2023 Illinois Compiled Statutes › Chapter 215 - INSURANCE › 215 ILCS 125/ - Health Maintenance Organization Act. › Article II - Certificate Of Authority, General Corporate And Financial Requirements

(215 ILCS 125/Art. II heading)
ARTICLE II.  
		CERTIFICATE OF AUTHORITY,
GENERAL CORPORATE AND FINANCIAL REQUIREMENTS
(215 ILCS 125/2-1) (from Ch. 111 1/2, par. 1403)
Sec. 2-1. Certificate of authority - Exception for corporate employee
programs - Applications - Material modification of operation.
(a) No organization shall establish or operate a Health Maintenance
Organization in this State without obtaining a certificate of authority
under this Act.  No person other than an organization may lawfully
establish or operate a Health Maintenance Organization in this State.
This Act shall not apply to the establishment and operation
of a Health Maintenance Organization exclusively providing or arranging
for health care services to employees of a  corporate affiliate of such
Health Maintenance Organization.  This exclusion shall be available
only to those Health Maintenance Organizations which require employee
contributions which equal less than 50% of the total cost of the 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.
This Act shall not apply to the establishment and operation of a Health
Maintenance Organization exclusively providing or arranging health care
services under contract with the State to persons committed to the custody
of the Illinois Department of Corrections.
This Act does not apply to the establishment and operation of
managed care community networks that are certified as risk-bearing entities
under Section 5-11 of the Illinois Public Aid Code and that contract with the
Department of Healthcare and Family Services (formerly Illinois Department of Public Aid) pursuant to that Section.
(b) Any organization may apply to the Director for and obtain a
certificate of authority to establish and operate a Health Maintenance
Organization in compliance with this Act. A foreign corporation may
qualify under this Act, subject to its registration to do business in
this State as a foreign corporation.
(c) Each application for a 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 organizational document;
(2) A copy of the bylaws, rules and regulations, or     similar document regulating the conduct of the internal affairs of the applicant, which shall include a mechanism to afford the enrollees an opportunity to participate in an advisory capacity in matters of policy and operations;
(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 applicant,     geographic area to be served, its facilities, personnel and the health care services to be offered;
(5) A copy of the form of any contract made or to be     made between the applicant and any providers regarding the provision of health care 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 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) Descriptions of the applicant's procedures for     resolving enrollee grievances which must include procedures providing for enrollees participation in the resolution of grievances;
(10) 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 accountant 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;
(11) A copy of the applicant's financial plan,     including a three-year projection of anticipated operating results, a statement of the sources of working capital, and any other sources of funding and provisions for contingencies;
(12) A description of rate methodology;
(13) A description of the proposed method of     marketing;
(14) A copy of every filing made with the Illinois     Secretary of State which relates to the applicant's registered agent or registered office;
(15) A description of the complaint procedures to be     established and maintained as required under Section 4-6 of this Act;
(16) A description, in accordance with regulations     promulgated by the Illinois Department of Public Health, of the quality assessment and utilization review procedures to be utilized by the applicant;
(17) 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; and
(18) Such other information as the Director may     reasonably require to make the determinations required by this Act.
(Source: P.A. 95-331, eff. 8-21-07.)
(215 ILCS 125/2-2) (from Ch. 111 1/2, par. 1404)
Sec. 2-2. Determination by Director.
(a) Upon receipt of an application for issuance of a certificate of
authority, the Director shall transmit copies of such application and
accompanying documents to the Director of the Illinois Department of Public
Health. The Director of the Department of Public Health shall then
determine whether the applicant for certificate of authority, with respect
to health care services to be furnished: (1) has demonstrated the
willingness and potential ability to assure that such health care 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; and (2) has
arrangements, established in accordance with regulations promulgated by the
Department of Public Health for an ongoing quality of health care assurance
program concerning health care processes and outcomes. Upon investigation,
the Director of the Department of Public Health shall certify to the
Director whether the proposed Health Maintenance Organization meets the
requirements of this subsection (a). If the Director of the Department of
Public Health certifies that the Health Maintenance Organization does not
meet such requirements, he shall specify in what respect it is deficient.
