(a) Intent andFindings. It is the intent of the General Assembly by the enactment of thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 to create aprocedure for a medical, hospital, or dental service corporation to convert toa stock accident and health insurance company or stock life insurance companythat is subject to the applicable provisions of Articles 1 through 64 of thisChapter. Except as provided herein, it is not the intent of the General Assemblyto supplant, modify, or repeal other provisions of this Article and Article 66of this Chapter or the provisions of Chapter 55A of the General Statutes (theNonprofit Corporation Act) that govern other transactions and the proceduresrelating to such transactions that apply to corporations governed by theprovisions of this Article and Article 66 of this Chapter.
The General Assemblyrecognizes the substantial and recent changes in market and health careconditions that are affecting these corporations and the benefit of equalregulatory treatment and competitive equality for health care insurers. TheGeneral Assembly finds that a procedure for conversion is in the best interestof policyholders because it will provide greater financial stability for thesecorporations and a greater opportunity for the corporations to remainfinancially independent. The General Assembly also finds that if a medical,hospital, or dental service corporation converts to a stock accident and healthinsurance company or stock life insurance company, the conversion plan mustprovide a benefit to the people of North Carolina equal to one hundred percent(100%) of the fair market value of the corporation.
(b) Definitions. Asused in this section, G.S. 58‑65‑132, and G.S. 58‑65‑133:
(1) "Certificateholder" includes an enrollee, as defined in Article 67 of this Chapter, ina health maintenance plan provided by the corporation or a subsidiary or by thenew corporation or a subsidiary.
(2) "Code"means Title 26 of the United States Code, the United States Internal RevenueCode of 1986, as amended.
(3) "Conversion"means the conversion of a hospital, medical, or dental service corporation to astock accident and health insurance company or stock life insurance companysubject to the applicable provisions of Articles 1 through 64 of this Chapter.
(4) "Corporation"means a hospital, medical, or dental service corporation governed by thisArticle that files or is required to file a plan of conversion with theCommissioner under subsection (d) of this section to convert from a hospital,medical, or dental service corporation to a stock accident and health insurancecompany or stock life insurance company.
(5) "Foundation"means a newly formed tax‑exempt charitable social welfare organizationformed and operating under section 501(c)(4) of the Code and Chapter 55A of theGeneral Statutes.
(6) "Newcorporation" means a corporation originally governed by this Article thathas had its plan of conversion approved by the Commissioner under G.S. 58‑65‑132and that has converted to a stock accident and health insurance company orstock life insurance company.
(c) Compliance Requiredin Certain Events. A corporation governed by this Article shall comply withthe provisions of this section, G.S. 58‑65‑132, and G.S. 58‑65‑133before it may do any of the following:
(1) Sell, lease, convey,exchange, transfer, or make other disposition, either directly or indirectly ina single transaction or related series of transactions, of ten percent (10%) ofthe corporation's assets, as determined by statutory accounting principles, to,or merge or consolidate or liquidate with or into, any business corporation orother business entity, except a business corporation or other business entitythat is a wholly owned subsidiary of the corporation. The ten percent (10%)asset limitation in this subdivision does not apply to:
a. The purchase,acquisition by assignment or otherwise by the corporation of individualaccident and health policies or contracts insuring North Carolina residents, orwith respect to accident and health group master policies or contracts, onlythe percentage portion of those policies or contracts covering North Carolinaresident certificate holders, and that are issued by a company domiciled or licensedto do business in North Carolina, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
b. In the case of apurchase by the corporation of all the common stock of a company domiciled orlicensed to do business in North Carolina, that portion of the value of thecompany which is determined by the Commissioner to be attributable toindividual accident and health policies or contracts insuring North Carolinaresidents or, in the case of accident and health group master policies orcontracts, the percentage portion of those policies or contracts covering NorthCarolina resident certificate holders, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
c. Grantingencumbrances such as security interests or deeds of trust with respect toassets owned by the corporation or any wholly owned subsidiary to secureindebtedness for borrowed money, the proceeds of which are paid solely to thecorporation or its wholly owned subsidiaries and remain subject to theprovisions of this section; and
d. Sales or othertransfers in the ordinary course of business for fair value of any interest inreal property or stocks, bonds, or other securities within the investmentportfolio owned by the corporation or any wholly owned subsidiary, the proceedsof which are paid solely to the corporation or any wholly owned subsidiary andremain subject to the provisions of this section.
