does it 
exclude the right to do such other acts not herein specifically 
enumerated or otherwise provided for as are necessary or 
expedient for the accomplishment of or in aid of the purpose of 
liquidation. 
    (24) The power of the liquidator of a health maintenance 
organization includes the power to transfer coverage obligations 
to a solvent and voluntary health maintenance organization, 
insurer, or nonprofit health service plan, and to assign 
provider contracts of the insolvent health maintenance 
organization to an assuming health maintenance organization, 
insurer, or nonprofit health service plan permitted to enter 
into such agreements.  The liquidator is not required to meet 
the notice requirements of section 62D.121.  Transferees of 
coverage obligations or provider contracts shall have no 
liability to creditors or obligees of the health maintenance 
organization except those liabilities expressly assumed. 
     Sec. 11.  Minnesota Statutes 1988, section 61A.284, is 
amended by adding a subdivision to read: 
    Subd. 3.  [INVESTMENTS IN HEALTH MAINTENANCE 
ORGANIZATIONS.] An investment in a health maintenance 
organization may be deemed by a domestic life insurance company 
to be an investment under this section. 
    Sec. 12.  Minnesota Statutes 1988, section 62D.02, 
subdivision 3, is amended to read: 
    Subd. 3.  "Commissioner of health" or "commissioner" means 
the state commissioner of health or a designee. 
    Sec. 13.  Minnesota Statutes 1988, section 62D.02, 
subdivision 15, is amended to read: 
    Subd. 15.  "Net worth" means admitted assets, as defined in 
section 62D.044, minus liabilities.  Liabilities do not include 
those obligations that are subordinated in the same manner as 
preferred ownership claims under section 60B.44, subdivision 10. 
For purposes of this subdivision, preferred ownership claims 
under section 60B.44, subdivision 10, include promissory notes 
subordinated to all other liabilities of the health maintenance 
organization. 
    Sec. 14.  Minnesota Statutes 1988, section 62D.03, 
subdivision 4, is amended to read: 
    Subd. 4.  Each application for a certificate of authority 
shall be verified by an officer or authorized representative of 
the applicant, and shall be in a form prescribed by the 
commissioner of health.  Each application shall include the 
following: 
    (a) a copy of the basic organizational document, if any, of 
the applicant and of each major participating entity; such as 
the articles of incorporation, or other applicable documents, 
and all amendments thereto; 
    (b) a copy of the bylaws, rules and regulations, or similar 
document, if any, and all amendments thereto which regulate the 
conduct of the affairs of the applicant and of each major 
participating entity; 
    (c) a list of the names, addresses, and official positions 
of the following: 
    (1) all members of the board of directors, or governing 
body of the local government unit, and the principal officers 
and shareholders of the applicant organization; and 
     (2) all members of the board of directors, or governing 
body of the local government unit, and the principal officers of 
the major participating entity and each shareholder beneficially 
owning more than ten percent of any voting stock of the major 
participating entity; 
     The commissioner may by rule identify persons included in 
the term "principal officers"; 
     (d) a full disclosure of the extent and nature of any 
contract or financial arrangements between the following:  
     (1) the health maintenance organization and the persons 
listed in clause (c)(1); 
     (2) the health maintenance organization and the persons 
listed in clause (c)(2); 
     (3) each major participating entity and the persons listed 
in clause (c)(1) concerning any financial relationship with the 
health maintenance organization; and 
     (4) each major participating entity and the persons listed 
in clause (c)(2) concerning any financial relationship with the 
health maintenance organization; 
     (e) the name and address of each participating entity and 
the agreed upon duration of each contract or agreement; 
     (f) a copy of the form of each contract binding the 
participating entities and the health maintenance organization.  
Contractual provisions shall be consistent with the purposes of 
sections 62D.01 to 62D.30, in regard to the services to be 
performed under the contract, the manner in which payment for 
services is determined, the nature and extent of 
responsibilities to be retained by the health maintenance 
organization, the nature and extent of risk sharing permissible, 
and contractual termination provisions; 
     (g) a copy of each contract binding major participating 
entities and the health maintenance organization.  Contract 
information filed with the commissioner shall be confidential 
and subject to the provisions of section 13.37, subdivision 1, 
clause (b), upon the request of the health maintenance 
organization.  
