Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 38 - Health Maintenance Organizations › Section 806 KAR 38:100 - Risk-based capital for health organizations

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				304.2-150,
				304.2-250(3),
				304.2-260,
				304.2-270,
				304.32-140,
				304.38-070,
				304.38A-080,
				304.38A-110
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				304.38-150 authorizes the Commissioner of the
				Kentucky Department of Insurance to promulgate administrative regulations
				necessary for the proper administration of KRS 304.38.
				KRS
				304.32-140(1),
				304.38-070,
				304.38A-080,
				and
				304.38A-110(2)
				require the Commissioner of the Kentucky Department of Insurance to promulgate
				administrative regulations establishing requirements for risk-based capital.
				KRS
				304.38-150 authorizes that the Commissioner
				of Insurance to promulgate reasonable administrative regulations necessary for
				the proper administration of KRS Subtitle 304.38. This administrative
				regulation establishes requirements for health maintenance organizations,
				limited health service corporations, and nonprofit health service corporations
				to comply with risk-based capital reporting requirements to aid in the
				department's financial monitoring.
Section
			 1. Definitions.
(1) "Adjusted
			 RBC report" means an RBC report that has been adjusted by the commissioner in
			 accordance with Section 2(3) of this administrative regulation.
(2) "Authorized control level event" means
			 any of the following events:
(a) The filing
			 of an RBC report by the health organization that indicates that the health
			 organization's total adjusted capital is greater than or equal to its Mandatory
			 Control Level RBC but less than its Authorized Control Level RBC;
(b) The notification by the commissioner to
			 the health organization of an adjusted RBC report that indicates the event in
			 paragraph (a) of this subsection, if the health organization does not challenge
			 the adjusted RBC report under Section 7 of this administrative
			 regulation;
(c) If, pursuant to
			 Section 7 of this administrative regulation, the health organization challenges
			 an adjusted RBC report that indicates the event in paragraph (a) of this
			 subsection, notification by the commissioner to the health organization that
			 the commissioner has, after a hearing, rejected the health organization's
			 challenge;
(d) The failure of the
			 health organization to respond to a corrective order, if the health
			 organization has not challenged the corrective order under Section 7 of this
			 administrative regulation; or
(e)
			 If the health organization has challenged a corrective order under Section 7 of
			 this administrative regulation and the commissioner has, after a hearing,
			 rejected the challenge or modified the corrective order, the failure of the
			 health organization to respond to the corrective order subsequent to rejection
			 or modification by the commissioner.
(3) "Commissioner" is defined by
			 KRS
			 304.1-050(1).
(4) "Company action level event" means any of
			 the following events:
(a) The filing of an
			 RBC report by a health organization that indicates that the health
			 organization's total adjusted capital is greater than or equal to its
			 Regulatory Action Level RBC but less than its Company Action Level
			 RBC;
(b) Notification by the
			 commissioner to the health organization of an adjusted RBC report that
			 indicates an event in paragraph (a) of this subsection, if the health
			 organization does not challenge the adjusted RBC report under Section 7 of this
			 administrative regulation;
(c)
			 Pursuant to Section 7 of this administrative regulation, if a health
			 organization challenges an adjusted RBC report that indicates the event in
			 paragraph (a) of this subsection, the notification by the commissioner to the
			 health organization that the commissioner has, after a hearing, rejected the
			 health organization's challenge; or
(d) A health maintenance organization that
			 has total adjusted capital greater than or equal to its Company Action Level
			 RBC but less than the product of its Authorized Control Level RBC and three and
			 zero-tenths (3.0) and triggers the trend test determined in accordance with the
			 trend test calculation included in the NAIC 2019 Risk-Based Capital Forecasting
			 & Instructions, Health.
(5) "Corrective order" means an order issued
			 by the commissioner specifying corrective actions that the commissioner has
			 determined are required, under the provisions of this administrative
			 regulation.
(6) "Department" is
			 defined by
			 KRS
			 304.1-050(2).
(7) "Domestic health organization" means a
			 health organization domiciled in this state.
(8) "Foreign health organization" means a
			 health organization that is licensed to do business in this state under KRS
			 Subtitle 304.38, 304.38A, or 304.32 but is not domiciled in this
			 state.
(9) "Health organization"
			 means a health maintenance organization, limited health service organization,
			 dental or vision plan, hospital, medical and dental indemnity or service
			 corporation, or other managed care organization licensed under KRS Subtitle
			 304.38, 304.38A, or 304.32, except for an organization that is licensed as
			 either a life and health insurer or a property and casualty insurer under KRS
			 Subtitle 304.24 or 304.3 and that is otherwise subject to either the life or
			 property and casualty RBC requirements.