(2) Directly orindirectly issue, sell, convey, exchange, transfer, or make other dispositionto any party of any equity or ownership interest in the corporation or in anybusiness entity that is owned by or is a subsidiary of the corporation,including stock, securities, or bonds, debentures, notes or any other debt orsimilar obligation that is convertible into any equity or ownership interest,stock or securities. This subdivision shall not be construed to prohibit thecorporation or a wholly owned subsidiary, with the approval of the Commissionerafter notice to the Attorney General, from investing in joint ventures orpartnerships with unrelated third parties, if no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the transaction is conducted at arm's length and for fair value,and the transaction furthers the corporation's ability to fulfill its purposes.
(3) Permit its aggregateannual revenues, determined in accordance with statutory accounting principles,from all for‑profit activities or operations, including but not limitedto those of the corporation, any wholly owned subsidiaries, and any jointventures or partnerships, to exceed forty percent (40%) of the aggregate annualrevenues, excluding investment income, of the corporation and its subsidiariesand determined in accordance with statutory accounting principles; or
(4) Permit its aggregateassets for four consecutive quarters, determined in accordance with statutoryaccounting principles, employed in all for‑profit activities oroperations, including, but not limited to, those assets owned or controlled byany for‑profit wholly owned subsidiaries, to exceed forty percent (40%)of the aggregate admitted assets of the corporation and its subsidiaries forfour consecutive quarters, determined in accordance with statutory accountingprinciples.
In determining whether thecorporation must comply with the provisions of this section, G.S. 58‑65‑132,and G.S. 58‑65‑133, the Commissioner may review and consolidateactions of the corporation, its subsidiaries, and other legal entities in whichthe corporation directly or indirectly owns an interest, and treat theconsolidated actions as requiring a conversion. An appeal of the Commissioner'sorder that consolidated actions require a conversion shall lie directly to theNorth Carolina Court of Appeals, provided that any party may petition the NorthCarolina Supreme Court, pursuant to G.S. 7A‑31(b), to certify the casefor discretionary review by the Supreme Court prior to determination by theCourt of Appeals. Appeals under this subsection must be filed within 30 days ofthe Commissioner's order and shall be considered in the most expeditious mannerpractical. The corporation must file a plan of conversion within 12 months ofthe later of the issuance of the Commissioner's order or a final decision onappeal.
(d) Charter Amendmentfor Conversion. A corporation may propose to amend its charter pursuant tothis Article to convert the corporation to a stock accident and healthinsurance company or stock life insurance company subject to the applicableprovisions of Articles 1 through 64 of this Chapter. The proposed amendedcharter and a plan for conversion as described in subsection (e) of thissection shall be filed with the Commissioner for approval.
(e) Filing ConversionPlan; Costs of Review. A corporation shall file a plan for conversion withthe Commissioner and submit a copy to the Attorney General at least 120 daysbefore the proposed date of conversion. The corporation or the new corporationshall reimburse the Department of Insurance and the office of the AttorneyGeneral for the actual costs of reviewing, analyzing, and processing the plan.The Commissioner and the Attorney General may contract with experts,consultants, or other professional advisors to assist in reviewing the plan.These contracts are personal professional service contracts exempt fromArticles 3 and 3C of Chapter 143 of the General Statutes. Contract costs forthese personal professional services shall not exceed an amount that isreasonable and appropriate for the review of the plan.
(f) Plan Requirements. A plan of conversion submitted to the Commissioner shall state withspecificity the following terms and conditions of the proposed conversion:
(1) The purposes of theconversion.
(2) The proposedarticles of incorporation of the new corporation.
(3) The proposed bylawsof the new corporation.
(4) A description of anychanges in the new corporation's mode of operations after conversion.
(5) A statementdescribing the manner in which the plan provides for the protection of allexisting contractual rights of the corporation's subscribers and certificateholders to medical or hospital services or the payment of claims forreimbursement for those services. The corporation's subscribers and certificateholders shall have no right to receive any assets, surplus, capital, payment ordistribution or to receive any stock or other ownership interest in the newcorporation in connection with the conversion.