     Upon initial filing of each contract, the health 
maintenance organization shall file a separate document 
detailing the projected annual expenses to the major 
participating entity in performing the contract and the 
projected annual revenues received by the entity from the health 
maintenance organization for such performance.  The commissioner 
shall disapprove any contract with a major participating entity 
if the contract will result in an unreasonable expense under 
section 62D.19.  The commissioner shall approve or disapprove a 
contract within 30 days of filing.  
     Within 120 days of the anniversary of the implementation of 
each contract, the health maintenance organization shall file a 
document detailing the actual expenses incurred and reported by 
the major participating entity in performing the contract in the 
proceeding year and the actual revenues received from the health 
maintenance organization by the entity in payment for the 
performance.  
     Contracts implemented prior to April 25, 1984, shall be 
filed within 90 days of April 25, 1984.  These contracts are 
subject to the provisions of section 62D.19, but are not subject 
to the prospective review prescribed by this clause, unless or 
until the terms of the contract are modified.  Commencing with 
the next anniversary of the implementation of each of these 
contracts immediately following filing, the health maintenance 
organization shall, as otherwise required by this subdivision, 
file annual actual expenses and revenues.  
     (h) a statement generally describing the health maintenance 
organization, its health maintenance contracts and separate 
health service contracts, facilities, and personnel, including a 
statement describing the manner in which the applicant proposes 
to provide enrollees with comprehensive health maintenance 
services and separate health services; 
     (i) a copy of the form of each evidence of coverage to be 
issued to the enrollees; 
     (j) a copy of the form of each individual or group health 
maintenance contract and each separate health service contract 
which is to be issued to enrollees or their representatives; 
     (k) financial statements showing the applicant's assets, 
liabilities, and sources of financial support.  If the 
applicant's financial affairs are audited by independent 
certified public accountants, a copy of the applicant's most 
recent certified financial statement may be deemed to satisfy 
this requirement; 
     (l) a description of the proposed method of marketing the 
plan, a schedule of proposed charges, and a financial plan which 
includes a three-year projection of the expenses and income and 
other sources of future capital; 
    (m) a statement reasonably describing the geographic area 
or areas to be served and the type or types of enrollees to be 
served; 
    (n) a description of the complaint procedures to be 
utilized as required under section 62D.11; 
    (o) a description of the procedures and programs to be 
implemented to meet the requirements of section 62D.04, 
subdivision 1, clauses (b) and (c) and to monitor the quality of 
health care provided to enrollees; 
    (p) a description of the mechanism by which enrollees will 
be afforded an opportunity to participate in matters of policy 
and operation under section 62D.06; 
    (q) a copy of any agreement between the health maintenance 
organization and an insurer or nonprofit health service 
corporation regarding reinsurance, stop-loss coverage, 
insolvency coverage, or any other type of coverage for potential 
costs of health services, as authorized in sections 62D.04, 
subdivision 1, clause (f), 62D.05, subdivision 3, and 62D.13; 
and 
    (r) a copy of the conflict of interest policy which applies 
to all members of the board of directors and the principal 
officers of the health maintenance organization, as described in 
section 62D.04, subdivision 1, paragraph (g).  All currently 
licensed health maintenance organizations shall also file a 
conflict of interest policy with the commissioner within 60 days 
after the effective date of this provision or at a later date if 
approved by the commissioner; 
   (s) a copy of the statement that describes the health 
maintenance organization's prior authorization administrative 
procedures; 
    (t) a copy of the agreement between the guaranteeing 
organization and the health maintenance organization, as 
described in section 62D.043, subdivision 6; and 
    (u) other information as the commissioner of health may 
reasonably require to be provided. 
