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62D.042 Net worth and working capital requirements.

Subdivision 1. Definitions. (a) For purposes of this section, "guaranteeing organization" means an organization that has agreed to make necessary contributions or advancements to the health maintenance organization to maintain the health maintenance organization's statutorily required net worth.

(b) For this section, "working capital" means current assets minus current liabilities.

(c) For purposes of this section, if a health maintenance organization offers supplemental benefits as described in section 62D.05, subdivision 6, "expenses" does not include any expenses attributable to the supplemental benefit.

Subd. 2. Beginning organizations. (a) Beginning organizations shall maintain net worth of at least 8-1/3 percent of the sum of all expenses expected to be incurred in the 12 months following the date the certificate of authority is granted, or $1,500,000, whichever is greater.

(b) After the first full calendar year of operation, organizations shall maintain net worth of at least 8-1/3 percent and at most 16-2/3 percent of the sum of all expenses incurred during the most recent calendar year, but in no case shall net worth fall below $1,000,000.

(c) Notwithstanding paragraphs (a) and (b), any health maintenance organization owned by a political subdivision of this state, which has a higher than average percentage of enrollees who are enrolled in medical assistance or general assistance medical care, may exceed the maximum net worth limits provided in paragraphs (a) and (b), with the advance approval of the commissioner.

Subd. 3. Existing organizations. Each organization shall have a net worth of at least four-fifths of 8-1/3 percent of the sum of all expenses incurred during the previous calendar year, or $1,000,000, whichever is greater.

Subd. 4. Reduction for reinsurance. In calculating expenses for purposes of the net worth requirement, a health maintenance organization may subtract 90 percent of the cost of premiums it pays for insurance coverage specified in section 62D.04, subdivision 1, clause (f).

Subd. 5. Guaranteeing organization. (a) The commissioner may determine that it is in the best interests of an organization's enrollees and the public to allow an organization's net worth requirement to be satisfied by a guaranteeing organization. The commissioner shall consider the net worth of a guaranteeing organization, the number of organizations it guarantees, whether it is a governmental entity with power to tax, and other factors the commissioner considers relevant. If the commissioner allows a guaranteeing organization to satisfy the net worth requirement of more than one health maintenance organization, the guaranteeing organization must maintain the required net worth of the guaranteed health maintenance organizations on an aggregate basis.

(b) A health maintenance organization that requests the commissioner to allow a guaranteeing organization to satisfy its net worth or deposit requirement shall provide the commissioner with the guaranteeing organization's financial records and other relevant information when the request is made and annually by April 1, and must continue to do so upon request by the commissioner.

(c) No provider may be compelled to serve as a guaranteeing organization.

Subd. 6. Working capital. A health maintenance organization must maintain a positive working capital.

Subd. 7. Plans of correction. If the working capital or net worth is less than the required minimum, operations must be adjusted to correct the net worth or working capital, according to a written plan proposed by the organization and approved by the commissioner. The commissioner may take action against the organization under chapter 60B or under the suspension and penalty provisions of sections 62D.15, 62D.16, and 62D.17 if:

(1) an organization does not propose a plan to correct its working capital or net worth within a reasonable time;

(2) an organization violates a plan that has been approved;

(3) the commissioner determines that an improper working capital or net worth status cannot be corrected within a reasonable time; or

(4) the commissioner determines that the organization is in such financial condition that the transaction of further business would be hazardous to its enrollees, its creditors, or the public.

HIST: 1988 c 612 s 14; 1989 c 282 art 2 s 5; 1993 c 345 art 2 s 1; 1995 c 234 art 7 s 7; 1997 c 205 s 5

Official Publication of the State of Minnesota
Revisor of Statutes