2013 North Dakota Century Code Title 26.1 Insurance Chapter 26.1-17 Nonprofit Health Service Corporations
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CHAPTER 26.1-17
NONPROFIT HEALTH SERVICE CORPORATIONS
26.1-17-01. Definitions.
As used in this chapter, unless the context requires otherwise:
1. "Dental service" means the general and usual service rendered and the care
administered by licensed dentists.
2. "Health service" means service performed for and rendered to persons to restore,
maintain, and promote personal health, to treat injuries and cure diseases, both
physical and mental, by any lawful means, and includes hospital service, medical
service, dental service, or optometric service, or any combination of these services.
However, health service is limited to those services rendered by physicians, surgeons,
practitioners, nurses, hospitals, nursing homes, or any other provider of health service
who is licensed or registered under the laws of this state.
3. "Health service contract" means a contract which provides for the furnishing of one or
more kinds of health service to a subscriber.
4. "Health service corporation" means a nonprofit corporation organized for the purposes
of establishing a health service plan whereby one or more kinds of health service is
provided to subscribers under a prepaid health service contract entitling each
subscriber to certain specified health services, but does not include a health
maintenance organization organized under chapter 26.1-18.1.
5. "Hospital service" includes bed and board, general nursing care, use of the operating
room, use of the delivery room, ordinary medications and dressings, and other
customary routine care, and nursing home services and health care and related
services furnished by vendors of the services, but does not include the practice of
medicine.
6. "Medical service" means the general and usual services rendered and care
administered by physicians and oral surgeons.
7. "Optometric service" means the general and usual services rendered and care
administered by practitioners.
8. "Oral surgeon" means a dentist who has met all of the formal requirements to be
certified by the American board of oral surgery.
9. "Practitioner" includes an optometrist, a physician, a chiropractor, or an advanced
registered nurse practitioner duly licensed to practice one's profession under North
Dakota law.
26.1-17-02. Nonprofit health service corporations authorized.
A health service corporation must be organized under this chapter and, to the extent
applicable, under chapter 10-33 for the purposes of establishing and putting into effect a health
service plan whereby one or more kinds of health service is provided to subscribers under a
contract entitling each subscriber to certain specified health service. Any corporation subject to
this chapter is not subject to the laws of this state relating to insurance and insurance
companies, except as specifically provided in such laws. This chapter applies only to
corporations organized pursuant to its provisions, except as specifically provided otherwise.
26.1-17-03. Articles of incorporation and bylaws - Filing.
The articles of incorporation of a health service corporation, and all amendments, are to be
filed with the secretary of state. A certified copy of the articles of incorporation and the bylaws,
and all amendments, is to be filed with the commissioner.
26.1-17-04. Directors - Responsibilities.
A board of directors shall manage the business and affairs of a health service corporation
and has the power to amend bylaws. The board is to consist of at least nine members. At least a
majority of the directors of a health service corporation writing hospital or medical service
contracts under this chapter must be at all times subscribers.
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A subscriber director is a director who is a subscriber and who is not a provider of health
care, a person who has a material financial or fiduciary interest in the delivery of health care
services or a related industry, an employee of an institution that provides health care services,
or a spouse or a member of the immediate family of such a person. Nominations for and
election of the subscriber directors must be made by the existing directors.
A director may serve on the board of only one corporation subject to this chapter at a time.
Population factors, representation of different geographic regions, and the demography of
the service area of the corporation subject to this chapter must be considered when making
nominations for the board of directors of a corporation subject to this chapter.
A health service corporation may not reimburse or compensate a director for more than
necessary and actual expenses for service as a member of the board of directors.
26.1-17-05. Authority of corporation writing hospital service contracts.
In addition to any other powers granted by law, a health service corporation writing hospital
service contracts may:
1. Enter into contracts for the rendering of hospital service to any of its subscribers with
hospitals maintained and operated by the state or any of its political subdivisions, or by
any corporation, limited liability company, association, or individual. The hospital
service plan operated by the corporation may provide for hospital service and other
related health services, excluding the practice of medicine, as advancements in health
care and treatment warrant the extension and providing of such services and in case
of emergency or expediency. All hospital and related health services provided are
subject to the approval of the health service corporation.