    Sec. 15.  Minnesota Statutes 1988, section 62D.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  Upon receipt of an application for a 
certificate of authority, the commissioner of health shall 
determine whether the applicant for a certificate of authority 
has: 
    (a) demonstrated the willingness and potential ability to 
assure that health care services will be provided in such a 
manner as to enhance and assure both the availability and 
accessibility of adequate personnel and facilities; 
    (b) arrangements for an ongoing evaluation of the quality 
of health care; 
    (c) a procedure to develop, compile, evaluate, and report 
statistics relating to the cost of its operations, the pattern 
of utilization of its services, the quality, availability and 
accessibility of its services, and such other matters as may be 
reasonably required by regulation of the commissioner of health; 
     (d) reasonable provisions for emergency and out of area 
health care services; 
     (e) demonstrated that it is financially responsible and may 
reasonably be expected to meet its obligations to enrollees and 
prospective enrollees.  In making this determination, the 
commissioner of health shall require the amounts of net worth 
and working capital required in section 62D.042, the deposit 
required in section 62D.041, and in addition shall consider: 
     (1) the financial soundness of its arrangements for health 
care services and the proposed schedule of charges used in 
connection therewith; 
     (2) arrangements which will guarantee for a reasonable 
period of time the continued availability or payment of the cost 
of health care services in the event of discontinuance of the 
health maintenance organization; and 
     (3) agreements with providers for the provision of health 
care services; 
     (f) demonstrated that it will assume full financial risk on 
a prospective basis for the provision of comprehensive health 
maintenance services, including hospital care; provided, 
however, that the requirement in this paragraph shall not 
prohibit the following: 
     (1) a health maintenance organization from obtaining 
insurance or making other arrangements (i) for the cost of 
providing to any enrollee comprehensive health maintenance 
services, the aggregate value of which exceeds $5,000 in any 
year, (ii) for the cost of providing comprehensive health care 
services to its members on a nonelective emergency basis, or 
while they are outside the area served by the organization, or 
(iii) for not more than 95 percent of the amount by which the 
health maintenance organization's costs for any of its fiscal 
years exceed 105 percent of its income for such fiscal years; 
and 
     (2) a health maintenance organization from having a 
provision in a group health maintenance contract allowing an 
adjustment of premiums paid based upon the actual health 
services utilization of the enrollees covered under the 
contract, except that at no time during the life of the contract 
shall the contract holder fully self-insure the financial risk 
of health care services delivered under the contract.  Risk 
sharing arrangements shall be subject to the requirements of 
sections 62D.01 to 62D.30; 
    (g) demonstrated that it has made provisions for and 
adopted a conflict of interest policy applicable to all members 
of the board of directors and the principal officers of the 
health maintenance organization.  The conflict of interest 
policy shall include the procedures described in section 
317A.255, subdivisions 1 and 2.  However, the commissioner is 
not precluded from finding that a particular transaction is an 
unreasonable expense as described in section 62D.19 even if the 
directors follow the required procedures; and 
    (h) otherwise met the requirements of sections 62D.01 to 
62D.30. 
    Sec. 16.  Minnesota Statutes 1988, section 62D.041, 
subdivision 2, is amended to read: 
    Subd. 2.  [REQUIRED DEPOSIT.] Each health maintenance 
organization shall deposit with any organization or trustee 
acceptable to the commissioner through which a custodial or 
controlled account is utilized, bankable funds in the cash 
amount required in this section.  The commissioner may allow a 
health maintenance organization's deposit requirement to be met 
funded by a guaranteeing organization, as defined in 
section 62D.042, subdivision 1, based on the criteria set out in 
section 62D.042, subdivision 5 62D.043. 
    Sec. 17.  [62D.043] [GUARANTEEING ORGANIZATIONS.] 
   Subdivision 1.  [DEFINITION.] (a) For purposes of this 
section, a "guaranteeing organization" means an organization 
that has agreed to assume the responsibility for the obligation 
of the health maintenance organization's net worth requirement. 
    Subd. 2.  [RESPONSIBILITIES OF GUARANTEEING ORGANIZATION.] 
Upon an order of rehabilitation or liquidation, a guaranteeing 
organization shall transfer funds to the commissioner in the 
amount necessary to satisfy the net worth requirement. 
    Subd. 3.  [REQUIREMENTS FOR GUARANTEEING ORGANIZATION.] (a) 
An organization's net worth requirement may be guaranteed 
provided that the guaranteeing organization: 
    (1) transfers into a restricted asset account cash or 
securities permitted by section 61A.28, subdivisions 2, 5, and 
6, in an amount necessary to satisfy the net worth requirement.  
