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Introduced Version House Bill 3149 History

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Key: Green = existing Code. Red = new code to be enacted
H. B. 3149


(By Delegates H. White, R. M. Thompson,

Hrutkay, Perry and Azinger)


[Introduced March 22, 2005; referred to the

Committee on Health and Human Resources then the Judiciary.]




A BILL to repeal §33-25A-24a, §33-25A-24b, §33-25A-29 and §33-25A-30 of the Code of West Virginia, 1931, as amended; to amend and reenact §33-25A-3a, §33-25A-12, §33-25A-14, §33-25A-17, §33-25A-22, §33-25A-23 and §33-25A-24 of said code; to amend said code by adding thereto a new section, designated §33-25A-14a; and to amend and reenact §33-40-1, §33-40-2, §33-40-3, §33-40-6 and §33-40-7 of said code, all relating to health maintenance organizations; eliminating the requirement that a health maintenance organization be incorporated in this state in order to obtain a certificate of authority; eliminating the requirement of annual application for renewal of certificates of authority; increasing the time copies of grievances must be retained; permitting health status to be a basis for underwriting individual policies; changing the period in which examinations must be performed by the Commissioner from three to five years; increasing the filing fee for annual reports; correcting a reference; clarifying scope of Commissioner's powers in performing examinations; clarifying that Insurance Fraud Prevention Act applies to health maintenance organizations; defining terms; and subjecting health maintenance organizations to risk based capital requirements.

Be it enacted by the Legislature of West Virginia:

That §33-25A-24a, §33-25A-24b, §33-25A-29 and §33-25A-30 of the Code of West Virginia, 1931, as amended, be repealed; that §33-25A-3a, §33-25A-12, §33-25A-14, §33-25A-17, §33-25A-22, §33-25A-23 and §33-25A-24 of said code be amended and reenacted; that said code be amended by adding thereto a new section, designated §33-25A-14a; and that §33-40-1, §33-40-2, §33-40-3, §33-40-6 and §33-40-7 of said code be amended and reenacted, all to read as follows:

ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.

§33-25A-3a. Conditions precedent to issuance or maintenance of a certificate of authority; renewal of certificate of authority; effect of bankruptcy proceedings.

(1) (a) As a condition precedent to the issuance or maintenance of a certificate of authority, a health maintenance organization must file or have on file with the Commissioner:
(a) (1) An acknowledgment that a delinquency proceeding pursuant to article ten of this chapter, or supervision by the Commissioner pursuant to article thirty-four of this chapter, constitutes constitute the sole and exclusive method methods for the liquidation, rehabilitation, reorganization or conservation of a health maintenance organization;
(b) (2) A waiver of any right to file or be subject to a bankruptcy proceeding;
(c) (3) Within thirty days of any change in the membership of the governing body of the organization or in the officers or persons holding five percent or more of the common stock of the organization, or as otherwise required by the Commissioner:
(i) (A) An amended list of the names, addresses and official positions of each member of the governing body, and a full disclosure of any financial interest by a member of the governing body or any provider or any organization or corporation owned or controlled by that person and the health maintenance organization and the extent and nature of any contract or financial arrangements between that person and the health maintenance organization; and
(ii) (B) A complete biographical statement on forms prescribed by the Commissioner and an independent investigation report on each person for whom a biographical statement and independent investigation report have not previously been submitted; and
(d) (4) Effective the first day of May, one thousand nine hundred ninety-eight, for health maintenance organizations that have been in existence at least three years, A copy of the current quality assurance report submitted to the health maintenance organization by a nationally recognized accreditation and review organization approved by the Commissioner, or in the case of the issuance of an initial certificate of authority to a health maintenance organization, a determination by the Commissioner as to the feasibility of the health maintenance organization's proposed quality assurance program: Provided, That if a health maintenance organization files proof found in the commissioners Commissioner's discretion to be sufficient to demonstrate that the health maintenance organization has timely applied for and reasonably pursued a review of its quality assurance program, but a quality report has not been issued by the accreditation and review organization, the health maintenance organization shall be deemed to have complied with this subdivision.
(2) After the effective date of this section, as a condition precedent to the issuance of a certificate of authority, any organization that has not yet obtained a certificate of authority to operate a health maintenance organization in this state shall be incorporated under the provisions of article one, chapter thirty-one of this code.
(3) (b) After the effective date of this subsection, All certificates of authority issued to health maintenance organizations shall expire at midnight on the thirty-first day of May of each year. The Commissioner shall renew annually the certificates of authority of all health maintenance organizations that continue to meet all requirements of this section and subsection (2), section four of this article: make application therefor upon a form prescribed by the commissioner and pay the renewal fee prescribed Provided, That a health maintenance organization shall not qualify for renewal of its certificate of authority if the organization has no subscribers in this state within twelve months after issuance of the certificate of authority: Provided, however, That an organization not qualifying for renewal may apply for a new certificate of authority under section three of this article.
