IC 27-13-12
    Chapter 12. Protection Against Insolvency; Net WorthRequirements

IC 27-13-12-1
"Net worth" defined; computation
    Sec. 1. (a) As used in this chapter, "net worth" means the excessof total assets over total liabilities, excluding liabilities that havebeen subordinated in a manner acceptable to the commissioner.
    (b) For the purposes of computing net worth, the total assets mustbe reduced by the value assigned to the following intangible assets:
        (1) Goodwill.
        (2) Going concern value.
        (3) Organizational expense.
        (4) Start-up costs.
        (5) Long term prepayments of deferred charges.
        (6) Nonreturnable deposits.
        (7) Obligations of officers, directors, owners, or affiliates,except short term obligations of affiliates for goods or servicesthat:
            (A) arise in the normal course of business;
            (B) are payable on the same terms as equivalent transactionswith nonaffiliates; and
            (C) are not past due.
    (c) For purposes of computing net worth, the health maintenanceorganization may include in its assets the value assigned to thefollowing:
        (1) Medical equipment that:
            (A) is owned by the health maintenance organization and isnot subject to any lien, claim, or encumbrance;
            (B) is used in the treatment, diagnosis, or care of enrolleesof the health maintenance organization;
            (C) has an initial cost of at least three thousand dollars($3,000) for each piece of equipment; and
            (D) has a useful life of at least two (2) years.
        (2) Data processing equipment that is:
            (A) owned by the health maintenance organization and is notsubject to any lien, claim, or encumbrance; and
            (B) used in the operation of the health maintenanceorganization.
    (d) The value assigned to the assets described in subsection (c)must equal the lesser of:
        (1) the fair market value; or
        (2) the cost of the equipment, minus its accumulateddepreciation, calculated in accordance with generally acceptedaccounting principles.
    (e) The aggregate value of the medical equipment described insubsection (c)(1) may not exceed thirty percent (30%) of the totalassets permitted to be included in the computation of net worth.
As added by P.L.26-1994, SEC.25. Amended by P.L.195-1996,

SEC.6.

IC 27-13-12-2
Initial minimum net worth
    Sec. 2. Before issuing a certificate of authority to a healthmaintenance organization, the commissioner shall require that thehealth maintenance organization:
        (1) have an initial net worth of at least one million five hundredthousand dollars ($1,500,000); and
        (2) maintain, after issuance of the certificate, at least theminimum net worth required under section 3 of this chapter.
As added by P.L.26-1994, SEC.25.

IC 27-13-12-3
Maintenance of minimum net worth
    Sec. 3. Except as provided in sections 4 and 5 of this chapter, ahealth maintenance organization shall maintain a minimum net worthequal to the greater of:
        (1) one million dollars ($1,000,000);
        (2) based on annual premium revenues as reported on the mostrecent annual financial statement filed with the commissioner,the total of two percent (2%) of annual premium revenues onthe first one hundred fifty million dollars ($150,000,000) ofpremium and one percent (1%) of annual premium on thepremium in excess of one hundred fifty million dollars($150,000,000);
        (3) an amount equal to the sum of three (3) months ofuncovered health care expenditures, as reported on the mostrecent financial statement of the health maintenanceorganization filed with the commissioner underIC 27-13-8-2(a)(1); or
        (4) an amount equal to the sum of:
            (A) eight percent (8%) of annual health care expendituresexcept those paid on a capitated basis or managed hospitalpayment basis as reported on the most recent financialstatement filed with the commissioner; and
            (B) four percent (4%) of annual hospital expenditures paidon a managed hospital payment basis as reported on the mostrecent financial statement filed with the commissioner.
As added by P.L.26-1994, SEC.25.

IC 27-13-12-4
Net worth schedule
    Sec. 4. A health maintenance organization licensed before July 1,1994, must maintain a net worth equal to the following:
        (1) Twenty-five percent (25%) of the amount required undersection 3 of this chapter by December 31, 1994.
        (2) Fifty percent (50%) of the amount required under section 3of this chapter by December 31, 1995.
        (3) Seventy-five percent (75%) of the amount required under

section 3 of this chapter by December 31, 1996.
        (4) One hundred percent (100%) of the amount required undersection 3 of this chapter by December 31, 1997.
As added by P.L.26-1994, SEC.25.

IC 27-13-12-5
Consideration of debts
    Sec. 5. (a) In determining net worth under this chapter, a debt maynot be considered fully subordinated unless:
        (1) the subordination clause is in a form acceptable to thecommissioner; and
        (2) any interest obligation relating to the repayment of thesubordinated debt is subordinated under a clause that is in aform acceptable to the commissioner.
    (b) The interest expense relating to the repayment of any fullysubordinated debt is considered a covered expense.
    (c) Any debt that:
        (1) is incurred through a note that meets the requirements of thischapter; and
        (2) is otherwise acceptable to the commissioner;
may not be considered liability and must be recorded as equity.
As added by P.L.26-1994, SEC.25.

IC 27-13-12-6
Adoption of rules
    Sec. 6. The commissioner may adopt rules to further definewhether and to what extent the assets of a health maintenanceorganization may be considered admitted assets for purposes ofcomplying with the requirements of this chapter.
As added by P.L.26-1994, SEC.25.