Restricted asset accounts shall be considered admitted assets 
for the purpose of determining whether a guaranteeing 
organization is maintaining sufficient net worth.  Permitted 
securities shall not be transferred to the restricted asset 
account in excess of the limits applied to the health 
maintenance organization, unless approved by the commissioner in 
advance; 
    (2) designates the restricted asset account specifically 
for the purpose of funding the health maintenance organization's 
net worth requirement; 
   (3) maintains positive working capital subsequent to 
establishing the restricted asset account, if applicable; 
    (4) maintains net worth, retained earnings, or surplus in 
an amount in excess of the amount of the restricted asset 
account, if applicable, and allows the guaranteeing organization:
   (i) to remain a solvent business organization, which shall 
be evaluated on the basis of the guaranteeing organization's 
continued ability to meet its maturing obligations without 
selling substantially all its operating assets and paying debts 
when due; and 
    (ii) to be in compliance with any state or federal 
statutory net worth, surplus, or reserve requirements applicable 
to that organization or lesser requirements agreed to by the 
commissioner; and 
    (5) fulfills requirements of clauses (1) to (4) by April 1 
of each year. 
    (b) The commissioner may require the guaranteeing 
organization to complete the requirements of paragraph (a) more 
frequently if the amount necessary to satisfy the net worth 
requirement increases during the year. 
    Subd. 4.  [EXCEPTIONS TO REQUIREMENTS.] When a guaranteeing 
organization is a governmental entity, subdivision 3 is not 
applicable.  The commissioner may consider factors which provide 
evidence that the governmental entity is a financially reliable 
guaranteeing organization.  Similarly, when a guaranteeing 
organization is a Minnesota-licensed health maintenance 
organization, health service plan corporation, or insurer, 
subdivision 3, paragraphs (1) and (2), are not applicable.  
    Subd. 5.  [AMOUNTS NEEDED TO MEET NET WORTH 
REQUIREMENTS.] The amount necessary for a guaranteeing 
organization to satisfy the health maintenance organization's 
net worth requirement shall be the lesser of: 
    (1) an amount needed to bring the health maintenance 
organization's net worth to the amount required by section 
62D.042; or 
    (2) an amount agreed to by the guaranteeing organization. 
    Subd. 6.  [CONSOLIDATED CALCULATIONS FOR GUARANTEED HEALTH 
MAINTENANCE ORGANIZATIONS.] If a guaranteeing organization 
guarantees one or more health maintenance organizations, the 
guaranteeing organization may calculate the amount necessary to 
satisfy the health maintenance organizations' net worth 
requirements on a consolidated basis.  Liabilities of the health 
maintenance organization to the guaranteeing organization must 
be subordinated in the same manner as preferred ownership claims 
under section 60B.44, subdivision 10.  
    Subd. 7.  [AGREEMENT BETWEEN GUARANTEEING ORGANIZATION AND 
HEALTH MAINTENANCE ORGANIZATION.] A written agreement between 
the guaranteeing organization and the health maintenance 
organization must include the commissioner as a party and 
include the following provisions: 
    (1) any or all of the funds needed to satisfy the health 
maintenance organization's net worth requirement shall be 
transferred, unconditionally and upon demand, according to 
subdivision 2; 
    (2) the arrangement shall not terminate for any reason 
without the commissioner being notified of the termination at 
least nine months in advance.  The arrangement may terminate 
earlier if net worth requirements will be satisfied under other 
arrangements, as approved by the commissioner; 
    (3) the guaranteeing organization shall pay or reimburse 
the commissioner for all costs and expenses, including 
reasonable attorney fees and costs, incurred by the commissioner 
in connection with the protection, defense, or enforcement of 
the guarantee; 
    (4) the guaranteeing organization shall waive all defenses 
and claims it may have or the health maintenance organization 
may have pertaining to the guarantee including, but not limited 
to, waiver, release, res judicata, statute of frauds, lack of 
authority, usury, illegality; 
   (5) the guaranteeing organization waives present demand for 
payment, notice of dishonor or nonpayment and protest, and the 
commissioner shall not be required to first resort for payment 
to other sources or other means before enforcing the guarantee; 
    (6) the guarantee may not be waived, modified, amended, 
terminated, released, or otherwise changed except as provided by 
the guarantee agreement, and as provided by applicable statutes; 
    (7) the guaranteeing organization waives its rights under 
the Federal Bankruptcy Code, United States Code, title 11, 
section 303, to initiate involuntary proceedings against the 
health maintenance organization and agrees to submit to the 
jurisdiction of the commissioner and Minnesota state courts in 
any rehabilitation or liquidation of the health maintenance 
organization; 
    (8) the guarantee shall be governed by and construed and 
enforced according to the laws of the state of Minnesota; and 
    (9) the guarantee must be approved by the commissioner. 