(4) (c) The commencement of a bankruptcy proceeding either by or against a health maintenance organization shall, by operation of law;
(a) Terminate the health maintenance organization's certificate of authority; and
(b) Vest in the Commissioner for the use and benefit of the subscribers of the health maintenance organization the title to any deposits of the health maintenance organization held by the Commissioner: Provided, That
(5) If the bankruptcy proceeding is initiated by a party other than the health maintenance organization, the operation of this subsection (4) of this section shall be stayed for a period of sixty days following the date of commencement of the proceeding.
§33-25A-12. Grievance procedure.
(1) (a) A health maintenance organization shall establish and maintain a grievance procedure, which has been approved by the Commissioner, to provide adequate and reasonable procedures for the expeditious resolution of written grievances initiated by enrollees concerning any matter relating to any provisions of the organization's health maintenance contracts, including, but not limited to, claims regarding the scope of coverage for health care services; denials, cancellations or nonrenewals of enrollee coverage; observance of an enrollee's rights as a patient; and the quality of the health care services rendered.
(2) (b) A detailed description of the HMO's subscriber grievance procedure shall be included in all group and individual contracts as well as any certificate or member handbook provided to subscribers. This procedure shall be administered at no cost to the subscriber. An HMO subscriber grievance procedure shall include the following:
(a) (1) Both informal and formal steps shall be available to resolve the grievance. A grievance is not considered formal until a written grievance is executed by the subscriber or completed on such forms as prescribed and received by the HMO;
(b) (2) Each HMO shall designate at least one grievance coordinator who is responsible for the implementation of the HMO's grievance procedure;
(c) (3) Phone numbers shall be specified by the HMO for the subscriber to call to present an informal grievance or to contact the grievance coordinator. Each phone number shall be toll free within the subscriber's geographic area and provide reasonable access to the HMO without undue delays. There must be an adequate number of phone lines to handle incoming grievances;
(d) (4) An address shall be included for written grievances;
(e) (5) Each level of the grievance procedure shall have some person with problem solving authority to participate in each step of the grievance procedure;
(f) (6) The HMO shall process the formal written subscriber grievance through all phases of the grievance procedure in a reasonable length of time not to exceed sixty days, unless the subscriber and HMO mutually agree to extend the time frame. If the complaint involves the collection of information outside the service area, the HMO has thirty additional days to process the subscriber complaint through all phases of the grievance procedure. The time limitations prescribed in this subdivision requiring completion of the grievance process within sixty days shall be tolled after the HMO has notified the subscriber, in writing, that additional information is required in order to properly complete review of the grievance. Upon receipt by the HMO of the additional information requested, the time for completion of the grievance process set forth in this subdivision shall resume;
(g) (7) The subscriber grievance procedure shall state that the subscriber has the right to appeal to the Commissioner. There shall be the additional requirement that subscribers under a group contract between the HMO and a department or division of the state shall first appeal to the state agency responsible for administering the relevant program, and if either of the two parties are not satisfied with the outcome of the appeal, they may then appeal to the Commissioner. The HMO shall provide to the subscriber written notice of the right to appeal upon completion of the full grievance procedure and supply the Commissioner with a copy of the final decision letter;
(h) (8) The HMO shall have physician involvement in reviewing medically related grievances. Physician involvement in the grievance process should not be limited to the subscriber's primary care physician, but may include at least one other physician;
(i) (9) The HMO shall offer to meet with the subscriber during the formal grievance process. The location of the meeting shall be at the administrative offices of the HMO within the service area or at a location within the service area which is convenient to the subscriber;
(j) (10) The HMO may not establish time limits of less than one year from the date of occurrence for the subscriber to file a formal grievance;
(k) (11) Each HMO shall maintain an accurate record of each formal grievance. Each record shall include the following: (i) A complete description of the grievance, the subscriber's name and address, the provider's name and address and the HMO's name and address; (ii) a complete description of the HMO's factual findings and conclusions after completion of the full formal grievance procedure; (iii) a complete description of the HMO's conclusions pertaining to the grievance as well as the HMO's final disposition of the grievance; and (iv) a statement as to which levels of the grievance procedure the grievance has been processed and how many more levels of the grievance procedure are remaining before the grievance has been processed through the HMO's entire grievance procedure.
(c) Copies of the grievances and the responses thereto shall be available to the Commissioner and, subject to state and federal privacy laws, to the public for inspection for three five years.
(3) (d) Any subscriber grievance in which time is of the essence must be handled on an expedited basis, such that a reasonable person would believe that a prevailing subscriber would be able to realize the full benefit of a decision in his or her favor.
(4) (e) Each health maintenance organization shall submit to the Commissioner an annual report in a form prescribed by the Commissioner which describes such grievance procedure and contains a compilation and analysis of the grievances filed, their disposition, and their underlying causes.
