ARIZONA STATE SENATE
Phoenix, Arizona
health care services
organizations; insolvency
Adjusts priorities regarding claimants and their priority for payment, and additional regulatory tools available to the Department of Insurance (DOI) regarding Health Care Services Organizations (HCSOs) insolvency.
Currently in statute, HCSOs, commonly referred to as HMOs, are required to have a plan for the risks of insolvency that take effect the moment an HCSO becomes insolvent. The plan must include a continuation of benefits period. In the event that a delinquency proceeding takes place against an insurer domiciled in Arizona, law has established a priority of distribution of claims as follows:
(1) the administrative expenses incurred from the delinquency proceeding;
(2) claims of the Arizona’s different guaranty funds established by law;
(3) claims under insurance policies and contracts and investment contracts;
(4) claims of the federal government;
(5) claims for compensation owed to employees of the insurer;
(6) claims of any state or local government;
(7) claims of other general creditors;
(8) claims filed after the date specified for filing proofs; and,
(9) claims of surplus note or certificate of contribution holders and claims of shareholders.
Every claim in each class shall be paid in full before the members of the next class receive payment. Other considerations include the other carriers that participated in the open enrollment period must offer coverage to enrollees of an HCSO that becomes insolvent. And the enrollees must be provided the same coverage and rates offered at the last open enrollment period without any waiting periods or pre-existing condition exclusion. H.B. 2117 adjusts payment priorities by claimants and expands the open enrollment provisions for displaced members, among other considerations.
According to the DOI, there
is no impact to the general fund associated with H.B. 2117.
1. Requires HCSO contracts include stipulations that the contracted provider shall remain in the network through the period of the insolvency unless:
(1)
the
receiver is not able to pay the health care provider’s post receivership claims
at the contract rate; or,
(2)
the
Receivership Court determines that the insolvent HCSO has satisfied its
obligations to its enrollees.
2. Establishes that claims of enrollees in a HCSO delinquency proceeding have the same priority as indemnity claims.
3. Designates that health care providers in an HCSO delinquency proceeding have the highest priority of all creditors to the extent that those claims are not fully funded by the plan for insolvency.
4. Establishes that notice from the receiver indicating there is inadequate assurance to pay provider claims after the insolvency is reason to terminate a provider contract.
5. Exempts HCSOs that the Director determines does not have adequate resources from the 30-day open enrollment requirement to enrollees on an insolvent HCSO.
6. Requires the receiver submit a report regarding the adequacy of the plan for the risk of insolvency soon after commencement of a delinquency proceeding.
7. Stipulates the receiver notify the Receivership Court and providers if the plan for the risk of insolvency is determined inadequate.
8. Requires the replacing HCSOs to offer similar coverage at a similar rate using statutory methodology.
9. Make individuals eligible for coverage with guaranteed issue in the event that their coverage terminates during the delinquency proceeding.
10. Permits the receiver to request that the Receivership Court approve an alternative plan to provide coverage to displaced enrollees.
11. Allows the Receivership Court to order that an offer of coverage terminate the obligations of the insolvent HCSO to its enrollee.
12. Prescribes definitions.
13. Provides for a general effective date.
Prepared by Senate Staff
March 13, 2001