    Subd. 8.  [SUBMISSION OF GUARANTEEING ORGANIZATION'S 
FINANCIAL STATEMENTS.] Health maintenance organizations shall 
submit to the commissioner the guaranteeing organization's 
audited financial statements annually by April 1 or at a 
different date if agreed to by the commissioner.  The health 
maintenance organization shall also provide other relevant 
financial information regarding a guaranteeing organization as 
may be requested by the commissioner. 
    Subd. 9.  [PERFORMANCE AS GUARANTEEING ORGANIZATION 
VOLUNTARY.] No provider may be compelled to serve as a 
guaranteeing organization. 
    Subd. 10.  [GUARANTOR STATUS IN REHABILITATION OR 
LIQUIDATION.] Any or all of the funds in excess of the amounts 
needed to satisfy the health maintenance organization's 
obligations as of the date of an order of liquidation or 
rehabilitation shall be returned to the guaranteeing 
organization in the same manner as preferred ownership claims 
under section 60B.44, subdivision 10. 
    Sec. 18.  Minnesota Statutes 1988, section 62D.044, is 
amended to read: 
    62D.044 [ADMITTED ASSETS.] 
    "Admitted assets" includes only the investments allowed by 
section 62D.045 and the following: 
    (1) petty cash and other cash funds in the organization's 
principal or official branch office that are under the 
organization's control; 
    (2) immediately withdrawable funds on deposit in demand 
accounts, in a bank or trust company organized and regularly 
examined under the laws of the United States or any state, and 
insured by an agency of the United States government, or like 
funds actually in the principal or official branch office at 
statement date, and, in transit to a bank or trust company with 
authentic deposit credit given before the close of business on 
the fifth bank working day following the statement date; 
    (3) the amount fairly estimated as recoverable on cash 
deposited in a closed bank or trust company, if the assets 
qualified under this section before the suspension of the bank 
or trust company; 
    (4) bills and accounts receivable that are collateralized 
by securities in which the organization is authorized to invest; 
    (5) premiums due from groups or individuals that are not 
more than 90 days past due; 
    (6) amounts due under reinsurance arrangements from 
insurance companies authorized to do business in this state; 
     (7) tax refunds due from the United States or this state; 
     (8) interest accrued on mortgage loans not exceeding in 
aggregate one year's total due and accrued interest on an 
individual loan; 
     (9) the rents due to the organization on real and personal 
property, directly or beneficially owned, not exceeding the 
amount of one year's total due and accrued rent on each 
individual property; 
     (10) interest or rents accrued on conditional sales 
agreements, security interests, chattel mortgages, and real or 
personal property under lease to other corporations that do not 
exceed the amount of one year's total due and accrued interest 
or rent on an individual investment; 
     (11) the fixed required interest due and accrued on bonds 
and other evidences of indebtedness that are not in default; 
     (12) dividends receivable on shares of stock, provided that 
the market price for valuation purposes does not include the 
value of the dividend; 
     (13) the interest on dividends due and payable, but not 
credited, on deposits in banks and trust companies or on 
accounts with savings and loan associations; 
    (14) interest accrued on secured loans that do not exceed 
the amount of one year's interest on any loan; 
    (15) interest accrued on tax anticipation warrants; 
    (16) the amortized value of electronic computer or data 
processing machines or systems purchased for use in the business 
of the organization, including software purchased and developed 
specifically for the organization's use; 
    (17) the cost of furniture, equipment, and medical 
equipment, less accumulated depreciation thereon, and medical 
and pharmaceutical supplies that are used to deliver health care 
and are under the organization's control, provided the assets do 
not exceed 30 percent of admitted assets; 
    (18) amounts currently due from an affiliate that has 
liquid assets with which to pay the balance and maintain its 
accounts on a current basis.  Any amount outstanding more than 
three months is not current; 
    (19) amounts on deposit under section 62D.041; and 
    (20) accounts receivable from participating health care 
providers that are not more than 60 days past due; and 
   (21) investments allowed by section 62D.045, except for 
investments in securities and properties described under section 
61A.284. 