(b) Issuance of a certificate of authority shall be granted if the
following conditions are met:
(1) the requirements of subsection (c) of Section 2-1     have been fulfilled;
(2) the persons responsible for the conduct of the     affairs of the applicant are competent, trustworthy, and possess good reputations, and have had appropriate experience, training or education;
(3) the Director of the Department of Public Health     certifies that the Health Maintenance Organization's proposed plan of operation meets the requirements of this Act;
(4) the Health Care Plan furnishes basic health care     services on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for co-payments or deductibles as authorized by this Act;
(5) the Health Maintenance Organization is     financially responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees; in making this determination, the Director shall consider:
(A) the financial soundness of the applicant's         arrangements for health services and the minimum standard rates, co-payments and other patient charges used in connection therewith;
(B) the adequacy of working capital, other         sources of funding, and provisions for contingencies; and
(C) that no certificate of authority shall be         issued if the initial minimum net worth of the applicant is less than $2,000,000. The initial net worth shall be provided in cash and securities in combination and form acceptable to the Director;
(6) the agreements with providers for the provision     of health services contain the provisions required by Section 2-8 of this Act; and
(7) any deficiencies identified by the Director have     been corrected.
(Source: P.A. 100-63, eff. 8-11-17.)
(215 ILCS 125/2-3) (from Ch. 111 1/2, par. 1405)
Sec. 2-3. Powers of health maintenance organizations. The powers of a health maintenance organization include, but are not
limited to 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 other purposes as may be necessary in the transaction of the business of the organization.
(b) The making of loans to a medical 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 medical facilities at hospitals or in furtherance of a program providing health care services for enrollees.
(c) The furnishing of health care services through     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.
(d-5) The voluntary use of a referral system for     enrollees to access providers under contract with or employed by the health maintenance organization. Nothing in this subsection (d-5) shall be construed as requiring the use of a referral system  with the health maintenance organization's contracted or employed providers to obtain a certificate of authority as set forth in Section 2-1.
(e) The contracting with an insurance company     licensed in this State, or with a hospital, medical, 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 health care service provided by the health maintenance organization.
(f) The offering, in addition to basic health care     services, of (1) health care services, (2) indemnity benefits covering out of area or emergency services, (3) indemnity benefits provided through insurers or hospital, medical, dental, vision, or pharmaceutical service corporations, and (4) health maintenance organization point-of-service benefits as authorized under Article 4.5.
(g) Rendering services related to the functions     involved in the operating of its health maintenance organization business including but not limited to providing health services, data processing, accounting, or claims.
(g-5) Indemnification for services provided to a     child as required under subdivision (e)(3) of Section 4-2.
(h) Any other business activity reasonably     complementary or supplementary to its health maintenance organization business to the extent approved by the Director.
(Source: P.A. 103-104, eff. 1-1-24.)
(215 ILCS 125/2-3.1) (from Ch. 111 1/2, par. 1405.1)
Sec. 2-3.1. (a) No health maintenance organization shall cause to be
dispensed any drug other than that prescribed by a physician.  Nothing
herein shall prohibit drug product selection under Section 3.14 of the
"Illinois Food, Drug
and Cosmetic Act", approved June 29, 1967, as amended, and in accordance
with the requirements of Section 25 of the "Pharmacy Practice Act",
approved September 24, 1987, as amended.
(b) No health maintenance organization shall include in any contract
with any physician providing for health care services any provision
requiring such physician to prescribe any particular drug product to any
enrollee unless the enrollee is a hospital in-patient where such drug product
may be permitted pursuant
to written guidelines or procedures previously established by a
pharmaceutical or therapeutics committee of a hospital, approved by the
medical staff of such hospital and specifically approved, in writing, by
the prescribing physician for his or her patients in such hospital, and
unless it is compounded, dispensed or sold by a
pharmacy located in a hospital, as defined in Section 3 of the Hospital
Licensing Act or a hospital organized under "An Act in relation to the
founding and operation of the University of Illinois Hospital and the
conduct of University of Illinois health care programs", approved July 3,
1931, as amended.
