RS 22:254     

§254. Protection against insolvency

            A. Prior to the issuance of any certificate of authority, each health maintenance organization applying therefor shall deposit with the commissioner a safe keeping receipt or trust receipt from banking corporations doing a banking business within the state of Louisiana or from a savings and loan association or other insured financial institution chartered to do business in the state of Louisiana, evidencing that the health maintenance organization has deposited with the several institutions one million dollars in cash to guarantee its financial responsibility. No single deposit shall exceed the insured deposit limit of any financial depository.

            B. Each certificate or other evidence of deposit or security shall contain a restriction which reads as follows, to wit:

ACKNOWLEDGMENT OF RESTRICTION

            The cash or other deposit evidenced by this certificate shall be held by the issuer, its successors, and assigns, to demonstrate to the Louisiana Department of Insurance that the owner-payee of the certificate is financially responsible and capable of performing its obligations as a health maintenance organization. This certificate shall be renewed and renegotiated between the issuer and the owner-payee without the necessity of the certificate's release or surrender and funds evidenced hereby shall remain on deposit at or with the issuing institution, its successors or assigns, until notice of release or a demand of payment signed by the duly authorized elected incumbent commissioner of insurance of the state of Louisiana, or his duly authorized deputy, has been presented to issuer. Any issuer making payment to the commissioner upon his written demand and upon a showing of good cause shall not be liable in any manner to the owner-payee or any other person for having made such disbursements of funds. Interest earned on the funds evidenced hereby shall be paid to the owner-payee on a regular periodic basis as agreed to by the issuer and the owner-payee.

            C. Each health maintenance organization shall establish prior to the issuance of any certificate of authority, and shall maintain as long as it does business in Louisiana as a health maintenance organization, capital and surplus in the amount of three million dollars.

            D.(1) In lieu of the one million dollar aggregate deposit or deposits provided by Subsection A of this Section, each health maintenance organization applying for a certificate of authority may deposit with the commissioner an irrevocable letter or letters of credit issued in his favor in the amount of one million dollars in the aggregate, which shall be issued and maintained subject to the terms and conditions hereinafter set forth. The letter or letters of credit shall be issued by a banking corporation doing a banking business within the state of Louisiana or a savings and loan association or other insured financial institution chartered to do business in the state of Louisiana.

            (2) Each letter of credit shall be issued for a term of three years from date thereof. Once issued, the letter or letters of credit shall not be cancelled regardless of the financial status of the applicant or the bank during the term thereof. Every letter of credit shall contain the following restrictions, to wit: After the initial three-year term, the letter or letters of credit shall be automatically extended, renewed, and reissued from year to year unless notice to the contrary by the issuing bank or institution is given to the commissioner by registered mail not less than ninety days prior to the expiration date. Upon receipt of notice that the letter or letters of credit will not be renewed, the commissioner shall have the following options:

            (a) He may convert the letter or letters of credit to a cash deposit by calling for funding or payment in full thereon;

            (b) He may accept a substitute letter or letters of credit if they meet all requirements of this Subpart; or

            (c) He may convert the letter or letters of credit to a cash deposit and suspend the certificate of authority as provided by R.S. 22:257.

            E. After three years of successful operations, the commissioner may, but is not required to, waive or release up to twenty-five percent of the aggregate total deposits or letters of credit requirement set forth in Subsections A and D of this Section whenever he is satisfied that the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability, or that its performance and obligations are reasonably guaranteed by an organization with sufficient net worth and with an adequate history of generating net income, or that the assets of the organization or its contracts with insurers, hospital or medical service corporations, governments, or other organizations are sufficient to reasonably assure the performance of its obligations as a health maintenance organization, to fully protect all enrollees, and to guarantee the services to which all enrollees are entitled.

            F.(1) No letter or letters of credit issued or other security provided for herein shall be revoked, cancelled, terminated, substituted, or withdrawn by any issuing bank or financial institution without the written approval of, and ninety days prior written notice to, the commissioner at his office in Baton Rouge, such notices to be given by registered mail return receipt requested. Upon receipt of any such notice, the commissioner may exercise the powers and options granted hereinabove with respect to the letter or letters of credit. Upon a final decision of which option the commissioner will exercise, he shall give written notice by registered mail to the issuing bank or institution and the health maintenance organization at least ten days prior to termination of the letter or letters of credit. The issuer of the letter or letters of credit shall fully fund the letter or letters of credit within twenty-four hours after receipt of notice to do so from the commissioner.

            (2) Upon failure of any bank or financial institution to fund any letter or letters of credit, the commissioner shall proceed to collect same by rule to show cause by applying to the Nineteenth Judicial District Court in and for the parish of East Baton Rouge.

            G. In the liquidation or windup of the affairs of the health maintenance organization, notwithstanding any provision of law to the contrary, the commissioner shall assure any payments authorized by the Department of Insurance and issued prior to any order of liquidation are honored; thereafter, the following schedule of preferences shall be followed:

            (1) The commissioner's costs and expenses of administration, including unpaid federal and state employment withholding taxes.

            (2) Compensation actually owing to employees other than officers of a health maintenance organization for services rendered within three months prior to the commencement of a proceeding against the health maintenance organization under this Subpart, but not exceeding two thousand five hundred dollars for such employee, shall be paid prior to the payment of any other debt or claim and in the discretion of the commissioner may be paid as soon as practicable after the proceeding has commenced. However, at all times the commissioner shall reserve such funds as will in his opinion be sufficient for the payment of all claims in Paragraphs (1) through (3) of this Subsection. This priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of such employees.

            (3) Claims for covered benefits prior to cancellation that are filed within ninety days of an order of liquidation. The commissioner shall, within one hundred twenty days, present a plan for timely payment of such claims to the court for approval. The Department of Insurance shall not require refiling any claim received for covered benefits or provision of any proof of claim that would otherwise be applicable to non-benefit claims. The maximum amount paid shall not exceed the amount that would be paid under Title XVIII of the Social Security Act, 42 U.S.C. 301 et seq. The department shall establish reasonable amounts for any services or supplies covered under a health policy or contract for which an amount has not been determined under the federal Medicare program.

            (4) Claims for unearned premiums or other premium refunds.

            (5) All other claims, including claims for covered benefits provided prior to cancellation that are not filed within ninety days of an order of liquidation.

            H. Effective August 1, 2018, the liquidation or windup of affairs of a health maintenance organization shall be governed by the provisions of Chapter 9 of this Title, R.S. 22:2001 et seq.

            Acts 1986, No. 1065, §1; Acts 1995, No. 1231, §1, eff. Sept. 1, 1995; Acts 2003, No. 1106, §1, eff. Dec. 31, 2003; Redesignated from R.S. 22:2010 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2009, No. 503, §1; Acts 2012, No. 54, §1; Acts 2018, No. 97, §1.

NOTE: Former R.S. 22:254 redesignated as R.S. 22:144 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009.