    Sec. 19.  Minnesota Statutes 1988, section 62D.08, 
subdivision 1, is amended to read: 
    Subdivision 1.  A health maintenance organization shall, 
unless otherwise provided for by rules adopted by the 
commissioner of health, file notice with the commissioner of 
health prior to any modification of the operations or documents 
described in the information submitted under clauses (a), (b), 
(e), (f), (g), (i), (j), (l), (m), (n), (o), (p), (q) and, (r), 
(s), and (t) of section 62D.03, subdivision 4.  If the 
commissioner of health does not disapprove of the filing 
within 30 60 days, it shall be deemed approved and may be 
implemented by the health maintenance organization.  
    Sec. 20.  Minnesota Statutes 1988, section 62D.08, 
subdivision 2, is amended to read: 
    Subd. 2.  Every health maintenance organization shall 
annually, on or before April 1, file a verified report with the 
commissioner of health and to the commissioner of commerce 
covering the preceding calendar year.  However, utilization data 
required under subdivision 3, clause (c), shall be filed on or 
before July 1. 
    Sec. 21.  Minnesota Statutes 1988, section 62D.08, 
subdivision 6, is amended to read: 
    Subd. 6.  A health maintenance organization shall submit to 
the commissioner unaudited financial statements of the 
organization on a quarterly basis for the first three quarters 
of the year on forms prescribed by the commissioner.  The 
statements are due 30 days after the end of each the quarter and 
shall be maintained as nonpublic data, as defined by section 
13.02, subdivision 9.  Unaudited financial statements for the 
fourth quarter shall be submitted at the request of the 
commissioner. 
    Sec. 22.  Minnesota Statutes 1988, section 62D.11, 
subdivision 1a, is amended to read: 
    Subd. 1a.  Where a complaint involves a dispute about a 
health maintenance organization's coverage of an immediately and 
urgently needed a service, the commissioner may either (a) 
review the complaint and any information and testimony necessary 
in order to make a determination and order the appropriate 
remedy pursuant to sections 62D.15 to 62D.17, or (b) order the 
health maintenance organization to use an expedited system to 
process the complaint. 
    Sec. 23.  Minnesota Statutes 1988, section 62D.11, is 
amended by adding a subdivision to read: 
   Subd. 1b.  [EXPEDITED RESOLUTION OF COMPLAINTS ABOUT 
URGENTLY NEEDED SERVICE.] In addition to any remedy contained in 
subdivision 1a, when a complaint involves a dispute about a 
health maintenance organization's coverage of an immediately and 
urgently needed service, the commissioner may also order the 
health maintenance organization to use an expedited system to 
process the complaint.  
    Sec. 24.  Minnesota Statutes 1988, section 62D.11, 
subdivision 4, is amended to read: 
    Subd. 4.  [COVERAGE OF SERVICE.] A health maintenance 
organization may not deny or limit coverage of a service which 
the enrollee has already received: 
    (1) solely on the basis of lack of prior authorization or 
second opinion, to the extent that the service would otherwise 
have been covered under the member's contract by the health 
maintenance organization had prior authorization or second 
opinion been obtained; or 
    (2) from a nonparticipating provider, if (i) the service 
was ordered or recommended by a participating provider; (ii) the 
service would otherwise be covered, or was part of a discharge 
plan of a participating provider; and (iii) the enrollee was not 
given prior written notice stating that this service by a 
nonparticipating provider would not be covered, and listing the 
participating providers of this service available in the 
enrollee's area. 
    Sec. 25.  Minnesota Statutes 1988, section 62D.121, is 
amended by adding a subdivision to read: 
    Subd. 2a.  [REPLACEMENT COVERAGE.] The terminating health 
maintenance organization may also offer as replacement coverage 
health maintenance organization coverage issued by another 
health maintenance organization. 