(6) A statement that thelegal existence of the corporation does not terminate and that the newcorporation is subject to all liabilities, obligations, and relations ofwhatever kind of the corporation and succeeds to all property, assets, rights,interests, and relations of the corporation.
(7) Documentationshowing that the corporation, acting by its board of directors, trustees, orother governing authority, has approved the plan. It shall not be necessary forthe subscribers or certificate holders of the corporation to vote on or approvethe plan of conversion, any amendments to the corporation's articles ofincorporation or bylaws, or the articles of incorporation or the bylaws of thenew corporation, notwithstanding any provision to the contrary in this Articleor Article 66 of this Chapter or in the articles of incorporation or bylaws ofthe corporation.
(8) The business plan ofthe new corporation, including, but not limited to, a comparative premium rateanalysis of the new corporation's major plans and product offerings, that,among other things, compares actual premium rates for the three‑yearperiod before the filing of the plan for conversion and forecasted premiumrates for a three‑year period following the proposed conversion. Thisrate analysis shall address the forecasted effect, if any, of the proposedconversion on the cost to policyholders or certificate holders of the newcorporation and on the new corporation's underwriting profit, investmentincome, and loss and claim reserves, including the effect, if any, of adversemarket or risk selection upon these reserves. Information provided under thissubsection is confidential pursuant to G.S. 58‑19‑40.
(9) Any conditions,other than approval of the plan of conversion by the Commissioner, to befulfilled by a proposed date upon which the conversion would become effective.
(10) The proposed articlesof incorporation and bylaws of the Foundation, containing the provisionsrequired by G.S. 58‑65‑133(h).
(11) Any proposedagreement between the Foundation and the new corporation, including, but notlimited to, any agreement relating to the voting or registration for sale ofany capital stock to be issued by the new corporation to the Foundation.
(g) Public Comment. Within 20 days of receiving a plan to convert, the Commissioner shall publish anotice in one or more newspapers of general circulation in the corporation'sservice area describing the name of the corporation, the nature of the planfiled under G.S. 58‑65‑131(d), and the date of receipt of the plan.The notice shall indicate that the Commissioner will solicit public commentsand hold three public hearings on the plan. The public hearings must becompleted within 60 days of the filing of the conversion plan. The writtenpublic comment period will be held open until 10 days after the last publichearing. For good cause the Commissioner may extend these deadlines once for amaximum of 30 days. The Commissioner shall provide copies of all written publiccomments to the Attorney General.
(h) Public Access toRecords. All applications, reports, plans, or other documents under thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 are publicrecords unless otherwise provided in this Chapter. The Commissioner shallprovide the public with prompt and reasonable access to public records relatingto the proposed conversion of the corporation. Access to public records coveredby this section shall be made available for at least 30 days before the end ofthe public comment period. (1998‑3, s. 2.)
(a) Intent andFindings. It is the intent of the General Assembly by the enactment of thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 to create aprocedure for a medical, hospital, or dental service corporation to convert toa stock accident and health insurance company or stock life insurance companythat is subject to the applicable provisions of Articles 1 through 64 of thisChapter. Except as provided herein, it is not the intent of the General Assemblyto supplant, modify, or repeal other provisions of this Article and Article 66of this Chapter or the provisions of Chapter 55A of the General Statutes (theNonprofit Corporation Act) that govern other transactions and the proceduresrelating to such transactions that apply to corporations governed by theprovisions of this Article and Article 66 of this Chapter.
The General Assemblyrecognizes the substantial and recent changes in market and health careconditions that are affecting these corporations and the benefit of equalregulatory treatment and competitive equality for health care insurers. TheGeneral Assembly finds that a procedure for conversion is in the best interestof policyholders because it will provide greater financial stability for thesecorporations and a greater opportunity for the corporations to remainfinancially independent. The General Assembly also finds that if a medical,hospital, or dental service corporation converts to a stock accident and healthinsurance company or stock life insurance company, the conversion plan mustprovide a benefit to the people of North Carolina equal to one hundred percent(100%) of the fair market value of the corporation.
(b) Definitions. Asused in this section, G.S. 58‑65‑132, and G.S. 58‑65‑133:
(1) "Certificateholder" includes an enrollee, as defined in Article 67 of this Chapter, ina health maintenance plan provided by the corporation or a subsidiary or by thenew corporation or a subsidiary.
