RELATES TO:
KRS
304.38-070,
304.38-130
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
304.38-150 provides that the Commissioner of
Insurance may adopt reasonable rules and administrative regulations that he
deems necessary for the proper administration of KRS Chapter 304.38.
KRS
304.2-110 provides that the Commissioner of
Insurance may make reasonable rules and administrative regulations necessary
for or as an aid to the effectuation of the Kentucky Insurance Code. This
administrative regulation specifies when a health maintenance organization is
no longer considered to be financially responsible and may reasonably be
expected to be unable to meet its obligations to enrollees or prospective
enrollees.
Section 1. A health
maintenance organization shall not be considered to be financially responsible
and may reasonably be expected to be unable to meet its obligations to
enrollees or prospective enrollees if the commissioner determines that the
health maintenance organization has failed to possess and maintain for the
protection of its enrollees a reserve as a portion of its net worth equivalent
to one and one-half (1 1/2) months of actual incurred medical, hospital,
secondary care, administrative, and solicitation expense as reported in the
health maintenance organization's annual financial statement filed with the
commissioner for the immediately preceding year. For its initial year of
operation, the health maintenance organization's reserve shall be based upon
projected medical, hospital, secondary care, administrative, solicitation
expense as estimated in its application for a certificate of
authority.
Section 2. Application
of this Administrative Regulation.
(1) Health
maintenance organizations holding a certificate of authority in good standing
with the executive director on July 15, 1986, need not comply with the 1986
amendment to
KRS
304.38-070 (1986 Ky. Acts c. 437, sec. 28),
but shall comply with Section 1 of this administrative regulation. However,
such health maintenance organizations need not comply with Section 1 of this
administrative regulation if they obtain capital stock of $1,000,000 and
surplus of $250,000 (if a corporation) or capital accounts of $1,250,000 (if a
partnership), and maintain such capital stock and surplus or capital accounts.
Health maintenance organizations receiving a certificate of authority after
July 15, 1986, need not comply with Section 1 of this administrative
regulation, but shall comply with the 1986 amendment to
KRS
304.38-070 (1986 Ky. Acts c. 437, sec.
28).
(2) Notwithstanding the other
provisions of this administrative regulation, the Commissioner of Insurance may
take whatever steps necessary to assure that a health maintenance organization
is financially responsible and may reasonably be expected to be able to meet
its obligations to enrollees or prospective enrollees, including, but not
limited to, maintaining reserve funds based on a percentage of incurred,
medical, hospital, secondary care, administrative, and solicitation expense
reported in the health maintenance organization's last financial statement
filed with the Commissioner of Insurance.
Section 3. Effective Date. This
administrative regulation shall become effective upon its approval pursuant to
KRS Chapter 13A.
