Sec. 38a-193. Protection against insolvency. (a) Net worth requirements.
(1) Before issuing any certificate of authority to any health care center on or after July
1, 1990, the commissioner shall require that a health care center have: (A) An initial
net worth of one million five hundred thousand dollars, and (B) agree to thereafter
maintain the minimum net worth required under subdivision (4) of this subsection.
(2) No health care center shall be licensed to transact business in this state or remain
so licensed unless, (A) its net worth bears a reasonable relationship to its liabilities based
upon the type, volume and nature of business transacted, and (B) its risk-based capital
related to its total adjusted capital is adequate for the type of business transacted. As
used in this subsection, "total adjusted capital" means the sum of a health care center's
net worth and any other item in the nature of capital as deemed appropriate by the
commissioner; and "risk-based capital" means the net worth of the health care center
adjusted to recognize the level of risk inherent in its business, including (i) risk with
respect to the health care center's assets, (ii) the risk of adverse underwriting experience
with respect to the health care center's liabilities and obligations, (iii) the credit risk
with respect to the health care center's business, and (iv) all other business risks and
such other relevant risks as the commissioner may determine.
(3) (A) In determining net worth, no debt shall be considered fully subordinated
unless the subordination clause is in a form acceptable to the commissioner. Any interest
obligation relating to the repayment of any subordinated debt must be similarly subordinated. (B) The interest expenses relating to the repayment of any fully subordinated
debt shall not be considered uncovered expenditures. (C) Any debt incurred by a note
meeting the requirements of this section, and otherwise acceptable to the commissioner,
shall not be considered a liability and shall be recorded as equity.
(4) Except as provided in subdivision (3) and subdivisions (5) to (7), inclusive, of
this subsection, each health care center shall maintain a minimum net worth equal to
the greater of: (A) One million dollars; or (B) two per cent of its annual premium revenues
as reported on the most recent annual financial statement filed with the commissioner
on the first one hundred fifty million dollars of premium revenues plus one per cent of
annual premium revenues in excess of one hundred fifty million dollars. No health care
center authorized by the commissioner to do business in this state, on July 1, 1990, shall
be required to comply with the provisions of subparagraph (B) of this subdivision until
January 1, 1995.
(5) Each health care center that offers or proposes to offer out-of-network benefits
shall either:
(A) Enter into an agreement with a duly licensed insurance company to provide
coverage to subscribers and enrollees outside of the health care center's established
network, subject to approval by the commissioner; or
(B) Implement an out-of-network benefit system to be operated by the health care
center, subject to approval by the commissioner, provided the health care center establishes and maintains its net worth at an amount equal to the greater of (i) three million
dollars, (ii) two per cent of its annual premium revenues as reported on the most recent
annual financial statement filed with the commissioner on the first one hundred fifty
million dollars of premium revenues plus one per cent of annual premium revenues in
excess of one hundred fifty million dollars, or (iii) two months of its cost of uncovered
expenditures. For purposes of this subsection, "annual premium revenues" does not
include revenue earned as a result of an arrangement between a health care center and
the federal Centers for Medicare and Medicaid Services, on a cost or risk basis, for
services to a Medicare beneficiary, or revenue earned as a result of an arrangement
between a health care center and a Medicaid state agency, for services to a Medicaid
beneficiary. For the purposes of this subsection, the uncovered expenditures of the health
care center for the requisite two-month period shall be calculated as follows:
UE = (X + Y − Z) 6
Where:
UE =
Uncovered expenditures of the health care center for the requisite two-
month period.
X =
Total year-to-date uncovered expenditures reported in the health care
center's most recent statutory quarterly or annual statement.
Y =
Total year-to-date uncovered expenditures reported in the health care
center's annual statement for the prior calendar year.
Z =
Total year-to-date uncovered expenditures reported in the health care
center's statutory quarterly or annual statement for the current calendar
quarter of the prior calendar year.
(6) The total cost of the out-of-network benefits of a health care center shall not
exceed ten per cent of the total cost of the health care center's claims and expenses on
a quarterly basis without the prior approval of the commissioner and the effectuation
of an uncovered expenditures insolvency deposit established with the commissioner
pursuant to section 38a-193a.
(7) Any health care center that provides out-of-network benefits pursuant to this
subsection shall provide a quarterly report concurrent with filing of the required quarterly and annual financial statements which shall demonstrate compliance with the provisions of this subsection.
(8) The commissioner may adopt regulations, in accordance with chapter 54, to
implement the purposes of this subsection, including, but not limited to, provisions
concerning: (A) The preparation and filing of reports by health care centers relating to
risk-based capital levels and the calculation thereof; (B) the preparation and filing of
comprehensive financial plans when such capital levels are reduced below minimum
threshold levels; (C) the confidentiality of such reports and plans; and (D) the regulatory
corrective actions the commissioner may take in the event minimum risk-based capital
levels are not maintained, or the health care center's financial plans filed with the commissioner are deficient, or the health care center fails to otherwise comply with the
provisions of the regulations.
