Alabama Administrative Code › Title 560 - ALABAMA MEDICAID AGENCY › Chapter 560-X-62 - REGIONAL CARE ORGANIZATIONS › Section 560-X-62-.25 - Surplus Notes

Current through Register Vol. 42, No. 9, June 28, 2024
(1) The
			 proceeds of a surplus note issued by an RCO in compliance with this rule shall
			 be eligible to be reported as capital or surplus or restricted reserves
			 required by Rule No.
			 560-X-62-.16. Such a surplus note
			 shall not be treated as a liability of the RCO for purposes of a determination
			 of the amount of the capital and surplus of the RCO pursuant to the rules of
			 the Medicaid Agency.
(2) A surplus
			 note shall be repayable only out of the issuing RCO's capital and surplus in
			 excess of the stated minimum capital and surplus set forth in the surplus note.
			 For purposes of this rule, "stated minimum capital and surplus" means the
			 amount of capital and surplus of an RCO which may not be used for payments of
			 interest or principal of the surplus note and which amount must be at least
			 110% of the minimum capital and surplus required by Rule No.
			 560-X-62-.16. If an RCO has
			 provided a performance bond to the Agency in compliance with Rule No.
			 560-X-62-.16, the portion of the
			 penal sum of such performance bond that is properly allocable to the
			 satisfaction of the RCO's capital and surplus requirements under Rule No.
			 560-X-62-.16 shall be deemed to
			 constitute capital and surplus for purposes of this rule.
(3) Proceeds received by an RCO in respect of
			 a surplus note must be in the form of cash or other admitted assets having
			 readily determinable values and liquidity satisfactory to the Medicaid
			 Agency.
(4) All surplus notes
			 issued by an RCO are subject to the prior approval of the Medicaid Agency,
			 regardless of amount, and an application therefor shall be filed at least 30
			 days prior to the proposed date of the issuance of the surplus note by the
			 RCO.
(5) All payments of principal
			 and interest by the RCO and all transfers of a surplus note by the note holder
			 are subject to the prior approval of the Medicaid Agency regardless of amount.
			 An application therefor shall be filed at least 30 days prior to the date of
			 the proposed payment or transfer.
(6) The Medicaid Agency shall prescribe a
			 maximum interest rate or rates for surplus notes issued by RCOs. Such maximum
			 interest rate or rates may be variable or fixed and shall be commercially
			 reasonable, as determined by the Medicaid Agency in its sole discretion. The
			 Medicaid Agency may adjust the maximum interest rate or rates from time to time
			 as it deems appropriate.
(7) No
			 surplus note shall include any stated maturity of principal or any installment
			 thereof sooner than the date that is 30 days after the latest date that the
			 risk contract between the Medicaid Agency and the RCO could by its terms
			 expire, including any extension periods. Any payment of principal of a surplus
			 note, whether at the stated maturity thereof or prior thereto, shall require
			 the approval of the Medicaid Agency in accordance with sections 5 and 8(e) of
			 this rule. This section shall not prevent an elective prepayment of principal
			 of a surplus note made in compliance with this rule and in accordance with the
			 terms of the surplus note.
(8) A
			 surplus note must contain the following provisions:
(a) The surplus note must be subordinated to
			 the claims of enrollees, providers, and all other classes of creditors of the
			 RCO, other than surplus note holders;
(b) The note holder may be paid only out of
			 the portion of the RCO's capital and surplus that exceeds the stated minimum
			 capital and surplus;
(c) The stated
			 minimum capital and surplus shall be at least 110% of the minimum capital and
			 surplus required by Rule No.
			 560-X-62-.16;
(d) The surplus note must have a stated rate
			 of interest not higher than the applicable maximum interest rate in effect at
			 the time of the issuance of the surplus note, as prescribed by the Medicaid
			 Agency in accordance with section 6 of this rule; and
(e) All payments of principal and interest by
			 the RCO and all transfers of the surplus note by the note holder shall be
			 subject to the prior approval of the Medicaid Agency. The Medicaid Agency may
			 withhold its approval of any payment of principal or interest or any transfer
			 of a surplus note if and so long as the RCO is in material violation or breach
			 of any provision of Sections
			 22-6-150,
et seq.
of the
Code of Ala. 1975
, the rules of the Medicaid
			 Agency, or the risk contract between the Medicaid Agency and the RCO, as
			 determined by the Medicaid Agency in its sole discretion.