2023 Illinois Compiled Statutes › Chapter 215 - INSURANCE › 215 ILCS 130/ - Limited Health Service Organization Act. › Article 2 - Certificate Of Authority; General Corporate And Financial Requirements

(215 ILCS 130/Art. 2 heading)
ARTICLE 2.
CERTIFICATE OF AUTHORITY;
GENERAL CORPORATE AND FINANCIAL REQUIREMENTS
(215 ILCS 130/2001) (from Ch. 73, par. 1502-1)
Sec. 2001. 
		
		Certificate of authority; exception for corporate employee
programs; applications; material modification of operation.
(a) No organization shall establish or operate a limited health service
organization in this State without obtaining and maintaining a certificate
of authority under this Act.  No person other than an organization may
lawfully establish or operate a limited health service organization in this
State.  This Act shall not apply to the establishment and operation of a
limited health service organization exclusively providing or arranging for
limited health services to employees of a corporate affiliate of such
limited health service organization.  This exclusion shall be available
only to those limited health service organizations which require employee
contributions which equal less than 50% of the total cost of the limited
health care plan, with the remainder of the cost being paid by the
corporate affiliate which is the employer of the participants in the plan.
(b) Any organization may apply to the Director for and obtain a
certificate of authority to establish and operate a limited health service
organization in compliance with this Act.  A foreign corporation may
qualify under this Act, subject to its obtaining and maintaining
authorization to do business in this State as a foreign corporation.
(c) Each application for certificate of authority shall be filed in
triplicate and verified by an officer or authorized representative
of the applicant, shall be in a form prescribed by the Director, and shall
set forth, without limiting what may be required by the Director, the following:
(1) A copy of the organization document.
(2) A copy of the bylaws, rules and regulations, or     similar document regulating the conduct of the internal affairs of the applicant.
(3) A list of the names, addresses, and official     positions of the persons who are to be responsible for the conduct of the affairs of the applicant; including but not limited to, all members of the board of directors, executive committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities or subordinated debt of the applicant.
(4) A statement generally describing the application,     geographic area to be served, its facilities, personnel and the limited health service or services to be offered.
(5) A copy of the form of any contract made or be     made between the applicant and any providers regarding the provision of limited health services to enrollees.
(6) A copy of the form of any contract made, or to be     made between the applicant and any person listed in paragraph (3) of this subsection.
(7) A copy of the form of any contract made or to be     made between the applicant and any person, corporation, partnership or other entity for the performance on the applicant's behalf of any functions including, but not limited to, marketing, administration, enrollment, investment management and subcontracting for the provision of limited health services to enrollees.
(8) A copy of the form of any group contract which is     to be issued to employers, unions, trustees or other organizations and a copy of any form of evidence of coverage to be issued to any enrollee or subscriber and any advertising material.
(9) A copy of the applicant's most recent financial     statements audited by an independent certified public accountant.  If the financial affairs of the applicant's parent company are audited by an independent certified public account, but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant's parent, attached to which shall be consolidating financial statements of the parent including separate unaudited financial statements of the applicant, unless the Director determines that additional or more recent financial information is required for the proper administration of this Act.
(10) A copy of the applicant's financial plan,     including a 3 year projection of anticipated operating results, a statement of the sources of working capital and any other sources of funding and provisions for contingencies.
(11) A description of rate methodology.
(12) A description of the proposed method of     marketing.
(13) Except in the case of a foreign applicant     authorized to transact business in this State, a statement acknowledging that all lawful process in any legal action or proceeding against the applicant on a cause of action arising in this State is valid if served in accordance with Section 112 of the Illinois Insurance Code as now or hereafter amended.
(14) A description of the complaint procedures to be     established and maintained as required under Section 3002 of this Act.
(15) A description of the quality assessment and     utilization review procedures to be utilized by the applicant.
(16) The fee for filing an application for issuance     of a certificate of authority provided in Section 408 of the Illinois Insurance Code as now or hereafter amended.
(17) Such other information as the Director may     reasonably require to make the determinations required by this Act.
