Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-080 - LIABILITIES OF HEALTH MAINTENANCE ORGANIZATIONS › Section 482-1-080-.05 - Liabilities Generally Of Health Maintenance Organizations

Current through Register Vol. 42, No. 9, June 28, 2024
(1) In any determination of the financial
			 condition of a Health Maintenance Organization, capital and liabilities to be
			 charged against its admitted assets shall include:
(a) The amount of its capital account which
			 consists of minimum capital stock of $100,000 in the form of paid-in capital
			 for a stock HMO and a paid-in partners share account in the case of a HMO which
			 is a partnership. The required annual deposit and the preliminary deposit made
			 with the State Treasurer are in addition to this capital requirement.
(b) The amount estimated as necessary to pay
			 all of its unpaid losses and claims incurred on or prior to the date of
			 statement, whether reported or unreported, including claims payable, accrued
			 inpatient claims, accrued physician claims, accrued referral claims, accrued
			 other medical expenses, accrued medical incentive pool, and other accrued
			 health related services including covered and uncovered expenditures.
The loss or claims reserves, provisions for experience rating
				refunds including the accrued medical incentive pool, and any other actuarial
				items are to be certified by a qualified actuary who is a member in good
				standing of the American Academy of Actuaries, or a person recognized by the
				American Academy of Actuaries as qualified for such actuarial valuation, or a
				person who otherwise has demonstrated his competency in such actuarial
				evaluation to the satisfaction of the Commissioner.
(c) Any loans and notes payable.
However, a HMO may borrow money to provide it with surplus
				funds in excess of the required $100,000 capital account and $100,000
				unimpaired surplus upon a written agreement which such is required to be repaid
				only out of the HMO's earned surplus in excess of which stipulated in such
				agreement; if the lender of the funds agrees to defer any interest and/or
				principal repayments until the capital and surplus of the HMO equals the
				minimum $1,800,000 capital and surplus required of a licensed life insurer; and
				also if the lender subordinates the debt to all other HMO creditors. The
				agreement may provide for interest at a reasonable rate per annum, which
				interest shall, or shall not, constitute a liability of the HMO as to its funds
				other than such excess of surplus, as stipulated in the agreement. No
				commission or promotion expense shall be paid in connection with any such
				loan.
Money so borrowed, together with the interest thereon if so
				stipulated in the agreement, shall not form a part of the HMO's legal accrued
				liabilities except as to its surplus in excess of the amount thereof stipulated
				in the agreement or be the basis of any setoff, but, until repaid, financial
				statements filed or published by the HMO shall show as a "write-in" line
				thereto the amount thereof then unpaid together with any interest thereon
				accrued but unpaid.
Any such loan shall be subject to the Commissioner's approval.
				The HMO shall, in advance of the loan, file with the Commissioner a statement
				of the purpose of the loan and a copy of the proposed loan agreement along with
				a detailed listing of all securities to be received in exchange for the note.
				The Commissioner shall disapprove any proposed loan or agreement if he finds
				the loan is unnecessary or excessive for the purpose intended or which the
				terms of the loan agreement are not fair and equitable to the parties and to
				other similar lenders, if any, to the HMO or which the information so filed by
				the HMO is inadequate.
Any such loan, or substantial portion thereof, shall be repaid
				by the HMO when no longer reasonably necessary for the purpose originally
				intended. No repayment of such a loan shall be made, unless in advance approved
				by the Commissioner.
The value of the surplus note issued under this section shall
				not be considered as the deciding authority for valuing the assets received for
				the above note, but shall only be taken into account with all other factors in
				determining admitted value.
An HMO domiciled in a state other than Alabama shall first
				obtain the written approval of any surplus note from its domiciliary state's
				insurance Commissioner or other state authority that regulates HMO before
				seeking approval of the note by the Commissioner.
(d) The amount of reserves equal to the
			 unearned portions of the gross premiums and other fees charged on contracts in
			 force, computed in accordance with procedures approved by the Commissioner.
The Health Maintenance Organization may compute all of such
				reserves on a monthly or more frequent pro rata basis. However, after adopting
				a method for computing such reserve, a Health Maintenance Organization shall
				not change methods without approval of the Commissioner;
(e) Taxes, expenses and other obligations due
			 or accrued at the date of the statement; and
(f) Any additional reserves which may be
			 required by the Commissioner consistent with practice as last formulated or
			 approved by the National Association of Insurance Commissioners or its
			 successor organization, on account of such business written by the Health
			 Maintenance Organization.