    Sec. 26.  Minnesota Statutes 1989 Supplement, section 
62D.121, subdivision 3, is amended to read: 
    Subd. 3.  If health maintenance organization replacement 
coverage is not provided offered by the health maintenance 
organization, as explained under subdivision subdivisions 2 and 
2a, the replacement coverage shall provide, for enrollees 
covered by title XVIII of the Social Security Act, coverage at 
least equivalent to a basic Medicare supplement plan as defined 
in section 62A.316, except that the replacement coverage shall 
also cover the liability for any Medicare part A and part B 
deductible as defined under title XVIII of the Social Security 
Act.  After satisfaction of the Medicare part B deductible, the 
replacement coverage shall be based on 120 percent of the at 
least 80 percent of usual and customary eligible medical 
expenses and supplies not covered by Medicare part B eligible 
expenses less the Medicare part B payment amount.  This does not 
include outpatient prescription drugs.  The fee or premium of 
the replacement coverage shall not exceed the premium charged by 
the state comprehensive health plan as established under section 
62E.08, for a qualified Medicare supplement plan.  All enrollees 
not covered by Medicare shall be given the option of a number 
three qualified plan or a number two qualified plan as defined 
in section 62E.06, subdivisions 1 and 2, for replacement 
coverage.  The fee or premium for a number three qualified plan 
shall not exceed 125 percent of the average of rates charged by 
the five insurers with the largest number of individuals in a 
number three qualified plan of insurance in force in Minnesota.  
The fee or premium for a number two qualified plan shall not 
exceed 125 percent of the average of rates charged by the five 
insurers with the largest number of individuals in a number two 
qualified plan of insurance in force in Minnesota.  
    Subd. 3a.  If the replacement coverage is health 
maintenance organization coverage, as explained in subdivisions 
2 and 2a, the fee shall not exceed 125 percent of the cost of 
the average fee charged by health maintenance organizations for 
a similar health plan.  The commissioner of health will 
determine the average cost of the plan on the basis of 
information provided annually by the health maintenance 
organizations concerning the rates charged by the health 
maintenance organizations for the plans offered.  Fees or 
premiums charged under this section must be actuarially 
justified. 
    Sec. 27.  Minnesota Statutes 1988, section 62D.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  The commissioner of health may, for any 
violation of statute or rule applicable to a health maintenance 
organization, or in lieu of suspension or revocation of a 
certificate of authority under section 62D.15, levy an 
administrative penalty in an amount up to $10,000 $25,000 for 
each violation.  In the case of contracts or agreements made 
pursuant to section 62D.05, subdivisions 2 to 4, each contract 
or agreement entered into or implemented in a manner which 
violates sections 62D.01 to 62D.30 shall be considered a 
separate violation.  In determining the level of an 
administrative penalty, the commissioner shall consider the 
following factors: 
    (1) the number of enrollees affected by the violation; 
     (2) the effect of the violation on enrollees' health and 
access to health services; 
     (3) if only one enrollee is affected, the effect of the 
violation on that enrollee's health; 
     (4) whether the violation is an isolated incident or part 
of a pattern of violations; and 
     (5) the economic benefits derived by the health maintenance 
organization or a participating provider by virtue of the 
violation. 
     Reasonable notice in writing to the health maintenance 
organization shall be given of the intent to levy the penalty 
and the reasons therefor, and the health maintenance 
organization may have 15 days within which to file a written 
request for an administrative hearing and review of the 
commissioner of health's determination.  Such administrative 
hearing shall be subject to judicial review pursuant to chapter 
14. 
    Sec. 28.  Minnesota Statutes 1988, section 62D.17, 
subdivision 4, is amended to read: 
    Subd. 4.  (a) The commissioner of health may issue an order 
directing a health maintenance organization or a representative 
of a health maintenance organization to cease and desist from 
engaging in any act or practice in violation of the provisions 
of sections 62D.01 to 62D.30. 
    (1) The cease and desist order may direct a health 
maintenance organization to pay for or provide a service when 
that service is required by statute or rule to be provided. 
    (2) The commissioner may issue a cease and desist order 
directing a health maintenance organization to pay for a service 
that is required by statute or rule to be provided, only if 
there is a demonstrable and irreparable harm to the public or an 
enrollee.  
    (3) If the cease and desist order involves a dispute over 
the medical necessity of a procedure based on its experimental 
nature, the commissioner may issue a cease and desist order only 
if the following conditions are met:  
    (i) the commissioner has consulted with appropriate and 
identified experts; 
    (ii) the commissioner has reviewed relevant scientific and 
medical literature; and 
    (iii) the commissioner has considered all other relevant 
factors including whether final approval of the technology or 
procedure has been granted by the appropriate government agency; 
the availability of scientific evidence concerning the effect of 
the technology or procedure on health outcomes; the availability 
of scientific evidence that the technology or procedure is as 
beneficial as established alternatives; and the availability of 
evidence of benefit or improvement without the technology or 
procedure. 
