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Alaska Statutes.

Title 21. Insurance

Chapter 86. Health Maintenance Organizations

Section 140. Protection Against Insolvency.

AS 21.86.140. Protection Against Insolvency.

(a) Except as otherwise provided in this section, a health maintenance organization shall deposit with the director, or with an organization or trustee acceptable to the director through which a custodial or controlled account is used, cash, securities, or a combination of these or other means acceptable to the director in the manner and amount required by this section.

(b) Except as provided in (d) and (e) of this section, the deposit amount for a health maintenance organization that begins operation after June 8, 1990 is the greater of 10 percent of its estimated expenditures for health care services for its first year of operation, twice its estimated average monthly uncovered expenditures for its first year of operation, or $250,000. Except as provided in (d) and (e) of this section, at the beginning of each succeeding year of operation, the organization shall deposit with the director, or organization or trustee, cash, securities, or a combination of these or other means acceptable to the director in an amount equal to four percent of its estimated annual uncovered expenditures for that year. Each year's estimate, after the first year of operation, shall reasonably reflect the prior year's operating experience and delivery arrangements.

(c) Except as provided in (d) and (e) of this section, a health maintenance organization that is in operation on June 8, 1990 shall, on the first day of its fiscal year beginning six months or more after June 8, 1990, make a deposit equal to the greater of one percent of the preceding 12 months' uncovered expenditures or $250,000. The organization shall, at the beginning of its second fiscal year after June 8, 1990, deposit an amount equal to two percent of the organization's estimated annual uncovered expenditures for that year. At the beginning of its third fiscal year, the organization shall deposit an amount equal to three percent of its estimated annual uncovered expenditures for that year. At the beginning of the fourth fiscal year and subsequent years, the organization shall deposit an amount equal to four percent of its estimated annual uncovered expenditures for that year. Each year's estimate, after the first year of operation, must reasonably reflect the prior year's operating experience and delivery arrangements.

(d) The director may waive the deposit requirements in (b) and (c) of this section if the director is satisfied that

(1) the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability for the next year;

(2) the organization's performance and obligations are guaranteed by another organization that has sufficient net worth and an adequate history of generating net income; or

(3) the assets of the organization, or its contracts with insurers, hospital or medical service corporations, governments, or other organizations, are reasonably sufficient to assure the performance of its obligations.

(e) The annual deposit requirements of (b) and (c) of this section do not apply if

(1) a health maintenance organization has achieved a net worth, not including land, buildings, and equipment, of at least $1,000,000 or has achieved a net worth, including land, buildings, and equipment, of at least $5,000,000;

(2) the total amount of the health maintenance organization's accumulated deposit is equal to 25 percent of its estimated annual uncovered expenditures for the next calendar year, or is equal to the capital and surplus requirements for the formation for admittance of a health insurer in this state, whichever is less;

(3) a health maintenance organization has a guaranteeing organization that

(A) does not sponsor any other health maintenance organization; and

(B) has been in operation for at least

(i) five years and has a net worth, not including land, buildings, and equipment, of at least $1,000,000; or

(ii) 10 years and has a net worth, including land, buildings, and equipment, of at least $5,000,000; or

(4) a health maintenance organization has a guaranteeing organization that sponsors more than one health maintenance organization and that

(A) has been in operation for at least

(i) five years and has a net worth that is at least that required by (3) (B) (i) of this subsection multiplied by a number equal to the number of organizations sponsored; or

(ii) 10 years and has a net worth that is at least that required by (3) (B) (ii) of this subsection multiplied by a number equal to the number of organizations sponsored; or

(B) has, for each organization sponsored, a net worth at least equal to the capital and surplus requirement for a health insurer.

(f) All deposit income belongs to the depositing health maintenance organization, and shall be paid to it as it becomes available. A health maintenance organization that has made a deposit of securities may withdraw that deposit, or any part of it, after making a substitute deposit of cash, securities, or a combination of these or other means of equal amount and value. Substitution of securities must have prior approval by the director.

(g) In a year in which an annual deposit is not required of a health maintenance organization under this section, at the organization's request the director shall reduce the required, previously accumulated deposit by $100,000 for each $250,000 of net worth in excess of the amount that allows the organization not to make the annual deposit. If the amount of an organization's net worth is reduced to less than the amount that allowed a reduction in accumulated deposit, the organization shall immediately redeposit $100,000 for each $250,000 of reduction in net worth, except that the total deposit need not exceed the maximum required under this section.

(h) A health maintenance organization that obtains a certificate of authority shall have and maintain a capital account of at least $100,000 in addition to deposit requirements under this section. The capital account must equal at least $100,000 after deducting accrued liabilities, and must be in the form of cash, securities, or a combination of these or other means acceptable to the director.