2. Make and enter into mutual agreements with hospitals or groups of hospitals, nursing
homes, and other vendors and furnishers of health care services and other related
facilities, excluding the practice of medicine.
3. Make and enter into mutual agreements with state, federal, or other governmental
agencies to provide hospital services, nursing home care, and other related health
services, excluding the practice of medicine, including health care services for the
needy and other persons.
4. Make and enter into mutual agreements with any other health care corporation or with
any state or local government or agency thereof to provide health care administrative
services, to act as administrator of any other health care service plan, or to act as a
marketing agency or as a fiscal intermediary of any health care plan or of any other
health care organization or of any state or local government or agency.
5. Enter into contracts with other corporations, including insurance companies but only
with prior approval of the commissioner, or other entities in this state or in other states
or possessions of the United States, or of Canada or other foreign countries so that:
a. Reciprocity of benefits may be provided to subscribers.
b. Transfer of subscribers from one entity to another may be effected to conform to
the subscriber's place of residence.
c. Uniform benefits may be provided for all employees and dependents of such
employees of entities and other organizations transacting business in this state
and elsewhere and a rate representing the composite experience of the areas
involved may be charged for such employees and their dependents.
d. Health services may be provided for subscribers or policyholders of this or other
corporations, including insurers, or entities for the purpose of ceding or accepting
reinsurance or of jointly providing benefits, underwriting, pooling, mutualization,
equalization, and other joint undertakings which the governing board may from
time to time approve.
26.1-17-05.1. Authority of corporation writing medical service contracts.
A health service corporation writing medical service contracts may:
1. Enter into contracts with subscribers whereby each subscriber, subscriber member,
officer, or employee is entitled to certain specified health services as provided in the
subscriber's contract.
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Enter into contracts with similar corporations within or without the state for the
interchange of services to those included in subscription or other similar contracts, and
may provide subscription contracts for the substitution of such services in lieu of those
therein recited.
Enter into contracts with physicians for the rendering of medical service to subscribers
in accordance with the terms of the subscriber contract.
Enter into contracts with laboratories and vendors of health appliances and prostheses
to provide material and services pursuant to contracts with subscribers.
26.1-17-06. Authority of corporation writing optometric service contracts.
A health service corporation writing optometric service contracts may:
1. Enter into contracts with subscribers whereby each subscriber, subscriber member,
officer, or employee is entitled to certain specified health services as provided in the
subscriber's contract.
2. Enter into contracts with similar corporations within or without the state for the
interchange of services to those included in subscription or other similar contracts, and
may provide subscription contracts for the substitution of such services in lieu of those
therein recited.
3. Enter into contracts with practitioners for the rendering of optometric service to
subscribers in accordance with the terms of the subscriber contract.
4. Enter into contracts with optical laboratories to provide material pursuant to contracts
with subscribers.
26.1-17-07. Authority of corporation writing certain health service contracts.
A health service corporation writing health service contracts other than hospital service,
medical service, and optometric service contracts may:
1. Enter into contracts with subscribers whereby each subscriber, subscriber member,
officer, or employee is entitled to certain specified health services as provided in the
subscriber's contract.
2. Enter into contracts with similar corporations within or without the state for the
interchange of services to those included in subscription or other similar contracts, and
may provide subscription contracts for the substitution of such services in lieu of those
therein recited.
3. Enter into contracts with health service providers for the rendering of health services to
subscribers in accordance with the terms of the subscriber contract.
4. Enter into contracts with laboratories and vendors of health appliances and prostheses
to provide material and services pursuant to contracts with subscribers.
26.1-17-08. Corporation not authorized to practice a profession.
This chapter does not authorize a health service corporation to engage in the practice of
medicine, dentistry, optometry, or any other profession for which a license or registration is
required.
26.1-17-09. Capital - Repayment.