(b) Liabilities. Every health care center shall, when determining liabilities, include
an amount estimated in the aggregate to provide for any unearned premium and for the
payment of all claims for health care expenditures which have been incurred, 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 calculated in accordance with those accounting procedures and practices prescribed by the National Association of Insurance Commissioners Accounting
Practices and Procedures Manual, version effective January 1, 2001, and subsequent
revisions and the National Association of Insurance Commissioners Annual Statement
Instructions, subject to any deviations prescribed by the commissioner.
(c) Required provisions in every contract between health care centers and participating providers. (1) Every contract between a health care center and a participating provider of health care services shall be in writing and shall contain the following
provisions or variations approved by the commissioner:
"(A) (Name of provider or facility) .... hereby agrees that in no event, including,
but not limited to, nonpayment by (name of health care center) ...., (name of health care
center's) .... insolvency, or breach of this contract shall (name of provider or facility) ....
bill, charge, collect a deposit from, seek compensation, remuneration, or reimbursement
from, or have any recourse against a covered person or person acting on their behalf,
other than (name of health care center) ...., for services provided pursuant to this contract.
This provision shall not prohibit collection of cost-sharing amounts, or costs for noncovered services, which have not otherwise been paid by a primary or secondary carrier in
accordance with regulatory standards for coordination of benefits, from covered persons
in accordance with the terms of the covered person's health plan.
(B) (Name of provider or facility).... agrees, in the event of (name of health care
center's) .... insolvency, to continue to provide the services promised in this contract to
covered persons of (name of health care center) .... for the duration of the period for
which premiums on behalf of the covered person were paid to (name of health care
center) .... or until the covered person's discharge from inpatient facilities, whichever
time is greater.
(C) Notwithstanding any other provision in this contract, nothing in this contract
shall be construed to modify the rights and benefits contained in the covered person's
health plan.
(D) (Name of provider or facility).... may not bill the covered person for covered
services, except for cost-sharing amounts, where (name of health care center) .... denies
payment because the provider or facility has failed to comply with the terms or conditions
of this contract.
(E) (Name of provider or facility) .... further agrees (i) that the provisions of subparagraphs (A), (B), (C) and (D) of this subdivision (or citations appropriate to the contract
form) .... shall survive termination of this contract regardless of the cause giving rise to
termination and shall be construed to be for the benefit of (name of health care
center's) .... covered persons, and (ii) that this provision supersedes any oral or written
contrary agreement now existing or hereafter entered into between (name of provider
or facility) .... and covered persons or persons acting on their behalf.
(F) If (name of provider or facility) .... contracts with other providers or facilities
who agree to provide covered services to covered persons of (name of health care
center) .... with the expectation of receiving payment directly or indirectly from (name
of health care center) ...., such providers or facilities shall agree to abide by the provisions
of subparagraphs (A), (B), (C), (D) and (E) of this subsection (or citations appropriate
to the contract form) ....."
(2) In the event that the participating provider contract has not been reduced to
writing as required by this subsection or that the contract fails to contain the provisions
required by subdivision (1) of this subsection, the participating provider shall not collect
or attempt to collect from the subscriber or enrollee sums owed by the health care center.
(3) No participating provider, or agent, trustee or assignee thereof, may: (A) Maintain any action at law against a subscriber or enrollee to collect sums owed by the health
care center; or (B) request payment from a subscriber or enrollee for such sums. For
purposes of this subdivision "request payment" includes, but is not limited to, submitting
a bill for services not actually owed or submitting for such services an invoice or other
communication detailing the cost of the services that is not clearly marked with the
phrase "THIS IS NOT A BILL". The contract between a health care center and a participating provider shall inform the participating provider that pursuant to section 20-7f, it
is an unfair trade practice in violation of chapter 735a for any health care provider to
request payment from an enrollee, other than a copayment or deductible, for covered
medical services, or to report to a credit reporting agency an enrollee's failure to pay a
bill for medical services when a health care center has primary responsibility for payment
of such services.
(d) Continuation of benefits. The commissioner shall require that each health care
center have a plan for handling insolvency which allows for continuation of benefits
for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined to inpatient facilities on the date of insolvency until their discharge or expiration of benefits. In considering such a plan, the
commissioner may approve one or more of the following: (1) Insurance to cover the
expenses to be paid for continued benefits after an insolvency; (2) provisions in provider
contracts that obligate the provider to provide services after the health care center's
insolvency for the duration of the period for which premium payment has been made
and until the enrollees' discharge from inpatient facilities; (3) insolvency reserves; (4)
acceptable letters of credit; or (5) any other arrangements to assure that benefits are
continued as specified above.
(e) Notice of termination. Every agreement to provide health care services between
a provider and a health care center shall require the provider to provide at least sixty
days' advance notice to the health care center to terminate the agreement.
(f) Deposit for the protection of enrollees in the event health care center is in
rehabilitation or conservation. (1) Unless otherwise provided in this subsection, each
health care center shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which
a custodian or controlled account is utilized, cash, securities or any combination of cash
or securities or other measures that are acceptable to the commissioner, which at all
times shall have a value of not less than five hundred thousand dollars.
