2016 North Dakota Century Code Title 26.1 Insurance Chapter 26.1-18.1 Health Maintenance Organizations
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CHAPTER 26.1-18.1
HEALTH MAINTENANCE ORGANIZATIONS
26.1-18.1-01. Definitions.
1. "Basic health care services" means the following medically necessary services:
preventive care, emergency care, inpatient and outpatient hospital and physician care,
diagnostic laboratory, and diagnostic and therapeutic radiological services.
2. "Capitated basis" means fixed per member per month payment or percentage of
premium payment wherein the provider assumes the full risk for the cost of contracted
services without regard to the type, value, or frequency of services provided. For
purposes of this definition, capitated basis includes the cost associated with operating
staff model facilities.
3. "Carrier" means a health maintenance organization, an insurer, a nonprofit hospital
and medical service corporation, or other entity responsible for the payment of benefits
or provision of services under a group contract.
4. "Copayment" means an amount an enrollee must pay in order to receive a specific
service which is not fully prepaid.
5. "Deductible" means the amount an enrollee is responsible to pay out of pocket before
the health maintenance organization begins to pay the costs associated with
treatment.
6. "Enrollee" means an individual who is covered by a health maintenance organization.
7. "Evidence of coverage" means a statement of the essential features and services of
the health maintenance organization coverage which is given to the subscriber by the
health maintenance organization or by the group contractholder.
8. "Extension of benefits" means the continuation of coverage under a particular benefit
provided under a contract following termination with respect to an enrollee who is
totally disabled on the date of termination.
9. "Grievance" means a written complaint submitted in accordance with the health
maintenance organization's formal grievance procedure by or on behalf of the enrollee
regarding any aspect of the health maintenance organization relative to the enrollee.
10. "Group contract" means a contract for health care services which by its terms limits
eligibility to members of a specified group. The group contract may include coverage
for dependents.
11. "Group contractholder" means the person to which a group contract has been issued.
12. "Health maintenance organization" means any person that undertakes to provide or
arrange for the delivery of basic health care services to enrollees on a prepaid basis,
except for enrollee responsibility for copayments or deductibles or both. However, a
qualified program of all-inclusive care for the elderly is not a health maintenance
organization.
13. "Health maintenance organization producer" means an insurance producer, as defined
in section 26.1-26-02, who solicits, negotiates, effects, procures, delivers, renews, or
continues a policy or contract for health maintenance organization membership, or
who takes or transmits a membership fee or premium for such a policy or contract,
other than for that person, or a person who advertises or otherwise holds out to the
public as such.
14. "Individual contract" means a contract for health care services issued to and covering
an individual. The individual contract may include dependents of the subscriber.
15. "Insolvent" or "insolvency" means that the organization has been declared insolvent
and placed under an order of liquidation by a court of competent jurisdiction.
16. "Managed hospital payment basis" means agreements wherein the financial risk is
primarily related to the degree of utilization rather than to the cost of services.
17. "Net worth" means the excess of total admitted assets over total liabilities, but the
liabilities do not include fully subordinated debt.
18. "Participating provider" means a provider as defined in subsection 19 who, under an
express or implied contract with the health maintenance organization or with its
contractor or subcontractor, has agreed to provide health care services to enrollees
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with an expectation of receiving payment, other than copayment or deductible, directly
or indirectly from the health maintenance organization.
"Provider" means any physician, hospital, or other person licensed or otherwise
authorized to furnish health care services.
"Qualified program of all-inclusive care for the elderly" means a program that:
a. Is sponsored by a religious or charitable organization that is itself or is controlled
by an entity organized under section 501(c)(3) of the Internal Revenue Code [26
U.S.C. 501(c)(3)];
b. Has been approved by the centers for medicare and medicaid services of the
United States department of health and human services to operate, and is
currently operating as, a program of all-inclusive care for the elderly; and
c. Has revenues from private pay sources which do not exceed ten percent of the
program's total revenues.
"Replacement coverage" means the benefits provided by a succeeding carrier.
"Subscriber" means an individual whose employment or other status, except family
dependency, is the basis for eligibility for enrollment in the health maintenance
organization, or in the case of an individual contract, the person in whose name the
contract is issued.
"Uncovered expenditures" means the costs to the health maintenance organization for
health care services that are the obligation of the health maintenance organization, for
which an enrollee may also be liable in the event of the health maintenance
organization's insolvency and for which no alternative arrangements have been made
that are acceptable to the commissioner.
26.1-18.1-02. Establishment of health maintenance organizations.
1. Notwithstanding any law of this state to the contrary, any person may apply to the
commissioner for a certificate of authority to establish and operate a health
maintenance organization in compliance with this chapter. No person may establish or
operate a health maintenance organization in this state without obtaining a certificate
of authority under this chapter. A foreign corporation may qualify under this chapter,
subject to obtaining a certificate of authority as a foreign corporation under section
10-19.1-136 and compliance with all provisions of this chapter and other applicable
state laws.
2. Any health maintenance organization that has not previously received a certificate of
authority to operate as a health maintenance organization as of August 1, 1993, shall
submit an application for a certificate of authority under subsection 3 within thirty days
of August 1, 1993. Each applicant may continue to operate until the commissioner acts
upon the application. In the event that an application is denied under section
26.1-18.1-03, the applicant must thereafter be treated as a health maintenance
organization whose certificate of authority has been revoked.
3. Each application for a certificate of authority must be verified by an officer or
authorized representative of the applicant, must be in a form prescribed by the
commissioner, and must set forth or be accompanied by the following:
a. A copy of the organizational documents of the applicant, such as the articles of
incorporation, articles of association, partnership agreement, trust agreement, or
other applicable documents, and all amendments thereto.
b. A copy of the bylaws, rules, and regulations, or similar document, if any,
regulating the conduct of the internal affairs of the applicant.
c. A list of the names, addresses, and official positions and biographical information
on forms acceptable to the commissioner of the persons who are to be
responsible for the conduct of the affairs and day-to-day operations of the
applicant, including all members of the board of directors, board of trustees,
executive committee, or other governing board or committee and the principal
officers in the case of a corporation, or the partners or members in the case of a
partnership or association.