    (b) Within 20 days after service of the order to cease and 
desist, the respondent may request a hearing on the question of 
whether acts or practices in violation of sections 62D.01 to 
62D.30 have occurred.  Such hearings shall be subject to 
judicial review as provided by chapter 14. 
    If the acts or practices involve violation of the reporting 
requirements of section 62D.08, or if the commissioner of 
commerce has ordered the rehabilitation, liquidation, or 
conservation of the health maintenance organization in 
accordance with section 62D.18, the health maintenance 
organization may request an expedited hearing on the matter.  
The hearing shall be held within 15 days of the request.  Within 
ten days thereafter, an administrative law judge shall issue a 
recommendation on the matter.  The commissioner shall make a 
final determination on the matter within ten days of receipt of 
the administrative law judge's recommendation.  
    When a request for a stay accompanies the hearing request, 
the matter shall be referred to the office of administrative 
hearings within three working days of receipt of the request. 
Within ten days thereafter, an administrative law judge shall 
issue a recommendation to grant or deny the stay.  The 
commissioner shall grant or deny the stay within five days of 
receipt of the administrative law judge's recommendation. 
    To the extent the acts or practices alleged do not involve 
(1) violations of section 62D.08,; (2) violations which may 
result in the financial insolvency of the health maintenance 
organization; (3) violations which threaten the life and health 
of enrollees; (4) violations which affect whole classes of 
enrollees; or (5) violations of benefits or service requirements 
mandated by law; if a timely request for a hearing is made, the 
cease and desist order shall be stayed for a period of 90 days 
from the date the hearing is requested or until a final 
determination is made on the order, whichever is earlier. During 
this stay, the respondent may show cause why the order should 
not become effective upon the expiration of the stay. Arguments 
on this issue shall be made through briefs filed with the 
administrative law judge no later than ten days prior to the 
expiration of the stay.  
    Sec. 29.  Minnesota Statutes 1988, section 62D.18, 
subdivision 1, is amended to read: 
    Subdivision 1.  [COMMISSIONER OF HEALTH; ORDER.] The 
commissioner of health may independently order the 
rehabilitation or liquidation of health maintenance 
organizations apply by verified petition to the District Court 
of Ramsey county or the county in which the principal office of 
the health maintenance organization is located for an order 
directing the commissioner of health to rehabilitate or 
liquidate a health maintenance organization.  The rehabilitation 
or liquidation of a health maintenance organization shall be 
conducted under the supervision of the commissioner of health 
under the procedures, and with the powers granted to a 
rehabilitator or liquidator, in chapter 60B, except to the 
extent that the nature of health maintenance organizations 
renders the procedures or powers clearly inappropriate and as 
provided in subdivisions 2 to 7 this subdivision or in chapter 
60B.  A health maintenance organization shall be considered an 
insurance company for the purposes of rehabilitation or 
liquidation as provided in subdivisions 4, 6, and 7. 
    Sec. 30.  Minnesota Statutes 1988, section 62D.211, is 
amended to read: 
    62D.211 [RENEWAL FEE.] 
    Each health maintenance organization subject to sections 
62D.01 to 62D.30 shall submit to the commissioner of health each 
year before April 1 June 15 a certificate of authority renewal 
fee in the amount of $10,000 each plus 20 cents per person 
enrolled in the health maintenance organization on December 31 
of the preceding year.  The commissioner may adjust the renewal 
fee in rule under the provisions of chapter 14. 
    Sec. 31.  Laws 1988, chapter 434, section 24, is amended to 
read: 
    Sec. 24.  [REPEALER.] 
    Laws 1984, chapter 464, sections 29 and 40, are repealed.  
Section 14 is repealed June 30, 1990 1992. 
    Sec. 32.  [REPEALER.] 
    Minnesota Statutes 1988, sections 62D.02, subdivision 2; 
62D.12, subdivision 16; and 62D.18, subdivisions 2, 3, and 5, 
are repealed. 
    Presented to the governor April 24, 1990 
    Signed by the governor April 26, 1990, 10:43 p.m.