38.2-4302 - Issuance of license; fee; minimum net worth; impairment.

§ 38.2-4302. Issuance of license; fee; minimum net worth; impairment.

A. The Commission shall issue a license to a health maintenance organizationafter the receipt of a complete application and payment of a $500nonrefundable application fee if the Commission is satisfied that thefollowing conditions are met:

1. The persons responsible for the conduct of the affairs of the applicantare competent, trustworthy, and reputable;

2. The health care plan constitutes an appropriate mechanism for the healthmaintenance organization to provide or arrange for the provision of, as aminimum, basic health care services or limited health care services on aprepaid basis, except to the extent of reasonable requirements forcopayments, deductibles, or both;

3. The health maintenance organization is financially responsible and mayreasonably be expected to meet its obligations to enrollees and prospectiveenrollees. In making this determination, the Commission may consider:

a. The financial soundness of the health care plan's arrangements for healthcare services and the schedule of prepaid charges used for those services;

b. The adequacy of working capital;

c. Any agreement with an insurer, a health services plan, a government, orany other organization for insuring the payment of the cost of health careservices or the provision for automatic applicability of an alternativecoverage if the health care plan is discontinued;

d. Any contracts with health care providers that set forth the health careservices to be performed and the providers' responsibilities for fulfillingthe health maintenance organization's obligations to its enrollees;

e. The deposit of acceptable securities in an amount satisfactory to theCommission, submitted in accordance with § 38.2-4310 as a guarantee that theobligations to the enrollees will be duly performed;

f. The applicant's net worth which shall include minimum net worth in anamount at least equal to the sum of uncovered expenses, but not less than$600,000, up to a maximum of $4 million; uncovered expenses shall be amountsdetermined from the most recently ended calendar quarter pursuant toregulations promulgated by the Commission; and

g. A financial statement of the health maintenance organization on the formrequired by § 38.2-4307;

4. The enrollees will be given an opportunity to participate in matters ofpolicy and operation as required by § 38.2-4304; and

5. Nothing in the method of operation is contrary to the public interest, asshown in the information submitted pursuant to § 38.2-4301 or Chapter 58 (§38.2-5800 et seq.) or by independent investigation. Issuance of a licenseshall not constitute approval of the forms submitted under subdivisions 6, 7,and 12 of subsection B of § 38.2-4301.

B. A licensed health maintenance organization shall have and maintain at alltimes the minimum net worth described in subdivision 3 f of subsection A ofthis section.

1. If the Commission finds that the minimum net worth of a domestic healthmaintenance organization is impaired, the Commission shall issue an orderrequiring the health maintenance organization to eliminate the impairmentwithin a period not exceeding 90 days. The Commission may by order servedupon the health maintenance organization prohibit the health maintenanceorganization from issuing any new contracts while the impairment exists. Ifat the expiration of the designated period the health maintenanceorganization has not satisfied the Commission that the impairment has beeneliminated, an order for the rehabilitation or liquidation of the healthmaintenance organization may be entered as provided in § 38.2-4317.

2. If the Commission finds an impairment of the minimum net worth of anyforeign health maintenance organization, the Commission may order the healthmaintenance organization to eliminate the impairment and restore the minimumnet worth to the amount required by this section. The Commission may, byorder served upon the health maintenance organization, prohibit the healthmaintenance organization from issuing any new contracts while the impairmentexists. If the health maintenance organization fails to comply with theCommission's order within a period of not more than 90 days, the Commissionmay, in the manner set out in § 38.2-4316, suspend or revoke the license ofthe health maintenance organization.

3. Prior to December 31, 1999, a health maintenance organization with lessthan minimum net worth which is licensed on and after June 30, 1998, maycontinue to operate as a licensed health maintenance organization without afinding of impairment if the licensee has net worth (i) on June 30, 1998, andup to December 31, 1998, in an amount at least equal to the sum of uncoveredexpenses, but not less than $300,000, up to a maximum of $2 million; (ii) onDecember 31, 1998, and up to June 30, 1999, in an amount at least equal tothe sum of uncovered expenses, but not less than $400,000, up to a maximum of$2.5 million; and (iii) on June 30, 1999, and up to December 31, 1999, in anamount at least equal to the sum of uncovered expenses, but not less than$500,000, up to a maximum of $3 million.

(1980, c. 720, § 38.1-865; 1981, c. 317; 1986, c. 562; 1992, c. 481; 1998,cc. 42, 891; 2000, c. 503; 2003, cc. 752, 767; 2004, c. 175.)