§33-25A-14. Prohibited advertising practices.
(1) (a) No health maintenance organization, or representative thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. No advertising may be used until it has been approved by the Commissioner. Advertising which has not been disapproved by the Commissioner within sixty days of filing shall be considered approved. For purposes of this article:
(a) (1) A statement or item of information shall be considered to be untrue if it does not conform to fact in any respect which is or may be significant to an enrollee of, or person considering enrollment in, a health maintenance organization;
(b) (2) A statement or item of information shall be considered to be misleading, whether or not it may be literally untrue if, in the total context in which the statement is made or the item of information is communicated, the statement or item of information may be reasonably understood by a reasonable person, not possessing special knowledge regarding health care coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage of possible significance to an enrollee of, or person considering enrollment in, a health maintenance organization, if the benefit or advantage or absence of limitation, exclusion or disadvantage does not in fact exist;
(c) (3) An evidence of coverage shall be considered to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography and format, as well as language, shall be such as to cause a reasonable person, not possessing special knowledge regarding health maintenance organizations, and evidences of coverage therefor, to expect benefits, services or other advantages which the evidence of coverage does not provide or which the health maintenance organization issuing the evidence of coverage does not regularly make available for enrollees covered under such evidence of coverage; and
(d) (4) The Commissioner may promulgate rules to further define practices which are untrue, misleading or deceptive.
(2) No health maintenance organization may cancel or fail to renew the coverage of an enrollee except for: (a) Failure to pay the charge for health care coverage; (b) termination of the health maintenance organization; (c) termination of the group plan; (d) enrollee moving out of the area served; (e) enrollee moving out of an eligible group; or (f) other reasons established in rules promulgated by the commissioner. No health maintenance organization shall use any technique of rating or grouping to cancel or fail to renew the coverage of an enrollee. An enrollee shall be given thirty days' notice of any cancellation or nonrenewal and the notice shall include the reasons for the cancellation or nonrenewal: Provided, That each enrollee moving out of an eligible group shall be granted the opportunity to enroll in the health maintenance organization on an individual basis. A health maintenance organization may not disenroll an enrollee for nonpayment of copayments unless the enrollee has failed to make payment in at least three instances over any twelve-month period: Provided, however, That the enrollee may not be disenrolled if the disenrollment would constitute abandonment of a patient. Any enrollee wrongfully disenrolled shall be reenrolled.
(3) (a)(b) (1) No health maintenance organization may use in its name, contracts, logo or literature any of the words "insurance", "casualty", "surety", "mutual" or any other words which are descriptive of the insurance, casualty or surety business or deceptively similar to the name or description of any insurance or surety corporation doing business in this state: Provided, That when a health maintenance organization has contracted with an insurance company for any coverage permitted by this article, it may so state; and
(b) (2) Only those persons that have a person that has been issued a certificate of authority under this article may use the words "health maintenance organization" or the initials "HMO" in its name, contracts, logo or literature to imply, directly or indirectly, that it is a health maintenance organization or hold itself out to be a health maintenance organization.
(4) The providers of a health maintenance organization who provide health care services and the health maintenance organization shall not have recourse against enrollees for amounts above those specified in the evidence of coverage as the periodic prepayment or copayment for health care services.
(5) No health maintenance organization shall enroll more than three hundred thousand persons in this state: Provided, That a health maintenance organization may petition the commissioner to exceed an enrollment of three hundred thousand persons and, upon notice and hearing, good cause being shown and a determination made that such an increase would be beneficial to the subscribers, creditors and stockholders of the organization or would otherwise increase the availability of coverage to consumers within the state, the commissioner may, by written order only, allow the petitioning organization to exceed an enrollment of three hundred thousand persons.
(6) No health maintenance organization shall discriminate in enrollment policies or quality of services against any person on the basis of race, sex, age, religion, place of residence, health status or source of payment: Provided, That differences in rates based on valid actuarial distinctions, including distinctions relating to age and sex, shall not be considered discrimination in enrollment policies.
(7) (c) (1) No agent of a health maintenance organization or person selling enrollments in a health maintenance organization shall sell an enrollment in a health maintenance organization unless the agent or person shall first disclose in writing to the prospective purchaser the following information using the following exact terms in bold print: (a) "Services offered", including any exclusions or limitations; (b) "full cost", including copayments; (c) "facilities available"; (d) "transportation services"; (e) "disenrollment rate"; and (f) "staff", including the names of all full-time staff physicians, consulting specialists, hospitals and pharmacies associated with the health maintenance organization. In any home solicitation, any three-day cooling-off period applicable to consumer transactions generally applies in the same manner as consumer transactions.
(2) The form disclosure statement shall not be used in sales until it has been approved by the Commissioner or submitted to the Commissioner for sixty days without disapproval. Any person who fails to disclose the requisite information prior to the sale of an enrollment may be held liable in an amount equivalent to one year's subscription rate to the health maintenance organization, plus costs and a reasonable attorney's fee.
