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HOUSE OF REPRESENTATIVES

H.B. NO.

590

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INSURANCE.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Section 432:1-407, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Net worth requirements are as follows:

(1) Before issuing a certificate of authority pursuant to section 432:1-301, the commissioner shall require that the mutual benefit society has an initial net worth of $1,500,000 and the society shall thereafter maintain the minimum net worth required under paragraph (2)[;].

(2) Except as provided in [paragraph (3),] paragraphs (3) and (4), every mutual benefit society shall maintain a minimum net worth equal to the greater of:

(A) $1,500,000;

(B) Two per cent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first $150,000,000 of premium revenues and one per cent of annual premium revenues on the premium revenues in excess of $150,000,000; [or]

(C) An amount equal to eight per cent of the sum of annual health care expenditures and operating expenses as reported on the most recent financial statement filed with the commissioner; or

(D) Three times the average of monthly net claims incurred during the past calendar year.

(3) The minimum net worth requirement set forth in subparagraph (2)(C) shall be phased in as follows:

(A) Fifty per cent of the amount required by subparagraph (2)(C) by December 31, 1997;

(B) Seventy-five per cent of the amount required by subparagraph (2)(C) by December 31, 1998; and

(C) One hundred per cent of the amount required by subparagraph (2)(C) by December 31, 1999.

(4) The minimum net worth requirement set forth in paragraph (2)(D) shall be phased in as follows:

(A) Fifty per cent of the amount required by paragraph (2)(D) by December 31, 2002;

(B) Seventy-five per cent of the amount required by paragraph (2)(D) by December 31, 2003; and

(C) One hundred per cent of the amount required by paragraph (2)(D) by December 31, 2004."

SECTION 2. Section 432D-8, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Net worth requirements are as follows:

(1) Before issuing any certificate of authority, the commissioner shall require that the health maintenance organization has an initial net worth of $1,500,000 and shall thereafter maintain the minimum net worth required under paragraph (2).

(2) Except as provided in [paragraph (3),] paragraphs (3) and (4), every health maintenance organization shall maintain a minimum net worth equal to the greater of:

(A) $1,500,000;

(B) Two per cent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first $150,000,000 of premium and one per cent of annual premium on the premium in excess of $150,000,000;

(C) An amount equal to the sum of three months uncovered health care expenditures as reported on the most recent financial statement filed with the commissioner; [or]

(D) An amount equal to the sum of:

(i) Eight per cent of annual health care expenditures except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the commissioner; and

(ii) Four per cent of annual hospital expenditures paid on a managed hospital payment basis as reported on the most recent financial statement filed with the commissioner[.]; or

(E) Three times the average of monthly net claims incurred during the past calendar year.

(3) The following shall apply in determining compliance with the requirements of this subsection:

(A) In determining net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the commissioner. Any interest obligation relating to the repayment of any subordinated debt shall be similarly subordinated;

(B) The interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses; and

(C) Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the commissioner, shall not be considered a liability and shall be recorded as equity.

(4) The minimum net worth requirement set forth in paragraph (2)(E) shall be phased in as follows:

(A) Fifty per cent of the amount required by paragraph (2)(E) by December 31, 2002;

(B) Seventy-five per cent of the amount required by paragraph (2)(E) by December 31, 2003; and

(C) One hundred per cent of the amount required by paragraph (2)(E) by December 31, 2004."

SECTION 3. Statutory material to be repealed is bracketed. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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