(2) A health care center that is in operation on October 1, 2007, shall make a deposit
equal to two hundred fifty thousand dollars. In the second year, the amount of the additional deposit for a health care center that is in operation on October 1, 2007, shall be
equal to two hundred fifty thousand dollars, for a total of five hundred thousand dollars.
(3) The deposit shall be an admitted asset of the health care center in the determination of net worth.
(4) All income from deposits shall be an asset of the organization. A health care
center that has made a securities deposit may withdraw such deposit or any part thereof
after making a substitute deposit of cash, securities or any combination of cash or securities or other measures of equal amount and value. Any securities shall be approved by
the commissioner before being deposited.
(5) The deposit shall be used to protect the interests of the health care center's
enrollees and to assure continuation of health care services to enrollees of a health care
center that is in rehabilitation or conservation. The commissioner may use the deposit
for administrative costs directly attributable to a receivership or liquidation. If the health
care center is placed in rehabilitation or liquidation, the deposit shall be an asset subject
to the provisions of the Insurers Rehabilitation and Liquidation Act.
(P.A. 90-68, S. 13, 16; P.A. 98-163, S. 2; P.A. 99-9, S. 4, 6; P.A. 00-30, S. 11, 14; P.A. 03-19, S. 89; P.A. 07-178, S. 1.)
History: P.A. 98-163 added Subsec. (c)(3)(B) prohibiting providers from requesting payment from subscribers or
enrollees of sums owed by health care centers and to define "request payment"; P.A. 99-9 amended Subsec. (a) to insert
new Subdiv. (2) re requirements for license, redesignated former Subdiv. (2) as Subdiv. (4), added new Subdivs. (5) to (7)
re out-of-network benefits and added new Subdiv. (8) re regulations, amended Subsec. (b) to substitute National Association
of Insurance Commissioners Accounting Practices and Procedures Manual and Annual Statement Instructions for regulations adopted by the commissioner and amended Subsec. (d) to add "or" before Subdiv. (5), effective May 12, 1999; P.A.
00-30 amended Subsec. (b) to substitute "calculated" for "computed" and to add "version effective January 1, 2001, and
subsequent revisions" re the National Association of Insurance Commissioners Accounting Practices and Procedures
Manual, effective January 1, 2001; P.A. 03-19 replaced "Health Care Financing Administration" with "Centers for Medicare
and Medicaid Services" in Subsec. (a)(5)(B), effective May 12, 2003; P.A. 07-178 amended Subsec. (a)(1) to make a
technical change and Subsec. (a)(6) to allow total cost of out-of-network benefits to exceed 10% of total expenditures if
health care center obtains the prior approval of commissioner and makes an uncovered expenditures insolvency deposit
pursuant to Sec. 38a-193a, amended Subsec. (c)(1) to require every contract between a health care center and a participating
provider to contain provisions specified in Subparas. (A) to (F) or a variation approved by commissioner, amended Subsec.
(c)(2) to substitute "provisions required by subdivision (1) of this subsection" for "required prohibition", amended Subsec.
(c)(3) to require contract between a health care center and participating provider to inform such provider that it is an unfair
trade practice to request payment from an enrollee, other than a copayment or deductible, for covered medical services or
to report an enrollee to a credit reporting agency for not paying a bill for which the health care center is responsible, and
added Subsec. (f) re required deposit by each health care center with commissioner of cash, securities or any combination
thereof or other measures acceptable to commissioner, which shall have a value of not less than $500,000 at all times.
Sec. 38a-193. Protection against insolvency. (a) Net worth requirements.
(1) Before issuing any certificate of authority to any health care center on or after July
1, 1990, the commissioner shall require that a health care center have: (A) An initial
net worth of one million five hundred thousand dollars, and (B) agree to thereafter
maintain the minimum net worth required under subdivision (4) of this subsection.
(2) No health care center shall be licensed to transact business in this state or remain
so licensed unless, (A) its net worth bears a reasonable relationship to its liabilities based
upon the type, volume and nature of business transacted, and (B) its risk-based capital
related to its total adjusted capital is adequate for the type of business transacted. As
used in this subsection, "total adjusted capital" means the sum of a health care center's
net worth and any other item in the nature of capital as deemed appropriate by the
commissioner; and "risk-based capital" means the net worth of the health care center
adjusted to recognize the level of risk inherent in its business, including (i) risk with
respect to the health care center's assets, (ii) the risk of adverse underwriting experience
with respect to the health care center's liabilities and obligations, (iii) the credit risk
with respect to the health care center's business, and (iv) all other business risks and
such other relevant risks as the commissioner may determine.
(3) (A) In determining net worth, no debt shall be considered fully subordinated
unless the subordination clause is in a form acceptable to the commissioner. Any interest
obligation relating to the repayment of any subordinated debt must be similarly subordinated. (B) The interest expenses relating to the repayment of any fully subordinated
debt shall not be considered uncovered expenditures. (C) Any debt incurred by a note
meeting the requirements of this section, and otherwise acceptable to the commissioner,
shall not be considered a liability and shall be recorded as equity.