(8) (d) No contract with an enrollee shall prohibit an enrollee from canceling his or her enrollment at any time for any reason except that the contract may require thirty days' notice to the health maintenance organization.
(9) (e) Any person who, in connection with an enrollment, violates any subsection provision of this section may be held liable for an amount equivalent to one year's subscription rate, plus costs and a reasonable attorney's fee.
§33-25A-14a. Other prohibited practices.
(a) No health maintenance organization may cancel or fail to renew the coverage of an enrollee except for: (1) Failure to pay the charge for health care coverage; (2) termination of the health maintenance organization; (3) termination of the group plan; (4) enrollee moving out of the area served; (5) enrollee moving out of an eligible group; or (6) other reasons established in rules promulgated by the Commissioner. No health maintenance organization shall use any technique of rating or grouping to cancel or fail to renew the coverage of an enrollee. An enrollee shall be given thirty days' notice of any cancellation or nonrenewal and the notice shall include the reasons for the cancellation or nonrenewal: Provided, That each enrollee moving out of an eligible group shall be granted the opportunity to enroll in the health maintenance organization on an individual basis. A health maintenance organization may not disenroll an enrollee for nonpayment of copayments unless the enrollee has failed to make payment in at least three instances over any twelve-month period: Provided, however, That the enrollee may not be disenrolled if the disenrollment would constitute abandonment of a patient. Any enrollee wrongfully disenrolled shall be reenrolled.
(b) The providers of a health maintenance organization who provide health care services and the health maintenance organization shall not have recourse against enrollees for amounts above those specified in the evidence of coverage as the periodic prepayment or copayment for health care services.
(c) No health maintenance organization shall enroll more than three hundred thousand persons in this state: Provided, That a health maintenance organization may petition the Commissioner to exceed an enrollment of three hundred thousand persons and, upon notice and hearing, good cause being shown and a determination made that such an increase would be beneficial to the subscribers, creditors and stockholders of the organization or would otherwise increase the availability of coverage to consumers within the state, the Commissioner may, by written order only, allow the petitioning organization to exceed an enrollment of three hundred thousand persons.
(d) No health maintenance organization shall discriminate in enrollment policies or quality of services against any person on the basis of race, sex, age, religion, place of residence, source of payment or, with respect to enrollment in group policies, health status: Provided, That differences in rates based on valid actuarial distinctions, including distinctions relating to age and sex, shall not be considered discrimination in enrollment policies.
(e) Any person who, in connection with an enrollment, violates any provision of this section may be held liable for an amount equivalent to one year's subscription rate, plus costs and a reasonable attorney's fee.
§33-25A-17. Examinations.
(1) (a) 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 he or she considers it necessary for the protection of the interests of the people of this state but not less frequently than once every three five years.
(2) (b) The Commissioner may contract with the Department of Health and Human Resources, any entity which has been accredited by a nationally recognized accrediting organization and has been approved by the Commissioner to make examinations concerning the quality of health care services of any health maintenance organization and providers with whom the organization has contracts, agreements or other arrangements, or any entity contracted with by the Department of Health and Human Resources of health and human resources, as often as it considers necessary for the protection of the interests of the people of this state, but not less frequently than once every three years: Provided, That in making the examination, the Department of Health and Human Resources or the accredited entity shall utilize the services of persons or organizations with demonstrable expertise in assessing quality of health care.
(3) (c) Every health maintenance organization and affiliated provider shall submit its books and records to the examinations and in every way facilitate them. For the purpose of examinations, the Commissioner and the Department of Health and Human Resources have all powers necessary to conduct the examinations, including, but not limited to, the power to issue subpoenas, the power to administer oaths to and examine the officers and agents of the health maintenance organization and the principals of the providers concerning their business.
(4) (d) The health maintenance organization is and any other entity subject to examination pursuant to this article are subject to the provisions of section nine sections four, five, six, seven, eight and nine, article two of this chapter in regard to the expense and conduct of examinations.
(5) (e) In lieu of the examination, the Commissioner may accept the report of an examination made by other states.
(6) (f) The expenses of an examination assessing quality of health care under subsection (2) (b) of this section and section seventeen-a of this article, shall be reimbursed pursuant to subsection (n), section nine, article two of this chapter.
§33-25A-22. Fees.
Every health maintenance organization subject to this article shall pay to the Commissioner the following fees: For filing an application for a certificate of authority or amendment thereto, two hundred dollars; for each renewal of a certificate of authority, the annual fee as provided in section thirteen, article three of this chapter; for each form filing and for each rate filing, the fee, as provided in section thirty-four, article six of this chapter; and for filing each annual report, twenty-five one hundred dollars. Fees charged under this section shall be for the purposes set forth in section thirteen, article three of this chapter.
