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304.17A-310 Financial solvency requirements for network.
To qualify as a provider-sponsored integrated health delivery network, the network
shall meet the following financial solvency requirements:
(1) Maintenance of a fidelity bond or fidelity insurance in an amount not less than
two hundred fifty thousand dollars ($250,000) on employees and officers,
directors, and partners who receive, collect, disburse, or invest funds of the
provider-sponsored network;
(2) (a) The provider-sponsored network shall have an initial net worth
requirement of one million five hundred thousand dollars ($1,500,000)
and shall thereafter maintain the minimum net worth required under
paragraph (b) of this subsection.
(b) Every provider-sponsored network shall maintain a minimum net worth
equal to the greater of:
1.
One million dollars ($1,000,000);
2.
Two percent (2%) of annual premium revenues as reported on the
most recent annual financial statement filed with the commissioner
on the first one hundred fifty million dollars ($150,000,000) of
premiums and one percent (1%) of annual premiums on the
premiums in excess of one hundred fifty million dollars
($150,000,000);
3.
An amount equal to the sum of three (3) months' uncovered health
care expenditures as reported on the most recent financial
statement filed with the commissioner of insurance; or
4.
An amount equal to the sum of eight percent (8%) of annual health
care expenditures except those paid on a capitated basis or
managed hospital payment basis and four percent (4%) of annual
hospital expenditures paid on a managed hospital payment basis as
reported on the most recent financial statement filed with the
commissioner.
(c) 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.
1.
The interest expenses relating to the repayment of any fully
subordinated debt shall be considered covered expenses.
2.
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.
(3) (a) Unless otherwise provided below, each provider-sponsored network 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 three
hundred thousand dollars ($300,000).
(b)
(4)
(5)
(6)
(7)
The deposit shall be an admitted asset of the provider-sponsored network
in the determination of net worth.
(c) All income from deposits shall be an asset of the provider-sponsored
network. A provider-sponsored network 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.
(d) The deposit shall be used to protect the interests of the
provider-sponsored network's enrollees and to assure continuation of
health care services to enrollees of a provider-sponsored network which
is in rehabilitation or conservation. The commissioner may use the
deposit for administrative costs directly attributable to a receivership or
liquidation. If the provider-sponsored network is placed in receivership or
liquidation, the deposit shall be an asset subject to the provisions of
Subtitle 33 of this chapter.
Every provider-sponsored network shall, when determining liabilities, include
an amount estimated in the aggregate to provide for any unearned premium
and for the payment of all claims for health care expenditures which have been
incurred, whether reported or unreported, which are unpaid and for which the
provider-sponsored network is or may be liable, and to provide for the expense
of adjustment or settlement of such claims.
(a) Every contract between a provider-sponsored network and a participating
provider of health care services shall be in writing and shall set forth that
in the event the provider-sponsored network fails to pay for health care
services as set forth in the contract, the enrollee shall not be liable to the
provider for any sums owed by the provider-sponsored network.
(b) If the participating provider contract has not been reduced to writing as
required by this subsection or if the contract fails to contain the required
prohibition, the participating provider shall not collect or attempt to collect
from the enrollee sums owed by the provider-sponsored network.
Each provider-sponsored network shall have a plan for handling insolvency
which guarantees the continuation of benefits for the duration of the contract
period for which premiums have been paid and continuation of benefits to
members who are confined on the date of insolvency in an inpatient facility until
their discharge or expiration of benefits.
If at any time uncovered expenditures exceed ten percent (10%) of total health
care expenditures, a provider-sponsored network shall place an uncovered
expenditures insolvency deposit with the commissioner or with any
organization or trustee acceptable to the commissioner through which a
custodial or controlled account is maintained, in cash or securities that are
acceptable to the commissioner. This deposit shall at all times have a fair
market value in an amount of one hundred twenty percent (120%) of the
provider-sponsored network's outstanding liability for uncovered expenditures
for enrollees, including incurred but not reported claims, and shall be calculated
as of the first day of the month and maintained for the remainder of the month.
The provider-sponsored network shall file a report within forty-five (45) days of
the end of the calendar quarter with information sufficient to demonstrate
compliance with this subsection. The provisions of subsection (6) of this section
shall apply to the deposit required in this subsection.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1223, effective July 15, 2010. -Amended 1998 Ky. Acts ch. 405, sec. 2, effective July 15, 1998. -- Created 1996
Ky. Acts ch. 371, sec. 19, effective July 15, 1996.
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