(4) Except as provided in subdivision (3) and subdivisions (5) to (7), inclusive, of
this subsection, each health care center shall maintain a minimum net worth equal to
the greater of: (A) One million dollars; or (B) two per cent of its annual premium revenues
as reported on the most recent annual financial statement filed with the commissioner
on the first one hundred fifty million dollars of premium revenues plus one per cent of
annual premium revenues in excess of one hundred fifty million dollars. No health care
center authorized by the commissioner to do business in this state, on July 1, 1990, shall
be required to comply with the provisions of subparagraph (B) of this subdivision until
January 1, 1995.
(5) Each health care center that offers or proposes to offer out-of-network benefits
shall either:
(A) Enter into an agreement with a duly licensed insurance company to provide
coverage to subscribers and enrollees outside of the health care center's established
network, subject to approval by the commissioner; or
(B) Implement an out-of-network benefit system to be operated by the health care
center, subject to approval by the commissioner, provided the health care center establishes and maintains its net worth at an amount equal to the greater of (i) three million
dollars, (ii) two per cent of its annual premium revenues as reported on the most recent
annual financial statement filed with the commissioner on the first one hundred fifty
million dollars of premium revenues plus one per cent of annual premium revenues in
excess of one hundred fifty million dollars, or (iii) two months of its cost of uncovered
expenditures. For purposes of this subsection, "annual premium revenues" does not
include revenue earned as a result of an arrangement between a health care center and
the federal Centers for Medicare and Medicaid Services, on a cost or risk basis, for
services to a Medicare beneficiary, or revenue earned as a result of an arrangement
between a health care center and a Medicaid state agency, for services to a Medicaid
beneficiary. For the purposes of this subsection, the uncovered expenditures of the health
care center for the requisite two-month period shall be calculated as follows:
UE = (X + Y − Z) 6
Where:
UE =
Uncovered expenditures of the health care center for the requisite two-
month period.
X =
Total year-to-date uncovered expenditures reported in the health care
center's most recent statutory quarterly or annual statement.
Y =
Total year-to-date uncovered expenditures reported in the health care
center's annual statement for the prior calendar year.
Z =
Total year-to-date uncovered expenditures reported in the health care
center's statutory quarterly or annual statement for the current calendar
quarter of the prior calendar year.
(6) The total cost of the out-of-network benefits of a health care center shall not
exceed ten per cent of the total cost of the health care center's claims and expenses on
a quarterly basis without the prior approval of the commissioner and the effectuation
of an uncovered expenditures insolvency deposit established with the commissioner
pursuant to section 38a-193a.
(7) Any health care center that provides out-of-network benefits pursuant to this
subsection shall provide a quarterly report concurrent with filing of the required quarterly and annual financial statements which shall demonstrate compliance with the provisions of this subsection.
(8) The commissioner may adopt regulations, in accordance with chapter 54, to
implement the purposes of this subsection, including, but not limited to, provisions
concerning: (A) The preparation and filing of reports by health care centers relating to
risk-based capital levels and the calculation thereof; (B) the preparation and filing of
comprehensive financial plans when such capital levels are reduced below minimum
threshold levels; (C) the confidentiality of such reports and plans; and (D) the regulatory
corrective actions the commissioner may take in the event minimum risk-based capital
levels are not maintained, or the health care center's financial plans filed with the commissioner are deficient, or the health care center fails to otherwise comply with the
provisions of the regulations.
(b) Liabilities. Every health care center shall, when determining liabilities, include
an amount estimated in the aggregate to provide for any unearned premium and for the
payment of all claims for health care expenditures which have been incurred, 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 calculated in accordance with those accounting procedures and practices prescribed by the National Association of Insurance Commissioners Accounting
Practices and Procedures Manual, version effective January 1, 2001, and subsequent
revisions and the National Association of Insurance Commissioners Annual Statement
Instructions, subject to any deviations prescribed by the commissioner.
(c) Required provisions in every contract between health care centers and participating providers. (1) Every contract between a health care center and a participating provider of health care services shall be in writing and shall contain the following
provisions or variations approved by the commissioner:
"(A) (Name of provider or facility) .... hereby agrees that in no event, including,
but not limited to, nonpayment by (name of health care center) ...., (name of health care
center's) .... insolvency, or breach of this contract shall (name of provider or facility) ....
bill, charge, collect a deposit from, seek compensation, remuneration, or reimbursement
from, or have any recourse against a covered person or person acting on their behalf,
other than (name of health care center) ...., for services provided pursuant to this contract.
This provision shall not prohibit collection of cost-sharing amounts, or costs for noncovered services, which have not otherwise been paid by a primary or secondary carrier in
accordance with regulatory standards for coordination of benefits, from covered persons
in accordance with the terms of the covered person's health plan.
(B) (Name of provider or facility).... agrees, in the event of (name of health care
center's) .... insolvency, to continue to provide the services promised in this contract to
covered persons of (name of health care center) .... for the duration of the period for
which premiums on behalf of the covered person were paid to (name of health care
center) .... or until the covered person's discharge from inpatient facilities, whichever
time is greater.
(C) Notwithstanding any other provision in this contract, nothing in this contract
shall be construed to modify the rights and benefits contained in the covered person's
health plan.