§33-25A-23. Penalties and enforcement.
(1) The Commissioner may, in lieu of suspension or revocation of a certificate of authority under section nineteen eighteen of this article, levy an administrative penalty in an amount not less than one hundred dollars nor more than five thousand dollars, if reasonable notice in writing is given of the intent to levy the penalty and the health maintenance organization has a reasonable time within which to remedy the defect in its operations which gave rise to the penalty citation. The Commissioner may augment this penalty by an amount equal to the sum that he calculates to be the damages suffered by enrollees or other members of the public.
(2) Any person who violates any provision of this article shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not less than one thousand dollars nor more than ten thousand dollars, or imprisoned in the county jail not more than one year, or both fined and imprisoned.
(3) (a) If the Commissioner shall for any reason have cause to believe that any violation of this article or regulations rules promulgated pursuant thereto has occurred or is threatened, prior to the levy of a penalty or suspension or revocation of a certificate of authority, the Commissioner shall give notice to the health maintenance organization and to the representatives, or other persons who appear to be involved in such suspected violation, to arrange a conference with the alleged violators or their authorized representatives for the purpose of attempting to ascertain the facts relating to such suspected violation, and, in the event it appears that any violation has occurred or is threatened, to arrive at an adequate and effective means of correcting or preventing such violation.
(b) Proceedings under this subsection shall not be governed by any formal procedural requirements, and may be conducted in such manner as the Commissioner may deem appropriate under the circumstances. Enrollees shall be afforded notice by publication of proceedings under this subsection (3) and shall be afforded the opportunity to intervene.
(4) (a) The Commissioner may issue an order directing a health maintenance organization or a representative of a health maintenance organization to cease and desist from engaging in any act or practice in violation of the provisions of this article or regulations promulgated pursuant thereto.
(b) Within ten days after service of the order of cease and desist, the respondent may request a hearing on the question of whether acts or practices in violation of this article have occurred. Such hearings shall be conducted pursuant to chapter twenty-nine-a of this code, and judicial review shall be available as provided by chapter twenty-nine-a of this code.
(5) In the case of any violation of the provisions of this article or regulations rules promulgated pursuant thereto, if the Commissioner elects not to issue a cease and desist order, or in the event of noncompliance with a cease and desist order issued pursuant to subsection (4) of this section, the Commissioner may institute a proceeding to obtain injunctive relief, or seek other appropriate relief, in the circuit court of the county of the principal place of business of the health maintenance organization.
(6) Any enrollee of or resident of the service area of the health maintenance organization may bring an action to enforce any provision, standard or regulation rule enforceable by the Commissioner. In the case of any successful action to enforce this article, or accompanying standards or regulations rules, the individual shall be awarded the costs of the action together with a reasonable attorney's fee as determined by the court. §33-25A-24. Scope of provisions; applicability of other laws.
(a) Except as otherwise provided in this article, provisions of the insurance laws and provisions of hospital or medical service corporation laws are not applicable to any health maintenance organization granted a certificate of authority under this article. The provisions of this article shall not apply to an insurer or hospital or medical service corporation licensed and regulated pursuant to the insurance laws or the hospital or medical service corporation laws of this state except with respect to its health maintenance corporation activities authorized and regulated pursuant to this article. The provisions of this article may not apply to an entity properly licensed by a reciprocal state to provide health care services to employer groups, where residents of West Virginia are members of an employer group, and the employer group contract is entered into in the reciprocal state. For purposes of this subsection, a "reciprocal state" means a state which physically borders West Virginia and which has subscriber or enrollee hold harmless requirements substantially similar to those set out in section seven-a of this article.
(b) Factually accurate advertising or solicitation regarding the range of services provided, the premiums and copayments charged, the sites of services and hours of operation and any other quantifiable, nonprofessional aspects of its operation by a health maintenance organization granted a certificate of authority, or its representative may not be construed to violate any provision of law relating to solicitation or advertising by health professions: Provided, That nothing contained in this subsection shall be construed as authorizing any solicitation or advertising which identifies or refers to any individual provider or makes any qualitative judgment concerning any provider.
(c) Any health maintenance organization authorized under this article may not be considered to be practicing medicine and is exempt from the provisions of chapter thirty of this code, relating to the practice of medicine.
