There is a newer version of the Kentucky Revised Statutes
2009 Kentucky Revised Statutes
Subtitle 38. Health Maintenance Organizations
304.38.070 Requirements for protection against insolvency -- Risk-based capital requirements.
Download pdf(a) Except as provided in paragraph (b) of this subsection, to qualify for authority to act as a health maintenance organization, a corporation or limited liability
company shall possess and thereafter maintain unimpaired paid-in capital
stock of one million dollars ($1,000,000), and, when first so authorized, shall
possess initial free surplus of not less than two million dollars ($2,000,000); (b) A corporation holding a valid certificate of authority to transact business as a health maintenance organization in Kentucky immediately prior to July 15,
1986, may, if otherwise qualified therefor, continue to be so authorized while
meeting the requirements for protection against insolvency required for such
authority immediately prior to July 15, 1986. Notwithstanding the other
provisions hereof, the exception provided in this paragraph shall cease to
apply to any such health maintenance organization from and after the date it
has accumulated capital and surplus equal to or in excess of the capital and
surplus required by paragraph (a) of this subsection; and (c) Each corporation authorized as a health maintenance organization shall at all times maintain bona fide additional surplus in the amount of two hundred fifty
thousand dollars ($250,000) and shall at all times comply with the risk-based
capital requirements as established in administrative regulations promulgated
by the commissioner. A corporation holding a valid certificate of authority to
transact business as a health maintenance organization in Kentucky
immediately prior to July 15, 1986, may, if otherwise qualified therefor,
continue to be so authorized while meeting the requirements for protection
against insolvency as required for such authority immediately prior to July 15,
1986. The exception provided in this paragraph shall cease to apply to any
such health maintenance organization from and after the date upon which it
has accumulated additional surplus equal to or in excess of the additional
surplus required by this subsection. (2) This subsection applies to a partnership applying for or holding a certificate of authority as a health maintenance organization:
(a) Except as provided in paragraph (b) of this subsection, to qualify for authority to act as a health maintenance organization, a partnership shall possess, when
first so authorized, a total of at least three million dollars ($3,000,000) in its
capital accounts. Thereafter, a partnership authorized as a health maintenance
organization shall possess and maintain a total of at least one million two
hundred fifty thousand dollars ($1,250,000) in its capital accounts and shall
comply at all times with the risk-based capital requirement established in
administrative regulations promulgated by the commissioner; (b) A partnership holding a valid certificate of authority to transact business as a health maintenance organization in Kentucky immediately prior to July 15,
1986, may, if otherwise qualified therefor, continue to be so authorized while meeting the requirements for protection against insolvency required for such
authority immediately prior to July 15, 1986. The exception provided for in
this paragraph shall cease to apply to any such health maintenance
organization from and after the date upon which the total of the funds which it
has accumulated in its capital accounts equal or exceed the total of the funds
in its capital accounts required by this subsection. (3) A corporation, partnership, or limited liability company applying for and holding a certificate of authority as a health maintenance organization which by contract
manages care and processes health care claims solely for Medicaid-eligible
enrollees and the Kentucky Children's Health Insurance Program shall comply with
risk-based capital (RBC) requirements as follows:
(a) For purposes of this subsection, risk-based capital shall be determined in accordance with the risk-based capital requirements for health maintenance
organizations established under this subtitle and any administrative regulation
promulgated pursuant to KRS Chapter 13A, except as otherwise provided in
this subsection. A corporation, partnership, or limited liability company
applying for and holding a certificate of authority as a health maintenance
organization which by contract manages care and processes health care claims
solely for Medicaid-eligible enrollees and the Kentucky Children's Health
Insurance Program shall comply with the same risk-based capital requirements
as other health maintenance organizations, except that no additional phase-in
or risk-based capital reports shall be required for 2000 or 2001, and the risk-
based capital levels shall be established in accordance with paragraph (b) of
this subsection; (b) For the risk-based capital reports required to be filed by health maintenance organizations which manage care and process health care claims solely for
Medicaid-eligible enrollees and the Kentucky Children's Health Insurance
Program, the risk-based capital levels shall be defined as follows:
1. "Company Action Level RBC" means the product of two (2.0) and its
Authorized Control Level RBC; 2. "Regulatory Action Level RBC" means the product of one and five-
tenths (1.5) and its Authorized Control Level RBC; 3. "Authorized Control Level RBC" means the product of four-tenths (.40)
and the risk-based capital after covariance determined under the risk-
based capital formula in accordance with the RBC instruction; and 4. "Mandatory Control Level RBC" means the product of seven-tenths
(.70) and the Authorized Control Level RBC; and (c) A corporation, partnership, or limited liability company applying for and holding a certificate of authority as a health maintenance organization
managing care, processing health care claims, or providing health benefits to
groups or individuals in addition to Medicaid-eligible and Kentucky
Children's Health Insurance Program enrollees shall comply with the risk-
based capital requirements of subsection (1) of this section and this subtitle, and shall not be eligible to calculate its risk-based capital according to this
subsection. Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1503, effective July 15, 2010; and repealed and reenacted ch. 51, sec. 137, effective July 15, 2010. -- Amended 2007
Ky. Acts ch. 137, sec. 137, effective June 26, 2007. -- Amended 2003 Ky. Acts
ch. 136, sec. 1, effective June 24, 2003. -- Amended 2000 Ky. Acts ch. 255, sec. 2,
effective July 14, 2000. -- Amended 1986 Ky. Acts ch. 437, sec. 28, effective July
15, 1986. -- Amended 1982 Ky. Acts ch. 128, sec. 7, effective July 15, 1982. --
Created 1974 Ky. Acts ch. 357, subtit. 38, sec. 7, effective June 21, 1972. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts ch. 24 and repealed and reenacted by 2010 Ky. Acts ch. 51. These
Acts do not appear to be in conflict and have been codified together pursuant to 2010
Ky. Acts ch. 51, sec. 184. Legislative Research Commission Note (7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, "The specific textual provisions of Sections 1 to 178 of this Act which
reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed
effective as of June 26, 2007, and those provisions are hereby made expressly
retroactive to that date, with the remainder of the text of those sections being
unaffected by the provisions of this section."
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