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304.17A-812 Initial and continuing financial solvency requirements.
(1)
(2)
(3)
This section applies to a group applying for and holding a certificate of filing as
a self-insured employer-organized association group.
To obtain and to maintain its certificate of filing, a self-insured
employer-organized association group shall have sufficient financial strength to
pay all public or professional liabilities covered by the group, including known
claims and expenses and incurred but unreported claims and expenses.
The commissioner shall require the following of a self-insured
employer-organized association group:
(a) An actuarial certification by a member of the American Academy of
Actuaries of the adequacy of the proposed rates funding arrangements of
the group;
(b) Specific reinsurance ensuring the solvency of the funding arrangement;
(c) A demonstration of capital and surplus as follows:
1.
Initial financial requirements. Every self-insured employer-organized
association shall demonstrate initial capital and surplus equal to the
greater of:
a.
Five hundred thousand dollars ($500,000);
b.
Two percent (2%) of projected annual contribution revenues on
the first one hundred fifty million dollars ($150,000,000) of
contributions and one percent (1%) of projected annual
contributions on the contributions in excess of one hundred fifty
million dollars ($150,000,000); or
c.
An amount equal to the sum of eight percent (8%) of projected
annual health care expenditures except those paid on a
capitated basis or managed hospital payment basis and four
percent (4%) of projected annual hospital expenditures paid on
a managed hospital payment basis.
2.
Continuing
financial
requirements.
Every
self-insured
employer-organized association shall demonstrate ongoing capital
and surplus equal to the greater of:
a.
Five hundred thousand dollars ($500,000);
b.
Two percent (2%) of annual contribution 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 contributions and one percent (1%) of
annual premiums on the contributions in excess of one
hundred fifty million dollars ($150,000,000); or
c.
An amount equal to the sum of eight percent (8%) of projected
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; and
(d) A fidelity bond for the administrator and a fidelity bond for the service
(4)
company in forms and amounts prescribed by the commissioner.
The commissioner, if not satisfied with the financial strength of a self-insured
employer-organized association group, may require any or all of the following
of a self-insured employer-organized association group:
(a) Security in the form and amount prescribed by the commissioner as
follows:
1.
A surety bond issued by a corporate surety authorized to transact
business in the Commonwealth of Kentucky; or
2.
Any financial security endorsement issued as part of an acceptable
excess insurance contract issued by an authorized insurer, which
may be used to meet all or part of the security requirement.
The bond or financial security endorsement shall be solely for the benefit
of the insured creditors to pay claims and associated expenses and shall
be payable upon the failure of the group to pay professional or public
liability claims the group is legally obligated to pay. The commissioner
may establish and adjust the requirements for the amount of security
based on differences among groups in their size, types of business, years
in existence, or other relevant factors.
(b) Specific and aggregate excess insurance in a form and amount issued by
an insurer acceptable to the commissioner.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1261, effective July 15, 2010. -Created 2003 Ky. Acts ch. 78, sec. 7, effective June 24, 2003.
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