(d) The following provisions of this chapter shall be applicable to any health maintenance organization granted a certificate of authority under this article or which is otherwise subject to the provisions of this article: The provisions of sections fifteen and twenty, article four (general provisions); section sections four, five, six, seven, eight, nine and nine-a, article two (one-time assessment) (Insurance Commissioner); sections fifteen and twenty, article four (general provisions); section twenty, article five (borrowing by insurers); section seventeen, article six (validity of noncomplying forms); section twenty, article five (borrowing by insurers); article six-c (guaranteed loss ratio ratios as applied to individual sickness and accident insurance policies); article seven (assets and liabilities); article eight (investments); article eight-a (use of clearing corporations and federal reserve book-entry system); article nine (administration of deposits); article ten (rehabilitation and liquidation); article twelve (agents, brokers, solicitors and excess line insurance producers and solicitors); section fourteen, article fifteen (individual accident and sickness insurance policies discriminating among health care providers); section sixteen, article fifteen (coverage of children policies not to exclude insured's children from coverage; required services; coordination with other insurance); section eighteen, article fifteen (equal treatment of state agency); section nineteen, article fifteen (coordination of benefits with medicaid); article fifteen-b (uniform health care administration act); section three, article sixteen (required policy provisions); section three-f, article sixteen (required policy provisions - treatment of temporomandibular joint disorder and craniomandibular disorder); section eleven, article sixteen (coverage of children group policies not to exclude insured's children from coverage; required services; coordination with other insurance); section thirteen, article sixteen (equal treatment of state agency); section fourteen, article sixteen (coordination of benefits with medicaid); article sixteen-a (group health insurance conversion); article sixteen-d (marketing and rate practices for small employers employer accident and sickness insurance policies); article twenty-five-c (health maintenance organization patient bill of rights); article twenty-five-f (coverage for patient cost of clinical trials); article twenty-seven (insurance holding company systems); article thirty-three (annual audited financial report); article thirty-four (administrative supervision); article thirty-four-a (standards and Commissioner's authority for companies considered deemed to be in hazardous financial condition); article thirty-five (criminal sanctions for failure to report impairment); article thirty-seven (managing general agents); article thirty-nine (disclosure of material transactions); article forty (risk based capital for insurers); article forty-one (privileges and immunity Insurance Fraud Prevention Act); and article forty-two (Women's Access to Health Care Act). shall be applicable to any health maintenance organization granted a certificate of authority under this article In circumstances where the code provisions made applicable to health maintenance organizations by this section subsection refer to the "insurer", the "corporation" or words of similar import, the language shall be construed to include health maintenance organizations.
(e) Any long-term care insurance policy delivered or issued for delivery in this state by a health maintenance organization shall comply with the provisions of article fifteen-a of this chapter.
ARTICLE 40. RISK-BASED CAPITAL (RBC) FOR INSURERS.
§33-40-1. Definitions.
As used in this article, these terms shall have the following meanings:
(a) "Adjusted RBC report" means an RBC report which has been adjusted by the Commissioner in accordance with subsection (e), section two of this article.
(b) "Corrective order" means an order issued by the Commissioner specifying corrective actions which the Commissioner has determined are required.
(c) "Commissioner" means the insurance commissioner of the state of West Virginia "HMO" means the same as defined in subsection (11), section two, article twenty-five-a of this chapter; as used in sections one, three, four, five, seven, eight and twelve of this article, the term "insurer" includes HMO.
(d) "Domestic insurer" means any insurance company, or farmers' mutual fire insurance company or HMO domiciled in this state.
(e) "Foreign insurer" means any insurance company which is licensed to do business in this state under article three of this chapter but is not domiciled in this state or any HMO that has been issued a certificate of authority under article twenty-five-a of this chapter but that is not domiciled in this state.
(f) "NAIC" means the National Association of Insurance Commissioners.
(g) "Life and/or health insurer" means any insurance company licensed under article three of this chapter or a licensed property and casualty insurer writing only accident and health insurance.
(h) "Property and casualty insurer" means any insurance company licensed under article three of this chapter or any farmers' mutual fire insurance company licensed under article twenty-two of this chapter, but shall not include monoline mortgage guaranty insurers, financial guaranty insurers and title insurers.
(i) "Negative trend" means, with respect to a life and/or health insurer, negative trend over a period of time, as determined in accordance with the trend test calculation included in the RBC instructions.
(j) "RBC instructions" means the RBC report including risk-based capital instructions adopted by the NAIC, as such RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
(k) "RBC level" means an insurer's or HMO's company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC where:
(1) "Company action level RBC" means, with respect to any insurer, the product of two and its authorized control level RBC;
(2) "Regulatory action level RBC" means the product of one and one half and its authorized control level RBC;
(3) "Authorized control level RBC" means the number determined under the risk-based capital formula in accordance with the RBC instructions;
(4) "Mandatory control level RBC" means the product of seven tenths and the authorized control level RBC.
(l) "RBC plan" means a comprehensive financial plan containing the elements specified in subsection (b), section three of this article. If the Commissioner rejects the RBC plan, and it is revised by the insurer or HMO, with or without the Commissioner's recommendation, the plan shall be called the revised RBC plan.
(m) "RBC report" means the report required in section two of this article.
(n) "Total adjusted capital" means the sum of:
(1) An insurer's or HMO's statutory capital and surplus as determined in accordance with the statutory accounting applicable to the financial statements required to be filed under section fourteen, article four of this chapter; and
(2) Such other items, if any, as the RBC instructions may provide.