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e.
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a.
b.
A copy of any contract form made or to be made between any class of providers
and the health maintenance organization and a copy of any contract made or to
be made between third-party administrators, marketing consultants, or persons
listed in subdivision c and the health maintenance organization.
A copy of the form of evidence of coverage to be issued to the enrollees.
A copy of the form of group contract, if any, which is to be issued to employers,
unions, trustees, or other organizations.
Financial statements showing the applicant's assets, liabilities, and sources of
financial support, including both a copy of the applicant's most recent and regular
certified financial statement and an unaudited current financial statement.
A financial feasibility plan that includes detailed enrollment projections, the
methodology for determining premium rates to be charged during the first twelve
months of operations certified by an actuary or other qualified person, a
projection of balance sheets, cash flow statements showing any capital
expenditures, purchase and sale of investments and deposits with the state, and
income and expense statements anticipated from the start of operations until the
organization has had net income for at least one year, and a statement as to the
sources of working capital as well as any other sources of funding.
A power of attorney duly executed by the applicant, if not domiciled in this state,
appointing the commissioner and the commissioner's successors in office, and
duly authorized deputies, as the true and lawful attorney of the applicant in and
for this state upon whom all lawful process in any legal action or proceeding
against the health maintenance organization on a cause of action arising in this
state may be served.
A statement or map reasonably describing the geographic area or areas to be
served.
A description of the internal grievance procedures to be utilized for the
investigation and resolution of enrollee complaints and grievances.
A description of the proposed quality assurance program, including the formal
organizational structure, methods for developing criteria, procedures for
comprehensive evaluation of the quality of care rendered to enrollees, and
processes to initiate corrective action and re-evaluation when deficiencies in
provider or organizational performance are identified.
A description of the procedures to be implemented to meet the protection against
insolvency requirements in section 26.1-18.1-12.
A list of the names, addresses, and license numbers of all providers with which
the health maintenance organization has agreements.
Such other information as the commissioner may require to make the
determinations required in section 26.1-18.1-03.
The commissioner may adopt rules as the commissioner deems necessary to the
proper administration of this chapter to require a health maintenance
organization, subsequent to receiving its certificate of authority, to submit the
information, modifications, or amendments to the items described in subsection 3
to the commissioner, either for the commissioner's approval or for information
only, prior to the effectuation of the modification or amendment, or to require the
health maintenance organization to indicate the modifications to the
commissioner at the time of the next succeeding site visit or examination.
Any modification or amendment for which the commissioner's approval is
required is deemed approved unless disapproved within thirty days, provided that
the commissioner may postpone the action for such further time, not exceeding
an additional thirty days, as necessary for proper consideration.
26.1-18.1-03. Issuance of certificate of authority.
1. Upon receipt of an application for issuance of a certificate of authority, the
commissioner shall issue a certificate of authority to any person filing a completed
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2.
application upon receiving the prescribed fees and upon the commissioner being
satisfied that:
a. The persons responsible for the conduct of the affairs of the applicant are
competent, trustworthy, and possess good reputations.
b. The health maintenance organization's proposed plan of operation meets the
requirements of section 26.1-18.1-06.
c. The health maintenance organization will effectively provide or arrange for the
provision of basic health care services on a prepaid basis, through insurance or
otherwise, except to the extent of reasonable requirements for copayments or
deductibles.
d. The health maintenance organization is in compliance with sections 26.1-18.1-12
and 26.1-18.1-14.
A certificate of authority may be denied only after the commissioner complies with the
requirements of section 26.1-18.1-19.
26.1-18.1-03.1. Bond or insurance requirement.
A qualified program of all-inclusive care for the elderly that operates in this state shall
maintain a surety bond, in the amount of two hundred fifty thousand dollars. Any surety bond
issued under this section must authorize recovery by the commissioner on behalf of any person
in this state that sustained damages as the result of unfair practices, conviction of fraud, or
failure by a qualified program of all-inclusive care for the elderly to perform a contractual
obligation owed to the person.
26.1-18.1-04. Powers of health maintenance organizations.
1. The powers of a health maintenance organization include the following:
a. The purchase, lease, construction, renovation, operation, or maintenance of
hospitals, medical facilities, or both, and their ancillary equipment, and such
property as may reasonably be required for its principal office or for such
purposes as may be necessary in the transaction of the business of the
organization.
b. Transactions between affiliated entities, including loans and the transfer of
responsibility under all contracts between affiliates or between the health
maintenance organization and its parent.
c. The furnishing of health care services through providers, provider associations, or
agents for providers which are under contract with or employed by the health
maintenance organization.
d. The contracting with any person for the performance on its behalf of certain
functions such as marketing, enrollment, and administration.
e. The contracting with an insurance company licensed in this state, or with a
hospital or medical service corporation authorized to do business in this state, for
the provision of insurance, indemnity, or reimbursement against the cost of health
care services provided by the health maintenance organization.
f. The offering of other health care services, in addition to basic health care
services. Nonbasic health care services may be offered by a health maintenance
organization on a prepaid basis without offering basic health care services to any
group or individual.
g. The joint marketing of products with an insurance company licensed in this state
or with a hospital or medical service corporation authorized to do business in this
state as long as the company that is offering each product is clearly identified.
2. a. A health maintenance organization shall file notice, with adequate supporting
information, with the commissioner prior to the exercise of any power granted in
subdivisions a, b, and d of subsection 1 which may affect the financial soundness
of the health maintenance organization. The commissioner shall disapprove the
exercise of power only if in the commissioner's opinion it would substantially and
adversely affect the financial soundness of the health maintenance organization
and endanger its ability to meet its obligations.