A health service corporation writing hospital service contracts or medical service contracts
may not commence business and enter into any contracts with subscribers, nor secure any
application therefor, unless the corporation has a contributed surplus of not less than one
hundred thousand dollars. A health service corporation writing health service contracts other
than hospital service or medical service contracts may not enter into any contracts with any
subscribers, nor secure any application therefor, unless the corporation has a contributed
surplus of not less than twenty-five thousand dollars. The contributed surplus is repayable when
the unassigned earned surplus exceeds the amount required to be initially paid in as contributed
surplus, only if the payment does not impair the working capital of the health service
corporation.
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26.1-17-10. Nonprofit corporation tax exempt - Insurance premium tax - Law
governing charitable organizations applicable.
Every nonprofit health service corporation is a charitable and benevolent organization and is
exempt from taxation by the state or any political subdivision thereof, except that the tax
imposed by section 26.1-03-17 is applicable to a corporation subject to this chapter and the real
property of a nonprofit health service corporation is subject to ad valorem taxes and special
assessments for special improvements. Except as otherwise provided in this chapter, the laws
of this state relating to and affecting nonprofit charitable and benevolent corporations are
applicable to all nonprofit health service corporations writing health service contracts.
26.1-17-11. Applicability of portion of Nonprofit Corporation Act.
Unless in conflict with this chapter, chapter 10-33 applies to the incorporation, operation,
and control of any nonprofit health service corporation.
26.1-17-12. Contract limitations.
1. Except as provided in this section, every physician, oral surgeon, dentist, or
practitioner licensed and registered in this state has the right to contract with any
health service corporation for furnishing general or special medical care, dental care,
or optometric care, as the case may be. A corporation may not impose any restriction
as to the methods of diagnosis or treatment. The private relationship of physician and
patient, dentist and patient, or practitioner and patient is to be maintained at all times
and the subscriber has the right of free choice in selecting any physician, oral surgeon,
dentist, or practitioner.
2. The governing board of a health service corporation that writes hospital or medical
service contracts may terminate a practitioner's participating contract, designate a
practitioner as nonpayable, or otherwise impose reasonable sanctions on any
practitioner who continues to engage in a practice pattern that is excessive or
inappropriate as compared to the practice pattern for the practitioner's specialty after
having been informed by the corporation, in writing, as to the manner in which the
practitioner's practice pattern is excessive or inappropriate. The corporation shall
consult with the practitioner and provide a reasonable time period of not less than six
months within which to modify the practitioner's practice pattern. If, after terminating a
practitioner's participating contract with the corporation, the practitioner's practice
pattern continues to be excessive or inappropriate, the corporation's central
professional services committee may consider recommending to the board that the
practitioner be designated nonpayable. The affected practitioner must be given the
right to be present and to be heard by the committee which must include
representation of the practitioner's specialty. The board may not designate a
practitioner as nonpayable in the absence of the committee's recommendation to do
so. All reports, data, and proceedings of the corporation relative to a practitioner who is
considered for designation as nonpayable is confidential, and may not be disclosed or
be subject to subpoena or other legal process. The corporation may not pay or
reimburse claims of its members relating to a treatment or service that is provided by a
practitioner who is designated nonpayable. Nonpayable status under this section may
not commence until after appropriate notification to the corporation's subscribers and
the affected practitioner.
3. All practitioners in a group practice shall elect participating or nonparticipating status,
as a group, with the health service corporation. If a practitioner is designated as
nonparticipating or nonpayable under this section, the participating or nonparticipating
status of the group is not affected. "Group practice" means a group of two or more
health care providers legally organized as a partnership, professional corporation, or
similar association.
4. A health service corporation may, in its discretion, by its articles of incorporation,
articles of association, or bylaws, and in its contract with its subscribers, limit the
benefits that the corporation will furnish, and may provide for a division of benefits it
agrees to furnish into classes or kinds. In the absence of any limitation or division of
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services, a corporation may provide both general and special medical and surgical,
dental, or optometric care benefits, including such service as may necessarily be
incident to such care. A corporation may, in its discretion, limit the issuance of
contracts as specified in its bylaws.
A dental or optometric service contract by a health service corporation may not provide
the payment of any cash indemnification by the corporation to the subscriber or the
subscriber's estate on account of death, illness, or other injury.