§33-40-2. RBC reports.
(a) Every domestic insurer shall, on or prior to each first day of March (the "filing date"), prepare and submit to the Commissioner a report of its RBC levels as of the end of the calendar year just ended, in a form and containing such information as is required by the RBC instructions. In addition, every domestic insurer shall file its RBC report:
(1) With the NAIC in accordance with the RBC instructions; and
(2) With the Insurance Commissioner in any state in which the insurer is authorized to do business, if the Insurance Commissioner has notified the insurer of its request in writing, in which case the insurer shall file its RBC report not later than the later of:
(A) Fifteen days from the receipt of notice to file its RBC report with that state; or
(B) The filing date.
(b) A life and health insurer's RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between):
(1) The risk with respect to the insurer's assets;
(2) The risk of adverse insurance experience with respect to the insurer's liabilities and obligations;
(3) The interest rate risk with respect to the insurer's business; and
(4) All other business risks and such other relevant risks as are set forth in the RBC instructions determined in each case by applying the factors in the manner set forth in the RBC instructions.
(c) A property and casualty insurer's RBC and an HMO's RBC shall be determined in accordance with the applicable formula set forth in the RBC instructions. The formula shall take into account (and may adjust for the covariance between), determined in each case by applying the factors in the manner set forth in the RBC instructions:
(1) Asset risk;
(2) Credit risk;
(3) Underwriting risk; and
(4) All other business risks and such other relevant risks as are set forth in the RBC instructions. determined in each case by applying the factors in the manner set forth in the RBC instructions
(d) An excess of capital over the amount produced by the risk-based capital requirements contained in this article and the formulas, schedules and instructions referenced in this article is desirable in the business of insurance. Accordingly, insurers and HMOs should seek to maintain capital above the RBC levels required by this article. Additional capital is used and useful in the insurance business and helps to secure an insurer insurers and HMOs against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this article.
(e) If a domestic insurer files an RBC report which, in the judgment of the Commissioner is inaccurate, then the Commissioner shall adjust the RBC report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBC report as so adjusted is referred to as an "Adjusted RBC Report".
§33-40-3. Company action level event.
(a) "Company action level event" means any of the following events:
(1) The filing of an RBC report by an insurer which indicates that:
(A) The insurer's total adjusted capital is greater than or equal to its regulatory action level RBC but less than its company action level RBC; or
(B) If a life and/or health insurer, the insurer has total adjusted capital which is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and two and one-half and has a negative trend;
(2) The notification by the Commissioner to the insurer of an adjusted RBC report that indicates an event in subdivision (1) of this subsection, provided the insurer does not challenge the adjusted RBC report under section seven of this article; or
(3) If, pursuant to section seven of this article, an insurer challenges an adjusted RBC report that indicates the event in subdivision (1) of this subsection, the notification by the Commissioner to the insurer that the Commissioner has, after a hearing, rejected the insurer's challenge.
(b) In the event of a company action level event, the insurer shall prepare and submit to the Commissioner an RBC plan which shall:
(1) Identify the conditions which contribute to the company action level event;
(2) Contain proposals of corrective actions which the insurer intends to take and would be expected to result in the elimination of the company action level event;
(3) Provide projections of the insurer's financial results in the current year and at least the four succeeding years or, in the case of an HMO, in the current year and at least the two succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital and/or surplus. (The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense and benefit component);
(4) Identify the key assumptions impacting the insurer's projections and the sensitivity of the projections to the assumptions; and
(5) Identify the quality of, and problems associated with, the insurer's business, including, but not limited to, its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business and use of reinsurance, if any, in each case.
(c) The RBC plan shall be submitted:
(1) Within forty-five days of the company action level event; or
(2) If the insurer challenges an adjusted RBC report pursuant to section seven of this article, within forty-five days after notification to the insurer that the Commissioner has, after a hearing, rejected the insurer's challenge.
(d) Within sixty days after the submission by an insurer of an RBC plan to the Commissioner, the Commissioner shall notify the insurer whether the RBC plan shall be implemented or is, in the judgment of the Commissioner, unsatisfactory. If the Commissioner determines the RBC plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination, and may set forth proposed revisions which will render the RBC plan satisfactory, in the judgment of the Commissioner. Upon notification from the Commissioner, the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the Commissioner, and shall submit the revised RBC plan to the Commissioner:
(1) Within forty-five days after the notification from the Commissioner; or
(2) If the insurer challenges the notification from the Commissioner under section seven of this article, within forty-five days after a notification to the insurer that the Commissioner has, after a hearing, rejected the insurer's challenge.
(e) In the event of a notification by the Commissioner to an insurer that the insurer's RBC plan or revised RBC plan is unsatisfactory, the Commissioner may, at the Commissioner's discretion, subject to the insurer's right to a hearing under section seven of this article, specify in the notification that the notification constitutes a regulatory action level event.
