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Colorado Revised Statutes Title 10. Insurance § 10-16-411. Protection against insolvency

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(1)(a) Before issuing any certificate of authority, the commissioner shall require that the health maintenance organization have an initial minimum surplus of one million five hundred thousand dollars. “Surplus” means total assets less all liabilities with the exception of long-term loans from the secretary of the United States department of health and human services or other loan or obligation with terms and conditions acceptable to the commissioner. Such loan or obligation shall be considered equity until such time as the funding source shall declare that repayment shall commence. Upon such declaration, the amount necessary to fund the repayments, including accrued interest thereon, for the ensuing twelve months will be included as a direct liability and so classified in the determination of minimum surplus as provided by this subsection (1).

(a.5) The minimum surplus required by paragraph (a) of this subsection (1) may be reduced by up to five hundred thousand dollars if the health maintenance organization has available to it an administrative infrastructure that the commissioner considers appropriate to reduce, control, or eliminate start-up costs associated with the administration of the health maintenance organization. Such infrastructure includes office space and equipment, computer systems, software, management services contract, and personnel recruitment fees.

(b) Every health maintenance organization shall maintain a minimum surplus at least equal to one million dollars.

(1.5)(a) Notwithstanding any provision of subsection (2) or (4) of this section to the contrary, a health maintenance organization whose sole business is providing health-care services to recipients under the “Colorado Medical Assistance Act”, articles 4 to 6 of title 25.5, C.R.S., the children's basic health plan, article 8 of title 25.5, C.R.S., or medicare under Title XVIII of the federal “Social Security Act”, as amended, shall maintain a minimum surplus of not less than four million dollars and shall maintain a claims liability within its financial statement equal to the greater of:

(I) One month of federal and state reimbursements received by the health maintenance organization for services provided to health-care recipients;  or

(II) The health maintenance organization's total outstanding claims liabilities.

(b) A health maintenance organization subject to this subsection (1.5) annually shall submit an opinion by a qualified actuary that attests that the health maintenance organization's surplus level and outstanding claims liability meet the requirements of this subsection (1.5).

(2) The commissioner may, by rule, establish standards consistent with the risk-based capital models applicable to managed care organizations developed or adopted by the national association of insurance commissioners that require any such corporation to maintain a greater minimum level of surplus than the specified dollar minimums established by subsection (1) of this section. Such minimum level of surplus shall reflect the type, volume, and nature of the business being transacted. Such rules may additionally require the submission of an opinion by a qualified actuary that states whether or not the surplus level of the entity is sufficient.

(3) If a health maintenance organization fails to comply with the surplus requirements of this section, the commissioner is authorized to take appropriate action to assure that the continued operation of the health maintenance organization will not be detrimental to its enrollees.

(4)(a) If the initial application of this section would cause a reduction in the total capital and surplus of a health maintenance organization of ten percent or more or would cause the capital and surplus of a health maintenance organization to fall to or below the company action level as defined by the commissioner by rule, such health maintenance organization may, within thirty days after the effective date of such rule, file with the commissioner a request to phase in the requirements of this section over a period not to exceed three years or another time period as approved by the commissioner.

(b) Any request made pursuant to paragraph (a) of this subsection (4) shall include a complete analysis, in a form prescribed by the commissioner, of the impact upon the health maintenance organization making the request, that is expected to result from application of this section and, if a phase-in is requested, a description of the health maintenance organization's plan for the phase-in period. The commissioner shall not deny a request for a phase-in except upon notice and an opportunity for a hearing as provided in section 24-4-105, C.R.S.

(c) Any request for a hearing made pursuant to paragraph (b) of this subsection (4) shall include a description of the basis upon which relief is sought. Upon receipt of such a request, the commissioner shall, with regard to the health maintenance organization making the request, postpone the effective date of the section pending the conclusion of the hearing and the taking of final agency action thereon. The hearing shall commence within sixty days after the commissioner receives the request and shall be conducted in accordance with section 24-4-105, C.R.S.

Cite this article: - Colorado Revised Statutes Title 10. Insurance § 10-16-411. Protection against insolvency - last updated January 01, 2022 |

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