(2) "Code"means Title 26 of the United States Code, the United States Internal RevenueCode of 1986, as amended.
(3) "Conversion"means the conversion of a hospital, medical, or dental service corporation to astock accident and health insurance company or stock life insurance companysubject to the applicable provisions of Articles 1 through 64 of this Chapter.
(4) "Corporation"means a hospital, medical, or dental service corporation governed by thisArticle that files or is required to file a plan of conversion with theCommissioner under subsection (d) of this section to convert from a hospital,medical, or dental service corporation to a stock accident and health insurancecompany or stock life insurance company.
(5) "Foundation"means a newly formed tax‑exempt charitable social welfare organizationformed and operating under section 501(c)(4) of the Code and Chapter 55A of theGeneral Statutes.
(6) "Newcorporation" means a corporation originally governed by this Article thathas had its plan of conversion approved by the Commissioner under G.S. 58‑65‑132and that has converted to a stock accident and health insurance company orstock life insurance company.
(c) Compliance Requiredin Certain Events. A corporation governed by this Article shall comply withthe provisions of this section, G.S. 58‑65‑132, and G.S. 58‑65‑133before it may do any of the following:
(1) Sell, lease, convey,exchange, transfer, or make other disposition, either directly or indirectly ina single transaction or related series of transactions, of ten percent (10%) ofthe corporation's assets, as determined by statutory accounting principles, to,or merge or consolidate or liquidate with or into, any business corporation orother business entity, except a business corporation or other business entitythat is a wholly owned subsidiary of the corporation. The ten percent (10%)asset limitation in this subdivision does not apply to:
a. The purchase,acquisition by assignment or otherwise by the corporation of individualaccident and health policies or contracts insuring North Carolina residents, orwith respect to accident and health group master policies or contracts, onlythe percentage portion of those policies or contracts covering North Carolinaresident certificate holders, and that are issued by a company domiciled or licensedto do business in North Carolina, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
b. In the case of apurchase by the corporation of all the common stock of a company domiciled orlicensed to do business in North Carolina, that portion of the value of thecompany which is determined by the Commissioner to be attributable toindividual accident and health policies or contracts insuring North Carolinaresidents or, in the case of accident and health group master policies orcontracts, the percentage portion of those policies or contracts covering NorthCarolina resident certificate holders, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
c. Grantingencumbrances such as security interests or deeds of trust with respect toassets owned by the corporation or any wholly owned subsidiary to secureindebtedness for borrowed money, the proceeds of which are paid solely to thecorporation or its wholly owned subsidiaries and remain subject to theprovisions of this section; and
d. Sales or othertransfers in the ordinary course of business for fair value of any interest inreal property or stocks, bonds, or other securities within the investmentportfolio owned by the corporation or any wholly owned subsidiary, the proceedsof which are paid solely to the corporation or any wholly owned subsidiary andremain subject to the provisions of this section.
(2) Directly orindirectly issue, sell, convey, exchange, transfer, or make other dispositionto any party of any equity or ownership interest in the corporation or in anybusiness entity that is owned by or is a subsidiary of the corporation,including stock, securities, or bonds, debentures, notes or any other debt orsimilar obligation that is convertible into any equity or ownership interest,stock or securities. This subdivision shall not be construed to prohibit thecorporation or a wholly owned subsidiary, with the approval of the Commissionerafter notice to the Attorney General, from investing in joint ventures orpartnerships with unrelated third parties, if no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the transaction is conducted at arm's length and for fair value,and the transaction furthers the corporation's ability to fulfill its purposes.
(3) Permit its aggregateannual revenues, determined in accordance with statutory accounting principles,from all for‑profit activities or operations, including but not limitedto those of the corporation, any wholly owned subsidiaries, and any jointventures or partnerships, to exceed forty percent (40%) of the aggregate annualrevenues, excluding investment income, of the corporation and its subsidiariesand determined in accordance with statutory accounting principles; or
(4) Permit its aggregateassets for four consecutive quarters, determined in accordance with statutoryaccounting principles, employed in all for‑profit activities oroperations, including, but not limited to, those assets owned or controlled byany for‑profit wholly owned subsidiaries, to exceed forty percent (40%)of the aggregate admitted assets of the corporation and its subsidiaries forfour consecutive quarters, determined in accordance with statutory accountingprinciples.