(Source: P.A. 86-600.)
(215 ILCS 130/2002) (from Ch. 73, par. 1502-2)
Sec. 2002. 
		Issuance of certificate of authority.
(a) Issuance of a certificate of authority shall be granted if the
following conditions are met:
(1) The requirements of subsection (c) of Section     2001 have been fulfilled.
(2) The persons responsible for conducting the     applicant's affairs are competent and trustworthy, possess good reputations and have had appropriate experience, training or education.
(3) The applicant has demonstrated the willingness     and potential ability to assure that such limited health service will be provided in a manner to insure both availability and accessibility of adequate personnel and facilities and in a manner enhancing availability, accessibility, and continuity of service.
(4) The applicant has arrangements for an ongoing     quality of health care assessment program concerning health care processes and outcomes.
(5) The applicant is financially responsible and may     reasonably be expected to meet its obligations to enrollees and to prospective enrollees.  In making this determination, the Director shall consider:
(A) the financial soundness of the applicant's         arrangements for limited health services and the minimum standard rates, copayments and other patient charges used in connection therewith.
(B) the adequacy of working capital, other         sources of funding, and provisions for contingencies.
(6) The limited health care plan furnishes limited     health services on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for copayments of a fixed amount.
(7) The agreements with providers for the provision     of limited health services contain the provisions required by Section 2008 of this Act.
(8) Any deficiencies identified by the Director have     been corrected.
(b) No certificate of authority shall be issued if the initial minimum net
worth of the applicant is less than $100,000.  The initial net worth shall
be provided in cash and securities in combination and form acceptable to the
Director.
(Source: P.A. 86-600.)
(215 ILCS 130/2003) (from Ch. 73, par. 1502-3)
Sec. 2003. Powers of limited health service organizations. The powers of a limited health service organization include, but are not
limited to the following:
(1) The purchase, lease, construction, renovation,     operation or maintenance of limited health service facilities and their ancillary equipment, and such property as may reasonably be required for its principal office or for such other purposes as may be necessary in the transaction of the business of the organization.
(2) The making of loans to a provider group under     contract with it and in furtherance of its program or the making of loans to a corporation or corporations under its control for the purpose of acquiring or constructing limited health service facilities or in furtherance of a program providing limited health services for enrollees.
(3) The furnishing of limited health services through     providers which are under contract with or employed by the limited health service organization.
(4) The contracting with any person for the     performance on its behalf of certain functions such as marketing, enrollment and administration.
(5) The contracting with an insurance company     licensed in this State, or with a hospital, medical, voluntary, dental, vision or pharmaceutical service corporation authorized to do business in this State, for the provision of insurance, indemnity or reimbursement against the cost of limited health service provided by the limited health service organization.
(6) Rendering services related to the functions     involved in the operation of its limited health service business including, but not limited to, providing limited health services, data processing, accounting, claims.
(7) Indemnity benefits covering out of area or     emergency services directly related to the provision of limited health service.
(8) The offering of point-of-service products as     authorized under Section 3009.
(9) Any other business activity reasonably     complementary or supplementary to its limited health service business to the extent approved by the Director.
(Source: P.A. 97-813, eff. 7-13-12.)
(215 ILCS 130/2004) (from Ch. 73, par. 1502-4)
Sec. 2004. 
		Required minimum net worth; impairment.
(a) A limited health service organization issued a certificate of
authority shall have and at all times maintain net worth of not less than
the greater of:
(1) $50,000; or
(2) 2% of the organization's annual gross premium     income, up to a maximum of $500,000.
(b) A limited health service organization that has annual uncovered
expenses in excess of $50,000, as reported on the most recent annual
financial statement filed with the Director, shall maintain additional net
worth equal to 25% of such uncovered expenses in excess of $50,000 in
addition to the net worth required by subsection (a), subject to the maximum
net worth set forth in item (2) of subsection (a).