26.1-17-12.1. Services of registered nurses - Denial of benefits prohibited.
Repealed by S.L. 1995, ch. 246, § 32.
26.1-17-13. Group medical service contracts - Options required.
Repealed by S.L. 1985, ch. 316, § 22.
26.1-17-14. Prisoner's coverage to continue - Conditions.
Repealed by S.L. 1985, ch. 316, § 22.
26.1-17-15. Juvenile's coverage to continue - Conditions.
Repealed by S.L. 1985, ch. 316, § 22.
26.1-17-16. Services of physicians, oral surgeons, dentists, and practitioners not
participating under health service plan.
A medical service plan may provide for medical services to subscribers by physicians and
oral surgeons not participating under the plan, subject to the approval of the board of directors
of the health service corporation. A dental service plan may provide for dental services to
subscribers by dentists not participating under the plan, subject to the approval of the board of
directors of the health service corporation. An optometric service plan may provide for
optometric services to subscribers by practitioners not participating under the plan, subject to
the approval of the board of directors of the health service corporation.
When a subscriber patient is referred by a participating physician to a nonparticipating
physician, the health service corporation is to pay, without the approval of the board of directors
of the corporation, to the subscriber, upon proper filing of the claim, an amount equal to ninety
percent of the maximum amount which the corporation would be obligated to pay to a
participating physician for identical service. If a participating physician refers a patient to a
nonparticipating physician, the referring physician shall inform the patient that the physician to
whom the referral is being made is nonparticipating and this may result in the patient being
subject to charges greater than those to which the patient would be subject if the patient were
being treated by a participating provider. The health service corporation shall provide a listing of
all participating physicians to all participating physicians annually. The corporation shall provide
monthly updates of the listing of the nonparticipating providers.
26.1-17-17. Coordination of benefit provisions.
Repealed by S.L. 1985, ch. 316, § 22.
26.1-17-18. Health service corporation contracts - Approval by commissioner.
Contracts between a health service corporation and health service providers at all times are
subject to the approval of the commissioner. Contracts between health service corporations and
subscribers for health service are subject to the applicable provisions of chapter 26.1-36 and
are subject to the filing and approval requirements of chapter 26.1-30.
26.1-17-19. Effects of health service contracts.
The issuance of a health service contract by a health service corporation to a subscriber
does not create the relationship of hospital and patient, physician and patient, dentist and
patient, practitioner and patient, or any other similar relationship between the corporation and
the subscriber. The subscriber at all times has the right to select any participating hospital,
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physician, oral surgeon, dentist, practitioner, or health service provider, subject to the terms and
conditions of the contract. An employee, agent, officer, or member of the board of directors of
any such corporation may not influence or attempt to influence any subscriber in the choosing
and selecting of the hospital, physician, oral surgeon, dentist, practitioner, or other health
service provider who is to care for or treat the subscriber. A civil action arising out of the
relationship of hospital and patient, physician and patient, dentist and patient, practitioner and
patient, or health service provider and patient may not be maintained against any health service
corporation governed by this chapter. A participating practitioner has the right to engage in other
practice.
26.1-17-20. Dental and optometric service in accordance with prevailing practice Emergency service.
All dental or optometric care rendered to a subscriber under the subscriber's contract must
be in accordance with the accepted standards of dental or optometric practice prevailing in the
community in which the service is rendered.
All service must be rendered by dentists and practitioners duly licensed and registered to
practice their profession in this state, except that in case of emergency, and subject to the
approval of the board of directors of the health service corporation, the benefits to which a
subscriber is entitled under the subscriber's contract may be rendered in another state, provided
the services are rendered by a duly licensed dentist or duly licensed practitioner in the other
state.
26.1-17-21. Limitations on dental and optometric service contracts.
Every subscriber under a dental or optometric service plan must receive a copy of the
contract. The contract must clearly state the care, appliances, materials, and supplies to be
provided under the contract and the rate charged the subscriber. Every subscriber must have, at
all times, free choice of the dentist or practitioner who is to treat the subscriber, and this right
must be prominently printed in the contract. Every optometric service contract must provide that
a subscriber has the freedom of choice to have the materials and supplies furnished by any
practitioner or optician, the cost for which is to be covered in accordance with the terms of the
contract.