In determining whether thecorporation must comply with the provisions of this section, G.S. 58‑65‑132,and G.S. 58‑65‑133, the Commissioner may review and consolidateactions of the corporation, its subsidiaries, and other legal entities in whichthe corporation directly or indirectly owns an interest, and treat theconsolidated actions as requiring a conversion. An appeal of the Commissioner'sorder that consolidated actions require a conversion shall lie directly to theNorth Carolina Court of Appeals, provided that any party may petition the NorthCarolina Supreme Court, pursuant to G.S. 7A‑31(b), to certify the casefor discretionary review by the Supreme Court prior to determination by theCourt of Appeals. Appeals under this subsection must be filed within 30 days ofthe Commissioner's order and shall be considered in the most expeditious mannerpractical. The corporation must file a plan of conversion within 12 months ofthe later of the issuance of the Commissioner's order or a final decision onappeal.
(d) Charter Amendmentfor Conversion. A corporation may propose to amend its charter pursuant tothis Article to convert the corporation to a stock accident and healthinsurance company or stock life insurance company subject to the applicableprovisions of Articles 1 through 64 of this Chapter. The proposed amendedcharter and a plan for conversion as described in subsection (e) of thissection shall be filed with the Commissioner for approval.
(e) Filing ConversionPlan; Costs of Review. A corporation shall file a plan for conversion withthe Commissioner and submit a copy to the Attorney General at least 120 daysbefore the proposed date of conversion. The corporation or the new corporationshall reimburse the Department of Insurance and the office of the AttorneyGeneral for the actual costs of reviewing, analyzing, and processing the plan.The Commissioner and the Attorney General may contract with experts,consultants, or other professional advisors to assist in reviewing the plan.These contracts are personal professional service contracts exempt fromArticles 3 and 3C of Chapter 143 of the General Statutes. Contract costs forthese personal professional services shall not exceed an amount that isreasonable and appropriate for the review of the plan.
(f) Plan Requirements. A plan of conversion submitted to the Commissioner shall state withspecificity the following terms and conditions of the proposed conversion:
(1) The purposes of theconversion.
(2) The proposedarticles of incorporation of the new corporation.
(3) The proposed bylawsof the new corporation.
(4) A description of anychanges in the new corporation's mode of operations after conversion.
(5) A statementdescribing the manner in which the plan provides for the protection of allexisting contractual rights of the corporation's subscribers and certificateholders to medical or hospital services or the payment of claims forreimbursement for those services. The corporation's subscribers and certificateholders shall have no right to receive any assets, surplus, capital, payment ordistribution or to receive any stock or other ownership interest in the newcorporation in connection with the conversion.
(6) A statement that thelegal existence of the corporation does not terminate and that the newcorporation is subject to all liabilities, obligations, and relations ofwhatever kind of the corporation and succeeds to all property, assets, rights,interests, and relations of the corporation.
(7) Documentationshowing that the corporation, acting by its board of directors, trustees, orother governing authority, has approved the plan. It shall not be necessary forthe subscribers or certificate holders of the corporation to vote on or approvethe plan of conversion, any amendments to the corporation's articles ofincorporation or bylaws, or the articles of incorporation or the bylaws of thenew corporation, notwithstanding any provision to the contrary in this Articleor Article 66 of this Chapter or in the articles of incorporation or bylaws ofthe corporation.
(8) The business plan ofthe new corporation, including, but not limited to, a comparative premium rateanalysis of the new corporation's major plans and product offerings, that,among other things, compares actual premium rates for the three‑yearperiod before the filing of the plan for conversion and forecasted premiumrates for a three‑year period following the proposed conversion. Thisrate analysis shall address the forecasted effect, if any, of the proposedconversion on the cost to policyholders or certificate holders of the newcorporation and on the new corporation's underwriting profit, investmentincome, and loss and claim reserves, including the effect, if any, of adversemarket or risk selection upon these reserves. Information provided under thissubsection is confidential pursuant to G.S. 58‑19‑40.
(9) Any conditions,other than approval of the plan of conversion by the Commissioner, to befulfilled by a proposed date upon which the conversion would become effective.
(10) The proposed articlesof incorporation and bylaws of the Foundation, containing the provisionsrequired by G.S. 58‑65‑133(h).
