Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 38 - Health Maintenance Organizations › Section 806 KAR 38:080 - Health maintenance organizations' reserve funds

Current through Register Vol. 51, No. 1, July 1, 2024
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.