26.1-17-22. Health service for needy persons - Payments.
A health service corporation may contract with state, federal, or other governmental
agencies, private agencies, corporations, associations, groups, or individuals to provide health
services for needy or other persons. A health service corporation may receive from these
entities payments covering the cost of all or any part of the contracts.
26.1-17-23. Licensing of sales representatives.
The sales representatives of any health service corporation are subject to the laws
pertaining to insurance producers as defined in chapter 26.1-26. The license for a sales
representative must be issued on a form prescribed by the commissioner, and the fee for a
license or renewal is prescribed in section 26.1-01-07.
26.1-17-24. Unfair insurance practices.
Chapter 26.1-04 applies to health service corporations and contracts with hospitals, doctors
of medicine and oral surgeons, dentists, practitioners, health service providers, and subscribers,
except to the extent that the commissioner determines that the nature of health service
corporations, or of any contracts issued or entered into by those corporations, renders chapter
26.1-04 clearly inappropriate.
26.1-17-25. Rate requirements.
Rates must cover reasonably anticipated claims, cover reasonable costs of operation and
overhead expenses, and maintain contingency reserves at a proper level of not less than the
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sum of incurred claims and operating and overhead expenses for at least two months, but not
more than four months. Rates may not be excessive, inadequate, or unfairly discriminatory.
26.1-17-26. Procedure for submitting rate filings.
1. Each health service corporation shall file with the commissioner every manual of
classifications, rates, rating formulas, rating systems, and rules applicable thereto, and
any modification of the foregoing which it proposes to use. Each filing must state the
proposed effective date thereof and must indicate the character and extent of the
coverage contemplated. When a filing is not accompanied by supporting information,
and the commissioner does not have sufficient information to determine whether the
filing meets the requirements of this chapter, the commissioner shall require the
corporation to furnish supporting information, and the waiting period will commence on
the date the information is furnished. The information furnished in support of a filing
must include the:
a. Contract of benefits;
b. Current rate structure;
c. Claims experience for the most recent period up to three years;
d. Claims experience projection for the next eighteen months;
e. Letter of opinion from the corporation actuary; and
f. Judgment of the corporation and its interpretation of the supporting data.
A filing and any supporting information is open to public inspection after the filing
becomes effective.
2. The commissioner shall review the filings pursuant to sections 26.1-30-19 through
26.1-30-21 to determine whether they meet the requirements of this chapter.
Upon written application by the corporation, the commissioner may authorize a
filing which the commissioner has reviewed to become effective before the expiration
of the waiting period or any extension thereof.
3. Under the rules the commissioner has adopted, the commissioner may, by written
order, suspend or modify the requirements of filing as to any kind of contract for health
services, subdivision thereof, or combination thereof, or as to any class of risks, the
rates for which cannot practically be filed before they are used. The orders and rules
must be made known to the health service corporation affected. The commissioner
may make an examination as the commissioner deems advisable to ascertain whether
any rates affected by an order meet the standards set forth in section 26.1-17-25.
26.1-17-27. Disapproval of rate filings.
1. If the commissioner finds that a rate filing does not meet the requirements of this
chapter, the commissioner shall disapprove the rate filing pursuant to section
26.1-30-21.
2. If at any time subsequent to the applicable waiting period or extension thereof the
commissioner finds that a rate filing does not meet the requirements of this chapter,
the commissioner shall issue, pursuant to section 26.1-30-21, an order to that effect
after a hearing. Copies of the order must be sent to the corporation.
3. Any person or organization aggrieved with respect to any filing which is in effect,
except the health service corporation which made the filing, may make written
application to the commissioner for a hearing thereon. The application must specify the
grounds relied upon by the applicant. If the commissioner finds that the application is
made in good faith, that the applicant would be so aggrieved if the applicant's grounds
were established, and that the grounds otherwise justify holding a hearing, the
commissioner shall hold, within thirty days after receipt of the application, a hearing
upon not less than ten days' written notice to the applicant and to each corporation
which made the filing. If after a hearing the commissioner finds that the filing does not
meet the requirements of this chapter, the commissioner shall issue an order pursuant
to section 26.1-30-21. Copies of this order must be sent to the applicant and to each
corporation.