(11) Any proposedagreement between the Foundation and the new corporation, including, but notlimited to, any agreement relating to the voting or registration for sale ofany capital stock to be issued by the new corporation to the Foundation.
(g) Public Comment. Within 20 days of receiving a plan to convert, the Commissioner shall publish anotice in one or more newspapers of general circulation in the corporation'sservice area describing the name of the corporation, the nature of the planfiled under G.S. 58‑65‑131(d), and the date of receipt of the plan.The notice shall indicate that the Commissioner will solicit public commentsand hold three public hearings on the plan. The public hearings must becompleted within 60 days of the filing of the conversion plan. The writtenpublic comment period will be held open until 10 days after the last publichearing. For good cause the Commissioner may extend these deadlines once for amaximum of 30 days. The Commissioner shall provide copies of all written publiccomments to the Attorney General.
(h) Public Access toRecords. All applications, reports, plans, or other documents under thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 are publicrecords unless otherwise provided in this Chapter. The Commissioner shallprovide the public with prompt and reasonable access to public records relatingto the proposed conversion of the corporation. Access to public records coveredby this section shall be made available for at least 30 days before the end ofthe public comment period. (1998‑3, s. 2.)
(a) Intent andFindings. It is the intent of the General Assembly by the enactment of thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 to create aprocedure for a medical, hospital, or dental service corporation to convert toa stock accident and health insurance company or stock life insurance companythat is subject to the applicable provisions of Articles 1 through 64 of thisChapter. Except as provided herein, it is not the intent of the General Assemblyto supplant, modify, or repeal other provisions of this Article and Article 66of this Chapter or the provisions of Chapter 55A of the General Statutes (theNonprofit Corporation Act) that govern other transactions and the proceduresrelating to such transactions that apply to corporations governed by theprovisions of this Article and Article 66 of this Chapter.
The General Assemblyrecognizes the substantial and recent changes in market and health careconditions that are affecting these corporations and the benefit of equalregulatory treatment and competitive equality for health care insurers. TheGeneral Assembly finds that a procedure for conversion is in the best interestof policyholders because it will provide greater financial stability for thesecorporations and a greater opportunity for the corporations to remainfinancially independent. The General Assembly also finds that if a medical,hospital, or dental service corporation converts to a stock accident and healthinsurance company or stock life insurance company, the conversion plan mustprovide a benefit to the people of North Carolina equal to one hundred percent(100%) of the fair market value of the corporation.
(b) Definitions. Asused in this section, G.S. 58‑65‑132, and G.S. 58‑65‑133:
(1) "Certificateholder" includes an enrollee, as defined in Article 67 of this Chapter, ina health maintenance plan provided by the corporation or a subsidiary or by thenew corporation or a subsidiary.
(2) "Code"means Title 26 of the United States Code, the United States Internal RevenueCode of 1986, as amended.
(3) "Conversion"means the conversion of a hospital, medical, or dental service corporation to astock accident and health insurance company or stock life insurance companysubject to the applicable provisions of Articles 1 through 64 of this Chapter.
(4) "Corporation"means a hospital, medical, or dental service corporation governed by thisArticle that files or is required to file a plan of conversion with theCommissioner under subsection (d) of this section to convert from a hospital,medical, or dental service corporation to a stock accident and health insurancecompany or stock life insurance company.
(5) "Foundation"means a newly formed tax‑exempt charitable social welfare organizationformed and operating under section 501(c)(4) of the Code and Chapter 55A of theGeneral Statutes.
(6) "Newcorporation" means a corporation originally governed by this Article thathas had its plan of conversion approved by the Commissioner under G.S. 58‑65‑132and that has converted to a stock accident and health insurance company orstock life insurance company.