(c) A limited health service organization that has been approved by
the Director to offer a POS contract shall have and at all times maintain
net worth of not less than the greater of:
(1) $100,000 if the LHSO's expenditures for     out-of-plan covered services do not exceed 10% of its total limited health expenditure in any calendar quarter; or
(2) $100,000 plus an additional $10,000 for each     percentage point that the LHSO's expenditures for out-of-plan covered services exceeds 10% of its total limited health service expenditure in any calendar quarter up to $200,000; or
(3) the amount set forth in item (2) of subsection     (a).
(d) A deficiency in meeting amounts required in subsection (a), (b), or (c)
shall require (1) filing with the Director a plan of correction of the
deficiency, acceptable to the Director and (2) correction of the deficiency
within a reasonable time, not to exceed 60 days unless an extension of
time, not to exceed 60 additional days, is granted by the Director.  Such a
deficiency will be deemed an impairment, and failure to correct the
deficiency in the prescribed time shall be grounds for suspension or
revocation pursuant to subsection (h) of Section 4005 of this Act.
(e) Unless allowed by the Director, no limited health service
organization, officer, director, trustee, producer or employee of such
organization may renew, issue, or deliver, or cause to be renewed, issued or
delivered, any evidence of coverage in this State, for which a premium is
charged or collected, when the organization writing such coverage is
insolvent or impaired, and the fact of such insolvency or impairment is
known to the organization, officer, director, producer or employee of such
organization.  An organization is impaired when a deficiency exists in
meeting the amounts required in subsection (a), (b), or (c) of this Section.
However, the existence of an impairment does not prevent the issuance or
renewal of any evidence of coverage when the enrollee exercises an option
granted under the plan to obtain new, renewed or converted coverage.
Any organization, officer, director, producer or employee of such
organization violating this subsection shall be guilty of a Class A
misdemeanor.
(Source: P.A. 87-1079; 88-667, eff. 9-16-94.)
(215 ILCS 130/2005) (from Ch. 73, par. 1502-5)
Sec. 2005. 
		Claims liabilities.
(a) Every limited health service organization shall, at all times, maintain
liabilities in an amount estimated in the aggregate to provide for the
payment of all claims incurred and any due and unpaid provider capitation,
whether reported or unreported, which are unpaid and for which such
organization is or may be liable, and to provide for the expense of
adjustment or settlement of such claims.  Such liabilities shall be
computed in accordance with regulations promulgated by the Director upon
reasonable consideration of the ascertained experience and character of
such business for the purpose of adequately protecting enrollees and
securing the solvency of such organizations.
(b) Whenever the claim and claim expense experience of any such organization
shows the liabilities calculated in accordance with such regulations to be
inadequate, the Director may require such organization to maintain additional liabilities.
(Source: P.A. 86-600.)
(215 ILCS 130/2006) (from Ch. 73, par. 1502-6)
Sec. 2006. 
		Statutory deposits.
(a) An organization subject to the provisions of this Act
shall make and
maintain with the Director, for the protection of enrollees of the
organization, a deposit of securities that are in the form authorized under
Section 2-6 of the Health Maintenance Organization Act having a fair market
value equal to the minimum net worth required under subsection (a) of Section
2004.  The amount on deposit shall remain as an admitted asset of the
organization in the determination of its net worth.  The Director may release
the required deposit of securities required by this Section
upon receipt of
an order of a court having proper jurisdiction or
upon: (i)
certification by the organization that it has no outstanding
enrollee creditors, enrollees, certificate holders, or enrollee obligations
in effect and no plans to engage in the
business of insurance as a limited health service organization; (ii) receipt of
a lawful resolution of the
organization's governing body effecting the surrender of
its certificate of authority, articles of incorporation, or other
organizational documents to their issuing governmental officer for voluntary or
administrative dissolution; and (iii) receipt of the name and
forwarding address for each of the final officers and directors of the
organization,
together with a plan of dissolution approved by the Director.
