REPORT TITLE:
RELATING TO INSURANCE


DESCRIPTION: Requires HMO's and mutual benefit societies to file
audit statements in accordance with the standards set forth by
the National Association of Insurance Commissioners.

 
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HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



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

 1      SECTION 1.  Chapter 432, Hawaii Revised Statutes, is amended
 
 2 by adding to article 1 a new section to be appropriately
 
 3 designated and to read as follows:
 
 4      "432:1-      Reserve credit for reinsurance.  Any society
 
 5 that takes credit for reserves on risks ceded to a reinsurer
 
 6 shall be subject to provisions of chapter 431 related to credit
 
 7 for reinsurance."
 
 8      SECTION 2.  Chapter 432D, Hawaii Revised Statutes, is
 
 9 amended by adding a new section to be appropriately designated
 
10 and to read as follows:
 
11      "432D-     Reserve credit for reinsurance.  Any health
 
12 maintenance organization that takes credit for reserves on risks
 
13 ceded to a reinsurer shall be subject to provisions of chapter
 
14 431 related to credit for reinsurance."
 
15      SECTION 3.  Section 432:1-404, Hawaii Revised Statutes, is
 
16 amended by amending subsection (a) to read as follows:
 
17      "(a)  Each society shall file with the commissioner
 
18 annually, on or before April 30 in each year, a statement under
 
19 oath, and in such form and detail as the commissioner shall
 

 
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 1 [prescribe.  Those societies promising or offering to pay death,
 
 2 sick, disability, or other benefits shall set forth in the
 
 3 statement the following:
 
 4      (1)  The total business transacted and the amount of gross
 
 5           receipts received by the society during the year ending
 
 6           December 31 last preceding;
 
 7      (2)  The resources and liabilities of the society at the
 
 8           close of business on December 31;
 
 9      (3)  The receipts and expenditures; and
 
10      (4)  The computation of the loss or gain of the society
 
11           during the calendar year.]
 
12 prescribe; provided that any association or society organized and
 
13 operating as a nonprofit medical indemnity or hospital service
 
14 association shall file a report with the commissioner covering
 
15 the preceding calendar year and verified by at least two
 
16 principal officers.  The report shall comply with sections 431:3-
 
17 301 and 431:3-302.  The commissioner may prescribe the forms on
 
18 which the report is to be filed.
 
19      In addition, any association or society organized and
 
20 operating as a nonprofit medical indemnity or hospital service
 
21 association annually shall file with the commissioner the
 
22 following by the dates specified:
 
23      (1)  An audit, by an independent, certified public
 

 
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 1           accountant or an accounting firm designated by the
 
 2           association or society, of the financial statements,
 
 3           reporting the financial condition and results of
 
 4           operations of the association or society on or before
 
 5           June 1, or a later date as the commissioner upon
 
 6           request or for cause may specify.  The association or
 
 7           society, on an annual basis and prior to the
 
 8           commencement of the audit, shall notify the
 
 9           commissioner in writing of the name and address of the
 
10           person or firm retained to conduct the annual audit.
 
11           The commissioner may disapprove the association's or
 
12           society's designation within fifteen days of receipt of
 
13           the association's or society's notice, and the
 
14           association or society shall be required to designate
 
15           another independent certified public accountant or
 
16           accounting firm.  The audit required in this paragraph
 
17           shall be prepared in accordance with the National
 
18           Association of Insurance Commissioners' annual
 
19           statement instructions, following the practices and
 
20           procedures prescribed by the National Association of
 
21           Insurance Commissioners' accounting practices and
 
22           procedures manuals; and
 
23      (2)  A description of the available grievance procedures,
 

 
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 1           the total number of grievances handled through those
 
 2           procedures, a compilation of the causes underlying
 
 3           those grievances, and a summary of the final
 
 4           disposition of those grievances on or before April 30."
 