(D) (Name of provider or facility).... may not bill the covered person for covered
services, except for cost-sharing amounts, where (name of health care center) .... denies
payment because the provider or facility has failed to comply with the terms or conditions
of this contract.
(E) (Name of provider or facility) .... further agrees (i) that the provisions of subparagraphs (A), (B), (C) and (D) of this subdivision (or citations appropriate to the contract
form) .... shall survive termination of this contract regardless of the cause giving rise to
termination and shall be construed to be for the benefit of (name of health care
center's) .... covered persons, and (ii) that this provision supersedes any oral or written
contrary agreement now existing or hereafter entered into between (name of provider
or facility) .... and covered persons or persons acting on their behalf.
(F) If (name of provider or facility) .... contracts with other providers or facilities
who agree to provide covered services to covered persons of (name of health care
center) .... with the expectation of receiving payment directly or indirectly from (name
of health care center) ...., such providers or facilities shall agree to abide by the provisions
of subparagraphs (A), (B), (C), (D) and (E) of this subsection (or citations appropriate
to the contract form) ....."
(2) In the event that the participating provider contract has not been reduced to
writing as required by this subsection or that the contract fails to contain the provisions
required by subdivision (1) of this subsection, the participating provider shall not collect
or attempt to collect from the subscriber or enrollee sums owed by the health care center.
(3) No participating provider, or agent, trustee or assignee thereof, may: (A) Maintain any action at law against a subscriber or enrollee to collect sums owed by the health
care center; or (B) request payment from a subscriber or enrollee for such sums. For
purposes of this subdivision "request payment" includes, but is not limited to, submitting
a bill for services not actually owed or submitting for such services an invoice or other
communication detailing the cost of the services that is not clearly marked with the
phrase "THIS IS NOT A BILL". The contract between a health care center and a participating provider shall inform the participating provider that pursuant to section 20-7f, it
is an unfair trade practice in violation of chapter 735a for any health care provider to
request payment from an enrollee, other than a copayment or deductible, for covered
medical services, or to report to a credit reporting agency an enrollee's failure to pay a
bill for medical services when a health care center has primary responsibility for payment
of such services.
(d) Continuation of benefits. The commissioner shall require that each health care
center have a plan for handling insolvency which allows for continuation of benefits
for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined to inpatient facilities on the date of insolvency until their discharge or expiration of benefits. In considering such a plan, the
commissioner may approve one or more of the following: (1) Insurance to cover the
expenses to be paid for continued benefits after an insolvency; (2) provisions in provider
contracts that obligate the provider to provide services after the health care center's
insolvency for the duration of the period for which premium payment has been made
and until the enrollees' discharge from inpatient facilities; (3) insolvency reserves; (4)
acceptable letters of credit; or (5) any other arrangements to assure that benefits are
continued as specified above.
(e) Notice of termination. Every agreement to provide health care services between
a provider and a health care center shall require the provider to provide at least sixty
days' advance notice to the health care center to terminate the agreement.
(f) Deposit for the protection of enrollees in the event health care center is in
rehabilitation or conservation. (1) Unless otherwise provided in this subsection, each
health care center shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which
a custodian or controlled account is utilized, cash, securities or any combination of cash
or securities or other measures that are acceptable to the commissioner, which at all
times shall have a value of not less than five hundred thousand dollars.
(2) A health care center that is in operation on October 1, 2007, shall make a deposit
equal to two hundred fifty thousand dollars. In the second year, the amount of the additional deposit for a health care center that is in operation on October 1, 2007, shall be
equal to two hundred fifty thousand dollars, for a total of five hundred thousand dollars.
(3) The deposit shall be an admitted asset of the health care center in the determination of net worth.
(4) All income from deposits shall be an asset of the organization. A health care
center that has made a securities deposit may withdraw such deposit or any part thereof
after making a substitute deposit of cash, securities or any combination of cash or securities or other measures of equal amount and value. Any securities shall be approved by
the commissioner before being deposited.
(5) The deposit shall be used to protect the interests of the health care center's
enrollees and to assure continuation of health care services to enrollees of a health care
center that is in rehabilitation or conservation. The commissioner may use the deposit
for administrative costs directly attributable to a receivership or liquidation. If the health
care center is placed in rehabilitation or liquidation, the deposit shall be an asset subject
to the provisions of the Insurers Rehabilitation and Liquidation Act.
(P.A. 90-68, S. 13, 16; P.A. 98-163, S. 2; P.A. 99-9, S. 4, 6; P.A. 00-30, S. 11, 14; P.A. 03-19, S. 89; P.A. 07-178, S. 1.)
History: P.A. 98-163 added Subsec. (c)(3)(B) prohibiting providers from requesting payment from subscribers or
enrollees of sums owed by health care centers and to define "request payment"; P.A. 99-9 amended Subsec. (a) to insert
new Subdiv. (2) re requirements for license, redesignated former Subdiv. (2) as Subdiv. (4), added new Subdivs. (5) to (7)
re out-of-network benefits and added new Subdiv. (8) re regulations, amended Subsec. (b) to substitute National Association
of Insurance Commissioners Accounting Practices and Procedures Manual and Annual Statement Instructions for regulations adopted by the commissioner and amended Subsec. (d) to add "or" before Subdiv. (5), effective May 12, 1999; P.A.