(b) An LHSO that offers a POS contract shall, in addition to the
deposit required by subsection (a), deposit and maintain with the Director
cash or securities that are authorized investments under Section 1003
having a fair market value equal to the greater of:
(1) $50,000 if the LHSO's expenditures for     out-of-plan covered services do not exceed 10% of its total limited health expenditures in any calendar quarter; or
(2) $100,000 if the LHSO's expenditures for     out-of-plan covered services exceeds 10% but are less than 20% of its total limited health services expenditure in any calendar quarter; or
(3) 120% of its current actual monthly out-of-plan     covered service claims expense plus incurred but not reported balances for out-of-plan covered services.
(c) The combined deposit amount required in subsections (a) and (b) shall
not exceed $200,000.
(Source: P.A. 92-75, eff. 7-12-01.)
(215 ILCS 130/2007)
Sec. 2007. (Repealed).
(Source: P.A. 91-549, eff. 8-14-99. Repealed by P.A. 97-486, eff. 1-1-12.)
(215 ILCS 130/2008) (from Ch. 73, par. 1502-8)
Sec. 2008. 
		Provider contracts.
(a) All contracts with providers or with
entities which subcontract for the provision of limited health services to
enrollees on a prepayment or  other basis and any contract with any
subcontractor thereof shall contain the following hold-harmless clause:
"The provider agrees that in no event including, but not limited to,
nonpayment by the organization of amounts due the provider under this
contract, insolvency of the organization or any breach of this contract by
the organization, shall the provider or its assignees or subcontractors
have a right to seek any type of payment from, bill, charge, collect a
deposit from or have any recourse against the enrollee, persons acting on
the enrollee's behalf (other than the organization), the employer or group
contractholder for services provided pursuant to this contract except for
the payment of applicable copayments for services covered by the
organization or fees for services not covered by the organization.  The
requirements of this clause shall survive any termination of this contract
for services rendered prior to such termination, regardless of the cause of
such termination.  The organization's enrollees shall be third party
beneficiaries of this clause.  This clause supersedes any oral or written
agreement now existing or hereafter entered into between the provider and
the enrollee or persons acting on the enrollee's behalf (other than the
organization).".  To the extent that any provider or subcontractor's
contract, fails to incorporate such provisions, such provisions shall be
deemed incorporated into such contracts by operation of law.
(b) All provider and subcontractor contracts must contain provisions
whereby the provider or subcontractor shall provide, arrange for or
participate in the quality assessment programs mandated by this Act, unless
the Department of Insurance certifies that such programs will
be fully implemented without any participation or action from such
contracting provider.
(c) The Director may promulgate rules requiring that provider contracts
contain provisions concerning reasonable notices to be given between the
parties and for the organization to provide reasonable notice to its
enrollees and to the Director.  Notice shall be given for such events as,
but not limited to, termination of insurance protection, quality assessment
or availability of medical area.
(Source: P.A. 86-600; 86-1408.)
(215 ILCS 130/2009) (from Ch. 73, par. 1502-9)
Sec. 2009. 
		Subordinated  indebtedness. 
		An organization having a
certificate of authority under this Act may borrow or assume a liability
for the repayment of a sum of money upon a written agreement that the loan
or advance with interest thereon not exceeding a reasonable rate shall be
repaid only out of net worth of the organization in excess of such minimum
net worth as is  stipulated in and by the agreement.  The agreement shall
first be submitted to and approved by the appropriate authoritative body of
the organization and the Director.  Repayment of principal or payment of
interest may be made only with the approval of the Director when he is
satisfied that the financial condition of the organization warrants such
action, but such approval may not be withheld if the organization shall
have and submit satisfactory evidence of net worth of not less than the
amount stipulated in the repayment of principal or interest payment clause
of the agreement. No loan or advance made under this Section or interest
accruing thereon shall form a part of the legal liabilities of the
organization until authorized for payment by the Director, but until such
authorization all statements published by the organization or filed with
the Director shall show the amount thereof then remaining unpaid as a
special surplus account.  Nothing in this Section shall be construed to
mean that an organization may not otherwise borrow money, but the amount so
borrowed with accrued interest thereon shall be carried by the company as
a liability.
(Source: P.A. 86-600.)