(c) Compliance Requiredin Certain Events. A corporation governed by this Article shall comply withthe provisions of this section, G.S. 58‑65‑132, and G.S. 58‑65‑133before it may do any of the following:
(1) Sell, lease, convey,exchange, transfer, or make other disposition, either directly or indirectly ina single transaction or related series of transactions, of ten percent (10%) ofthe corporation's assets, as determined by statutory accounting principles, to,or merge or consolidate or liquidate with or into, any business corporation orother business entity, except a business corporation or other business entitythat is a wholly owned subsidiary of the corporation. The ten percent (10%)asset limitation in this subdivision does not apply to:
a. The purchase,acquisition by assignment or otherwise by the corporation of individualaccident and health policies or contracts insuring North Carolina residents, orwith respect to accident and health group master policies or contracts, onlythe percentage portion of those policies or contracts covering North Carolinaresident certificate holders, and that are issued by a company domiciled or licensedto do business in North Carolina, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
b. In the case of apurchase by the corporation of all the common stock of a company domiciled orlicensed to do business in North Carolina, that portion of the value of thecompany which is determined by the Commissioner to be attributable toindividual accident and health policies or contracts insuring North Carolinaresidents or, in the case of accident and health group master policies orcontracts, the percentage portion of those policies or contracts covering NorthCarolina resident certificate holders, if the purchase is first approved by theCommissioner after notice to the Attorney General, no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the purchase is transacted at arm's length and for fair value,and the purchase will further the corporation's ability to fulfill itspurposes;
c. Grantingencumbrances such as security interests or deeds of trust with respect toassets owned by the corporation or any wholly owned subsidiary to secureindebtedness for borrowed money, the proceeds of which are paid solely to thecorporation or its wholly owned subsidiaries and remain subject to theprovisions of this section; and
d. Sales or othertransfers in the ordinary course of business for fair value of any interest inreal property or stocks, bonds, or other securities within the investmentportfolio owned by the corporation or any wholly owned subsidiary, the proceedsof which are paid solely to the corporation or any wholly owned subsidiary andremain subject to the provisions of this section.
(2) Directly orindirectly issue, sell, convey, exchange, transfer, or make other dispositionto any party of any equity or ownership interest in the corporation or in anybusiness entity that is owned by or is a subsidiary of the corporation,including stock, securities, or bonds, debentures, notes or any other debt orsimilar obligation that is convertible into any equity or ownership interest,stock or securities. This subdivision shall not be construed to prohibit thecorporation or a wholly owned subsidiary, with the approval of the Commissionerafter notice to the Attorney General, from investing in joint ventures orpartnerships with unrelated third parties, if no profit will inure to thebenefit of any officer, director, or employee of the corporation or itssubsidiaries, the transaction is conducted at arm's length and for fair value,and the transaction furthers the corporation's ability to fulfill its purposes.
(3) Permit its aggregateannual revenues, determined in accordance with statutory accounting principles,from all for‑profit activities or operations, including but not limitedto those of the corporation, any wholly owned subsidiaries, and any jointventures or partnerships, to exceed forty percent (40%) of the aggregate annualrevenues, excluding investment income, of the corporation and its subsidiariesand determined in accordance with statutory accounting principles; or
(4) Permit its aggregateassets for four consecutive quarters, determined in accordance with statutoryaccounting principles, employed in all for‑profit activities oroperations, including, but not limited to, those assets owned or controlled byany for‑profit wholly owned subsidiaries, to exceed forty percent (40%)of the aggregate admitted assets of the corporation and its subsidiaries forfour consecutive quarters, determined in accordance with statutory accountingprinciples.
In determining whether thecorporation must comply with the provisions of this section, G.S. 58‑65‑132,and G.S. 58‑65‑133, the Commissioner may review and consolidateactions of the corporation, its subsidiaries, and other legal entities in whichthe corporation directly or indirectly owns an interest, and treat theconsolidated actions as requiring a conversion. An appeal of the Commissioner'sorder that consolidated actions require a conversion shall lie directly to theNorth Carolina Court of Appeals, provided that any party may petition the NorthCarolina Supreme Court, pursuant to G.S. 7A‑31(b), to certify the casefor discretionary review by the Supreme Court prior to determination by theCourt of Appeals. Appeals under this subsection must be filed within 30 days ofthe Commissioner's order and shall be considered in the most expeditious mannerpractical. The corporation must file a plan of conversion within 12 months ofthe later of the issuance of the Commissioner's order or a final decision onappeal.
(d) Charter Amendmentfor Conversion. A corporation may propose to amend its charter pursuant tothis Article to convert the corporation to a stock accident and healthinsurance company or stock life insurance company subject to the applicableprovisions of Articles 1 through 64 of this Chapter. The proposed amendedcharter and a plan for conversion as described in subsection (e) of thissection shall be filed with the Commissioner for approval.
