2022 Hawaii Revised Statutes
Title 24. Insurance
432G. Dental Insurers
432G-6 Protection against insolvency; net solvency report.

§432G-6 Protection against insolvency; net solvency report. (a) Net worth requirements are as follows:

(1) Before issuing any certificate of authority, the commissioner shall require that the dental insurer has an initial net worth of $2,000,000 and shall thereafter maintain the minimum net worth required under paragraph (2);

(2) Except as provided in paragraphs (3) and (4), every dental insurer shall maintain a minimum net worth equal to the greater of:

(A) $2,000,000;

(B) Two per cent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first $150,000,000 of premium revenues and one per cent of annual premium revenues on the premium revenues in excess of $150,000,000;

(C) An amount equal to the sum of three months uncovered dental care expenditures as reported on the most recent financial statement filed with the commissioner; or

(D) An amount equal to eight per cent of annual dental care expenditures except those paid on a capitated basis as reported on the most recent financial statement filed with the commissioner;

(3) The minimum net worth requirement set forth in paragraph (2)(A) shall be phased in as follows:

(A) Seventy-five per cent of the required amount by January 1, 2016; and

(B) One hundred per cent of the required amount by December 31, 2017; and

(4) The following shall apply in determining compliance with the requirements of this subsection:

(A) In determining net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the commissioner. Any interest obligation relating to the repayment of any subordinated debt shall be similarly subordinated;

(B) The interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses; and

(C) Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the commissioner, shall not be considered a liability and shall be recorded as equity.

(b) Deposit requirements are as follows:

(1) Unless otherwise provided in this subsection, each dental insurer shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that are acceptable to the commissioner which at all times shall have a value of not less than $300,000;

(2) A dental service corporation formed and operating pursuant to chapter 423 that is in operation on July 1, 2013, shall make a deposit equal to $150,000. Within one year after January 1, 2014, a dental service corporation originally formed pursuant to chapter 423 that is reconstituted under this chapter and in operation on January 1, 2014, shall make an additional deposit of $150,000 for a total of $300,000;

(3) Deposits shall be an asset of the dental insurer in the determination of net worth;

(4) All income from deposits shall be an asset of the dental insurer. A dental insurer that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities, or any combination of these or other measures of equal amount and value. Any securities shall be approved by the commissioner before being deposited or substituted;

(5) The deposit shall be used to protect the interests of the dental insurer's enrollees and to assure continuation of dental care services to enrollees of a dental insurer which is in rehabilitation or conservation. The commissioner may use the deposit for administrative costs directly attributable to a receivership or liquidation. If the dental insurer is placed in receivership or liquidation, the deposit shall be an asset subject to the provisions of article 15 of chapter 431; and

(6) The commissioner may reduce or eliminate the deposit requirement if the dental insurer deposits with the director of finance of this State, or the commissioner, or other official body of the state or jurisdiction of domicile of such dental insurer, for the protection of all subscribers and enrollees, wherever located, cash, acceptable securities, or surety, and delivers to the commissioner a certificate to such effect, duly authenticated by the appropriate state official holding the deposit.

(c) Every dental insurer, when determining liabilities, shall include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for dental care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which the organization is or may be liable, and to provide for the expense of adjustment or settlement of claims. These liabilities shall be computed in accordance with rules adopted by the commissioner upon reasonable consideration of the ascertained experience and character of the dental insurer.

(d) Every contract between a dental insurer and a participating provider shall be in writing and shall set forth that in the event the dental insurer fails to pay for dental care services as set forth in the contract, the subscriber or enrollee shall not be liable to the provider for any sums owed by the dental insurer. In the event that a contract with a participating provider has not been reduced to writing as required by this subsection or that a contract fails to contain the required prohibition, the participating provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the dental insurer. No participating provider, or agent, trustee, or assignee thereof, may maintain any action at law against a subscriber or enrollee to collect sums owed by the dental insurer.

(e) The commissioner shall require that each dental insurer have a plan for handling insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid. In considering such a plan, the commissioner may require:

(1) Insurance to cover the expenses to be paid for continued benefits after an insolvency;

(2) Provisions in participating provider contracts that obligate the provider to provide dental care services for the duration of the period after the dental insurer's insolvency for which premium payment has been made;

(3) Insolvency reserves;

(4) Acceptable letters of credit; or

(5) Any other arrangements acceptable to the commissioner to assure that benefits are continued as specified in this subsection.

(f) An agreement to provide dental care services between a participating provider and a dental insurer shall require that a participating provider shall give the dental insurer at least sixty days' advance notice in the event of termination.

(g) Each dental insurer shall prepare for review by the commissioner on or before the forty-fifth day of each quarter, a copy of its quarterly net solvency report verified by at least two principal officers. The commissioner may prescribe the forms on which the reports are to be prepared. Every dental insurer shall maintain a copy of its current net solvency report on the premises of its primary place of business.

(h) The commissioner may order an examination, subject to article 2 of chapter 431, to determine whether a dental insurer is in compliance with this section. Any dental insurer that fails or refuses to prepare or produce for review the quarterly net solvency report or any of the documents as required by this section shall be liable for a penalty pursuant to section 432G-4(c). [L 2013, c 191, pt of §1]