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b.
The commissioner may adopt rules exempting from the filing requirement of
subdivision a those activities having a de minimis effect.
26.1-18.1-05. Fiduciary responsibilities.
1. Any director, officer, employee, or partner of a health maintenance organization who
receives, collects, disburses, or invests funds in connection with the activities of the
organization is responsible for the funds in a fiduciary relationship to the organization.
2. If the commissioner deems it necessary for the security of the funds of a health
maintenance organization, the commissioner may require an official bond of each
officer and each employee of the organization in an amount not to exceed the sum of
money for which each is accountable.
26.1-18.1-06. Quality assurance program.
1. The health maintenance organization shall establish procedures to assure that the
health care services provided to enrollees will be rendered under reasonable
standards of quality of care consistent with prevailing professionally recognized
standards of medical practice. The procedures must include mechanisms to assure
availability, accessibility, and continuity of care.
2. The health maintenance organization must have an ongoing internal quality assurance
program to monitor and evaluate its health care services, including primary and
specialist physician services, and ancillary and preventive health care services, across
all institutional and noninstitutional settings. The program must include, at a minimum,
the following:
a. A written statement of goals and objectives which emphasizes improved health
status in evaluating the quality of care rendered to enrollees.
b. A written quality assurance plan which describes the following:
(1) The health maintenance organization's scope and purpose in quality
assurance.
(2) The organizational structure responsible for quality assurance activities.
(3) Contractual arrangements, when appropriate, for delegation of quality
assurance activities.
(4) Confidentiality policies and procedures.
(5) A system of ongoing evaluation activities.
(6) A system of focused evaluation activities.
(7) A system for credentialing providers and performing peer review activities.
(8) Duties and responsibilities of the designated physician responsible for the
quality assurance activities.
c. A written statement describing the system of ongoing quality assurance activities,
including:
(1) Problem assessment, identification, selection, and study.
(2) Corrective action, monitoring, evaluation, and reassessment.
(3) Interpretation and analysis of patterns of care rendered to individual patients
by individual providers.
d. A written statement describing the system of focused quality assurance activities
based on representative samples of the enrolled population which identifies
method of topic selection, study, data collection, analysis, interpretation, and
report format.
e. Written plans for taking appropriate corrective action whenever, as determined by
the quality assurance program, inappropriate or substandard services have been
provided or services which should have been furnished have not been provided.
3. The organization shall record proceedings of formal quality assurance program
activities and maintain documentation in a confidential manner. Quality assurance
program minutes must be available to the commissioner.
4. The organization shall ensure the use and maintenance of an adequate patient record
system which will facilitate documentation and retrieval of clinical information for the
purpose of the health maintenance organization evaluating continuity and coordination
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6.
of patient care and assessing the quality of health and medical care provided to
enrollees.
Enrollee clinical records must be available to the commissioner or an authorized
designee for examination and review to ascertain compliance with this section, or as
deemed necessary by the commissioner. The clinical records are confidential and are
not subject to section 44-04-18, except upon written consent for disclosure by the
enrollee or the enrollee's authorized representative.
The organization shall establish a mechanism for periodic reporting of quality
assurance program activities to the governing body, providers, and appropriate
organization staff.
26.1-18.1-07. Requirements for group contract, individual contract, and evidence of
coverage.
1. a. Every group and individual contractholder is entitled to a group or individual
contract.
b. The contract may not contain provisions or statements which are unjust, unfair,
inequitable, misleading, deceptive, or which encourage misrepresentation as
defined by chapter 26.1-04.
c. The contract must contain a clear statement of the following:
(1) Name and address of the health maintenance organization.
(2) Eligibility requirements.
(3) Benefits and services within the service area.
(4) Emergency care benefits and services.
(5) Out-of-area benefits and services, if any.
(6) Copayments, deductibles, or other out-of-pocket expenses.
(7) Limitations and exclusions.
(8) Enrollee termination.
(9) Enrollee reinstatement, if any.
(10) Claims procedures.
(11) Enrollee grievance procedures.
(12) Continuation of coverage.
(13) Conversion.
(14) Extension of benefits, if any.
(15) Coordination of benefits, if applicable.
(16) Subrogation, if any.
(17) Description of the service area.
(18) Entire contract provision.
(19) Term of coverage.
(20) Cancellation of group or individual contractholder.
(21) Renewal.
(22) Reinstatement of group or individual contractholder, if any.
(23) Grace period.
(24) Conformity with state law.
An evidence of coverage may be filed as part of the group contract to describe
the provisions required in this subdivision.
2. In addition to those provisions required in subdivision c of subsection 1, an individual
contract must provide for a ten-day period to examine and return the contract and
have the premium refunded. If services were received during the ten-day period, and
the person returns the contract to receive a refund of the premium paid, the person
must pay for the services.
3. a. Every subscriber shall receive an evidence of coverage from the group
contractholder or the health maintenance organization.
b. The evidence of coverage may not contain provisions or statements which are
unfair, unjust, inequitable, misleading, deceptive, or which encourage
misrepresentation as defined by chapter 26.1-04.
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6.
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The evidence of coverage must contain a clear statement of the provisions
required in subdivision c of subsection 1.
The commissioner may adopt rules establishing readability standards for individual
contract, group contract, and evidence of coverage forms.
No group or individual contract, evidence of coverage, or amendment thereto may be
delivered or issued for delivery in this state, unless its form has been filed with and
approved by the commissioner, as provided by sections 26.1-30-19 and 26.1-30-20.
The provisions set forth in sections 26.1-30-20 and 26.1-30-21 govern the approval
and disapproval of forms required to be filed under this section.
The commissioner may require the submission of whatever relevant information the
commissioner deems necessary in determining whether to approve or disapprove a
filing made pursuant to this section.
26.1-18.1-08. Annual report.