00-30 amended Subsec. (b) to substitute "calculated" for "computed" and to add "version effective January 1, 2001, and
subsequent revisions" re the National Association of Insurance Commissioners Accounting Practices and Procedures
Manual, effective January 1, 2001; P.A. 03-19 replaced "Health Care Financing Administration" with "Centers for Medicare
and Medicaid Services" in Subsec. (a)(5)(B), effective May 12, 2003; P.A. 07-178 amended Subsec. (a)(1) to make a
technical change and Subsec. (a)(6) to allow total cost of out-of-network benefits to exceed 10% of total expenditures if
health care center obtains the prior approval of commissioner and makes an uncovered expenditures insolvency deposit
pursuant to Sec. 38a-193a, amended Subsec. (c)(1) to require every contract between a health care center and a participating
provider to contain provisions specified in Subparas. (A) to (F) or a variation approved by commissioner, amended Subsec.
(c)(2) to substitute "provisions required by subdivision (1) of this subsection" for "required prohibition", amended Subsec.
(c)(3) to require contract between a health care center and participating provider to inform such provider that it is an unfair
trade practice to request payment from an enrollee, other than a copayment or deductible, for covered medical services or
to report an enrollee to a credit reporting agency for not paying a bill for which the health care center is responsible, and
added Subsec. (f) re required deposit by each health care center with commissioner of cash, securities or any combination
thereof or other measures acceptable to commissioner, which shall have a value of not less than $500,000 at all times.
Sec. 38a-193. Protection against insolvency. (a) Net worth requirements.
(1) Before issuing any certificate of authority to any health care center on or after July
1, 1990, the commissioner shall require that a health care center have: (A) An initial
net worth of one million five hundred thousand dollars, and (B) agree to thereafter
maintain the minimum net worth required under subdivision (4) of this subsection.
(2) No health care center shall be licensed to transact business in this state or remain
so licensed unless, (A) its net worth bears a reasonable relationship to its liabilities based
upon the type, volume and nature of business transacted, and (B) its risk-based capital
related to its total adjusted capital is adequate for the type of business transacted. As
used in this subsection, "total adjusted capital" means the sum of a health care center's
net worth and any other item in the nature of capital as deemed appropriate by the
commissioner; and "risk-based capital" means the net worth of the health care center
adjusted to recognize the level of risk inherent in its business, including (i) risk with
respect to the health care center's assets, (ii) the risk of adverse underwriting experience
with respect to the health care center's liabilities and obligations, (iii) the credit risk
with respect to the health care center's business, and (iv) all other business risks and
such other relevant risks as the commissioner may determine.
(3) (A) In determining net worth, no debt shall be considered fully subordinated
unless the subordination clause is in a form acceptable to the commissioner. Any interest
obligation relating to the repayment of any subordinated debt must be similarly subordinated. (B) The interest expenses relating to the repayment of any fully subordinated
debt shall not be considered uncovered expenditures. (C) Any debt incurred by a note
meeting the requirements of this section, and otherwise acceptable to the commissioner,
shall not be considered a liability and shall be recorded as equity.
(4) Except as provided in subdivision (3) and subdivisions (5) to (7), inclusive, of
this subsection, each health care center shall maintain a minimum net worth equal to
the greater of: (A) One million dollars; or (B) two per cent of its annual premium revenues
as reported on the most recent annual financial statement filed with the commissioner
on the first one hundred fifty million dollars of premium revenues plus one per cent of
annual premium revenues in excess of one hundred fifty million dollars. No health care
center authorized by the commissioner to do business in this state, on July 1, 1990, shall
be required to comply with the provisions of subparagraph (B) of this subdivision until
January 1, 1995.
(5) Each health care center that offers or proposes to offer out-of-network benefits
shall either:
(A) Enter into an agreement with a duly licensed insurance company to provide
coverage to subscribers and enrollees outside of the health care center's established
network, subject to approval by the commissioner; or
(B) Implement an out-of-network benefit system to be operated by the health care
center, subject to approval by the commissioner, provided the health care center establishes and maintains its net worth at an amount equal to the greater of (i) three million
dollars, (ii) two per cent of its annual premium revenues as reported on the most recent
annual financial statement filed with the commissioner on the first one hundred fifty
million dollars of premium revenues plus one per cent of annual premium revenues in
excess of one hundred fifty million dollars, or (iii) two months of its cost of uncovered
expenditures. For purposes of this subsection, "annual premium revenues" does not
include revenue earned as a result of an arrangement between a health care center and
the federal Centers for Medicare and Medicaid Services, on a cost or risk basis, for
services to a Medicare beneficiary, or revenue earned as a result of an arrangement
between a health care center and a Medicaid state agency, for services to a Medicaid
beneficiary. For the purposes of this subsection, the uncovered expenditures of the health
care center for the requisite two-month period shall be calculated as follows:
UE = (X + Y − Z) 6
Where:
UE =
Uncovered expenditures of the health care center for the requisite two-
month period.