(Source: P.A. 95-689, eff. 10-29-07.)
(215 ILCS 125/2-4) (from Ch. 111 1/2, par. 1406)
Sec. 2-4. 
		
		Required minimum net worth; special contingent
reserve; deficiency; impairment.
(a) A health maintenance
organization issued a certificate of authority on or after the
effective date of this amendatory Act of 1987
shall have and at all times maintain net worth of not
less than $1,500,000.  As an allocation of net worth, organizations
certified prior to the effective date of this amendatory Act of 1987
shall maintain a special contingent reserve. The special contingent
reserve for an organization certified between January 1, 1986 and the
effective date of this amendatory Act of 1987 shall be equal to 5% of its
net earned subscription revenue for health care services through December
31st of the year in which certified.  In subsequent years such organization
shall accumulate additions to the
contingent reserve in an amount which is equal to 2% of
its net earned subscription revenue for each calendar year.  For purposes
of this Section, net earned subscription
revenue means premium minus reinsurance expenses.  Maintenance of the
contingent reserve requires that net worth equals or exceeds the contingent
reserve at any balance sheet date.
(b) Additional accumulations under subsection (a) will no longer be
required at such time that the total special contingent reserve required
by subsection (a) is equal to $1,500,000.
(c) A deficiency in meeting amounts required in
subsections (a),  (b), and (d) will require (1)
filing with the Director a plan for
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 5-5.
(d) All health maintenance organizations issued a certificate of
authority on or prior to December 31, 1985 and regulated under this Act
must have and at all times maintain, prior to December 31, 1988, the net
worth and special contingent
reserve that was required for that particular organization at the time it
was certified.  All such organizations must have by December 31, 1988 and
thereafter maintain at all times, net worth of not less than $300,000 and a
special contingent reserve calculated and accumulated in the same manner as
required of a health maintenance organization issued a certificate of
authority on or between January 1, 1986 and the effective date of this
amendatory Act of 1987.  Such calculation shall commence with
the financial reporting period first following certification.
All organizations issued a certificate of authority between January 1,
1986 and the effective date of this amendatory Act of 1987 must have and at
all times maintain the net worth and special contingent reserve that was
required for that particular organization at the time it was certified.
(d-5) A health maintenance organization that offers a point-of-service
product
must
maintain minimum net worth of not less than:
(1) the greater of 300% of the "authorized control     level" as defined by Article IIA of the Illinois Insurance Code; or
(2) $3,500,000 if the health maintenance     organization's annual projected out-of-plan claims are less than $500,000; or
(3) $4,500,000 if the health maintenance     organization's annual projected out-of-plan claims are equal to or greater than $500,000 but less than $1,000,000; or
(4) $6,000,000 if the health maintenance     organization's annual projected out-of-plan claims are $1,000,000 or greater.
(e) Unless allowed by the Director, no health maintenance
organization, officer, director, trustee, producer, or employee of such
organization may renew, issue, or deliver, or cause to be renewed, issued
or delivered, any certificate, agreement, or contract 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,
trustee, producer, or employee of such organization.  An organization is
impaired when a deficiency exists in meeting the amounts required in
subsections (a), (b), and (d) of Section 2-4.
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 new, renewed or converted coverage.
Any organization, officer, director, trustee, producer, or employee of
such organization violating this subsection shall be guilty of a
Class A misdemeanor.
(Source: P.A. 92-135, eff. 1-1-02.)
(215 ILCS 125/2-5) (from Ch. 111 1/2, par. 1406.1)
Sec. 2-5. 
		Claims Liabilities. 
		Every Health
Maintenance 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.
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. 86-620.)