1. Every domestic health maintenance organization shall annually, on or before March
first, and every foreign health maintenance organization shall annually, on or before
the date that its annual report is due in its domestic state, file a report verified by at
least two principal officers with the commissioner, covering the preceding calendar
year. The report must be on forms prescribed by the commissioner. In addition, the
domestic health maintenance organization shall file by March first, and every foreign
health maintenance organization shall file annually, on or before the date that its
annual report is due in its domestic state, unless otherwise stated:
a. Audited financial statements on or before June first.
b. A list of the providers who have executed a contract that complies with
subdivision a of subsection 4 of section 26.1-18.1-12.
c. (1) A description of the grievance procedures.
(2) The total number of grievances handled through the procedures, a
compilation of the causes underlying those grievances, and a summary of
the final disposition of those grievances.
2. The commissioner may require additional reports as are deemed necessary and
appropriate to enable the commissioner to carry out the commissioner's duties under
this chapter. The commissioner may waive the filing of the annual report and other
information for a health maintenance organization that has discontinued its operation
in this state.
3. The commissioner may designate the national association of insurance commissioners
as the repository for the filing of the annual report.
26.1-18.1-09. Information to enrollees or subscribers.
1. The health maintenance organization shall provide to its subscribers a list of providers
upon enrollment and re-enrollment.
2. Every health maintenance organization shall provide within thirty days to its
subscribers notice of any material change in the operation of the organization that will
affect them directly.
3. An enrollee must be notified in writing by the health maintenance organization of the
termination of the primary care provider who provided health care services to that
enrollee. The health maintenance organization shall provide assistance to the enrollee
in transferring to another participating primary care provider.
4. The health maintenance organization shall provide to subscribers information on how
services may be obtained, where additional information on access to services can be
obtained, and a telephone number where the enrollee can contact the health
maintenance organization, at no cost to the enrollee.
26.1-18.1-10. Grievance procedures.
1. Every health maintenance organization shall establish and maintain a grievance
procedure which has been approved by the commissioner to provide procedures for
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the resolution of grievances initiated by enrollees. The health maintenance
organization shall maintain records regarding grievances received since the date of its
last examination of the grievances.
The commissioner may examine the grievance procedures.
26.1-18.1-11. Investments.
With the exception of investments made in accordance with subdivision a of subsection 1 of
section 26.1-18.1-04, the funds of a health maintenance organization may be invested only in
those investments authorized to be made by domestic insurance companies of this state.
26.1-18.1-12. Protection against insolvency.
1. Net worth requirements.
a. Before issuing any certificate of authority, the commissioner shall require that the
health maintenance organization have an initial net worth of one million dollars
and shall thereafter maintain the minimum net worth required under subdivision b.
b. Except as provided in subdivisions c and d, every health maintenance
organization must maintain a minimum net worth equal to the greater of:
(1) One million dollars;
(2) Two percent 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 of premium and one percent of annual premium
on the premium in excess of one hundred fifty million dollars;
(3) An amount equal to the sum of three months uncovered health care
expenditures as reported on the most recent financial statement filed with
the commissioner; or
(4) An amount equal to the sum of:
(a) Eight percent of annual health care expenditures except those paid on
a capitated basis or managed hospital payment basis as reported on
the most recent financial statement filed with the commissioner; and
(b) Four percent of annual hospital expenditures paid on a managed
hospital payment basis as reported on the most recent financial
statement filed with the commissioner.
c. A health maintenance organization licensed before August 1, 1993, and licensed
only in this state must maintain the minimum requirements which are in effect at
the time this chapter became law.
d. (1) In determining net worth, no debt may 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
must be similarly subordinated.
(2) The interest expenses relating to the repayment of any fully subordinated
debt must be considered covered expenses.
(3) Any debt incurred by a note meeting the requirements of this section, and
otherwise acceptable to the commissioner, may not be considered a liability
and must be recorded as equity.
2. Deposit requirements.
a. Unless otherwise provided below, each health maintenance organization 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.
b. A health maintenance organization that is licensed only in this state and is in
operation on August 1, 1993, shall make a deposit equal to one hundred
thousand dollars.
c. The deposit shall be an admitted asset of the health maintenance organization in
the determination of net worth.
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3.
4.
5.
All income from deposits is an asset of the organization. A health maintenance
organization 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 must be approved by the commissioner before being deposited or
substituted.
e. The deposit must be used to protect the interests of the health maintenance
organization's enrollees and to assure continuation of health care services to
enrollees of a health maintenance organization that is in rehabilitation or
conservation. The commissioner may use the deposit for administrative costs
directly attributable to a receivership or liquidation. If the health maintenance
organization is placed in receivership or liquidation, the deposit is an asset
subject to the provisions of the liquidation act.
f. The commissioner may reduce or eliminate the deposit requirement if the health
maintenance organization deposits with the state treasurer, insurance
commissioner, or other official body of the state or jurisdiction of domicile for the
protection of all subscribers and enrollees, wherever located, of the health
maintenance organization, cash, acceptable securities or surety, and delivers to
the commissioner a certificate to the effect, duly authenticated by the appropriate
state official holding the deposit.
Liabilities. Every health maintenance organization 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
organization is or may be liable, and to provide for the expense of adjustment or
settlement of the claims. The liabilities must be computed in accordance with rules
adopted by the commissioner upon reasonable consideration of the ascertained
experience and character of the health maintenance organization.
Hold harmless.
a. Every contract between a health maintenance organization and a participating
provider of health care services must be in writing and must set forth that in the
event the health maintenance organization fails to pay for health care services as
set forth in the contract, the subscriber or enrollee is not liable to the provider for
any sums owed by the health maintenance organization.
b. In the event that the participating provider contract has not been reduced to
writing as required by this subsection or that the contract fails to contain the
required prohibition, the participating provider may not collect or attempt to collect
from the subscriber or enrollee sums owed by the health maintenance
organization.
c. 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 health
maintenance organization.