(e) Filing ConversionPlan; Costs of Review. A corporation shall file a plan for conversion withthe Commissioner and submit a copy to the Attorney General at least 120 daysbefore the proposed date of conversion. The corporation or the new corporationshall reimburse the Department of Insurance and the office of the AttorneyGeneral for the actual costs of reviewing, analyzing, and processing the plan.The Commissioner and the Attorney General may contract with experts,consultants, or other professional advisors to assist in reviewing the plan.These contracts are personal professional service contracts exempt fromArticles 3 and 3C of Chapter 143 of the General Statutes. Contract costs forthese personal professional services shall not exceed an amount that isreasonable and appropriate for the review of the plan.
(f) Plan Requirements. A plan of conversion submitted to the Commissioner shall state withspecificity the following terms and conditions of the proposed conversion:
(1) The purposes of theconversion.
(2) The proposedarticles of incorporation of the new corporation.
(3) The proposed bylawsof the new corporation.
(4) A description of anychanges in the new corporation's mode of operations after conversion.
(5) A statementdescribing the manner in which the plan provides for the protection of allexisting contractual rights of the corporation's subscribers and certificateholders to medical or hospital services or the payment of claims forreimbursement for those services. The corporation's subscribers and certificateholders shall have no right to receive any assets, surplus, capital, payment ordistribution or to receive any stock or other ownership interest in the newcorporation in connection with the conversion.
(6) A statement that thelegal existence of the corporation does not terminate and that the newcorporation is subject to all liabilities, obligations, and relations ofwhatever kind of the corporation and succeeds to all property, assets, rights,interests, and relations of the corporation.
(7) Documentationshowing that the corporation, acting by its board of directors, trustees, orother governing authority, has approved the plan. It shall not be necessary forthe subscribers or certificate holders of the corporation to vote on or approvethe plan of conversion, any amendments to the corporation's articles ofincorporation or bylaws, or the articles of incorporation or the bylaws of thenew corporation, notwithstanding any provision to the contrary in this Articleor Article 66 of this Chapter or in the articles of incorporation or bylaws ofthe corporation.
(8) The business plan ofthe new corporation, including, but not limited to, a comparative premium rateanalysis of the new corporation's major plans and product offerings, that,among other things, compares actual premium rates for the three‑yearperiod before the filing of the plan for conversion and forecasted premiumrates for a three‑year period following the proposed conversion. Thisrate analysis shall address the forecasted effect, if any, of the proposedconversion on the cost to policyholders or certificate holders of the newcorporation and on the new corporation's underwriting profit, investmentincome, and loss and claim reserves, including the effect, if any, of adversemarket or risk selection upon these reserves. Information provided under thissubsection is confidential pursuant to G.S. 58‑19‑40.
(9) Any conditions,other than approval of the plan of conversion by the Commissioner, to befulfilled by a proposed date upon which the conversion would become effective.
(10) The proposed articlesof incorporation and bylaws of the Foundation, containing the provisionsrequired by G.S. 58‑65‑133(h).
(11) Any proposedagreement between the Foundation and the new corporation, including, but notlimited to, any agreement relating to the voting or registration for sale ofany capital stock to be issued by the new corporation to the Foundation.
(g) Public Comment. Within 20 days of receiving a plan to convert, the Commissioner shall publish anotice in one or more newspapers of general circulation in the corporation'sservice area describing the name of the corporation, the nature of the planfiled under G.S. 58‑65‑131(d), and the date of receipt of the plan.The notice shall indicate that the Commissioner will solicit public commentsand hold three public hearings on the plan. The public hearings must becompleted within 60 days of the filing of the conversion plan. The writtenpublic comment period will be held open until 10 days after the last publichearing. For good cause the Commissioner may extend these deadlines once for amaximum of 30 days. The Commissioner shall provide copies of all written publiccomments to the Attorney General.
(h) Public Access toRecords. All applications, reports, plans, or other documents under thissection, G.S. 58‑65‑132, and G.S. 58‑65‑133 are publicrecords unless otherwise provided in this Chapter. The Commissioner shallprovide the public with prompt and reasonable access to public records relatingto the proposed conversion of the corporation. Access to public records coveredby this section shall be made available for at least 30 days before the end ofthe public comment period. (1998‑3, s. 2.)