X =
Total year-to-date uncovered expenditures reported in the health care
center's most recent statutory quarterly or annual statement.
Y =
Total year-to-date uncovered expenditures reported in the health care
center's annual statement for the prior calendar year.
Z =
Total year-to-date uncovered expenditures reported in the health care
center's statutory quarterly or annual statement for the current calendar
quarter of the prior calendar year.
(6) The total cost of the out-of-network benefits of a health care center shall not
exceed ten per cent of the total cost of the health care center's claims and expenses on
a quarterly basis without the prior approval of the commissioner and the effectuation
of an uncovered expenditures insolvency deposit established with the commissioner
pursuant to section 38a-193a.
(7) Any health care center that provides out-of-network benefits pursuant to this
subsection shall provide a quarterly report concurrent with filing of the required quarterly and annual financial statements which shall demonstrate compliance with the provisions of this subsection.
(8) The commissioner may adopt regulations, in accordance with chapter 54, to
implement the purposes of this subsection, including, but not limited to, provisions
concerning: (A) The preparation and filing of reports by health care centers relating to
risk-based capital levels and the calculation thereof; (B) the preparation and filing of
comprehensive financial plans when such capital levels are reduced below minimum
threshold levels; (C) the confidentiality of such reports and plans; and (D) the regulatory
corrective actions the commissioner may take in the event minimum risk-based capital
levels are not maintained, or the health care center's financial plans filed with the commissioner are deficient, or the health care center fails to otherwise comply with the
provisions of the regulations.
(b) Liabilities. Every health care center shall, when determining liabilities, include
an amount estimated in the aggregate to provide for any unearned premium and for the
payment of all claims for health care expenditures which have been incurred, 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 calculated in accordance with those accounting procedures and practices prescribed by the National Association of Insurance Commissioners Accounting
Practices and Procedures Manual, version effective January 1, 2001, and subsequent
revisions and the National Association of Insurance Commissioners Annual Statement
Instructions, subject to any deviations prescribed by the commissioner.
(c) Required provisions in every contract between health care centers and participating providers. (1) Every contract between a health care center and a participating provider of health care services shall be in writing and shall contain the following
provisions or variations approved by the commissioner:
"(A) (Name of provider or facility) .... hereby agrees that in no event, including,
but not limited to, nonpayment by (name of health care center) ...., (name of health care
center's) .... insolvency, or breach of this contract shall (name of provider or facility) ....
bill, charge, collect a deposit from, seek compensation, remuneration, or reimbursement
from, or have any recourse against a covered person or person acting on their behalf,
other than (name of health care center) ...., for services provided pursuant to this contract.
This provision shall not prohibit collection of cost-sharing amounts, or costs for noncovered services, which have not otherwise been paid by a primary or secondary carrier in
accordance with regulatory standards for coordination of benefits, from covered persons
in accordance with the terms of the covered person's health plan.
(B) (Name of provider or facility).... agrees, in the event of (name of health care
center's) .... insolvency, to continue to provide the services promised in this contract to
covered persons of (name of health care center) .... for the duration of the period for
which premiums on behalf of the covered person were paid to (name of health care
center) .... or until the covered person's discharge from inpatient facilities, whichever
time is greater.
(C) Notwithstanding any other provision in this contract, nothing in this contract
shall be construed to modify the rights and benefits contained in the covered person's
health plan.
(D) (Name of provider or facility).... may not bill the covered person for covered
services, except for cost-sharing amounts, where (name of health care center) .... denies
payment because the provider or facility has failed to comply with the terms or conditions
of this contract.
(E) (Name of provider or facility) .... further agrees (i) that the provisions of subparagraphs (A), (B), (C) and (D) of this subdivision (or citations appropriate to the contract
form) .... shall survive termination of this contract regardless of the cause giving rise to
termination and shall be construed to be for the benefit of (name of health care
center's) .... covered persons, and (ii) that this provision supersedes any oral or written
contrary agreement now existing or hereafter entered into between (name of provider
or facility) .... and covered persons or persons acting on their behalf.
(F) If (name of provider or facility) .... contracts with other providers or facilities
who agree to provide covered services to covered persons of (name of health care
center) .... with the expectation of receiving payment directly or indirectly from (name
of health care center) ...., such providers or facilities shall agree to abide by the provisions
of subparagraphs (A), (B), (C), (D) and (E) of this subsection (or citations appropriate
to the contract form) ....."
(2) In the event that the participating provider contract has not been reduced to
writing as required by this subsection or that the contract fails to contain the provisions
required by subdivision (1) of this subsection, the participating provider shall not collect
or attempt to collect from the subscriber or enrollee sums owed by the health care center.