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4.
A manual of classifications, rules, rating plans, rating formulas, or modifications of any
of the foregoing which establish standards for measuring variations in hazards or
expense provisions, or both, and which has been filed pursuant to the requirements of
section 26.1-17-26, may not be disapproved if the rates thereby produced meet the
requirements of this chapter.
26.1-17-28. Information to be furnished subscribers - Hearings and appeals of
subscribers.
Each health service corporation, within a reasonable time after receiving a written request
therefor, shall furnish to any subscriber with whom it has a contract and who is affected by a
rate made by it, or to the authorized representative of the subscriber, all pertinent information as
to the rate.
Each corporation must provide reasonable means whereby any person aggrieved by the
application of its rating system, rating formula, or rate may be heard in person or through that
person's authorized representative on that person's written request to review the manner in
which the rating system, rating formula, or rate has been applied in connection with the contract
issued to that person. If the corporation fails to grant or reject the request within thirty days after
it is made, the applicant may proceed in the same manner as if the application has been
rejected. Any party affected by the action of a corporation on such request may appeal, within
thirty days after written notice of the action, to the commissioner who, after hearing held upon
not less than ten days' written notice to the appellant and to the corporation, may affirm or
reverse the action.
26.1-17-29. False or misleading information - Penalty.
A subscriber under a health service contract or a health service corporation may not willfully
withhold information from, or give false or misleading information to, the commissioner or any
statistical agency designated by the commissioner, when the information given or withheld will
affect the rates or premiums chargeable under this chapter. Any subscriber or corporation who
violates this section is guilty of an infraction.
26.1-17-30. Investment of funds.
The funds of any health service corporation may be invested only in those investments
authorized to be made by domestic insurance companies of this state. Investments made prior
to July 1, 1983, are subject to the requirements for authorized investments prior to July 1, 1983,
and not to the requirements for authorized investments after July 1, 1983.
26.1-17-31. Annual statement.
Every health service corporation shall transmit to the commissioner, not later than March
first of each year, a statement of its condition and business for the year ending on the preceding
December thirty-first. The statement must be in the form and must contain the information
prescribed by the commissioner.
26.1-17-32. Investigation and examination.
The commissioner, or any deputy or examiner designated by the commissioner, has the
right, at all reasonable times, to free access to all books and records of a health service
corporation, and may summon and examine, under oath, the officers and employees of the
corporation in all matters pertaining to its financial condition. The corporation must bear the
expense of any examination of its books and financial condition.
26.1-17-33. Liquidation - Dissolution - Merger - Consolidation.
Any involuntary liquidation and dissolution of a health service corporation is governed by
chapter 26.1-07. Any voluntary liquidation and dissolution is governed by chapter 10-33. Any
merger or consolidation of a health service corporation is subject to the approval of the
commissioner in accordance with the procedures set forth in chapter 26.1-07, but the
consolidation or merger must be accomplished under chapter 10-33.
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26.1-17-33.1. Nonprofit health service corporation - Conversion to nonprofit mutual
insurance company - Application of law.
1. Any nonprofit health service corporation organized under chapter 26.1-17, having
admitted assets in excess of all liabilities at least equal to the original surplus required
of a mutual insurance company by section 26.1-12-10, without reincorporation, and
upon adoption of a resolution by its board of directors, may petition the insurance
commissioner for an order to become a nonprofit mutual insurance company subject to
chapter 26.1-12. For the purpose of obtaining approval from the insurance
commissioner, conversion to a nonprofit mutual insurance company under this section
is deemed a consolidation pursuant to chapter 26.1-07 and the procedure described
therein must be followed.
2. Upon becoming subject to chapter 26.1-12, the company may continue to provide
health care and related services to its present or future members and subscribers by
health care contracts and may make provision for the payment of health care services
directly to hospitals and other agencies or institutions or persons rendering health care
services or related services or may make direct payment to the member or subscriber.