(215 ILCS 125/2-6) (from Ch. 111 1/2, par. 1406.2)
Sec. 2-6. 
		Statutory deposits.
(a) An organization subject to the provisions
of this Act shall make and maintain with the Director through December 30,
1993, for the protection of enrollees of the organization, a deposit of
securities which are authorized investments under paragraphs (1)
and (2) of subsection (h) of Section 3-1 having a fair market value equal to
at least $100,000.  Effective December 31, 1993 and through December 30,
1994, the deposit shall have a fair market value at least equal to $200,000.
Effective December 31, 1994 and thereafter, the deposit shall have a fair
market value at least equal to $300,000.  An organization issued a certificate
of authority on or after the effective date of this Amendatory Act of 1993,
shall make and maintain with the Director; for the protection of enrollees of
the organization, a deposit of securities which are authorized investments
under paragraphs (1) and (2) of subsection (h) of Section 3-1 having a fair
market value equal to at least $300,000.  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
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 health maintenance 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 organization that offers a point-of-service product, as permitted
by Article 4.5, must maintain an additional deposit in an amount that is not
less than the greater of 125% of the organization's annual projected
point-of-service claims or $300,000.
(Source: P.A. 92-75, eff. 7-12-01; 92-135, eff. 1-1-02; 92-651, eff.
7-11-02.)
(215 ILCS 125/2-7)
Sec. 2-7. (Repealed).
(Source: P.A. 92-16, eff. 6-28-01. Repealed by P.A. 97-486, eff. 1-1-12.)
(215 ILCS 125/2-8) (from Ch. 111 1/2, par. 1407.01)
Sec. 2-8. 
		Provider agreements. 
		(a) All provider contracts currently in
existence between any organization and any hospital which are renewed on
or after 180 days following the effective date of this amendatory Act of
1987, and all contracts between any organization and any hospital executed
on or after 180 days after such effective date, 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
hospital provider under this contract, insolvency of the organization or
any breach of this contract by the organization, shall the hospital
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 contract holder for services
provided pursuant to this contract except for the payment of applicable
co-payments or deductibles 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, the persons acting on the enrollee's behalf
(other than the organization) and the employer or group contract holder
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, persons acting on the enrollee's
behalf (other than the organization) and the employer or group contract
holder." To the extent that any hospital provider contract, which is
renewed or entered into on or after 180 days following the effective date
of this amendatory Act of 1987, fails to incorporate such provisions, such
provisions shall be deemed incorporated into such contracts by operation of
law as of the date of such renewal or execution.
(b) All provider and subcontractor contracts must contain provisions
whereby the provider or subcontractor shall provide, arrange for, or
participate in the quality assurance programs mandated by this Act, unless
the Illinois Department of Public Health 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 assurance
or availability of medical care.
(Source: P.A. 86-620.)
(215 ILCS 125/2-9) (from Ch. 111 1/2, par. 1407.02)
Sec. 2-9. 
		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 form
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 organization
as a liability.
(Source: P.A. 86-620.)
(215 ILCS 125/2-10)
Sec. 2-10. 
		Directors.
(a) After June 30, 2002, the corporate powers for domestic organizations
issued a certificate of authority under this Act must be exercised by, and its
business and affairs must be under the control of, a board of directors
composed of not less than 3 nor more than 21 natural persons who are at least
18
years of age.  At least 3 of the directors must be residents and citizens of
this State.  A person convicted of a felony may not be a director.  A
director must be of good character and known professional, administrative, or
business ability.  The requisite ability must include a practical knowledge of
managed health care, insurance, finance, or investment.
(b) After June 30, 2002, not less than one-third of the directors of a
domestic organization that is not a controlled insurer for purposes of Section
131.20b of the Illinois Insurance Code must be persons who are not officers or
employees of the organization.  At least one of those persons must be included
in
any quorum for the transaction of business at any meeting of the board of
directors or any committee thereof.
(Source: P.A. 92-140, eff. 7-24-01.)