Continuation of benefits. The commissioner shall require that each health maintenance
organization 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 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. In considering a plan, the
commissioner may require:
a. Insurance to cover the expenses to be paid for continued benefits after an
insolvency.
b. Provisions in provider contracts that obligate the provider to provide services for
the duration of the period after the health maintenance organization's insolvency
for which premium payment has been made and until the enrollee's discharge
from inpatient facilities.
c. Insolvency reserves.
d. Acceptable letters of credit.
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e. Any other arrangements to assure that benefits are continued as specified above.
Notice of termination. An agreement to provide health care services between a
provider and a health maintenance organization must require that if the provider
terminates the agreement, the provider shall give the organization at least sixty days'
advance notice of termination.
26.1-18.1-13. Uncovered expenditures insolvency deposit.
1. If at any time uncovered expenditures exceed ten percent of total health care
expenditures, a health maintenance organization shall place an uncovered
expenditures insolvency deposit with the commissioner, with any organization or
trustee acceptable to the commissioner through which a custodial or controlled
account is maintained, cash or securities that are acceptable to the commissioner. The
deposit must at all times have a fair market value in an amount of one hundred twenty
percent of the health maintenance organization's outstanding liability for uncovered
expenditures for enrollees in this state, including incurred but not reported claims, and
must be calculated as of the first day of the month and maintained for the remainder of
the month. If a health maintenance organization is not otherwise required to file a
quarterly report, it shall file a report within forty-five days of the end of the calendar
quarter with information sufficient to demonstrate compliance with this section.
2. The deposit required under this section is in addition to the deposit required under
section 26.1-18.1-12 and is an admitted asset of the health maintenance organization
in the determination of net worth. All income from the deposits or trust accounts is an
asset of the health maintenance organization and may be withdrawn from the deposit
or account quarterly with the approval of the commissioner.
3. A health maintenance organization that has made a deposit may withdraw that deposit
or any part of the deposit if a substitute deposit of cash or securities of equal amount
and value is made, the fair market value exceeds the amount of the required deposit,
or the required deposit under subsection 1 is reduced or eliminated. Deposits,
substitutions, or withdrawals may be made only with the prior written approval of the
commissioner.
4. The deposit required under this section is in trust and may be used only as provided
under this section. The commissioner may use the deposit of an insolvent health
maintenance organization for administrative costs associated with administering the
deposit and payment of claims of enrollees of this state for uncovered expenditures in
this state. Claims for uncovered expenditures must be paid on a pro rata basis based
on assets available to pay such ultimate liability for incurred expenditures. Partial
distribution may be made pending final distribution. Any amount of the deposit
remaining must be paid into the liquidation or receivership of the health maintenance
organization.
5. The commissioner may by regulation prescribe the time, manner, and form for filing
claims under subsection 4.
6. The commissioner may by rule or order require health maintenance organizations to
file annual, quarterly, or more frequent reports as the commissioner deems necessary
to demonstrate compliance with this section. The commissioner may require that the
reports include liability for uncovered expenditures as well as an audit opinion.
26.1-18.1-14. Enrollment period and replacement coverage in the event of insolvency.
1. Enrollment period.
a. In the event of an insolvency of a health maintenance organization, upon order of
the commissioner all other carriers that participated in the enrollment process
with the insolvent health maintenance organization at a group's last regular
enrollment period shall offer the group's enrollees of the insolvent health
maintenance organization a thirty-day enrollment period commencing upon the
date of insolvency. Each carrier shall offer the enrollees of the insolvent health
maintenance organization the same coverages and rates that it had offered to the
enrollees of the group at its last regular enrollment period.
Page No. 10
b.
2.
If no other carrier had been offered to some groups enrolled in the insolvent
health maintenance organization, or if the commissioner determines that the
other health benefit plans lack sufficient health care delivery resources to assure
that health care services will be available and accessible to all of the group
enrollees of the insolvent health maintenance organization, then the
commissioner shall allocate equitably the insolvent health maintenance
organization's group contracts for the groups among all health maintenance
organizations which operate within a portion of the insolvent health maintenance
organization's service area, taking into consideration the health care delivery
resources of each health maintenance organization. Each health maintenance
organization to which a group or groups are so allocated shall offer the group or
groups the health maintenance organization's existing coverage which is most
similar to each group's coverage with the insolvent health maintenance
organization at rates determined in accordance with the successor health
maintenance organization's existing rating methodology.
c. The commissioner shall also allocate equitably the insolvent health maintenance
organization's nongroup enrollees which are unable to obtain other coverage
among all health maintenance organizations which operate within a portion of the
insolvent health maintenance organization's service area, taking into
consideration the health care delivery resources of each health maintenance
organization. Each health maintenance organization to which nongroup enrollees
are allocated shall offer nongroup enrollees the health maintenance
organization's existing coverage for individual or conversion coverage as
determined by the type of coverage in the insolvent health maintenance
organization at rates determined in accordance with the successor health
maintenance organization's existing rating methodology. Successor health
maintenance organizations which do not offer direct nongroup enrollment may
aggregate all of the allocated nongroup enrollees into one group for rating and
coverage purposes.
Replacement coverage.
a. "Discontinuance" means the termination of the contract between the group
contractholder and a health maintenance organization due to the insolvency of
the health maintenance organization, and does not refer to the termination of any
agreement between any individual enrollee and the health maintenance
organization.
b. Any carrier providing replacement coverage with respect to group hospital,
medical, or surgical expense or service benefits within a period of sixty days from
the date of discontinuance of a prior health maintenance organization contract or
policy providing hospital, medical, or surgical expense or service benefits shall
immediately cover all enrollees who were validly covered under the previous
health maintenance organization contract or policy at the date of discontinuance
and who would otherwise be eligible for coverage under the succeeding carrier's
contract, regardless of any provisions of the contract relating to active
employment or hospital confinement or pregnancy.
c. Except to the extent benefits for the condition would have been reduced or
excluded under the prior carrier's contract or policy, no provision in a succeeding
carrier's contract of replacement coverage which would operate to reduce or
exclude benefits on the basis that the condition giving rise to benefits pre-existed
the effective date of the succeeding carrier's contract may be applied with respect
to those enrollees validly covered under the prior carrier's contract or policy on
the date of discontinuance.