(3) No participating provider, or agent, trustee or assignee thereof, may: (A) Maintain any action at law against a subscriber or enrollee to collect sums owed by the health
care center; or (B) request payment from a subscriber or enrollee for such sums. For
purposes of this subdivision "request payment" includes, but is not limited to, submitting
a bill for services not actually owed or submitting for such services an invoice or other
communication detailing the cost of the services that is not clearly marked with the
phrase "THIS IS NOT A BILL". The contract between a health care center and a participating provider shall inform the participating provider that pursuant to section 20-7f, it
is an unfair trade practice in violation of chapter 735a for any health care provider to
request payment from an enrollee, other than a copayment or deductible, for covered
medical services, or to report to a credit reporting agency an enrollee's failure to pay a
bill for medical services when a health care center has primary responsibility for payment
of such services.
(d) Continuation of benefits. The commissioner shall require that each health care
center have a plan for handling insolvency which allows for continuation of benefits
for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined to inpatient facilities on the date of insolvency until their discharge or expiration of benefits. In considering such a plan, the
commissioner may approve one or more of the following: (1) Insurance to cover the
expenses to be paid for continued benefits after an insolvency; (2) provisions in provider
contracts that obligate the provider to provide services after the health care center's
insolvency for the duration of the period for which premium payment has been made
and until the enrollees' discharge from inpatient facilities; (3) insolvency reserves; (4)
acceptable letters of credit; or (5) any other arrangements to assure that benefits are
continued as specified above.
(e) Notice of termination. Every agreement to provide health care services between
a provider and a health care center shall require the provider to provide at least sixty
days' advance notice to the health care center to terminate the agreement.
(f) Deposit for the protection of enrollees in the event health care center is in
rehabilitation or conservation. (1) Unless otherwise provided in this subsection, each
health care center shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which
a custodian or controlled account is utilized, cash, securities or any combination of cash
or securities or other measures that are acceptable to the commissioner, which at all
times shall have a value of not less than five hundred thousand dollars.
(2) A health care center that is in operation on October 1, 2007, shall make a deposit
equal to two hundred fifty thousand dollars. In the second year, the amount of the additional deposit for a health care center that is in operation on October 1, 2007, shall be
equal to two hundred fifty thousand dollars, for a total of five hundred thousand dollars.
(3) The deposit shall be an admitted asset of the health care center in the determination of net worth.
(4) All income from deposits shall be an asset of the organization. A health care
center that has made a securities deposit may withdraw such deposit or any part thereof
after making a substitute deposit of cash, securities or any combination of cash or securities or other measures of equal amount and value. Any securities shall be approved by
the commissioner before being deposited.
(5) The deposit shall be used to protect the interests of the health care center's
enrollees and to assure continuation of health care services to enrollees of a health care
center that is in rehabilitation or conservation. The commissioner may use the deposit
for administrative costs directly attributable to a receivership or liquidation. If the health
care center is placed in rehabilitation or liquidation, the deposit shall be an asset subject
to the provisions of the Insurers Rehabilitation and Liquidation Act.
(P.A. 90-68, S. 13, 16; P.A. 98-163, S. 2; P.A. 99-9, S. 4, 6; P.A. 00-30, S. 11, 14; P.A. 03-19, S. 89; P.A. 07-178, S. 1.)
History: P.A. 98-163 added Subsec. (c)(3)(B) prohibiting providers from requesting payment from subscribers or
enrollees of sums owed by health care centers and to define "request payment"; P.A. 99-9 amended Subsec. (a) to insert
new Subdiv. (2) re requirements for license, redesignated former Subdiv. (2) as Subdiv. (4), added new Subdivs. (5) to (7)
re out-of-network benefits and added new Subdiv. (8) re regulations, amended Subsec. (b) to substitute National Association
of Insurance Commissioners Accounting Practices and Procedures Manual and Annual Statement Instructions for regulations adopted by the commissioner and amended Subsec. (d) to add "or" before Subdiv. (5), effective May 12, 1999; P.A.
00-30 amended Subsec. (b) to substitute "calculated" for "computed" and to add "version effective January 1, 2001, and
subsequent revisions" re the National Association of Insurance Commissioners Accounting Practices and Procedures
Manual, effective January 1, 2001; P.A. 03-19 replaced "Health Care Financing Administration" with "Centers for Medicare
and Medicaid Services" in Subsec. (a)(5)(B), effective May 12, 2003; P.A. 07-178 amended Subsec. (a)(1) to make a
technical change and Subsec. (a)(6) to allow total cost of out-of-network benefits to exceed 10% of total expenditures if
health care center obtains the prior approval of commissioner and makes an uncovered expenditures insolvency deposit
pursuant to Sec. 38a-193a, amended Subsec. (c)(1) to require every contract between a health care center and a participating
provider to contain provisions specified in Subparas. (A) to (F) or a variation approved by commissioner, amended Subsec.
(c)(2) to substitute "provisions required by subdivision (1) of this subsection" for "required prohibition", amended Subsec.
(c)(3) to require contract between a health care center and participating provider to inform such provider that it is an unfair
trade practice to request payment from an enrollee, other than a copayment or deductible, for covered medical services or
to report an enrollee to a credit reporting agency for not paying a bill for which the health care center is responsible, and
added Subsec. (f) re required deposit by each health care center with commissioner of cash, securities or any combination
thereof or other measures acceptable to commissioner, which shall have a value of not less than $500,000 at all times.