 5      SECTION 4.  Section 432D-5, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a)  Every health maintenance organization shall file
 
 8 annually, on or before [March 1,] April 30, [file] a report
 
 9 verified by at least two principal officers [with the
 
10 commissioner] covering the preceding calendar year.  Each health
 
11 maintenance organization shall file quarterly[,] with the
 
12 commissioner, on or before the forty-fifth day after each
 
13 quarter, a copy of its quarterly report verified by at least two
 
14 principal officers [with the commissioner].  These reports shall
 
15 comply with sections 431:3-301 and 431:3-302.  The commissioner
 
16 may prescribe [on which] the forms on which the reports are to be
 
17 filed.  In addition, the health maintenance organization annually
 
18 shall file with the commissioner the following by the dates
 
19 specified:
 
20      (1)  An audit, by [a designated] an independent certified
 
21           public accountant or an accounting firm designated by
 
22           the health maintenance organization of the financial
 
23           statements, reporting the financial condition and
 
24           results of operations of the health maintenance
 

 
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 1           organization on or before June 1, or [such] a later
 
 2           date as the commissioner upon request or for cause may
 
 3           specify.  The health maintenance organization, on an
 
 4           annual basis and prior to the commencement of the
 
 5           audit, shall notify the commissioner in writing of the
 
 6           name and address of the person or firm retained to
 
 7           conduct the annual audit.  The commissioner may
 
 8           disapprove the health maintenance organization's
 
 9           designation within fifteen days of receipt of the
 
10           health maintenance organization's notice, and the
 
11           health maintenance organization shall be required to
 
12           designate another independent certified public
 
13           accountant or accounting firm[;].  The audit required
 
14           in this paragraph shall be prepared in accordance with
 
15           the National Association of Insurance Commissioners'
 
16           annual statement instructions, following the practices
 
17           and procedures prescribed by the National Association
 
18           of Insurance Commissioners' accounting practices and
 
19           procedures manuals;
 
20      (2)  A list of the providers who have executed a contract
 
21           that complies with section 432D-8(d) on or before
 
22           [March 1;] April 30; and
 
23      (3)  A description of the available grievance procedures,
 
24           the total number of grievances handled through those
 

 
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 1           procedures, a compilation of the causes underlying
 
 2           those grievances, and a summary of the final
 
 3           disposition of those grievances on or before [March 1.]
 
 4           April 30."
 
 5      SECTION 5.  Section 432D-7, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]432D-7[]]  Investments.  All investments permitted
 
 8 under this section or section 432D-3(a)(1) can be considered as
 
 9 admitted assets in determination of net worth; provided that
 
10 these investments are in compliance [with rules adopted by the
 
11 commissioner.  With the exception of investments made in
 
12 accordance with section 432D-3(a)(1), the funds of a health
 
13 maintenance organization shall be invested only as permitted by
 
14 rules adopted by the commissioner pursuant to chapter 91.] with
 
15 article 6 of chapter 431."
 
16      SECTION 6.  Section 432D-22, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "[[]432D-22[]]  Acquisition of control of or merger of a
 
19 health maintenance organization.  No person may make a tender for
 
20 or a request or invitation for tenders of, enter into an
 
21 agreement to exchange securities for, or acquire in the open
 
22 market or otherwise, any voting security of a health maintenance
 
23 organization or enter into any other agreement if, after the
 
24 consummation thereof, that person [would], directly or
 
25 indirectly, or by conversion or by exercise of any right to
 

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 1 acquire, would be in control of the health maintenance
 
 2 organization, and no person may enter into an agreement to merge
 
 3 or consolidate with or otherwise to acquire control of a health
 
 4 maintenance organization, unless, at the time any offer, request,
 
 5 or invitation is made or any agreement is entered into, or prior
 
 6 to the acquisition of the securities if no offer or agreement is
 
 7 involved, the person has filed with the commissioner and has sent
 
 8 to the health maintenance organization[,] information required by
 
 9 section [431:11-103(a)(1), (2), (3), (4), (5), and (12)] 431:11-
 
10 104 and the offer, request, invitation, agreement, or acquisition
 
11 has been approved by the commissioner.  Approval by the
 
12 commissioner shall be governed by section 431:11-104(d)[.];
 
13 provided that if no action is taken by the commissioner within
 
14 thirty days, the offer, request, invitation, agreement, or
 
15 acquisition shall be deemed approved."
 
16      SECTION 7.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 8.  This Act shall take effect upon its approval.
 

 
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