26.1-18.1-15. Filing requirements for rating information.
1. No premium rate may be used until either a schedule of premium rates or
methodology for determining premium rates has been filed with and approved by the
commissioner.
Page No. 11
2.
3.
Either a specific schedule of premium rates, or a methodology for determining
premium rates, must be established in accordance with actuarial principles for various
categories of enrollees, provided that the premium applicable to an enrollee may not
be individually determined based on the status of the enrollee's health. However, the
premium rates may not be excessive, inadequate, or unfairly discriminatory. A
certification by a qualified actuary or other qualified person acceptable to the
commissioner as to the appropriateness of the use of the methodology, based on
reasonable assumptions, shall accompany the filing along with adequate supporting
information.
The commissioner shall approve the schedule of premium rates or methodology for
determining premium rates if the requirements of subsection 2 are met. The
procedures set forth in sections 26.1-30-20 and 26.1-30-21 govern the approval and
disapproval of rating information required to be filed under this section.
26.1-18.1-16. Regulation of health maintenance organization producers.
1. The commissioner may adopt rules necessary to provide for the licensing of health
maintenance organization producers. The rules must establish:
a. The requirements for licensure of resident health maintenance organization
producers.
b. The conditions for entering into reciprocal agreements with other jurisdictions for
the licensure of nonresident health maintenance organization producers.
c. Any examination, prelicensing, or continuing education requirements.
d. The requirements for registering and terminating the appointment of health
maintenance organization producers.
e. Any requirements for registering any assumed names or office locations in which
a health maintenance organization producer does business.
f. The conditions for health maintenance organization producer license renewal.
g. The grounds for denial, refusal, suspension, or revocation of a health
maintenance organization producer's license.
h. Any required fees for the licensing activities of health maintenance organization
producers.
i. Any other requirement or procedure and any form as may be reasonably
necessary to provide for the effective administration of the licensing of health
maintenance organization producers under this section.
2. None of the following may be required to hold a health maintenance organization
producer license:
a. Any regular salaried officer or employee of a health maintenance organization
who devotes substantially all of the person's time to activities other than the
taking or transmitting of applications or membership fees or premiums for health
maintenance organization membership, or who receives no commission or other
compensation directly dependent upon the business obtained and who does not
solicit or accept from the public applications for health maintenance organization
membership;
b. Employers or their officers or employees or the trustees of any employee benefit
plan to the extent that the employers, officers, employees, or trustees are
engaged in the administration or operation of any program of employee benefits
involving the use of health maintenance organization memberships, provided that
the employers, officers, employees, or trustees are not in any manner
compensated directly or indirectly by the health maintenance organization issuing
the health maintenance organization memberships;
c. Banks or their officers and employees to the extent that the banks, officers, and
employees collect and remit charges by charging same against accounts of
depositors on the orders of the depositor; or
d. Any person or the employee of any person who has contracted to provide
administrative, management, or health care services to a health maintenance
organization and who is compensated for those services by the payment of an
Page No. 12
3.
amount calculated as a percentage of the revenues, net income, or profit of the
health maintenance organization, if that method of compensation is the sole basis
for subjecting that person or the employee of the person to this chapter.
The commissioner may by rule exempt certain classes of persons from the
requirement of obtaining a license:
a. If the functions they perform do not require special competence, trustworthiness,
or the regulatory surveillance made possible by licensing; or
b. If other existing safeguards make regulation unnecessary.
26.1-18.1-17. Powers of insurers.
1. An insurance company licensed in this state, or a hospital or medical service
corporation authorized to do business in this state, may either directly or through a
subsidiary or affiliate, organize and operate a health maintenance organization under
the provisions of this chapter. Notwithstanding any other law which may be
inconsistent, any two or more insurance companies, hospital or medical service
corporations, or subsidiaries or affiliates thereof, may jointly organize and operate a
health maintenance organization. The business of insurance is deemed to include the
providing of health care by a health maintenance organization owned or operated by
an insurer or a subsidiary thereof.
2. Notwithstanding any provision of insurance and hospital or medical service corporation
laws, an insurer or a hospital or medical service corporation may contract with a health
maintenance organization to provide insurance or similar protection against the cost of
care provided through health maintenance organizations and to provide coverage in
the event of the failure of the health maintenance organization to meet its obligations.
The enrollees of a health maintenance organization constitute a permissible group
under the laws. Among other things, under the contracts, the insurer or hospital or
medical service corporation may make benefit payments to health maintenance
organizations for health care services rendered by providers.
26.1-18.1-18. Examinations.
1. The commissioner may make an examination of the affairs of any health maintenance
organization and providers with whom the organization has contracts, agreements, or
other arrangements as often as is reasonably necessary for the protection of the
interests of the people of this state but not less frequently than once every five years.
2. Every health maintenance organization and provider shall submit its books and
records for the examinations and in every way facilitate the completion of the
examination. For the purpose of examinations, the commissioner may administer
oaths to, and examine the officers and insurance producers of, the health maintenance
organization and the principals of the providers concerning their business.
3. The expenses of examinations under this section must be assessed against the health
maintenance organization being examined and remitted to the commissioner.
4. In lieu of the examination, the commissioner may accept the report of an examination
made by the commissioner of another state.
26.1-18.1-19. Suspension or revocation of certificate of authority.