The conversion of a nonprofit health service corporation into a mutual insurance
company must not impair the rights or obligations or any existing contractual rights of a
health care service corporation or its members. Except as provided in this section, the
laws that apply to mutual insurance companies, and insurance companies generally,
apply to a nonprofit mutual insurance company converted from a nonprofit health
service corporation pursuant to this section.
3. The nonprofit corporation laws apply to the operation and control of a nonprofit mutual
insurance company converted from a nonprofit health service corporation under this
section and supersede any conflicting provisions in title 26.1 unless title 26.1 is more
restrictive.
4. The funds of a nonprofit mutual insurance company may be invested in those
investments authorized to be made by domestic insurance companies under section
26.1-05-19, as limited by section 26.1-05-18.
5. A nonprofit mutual insurance company may form a wholly owned company for the
purpose of administering medicare claims and engaging in other business activities
that do not accept insurance risk. A company established under this subsection may
form a joint venture or subsidiary to conduct one or more of the functions the nonprofit
mutual insurance company could conduct directly. An officer, a director, or a
management employee of the nonprofit mutual insurance company may not directly or
indirectly own an interest in a subsidiary.
6. Except as authorized under subsection 12, a nonprofit mutual insurance company may
not demutualize. A nonprofit mutual insurance company may not be converted to a forprofit mutual company or to a for-profit stock company.
7. A nonprofit mutual insurance company may avail itself of the additional investment
authority under chapter 26.1-10. Upon approval by the commissioner after a showing
of good cause by the nonprofit mutual insurance company, aggregate investments in
all subsidiaries of the company under subsection 21 of section 26.1-05-19 and under
chapter 26.1-10 may exceed an amount equal to twenty-five percent of the company's
admitted assets.
8. A conversion of a nonprofit health service corporation to a nonprofit mutual insurance
company under this section or the restructuring of a nonprofit mutual insurance
company under subsection 12, to the extent that any assets of the nonprofit health
service corporation or the restructured nonprofit mutual insurance company and the
restructured nonprofit mutual insurance company's nonprofit holding corporation
parent formed pursuant to subsection 12 are impressed with a charitable trust
immediately before the conversion or restructuring, does not give rise to a breach of
the charitable trust or violate any fiduciary duty laws, and does not constitute grounds
for disapproval of the petition to convert to a nonprofit mutual insurance company, the
articles of incorporation of the company under section 26.1-12-04, or application for
restructuring of a nonprofit mutual insurance company under subsection 12. A
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conversion or restructuring authorized by this section does not diminish the application
of charitable trust or fiduciary duty laws that may apply to the converted or restructured
company immediately before the conversion.
A nonprofit mutual insurance company may not engage in the practice of medicine,
dentistry, optometry, or any other profession for which a license or registration is
required.
Each nonprofit mutual insurance company and each nonprofit mutual insurance
company and its nonprofit holding corporation parent are charitable and benevolent
organizations and the laws of this state relating to and affecting nonprofit charitable
and benevolent corporations are applicable to all nonprofit mutual insurance
companies and restructured nonprofit mutual insurance companies and their nonprofit
holding corporation parents.
Except as authorized under subsection 12, a nonprofit mutual insurance company may
not form a mutual insurance holding company.
Upon approval of the nonprofit mutual insurance company's board of directors, the
approval of the commissioner pursuant to this subsection, and any necessary approval
of the nonprofit mutual insurance company's members, a nonprofit mutual insurance
company may restructure, while remaining a nonprofit corporation, by forming a
nonprofit holding corporation that will be the sole member of the restructured company.
a. The restructured company shall retain any additional authority granted to the
restructured company as a nonprofit mutual insurance company under this
section and the restructured company shall remain subject to subsections 3, 4, 5,
6, 7, 8, 9, and 10, except to the extent inconsistent with this subsection and
chapter 10-33.
b. The restructured company must be treated as a mutual insurance company
subject to the provisions of chapter 26.1-12, except for sections 26.1-12-01,
26.1-12-02, 26.1-12-03, 26.1-12-05, 26.1-12-06, 26.1-12-07, 26.1-12-08,
26.1-12-09, 26.1-12-10, 26.1-12-14, 26.1-12-16, 26.1-12-18, 26.1-12-19,
26.1-12-23, 26.1-12-24, 26.1-12-25, 26.1-12-26, 26.1-12-29, 26.1-12-30, and
26.1-12-32.