(f) Every domestic insurer that files an RBC plan or revised RBC plan with the Commissioner shall file a copy of the RBC plan or revised RBC plan with the Insurance Commissioner in any state in which the insurer is authorized to do business if:
(1) Such state has an RBC provision substantially similar to subsection (a), section eight of this article; and
(2) The Insurance Commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the RBC plan or revised RBC plan in that state no later than the later of:
(i) Fifteen days after the receipt of notice to file a copy of its RBC plan or revised RBC plan with the state; or
(ii) The date on which the RBC plan or revised RBC plan is filed under subsections (c) and (d) of this section. §33-40-6. Mandatory control level event.
(a) "Mandatory control level event" means any of the following events:
(1) The filing of an RBC report which indicates that the insurer's or HMO's total adjusted capital is less than its mandatory control level RBC;
(2) Notification by the Commissioner to the insurer or HMO of an adjusted RBC report that indicates the event in subdivision (1) of this subsection, provided the insurer or HMO does not challenge the adjusted RBC report under section seven of this article; or
(3) If, pursuant to section seven of this article, the insurer or HMO challenges an adjusted RBC report that indicates the event in subdivision (1) of this subsection, notification by the Commissioner to the insurer or HMO that the Commissioner has, after a hearing, rejected the insurer's or HMO's challenge.
(b) In the event of a mandatory control level event:
(1) With respect to a life insurer, the Commissioner shall take such actions as are necessary to place the insurer under regulatory control under article ten of this chapter. In that event, the mandatory control level event shall be deemed sufficient grounds for the Commissioner to take action under said article, and the Commissioner shall have the rights, powers and duties with respect to the insurer as are set forth in said article. If the Commissioner takes actions pursuant to an adjusted RBC report, the insurer shall be entitled to the protections of said article pertaining to summary proceedings. Notwithstanding any of the foregoing, the Commissioner may forego action for up to ninety days after the mandatory control level event if the Commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period.
(2) With respect to a property and casualty insurer, the Commissioner shall take such actions as are necessary to place the insurer under regulatory control under article ten of this chapter, or, in the case of an insurer which is writing no business and which is running-off its existing business, may allow the insurer to continue its run-off under the supervision of the Commissioner. In either event, the mandatory control level event shall be deemed sufficient grounds for the Commissioner to take action under said article and the Commissioner shall have the rights, powers and duties with respect to the insurer as are set forth in said article. If the Commissioner takes actions pursuant to an adjusted RBC report, the insurer shall be entitled to the protections of said article pertaining to summary proceedings. Notwithstanding any of the foregoing, the Commissioner may forego action for up to ninety days after the mandatory control level event if the Commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period.
(3) With respect to HMO's, the Commissioner shall take such actions as are necessary to place the HMO under regulatory control in accordance with the provisions of article ten and section nineteen, article twenty-five of this chapter. In that event, the mandatory control level event shall be deemed sufficient grounds for the Commissioner to take action under said section and the Commissioner shall have the rights, powers and duties with respect to the HMO as are set forth in said section. If the Commissioner takes actions pursuant to an adjusted RBC report, the HMO shall be entitled to the protections of said article pertaining to summary proceedings. Notwithstanding any of the foregoing, the Commissioner may forego action for up to ninety days after the mandatory control level event if the Commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period.
§33-40-7. Hearings.
Insurers shall have the right to a confidential departmental hearing, on a record, at which the insurer may challenge any determination or action by the Commissioner made pursuant to the provisions of this article. The insurer shall notify the Commissioner of its request for a hearing within five ten days after receiving notification from the Commissioner.
(a) Notification to an insurer by the Commissioner of an adjusted RBC report; or
(b) Notification to an insurer by the Commissioner that:
(1) The insurer's RBC plan or revised RBC plan is unsatisfactory; and
(2) Such notification constitutes a regulatory action level event with respect to such insurer; or
(c) Notification to any insurer by the Commissioner that the insurer has failed to adhere to its RBC plan or revised RBC plan and that such failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its RBC plan or revised RBC plan; or
(d) Notification to an insurer by the Commissioner of a corrective order with respect to the insurer.
(e) Upon receipt of the insurer's request for a hearing, the Commissioner shall set a date for the hearing, which date shall be no less than fifteen nor more than forty-five days after the date of the insurer's request.
(f) To the extent that the provisions of this section conflict with any other provisions applicable to HMO's, the provisions of this section shall apply.


NOTE: The purpose of this bill is make HMO's subject to risk based capital requirements. The bill also permits HMO's that are not domiciled in this state to be granted a certificate of authority, and it also increases the period that grievance records must be maintained. It also increases the annual filing fee.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.

§33-25A-14a is new; therefore, strike-throughs and underscoring have been omitted.
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