§ 301.121. Protections against insolvency.
(a) A new certificate of authority filing shall include procedures to be implemented to meet the requirements for protection against insolvency.
(b) Requirements for protection against insolvency include:
(1) For new plans filing for a certificate of authority, a minimum initial net worth of $1.5 million.
(2) For every operational HMO, minimum net worth equal to the greater of $1 million or 3 months uncovered health care expenditures for Pennsylvania enrollees as reported on the most recent financial statement filed with the Commissioner. A dedicated funding commitment, such as an irrevocable letter of credit or other instrument from a parent company, may be considered in assessing net worth, if approved by the Commissioner. This commitment would not be considered a substitute for a capital infusion needed to obtain a positive net worth.
(c) Existing HMOs have 4 years to meet the net worth requirements, in increments of $250,000 as of January 1 of each year. The plan is required to include the uncovered expenses amount, if applicable, in the fifth year.
(d) Interest expenses relating to the repayment of a fully subordinated debt are considered a covered expense.
(e) Fully subordinated debt is not considered a liability.
(f) An HMO shall deposit with the Commissioner cash, securities or a bond, or an acceptable combination, which has a value of at least $100,000. The deposit shall cover administrative costs in the event of liquidation.
(g) The deposit, as required in subsection (f), is an admitted asset of the HMO in the determination of net worth.
(h) Income from deposits is an asset of the organization. An HMO that has made a securities deposit could withdraw that deposit or a part thereof after making a substitute deposit of cash, securities, or a combination of these, or other instruments of equal amount and value.
(i) The Commissioner may reduce or eliminate the deposit requirement if the HMO deposits with the State Treasurer, the Commissioner or other official body of the state of the HMO’s domicile for the protection of all subscribers and enrollees of the HMO, wherever located, cash, acceptable securities or surety, and delivers to the Commissioner a certificate to that effect, authenticated by the appropriate state official holding the deposit.
(j) An HMO investment is subject to the investment provisions for a stock life company in sections 404.1 and 404.2 of The Insurance Company Law of 1921 (40 P. S. § § 504.1 and 504.2).
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