(10) "Mandatory control level event" means
			 any of the following events:
(a) The filing of
			 an RBC report that indicates that the health organization's total adjusted
			 capital is less than its Mandatory Control Level RBC;
(b) Notification by the commissioner to the
			 health organization of an adjusted RBC report that indicates the event in
			 paragraph (a) of this subsection, if the health organization does not challenge
			 the adjusted RBC report under Section 7 of this administrative regulation;
			 or
(c) Pursuant to Section 7 of
			 this administrative regulation, the health organization challenges an adjusted
			 RBC report that indicates the event in paragraph (a) of this subsection,
			 notification by the commissioner to the health organization that the executive
			 director has, after a hearing, rejected the health organization's
			 challenge.
(11) "NAIC"
			 means the National Association of Insurance Commissioners.
(12) "RBC" means risk-based
			 capital.
(13) "RBC instructions"
			 means the RBC report including risk-based capital instructions adopted by the
			 NAIC, as these RBC instructions are amended by the NAIC from time to time in
			 accordance with the procedures adopted by the NAIC.
(14) "RBC level" means a health
			 organization's company action level RBC, regulatory action level RBC,
			 authorized control level RBC, or mandatory control level RBC in which:
(a) "Company Action Level RBC" means, with
			 respect to any health organization, the product of two and zero-tenths (2.0)
			 and its Authorized Control Level RBC;
(b) "Regulatory Action Level RBC" means the
			 product of one and five-tenths (1.5) and its Authorized Control Level
			 RBC;
(c) "Authorized Control Level
			 RBC" means the number determined under the risk-based capital formula in
			 accordance with the RBC instructions; and
(d) "Mandatory Control Level RBC" means the
			 product of 0.70 and the Authorized Control Level RBC.
(15) "RBC plan" means a comprehensive
			 financial plan containing the elements established in Section 3(2) of this
			 administrative regulation.
(16)
			 "RBC report" means the report required in Section 2 of this administrative
			 regulation.
(17) "Regulatory action
			 level event" means, with respect to a health organization, any of the following
			 events:
(a) The filing of an RBC report by the
			 health organization that indicates that the health organization's total
			 adjusted capital is greater than or equal to its Authorized Control Level RBC
			 but less than its Regulatory Action Level RBC;
(b) Notification by the commissioner to a
			 health organization of an adjusted RBC report that indicates the event in
			 paragraph (a) of this subsection, if the health organization does not challenge
			 the adjusted RBC report under Section 7 of this administrative
			 regulation;
(c) If, pursuant to
			 Section 7 of this administrative regulation, the health organization challenges
			 an adjusted RBC report that indicates the event in paragraph (a) of this
			 subsection, the notification by the commissioner to the health organization
			 that the commissioner has, after a hearing, rejected the health organization's
			 challenge;
(d) The failure of the
			 health organization to file an RBC report by the filing date, unless the health
			 organization has provided an explanation for the failure and has cured the
			 failure within ten (10) days after the filing date;
(e) The failure of the health organization to
			 submit an RBC plan to the commissioner within the time period established in
			 Section 3(3) of this administrative regulation;
(f) Notification by the commissioner to the
			 health organization that:
1. The RBC plan or
			 revised RBC plan submitted by the health organization is unsatisfactory;
			 and
2. Notification constitutes a
			 regulatory action level event with respect to the health organization, if the
			 health organization has not challenged the determination under Section 7 of
			 this administrative regulation;
(g) If, pursuant to Section 7 of this
			 administrative regulation, the health organization challenges a determination
			 by the commissioner under this paragraph, the notification by the commissioner
			 to the health organization that the commissioner has, after a hearing, rejected
			 the challenge;
(h) Notification by
			 the commissioner to the health organization that the health organization has
			 failed to adhere to its RBC plan or revised RBC plan, but only if the failure
			 has a substantial adverse effect on the ability of the health organization to
			 eliminate the company action level event in accordance with its RBC plan or
			 revised RBC plan and the commissioner has stated so in the notification, if the
			 health organization has not challenged the determination under Section 7 of
			 this administrative regulation; or
(i) If, pursuant to Section 7 of this
			 administrative regulation, the health organization challenges a determination
			 by the commissioner under this paragraph, the notification by the commissioner
			 to the health organization that the commissioner has, after a hearing, rejected
			 the challenge.
(18)
			 "Revised RBC plan" means an RBC plan that was:
(a) Rejected by the commissioner;
			 and
(b) Revised by the health
			 organization, with or without the commissioner's recommendation.
(19) "Total adjusted capital"
			 means the sum of:
(a) A health organization's
			 statutory capital and surplus (net worth) as determined in accordance with the
			 statutory accounting applicable to the annual financial statements required to
			 be filed under
			 KRS
			 304.3-240 or
			 304.32-090;
			 and
(b) Other items, if any, as the
			 RBC instructions provide.