1. Any certificate of authority issued under this chapter may be suspended or revoked,
and any application for a certificate of authority may be denied, if the commissioner
finds that any of these conditions exist:
a. The health maintenance organization is operating significantly in contravention of
its basic organizational document or in a manner contrary to that described in any
other information submitted under section 26.1-18.1-02, unless amendments to
the submissions have been filed with and approved by the commissioner.
b. The health maintenance organization issues an evidence of coverage or uses a
schedule of charges for health care services which do not comply with the
requirements of sections 26.1-18.1-07 and 26.1-18.1-15.
Page No. 13
c.
2.
3.
4.
The health maintenance organization does not provide or arrange for basic health
care services.
d. (1) The health maintenance organization does not meet the requirements of
section 26.1-18.1-06; or
(2) The health maintenance organization is unable to fulfill its obligations to
furnish health care services.
e. The health maintenance organization is no longer financially responsible and may
reasonably be expected to be unable to meet its obligations to enrollees or
prospective enrollees.
f. The health maintenance organization has failed to correct, within the time
prescribed by subsection 3, any deficiency occurring due to the health
maintenance organization's prescribed minimum net worth being impaired.
g. The health maintenance organization has failed to implement the grievance
procedures required by section 26.1-18.1-10 in a reasonable manner to resolve
valid complaints.
h. The health maintenance organization, or any person on its behalf, has advertised
or merchandised its services in an untrue, misrepresentative, misleading,
deceptive, or unfair manner.
i. The continued operation of the health maintenance organization would be
hazardous to its enrollees.
j. The health maintenance organization has otherwise failed substantially to comply
with this chapter.
In addition to or in lieu of suspension or revocation of a certificate of authority pursuant
to this section, the applicant or health maintenance organization may be subjected to
an administrative penalty of up to ten thousand dollars for each cause for suspension
or revocation.
The following pertains when insufficient net worth is maintained:
a. Whenever the commissioner finds that the net worth maintained by any health
maintenance organization subject to the provisions of this chapter is less than the
minimum net worth required to be maintained by section 26.1-18.1-12, the
commissioner shall give written notice to the health maintenance organization of
the amount of the deficiency and require filing with the commissioner a plan for
correction of the deficiency acceptable to the commissioner, and correction of the
deficiency within a reasonable time, not to exceed sixty days, unless an extension
of time, not to exceed sixty additional days, is granted by the commissioner. Such
a deficiency must be deemed an impairment, and failure to correct the
impairment in the prescribed time is grounds for suspension or revocation of the
certificate of authority or for placing the health maintenance organization in
conservation, rehabilitation, or liquidation.
b. Unless allowed by the commissioner, no health maintenance organization or
person acting on its behalf may, directly or indirectly, renew, issue, or deliver any
certificate, agreement, or contract of coverage in this state, for which a premium
is charged or collected, when the health maintenance organization writing the
coverage is impaired, and the fact of the impairment is known to the health
maintenance organization or to the person. However, the existence of an
impairment does not prevent the issuance or renewal of a certificate, agreement,
or contract when the enrollee exercises an option granted under the plan to
obtain a new, renewed, or converted coverage.
A certificate of authority must be suspended or revoked or an application or a
certificate of authority denied or an administrative penalty imposed only after
compliance with the requirements of this section.
a. Suspension or revocation of a certificate of authority or the denial of an
application or the imposition of an administrative penalty pursuant to this section
must be by written order and must be sent to the health maintenance
organization or applicant by certified mail. The written order must state the
grounds, charges, or conduct on which suspension, revocation, or denial or
Page No. 14
5.
6.
7.
administrative penalty is based. The health maintenance organization or applicant
may in writing request a hearing within thirty days from the date of mailing of the
order. If no written request is made, the order is final upon the expiration of said
thirty days.
b. If the health maintenance organization or applicant requests a hearing pursuant
to this section, the commissioner shall issue a written notice of hearing and send
it to the health maintenance organization or applicant by certified or registered
mail stating:
(1) A specific time for the hearing, which may not be less than twenty nor more
than thirty days after mailing of the notice of hearing; and
(2) A specific place for the hearing, which may be either in Bismarck, North
Dakota, or in the county where the health maintenance organization's or
applicant's principal place of business is located.
After the hearing, or upon failure of the health maintenance organization to
appear at the hearing, the commissioner shall take whatever action the
commissioner deems necessary based on written findings and shall mail the
decision to the health maintenance organization or applicant. The action of the
commissioner is subject to review under chapter 28-32, or other applicable
statutory review process.
The provisions of chapter 28-32 apply to proceedings under this section to the extent
they are not in conflict with subdivision b of subsection 4.
When the certificate of authority of a health maintenance organization is suspended,
the health maintenance organization may not, during the period of the suspension,
enroll any additional enrollees except newborn children or other newly acquired
dependents of existing enrollees, and may not engage in any advertising or solicitation
whatsoever.
When the certificate of authority of a health maintenance organization is revoked, the
organization shall proceed, immediately following the effective date of the order of
revocation, to wind up its affairs, and shall conduct no further business except as may
be essential to the orderly conclusion of the affairs of the organization. It may engage
in no further advertising or solicitation whatsoever. The commissioner may, by written
order, permit the further operation of the organization as the commissioner may find to
be in the best interest of enrollees to the end that enrollees will be afforded the
greatest practical opportunity to obtain continuing health care coverage.
26.1-18.1-20. Rehabilitation, liquidation, or conservation of health maintenance
organizations.
1. Any rehabilitation, liquidation, or conservation of a health maintenance organization
must be deemed to be the rehabilitation, liquidation, or conservation of an insurance
company and must be conducted under the supervision of the commissioner pursuant
to the law governing the rehabilitation, liquidation, or conservation of insurance
companies. The commissioner may apply for an order directing the commissioner to
rehabilitate, liquidate, or conserve a health maintenance organization upon any one or
more grounds set out in chapter 26.1-06; or when in the commissioner's opinion the
continued operation of the health maintenance organization would be hazardous either
to the enrollees or to the people of this state. Enrollees have the same priority in the
event of liquidation or rehabilitation as the law provides to policyholders of an insurer.
