State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_131E > GS_131E-286

§ 131E‑286. Ongoing financial standards – Net worth.

(a)        Beginning the first day of operation of the PSO and exceptas otherwise provided in subsection (d) of this section, every PSO shallmaintain a minimum net worth equal to the greatest of the following amounts:

(1)        One million dollars ($1,000,000);

(2)        Two percent (2%) of annual premium revenues as reported onthe most recent annual financial statement filed with the Division on the firstone hundred fifty million dollars ($150,000,000) of premium and one percent(1%) of annual premium on the premium in excess of one hundred fifty milliondollars ($150,000,000);

(3)        An amount equal to the sum of three months uncovered healthcare expenditures as reported on the most recent financial statement filed withthe Division;

(4)        An amount equal to the sum of:

a.         Eight percent (8%) of annual health care expenditures paidon a noncapitated basis to nonaffiliated providers as reported on the mostrecent financial statement filed with the Division; and

b.         Four percent (4%) of annual health care expenditures paid ona capitated basis to nonaffiliated providers plus annual health careexpenditures paid on a noncapitated basis to affiliated providers; and

c.         Zero percent (0%) of annual health care expenditures paid ona capitated basis to affiliated providers regardless of downstream arrangementsfrom the affiliated provider.

(b)        In calculating net worth, liabilities shall not includefully subordinated debt or subordinated liabilities. For purposes of thisprovision, subordinated liabilities are claims liabilities otherwise due toproviders that are retained by the PSO to meet net worth requirements and arefully subordinated to all creditors.

(c)        In calculating net worth for purposes of this section, theitems described in G.S. 131E‑282(b) shall be admitted, except as follows:

(1)        For intangible assets, if at least the greater of onemillion dollars ($1,000,000) or sixty‑seven percent (67%) of the ongoingminimum net worth requirement is met by cash or cash equivalents, then theDivision shall admit the book value of intangible assets up to twenty percent(20%) of the minimum net worth amount required. If less than the greater of onemillion dollars ($1,000,000) or sixty‑seven percent (67%) of the ongoingminimum net worth requirement is met by cash or cash equivalents, then theDivision shall admit the book value of intangible assets up to ten percent(10%) of the minimum net worth amount required; and

(2)        Deferred acquisition costs shall not be admitted.

(d)        The Division may lower the minimum ongoing net worththreshold, and the amount held in cash or cash equivalents for PSOs thatoperate primarily in rural areas.

(e)        During the start‑up phase of the PSO, the pre‑break‑evenfinancial plan requirements shall apply. After the point of breakeven, thefinancial plan requirement shall address cash needs and the financing requiredfor the next three years.

(f)         If a PSO, or the legal entity of which the PSO is acomponent, did not earn a net operating surplus during the most recent fiscalyear, the PSO shall submit a financial plan, satisfactory to the Division,meeting all of the requirements established for the initial financial plan. (1998‑227, s. 1.)