c. The restructured company may elect to use the term "mutual" in the company's
name, marketing materials, and other communications.
d. The nonprofit holding corporation is subject to the provisions of sections
26.1-12-06, 26.1-12-07, 26.1-12-14, and 26.1-12-16. After restructuring under this
subsection, chapter 26.1-12.1 does not apply to the restructured company or the
restructured company's nonprofit holding corporation parent.
e. The membership interests of the members of the restructuring company must be
converted into membership interests in the nonprofit holding corporation;
however, notwithstanding section 26.1-12-14, upon the effective date of the
restructuring, such membership interests may be weighted or otherwise adjusted
to reflect the number of subscribers covered under a particular policy.
Concomitantly with the restructuring, and without complying with sections
26.1-10-05 and 26.1-10-05.1, the restructuring company may transfer or assign
the restructuring company's shares, membership units, or other incidents of
ownership in one or more of the restructuring company's subsidiaries and
affiliates, as well as the restructuring company's workforce, to the nonprofit
holding corporation.
f. The restructuring company shall submit an application for restructuring,
consisting of revised articles and bylaws, the articles and bylaws of the nonprofit
holding company, any share or membership interest transfer documents,
authorizing resolutions and other materials the restructuring company deems
pertinent to the restructuring to the commissioner. The commissioner shall
approve the restructuring unless, after a public hearing, the commissioner finds:
(1) After the change of control, the domestic insurance company referenced in
subsection 1 would not be able to satisfy the requirements for the issuance
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13.
14.
of a certificate of authority to write the lines of insurance for which the
domestic insurance company is presently licensed;
(2) The effect of the merger or other acquisition of control would be to
substantially lessen competition in insurance in this state or tend to create a
monopoly in this state;
(3) The financial condition of any acquiring party might jeopardize the financial
stability of the insurance company or prejudice the interest of the insurance
company's policyholders;
(4) The acquiring party's plans or proposals to liquidate the insurance company,
to sell the insurance company's assets, to consolidate or merge with any
person, or to make any other material change in the insurance company's
business or corporate structure or management are unfair and
unreasonable to policyholders of the company and are not in the public
interest;
(5) The competence, experience, and integrity of those persons that would
control the operation of the insurance company are such that it would not be
in the interest of policyholders of the company and of the public to permit the
merger or other acquisition of control; or
(6) The acquisition is likely to be hazardous or prejudicial to the insurancebuying public.
g. Within thirty days of submission of the application to the commissioner under this
subsection, the commissioner shall make written findings, conclusions, and a
determination on the application.
A merger or consolidation of a nonprofit mutual insurance company that has been
restructured under subsection 12, merger or consolidation of the restructured nonprofit
mutual insurance company's nonprofit holding corporation parent, acquisition of control
of either, or acquisition of another insurer by the restructured company or the
restructured company's nonprofit holding corporation parent is subject to the
provisions of sections 26.1-10-03 and 26.1-10-03.1 and chapter 26.1-07 which would
be applicable to the type of transaction involved.
This section does not supersede or impair the rights, powers, or authority of the
attorney general or courts of this state established by statute, case law, or common
law with respect to charitable or benevolent corporations.
26.1-17-34. Hearing procedure and judicial review.
1. Any health service corporation aggrieved by any order or decision of the commissioner
made without a hearing, within thirty days after notice of the order to the corporation,
may make written request to the commissioner for a hearing thereon. The
commissioner shall hear the party within twenty days after receipt of the request and
shall give not less than ten days' written notice of the time and place of the hearing.
Within fifteen days after the hearing, the commissioner shall affirm, reverse, or modify
the previous action specifying the reasons therefor. Pending a hearing and decision
thereon, the commissioner may suspend or postpone the effective date of the previous
action.
2. This chapter does not require the observance at any hearing of formal rules of
pleading or evidence.
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