2. For purposes of determining the priority of distribution of general assets, claims of
enrollees and enrollees' beneficiaries have the same priority as established by chapter
26.1-06.1 for policyholders and beneficiaries of insureds of insurance companies. If an
enrollee is liable to any provider for services provided pursuant to and covered by the
health care plan, that liability has the status of an enrollee claim for distribution of
general assets. Any provider who is obligated by statute or agreement to hold
enrollees harmless from liability for services provided pursuant to and covered by a
health care plan has a priority of distribution of the general assets immediately
Page No. 15
following that of enrollees and enrollees' beneficiaries as described herein, and
immediately preceding the priority of distribution described in chapter 26.1-06.1.
26.1-18.1-21. Summary orders and supervision.
1. Whenever the commissioner determines that the financial condition of any health
maintenance organization is such that its continued operation might be hazardous to
its enrollees, creditors, or the general public, or that it has violated any provision of this
chapter, the commissioner may, after notice and hearing, order the health maintenance
organization to take action as may be reasonably necessary to rectify the condition or
violation, including one or more of the following:
a. Reduce the total amount of present and potential liability for benefits by
reinsurance or other method acceptable to the commissioner.
b. Reduce the volume of new business being accepted.
c. Reduce expenses by specified methods.
d. Suspend or limit the writing of new business for a period of time.
e. Increase the health maintenance organization's capital and surplus by
contribution.
f. Take other steps as the commissioner may deem appropriate under the
circumstances.
2. For purposes of this section, the violation by a health maintenance organization of any
law of this state to which the health maintenance organization is subject must be
deemed a violation of this chapter.
3. The commissioner may set uniform standards and criteria by rule for early warning that
the continued operation of any health maintenance organization might be hazardous to
its enrollees, creditors, or the general public and to set standards for evaluating the
financial condition of any health maintenance organization, which standards must be
consistent with the purposes expressed in subsection 1.
4. The remedies and measures available to the commissioner under this section are in
addition to, and not in lieu of, the remedies and measures available to the
commissioner under the provisions of section 26.1-06.1-09.
26.1-18.1-22. Rulemaking authority.
The commissioner may adopt reasonable rules necessary and proper to carry out the
provisions of this chapter.
26.1-18.1-23. Confidentiality of medical information and limitation of liability.
1. Any data or information pertaining to the diagnosis, treatment, or health of any enrollee
or applicant obtained from the person or from any provider by any health maintenance
organization must be held in confidence and may not be disclosed to any person
except to the extent that it may be necessary to carry out the purposes of this chapter,
or upon the express consent of the enrollee or applicant, or pursuant to statute or court
order for the production of evidence or the discovery thereof, or in the event of claim or
litigation between the person and the health maintenance organization wherein the
data or information is pertinent. A health maintenance organization is entitled to claim
any statutory privileges against the disclosure which the provider who furnished the
information to the health maintenance organization is entitled to claim.
2. A person who, in good faith and without malice, takes any action or makes any
decision or recommendation as a member, agent, or employee of a health care review
committee or who furnishes any records, information, or assistance to such a
committee is not subject to liability for civil damages or any legal action in
consequence of the action, nor is the health maintenance organization which
established the committee or the officers, directors, employees, or agents of the health
maintenance organization liable for the activities of any person. This section may not
be construed to relieve any person of liability arising from treatment of a patient.
Page No. 16
3.
4.
a.
The information considered by a health care review committee and the records of
their actions and proceedings are confidential and not subject to subpoena or
order to produce except in proceedings before the appropriate state licensing or
certifying agency, or in an appeal, if permitted, from the committee's findings or
recommendations. No member of a health care review committee, or officer,
director, or other member of a health maintenance organization or its staff
engaged in assisting the committee, or any person assisting or furnishing
information to the committee may be subpoenaed to testify in any judicial or
quasi-judicial proceeding if the subpoena is based solely on the activities.
b. Information considered by a health care review committee and the records of its
actions and proceedings which are used pursuant to subdivision a by a state
licensing or certifying agency or in an appeal must be kept confidential and is
subject to the same provision concerning discovery and use in legal actions as
are the original information and records in the possession and control of a health
care review committee.
To fulfill its obligations under section 26.1-18.1-06, the health maintenance
organization shall have access to treatment records and other information pertaining to
the diagnosis, treatment, or health status of any enrollee.
26.1-18.1-24. Acquisition of control of or merger of a health maintenance
organization.
No person may make a tender for or a request or invitation for tenders of, or enter into an
agreement to exchange securities for or acquire in the open market or otherwise, any voting
security of a health maintenance organization or enter into any other agreement if, after the
consummation thereof, that person would, directly or indirectly, or by conversion or by exercise
of any right to acquire, be in control of the health maintenance organization, and no person may
enter into an agreement to merge or consolidate with or otherwise to acquire control of a health
maintenance organization, unless, at the time any offer, request, or invitation is made or any
agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is
involved, the person has filed with the commissioner and has sent to the health maintenance
organization information required by section 26.1-10-03 and the offer, request, invitation,
agreement, or acquisition has been approved by the commissioner. Approval by the
commissioner must be governed by section 26.1-10-03.
26.1-18.1-25. Coordination of benefits.
1. Health maintenance organizations are permitted, but not required, to adopt
coordination of benefits provisions to avoid overinsurance and to provide for the
orderly payment of claims when a person is covered by two or more group health
insurance or health care plans.
2. If health maintenance organizations adopt coordination of benefits, the provisions must
be consistent with the coordination of benefits provisions that are in general use in the
state for coordinating coverage between two or more group health insurance or health
care plans.
3. To the extent necessary for health maintenance organizations to meet their obligations
as secondary carriers under the rules for coordination, health maintenance
organizations shall make payments for services that are received from nonparticipating
providers, provided outside their service areas, or not covered under the terms of their
group contracts or evidence of coverage.
Page No. 17
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