CHAPTER 698a

HEALTH CARE AND RELATED SERVICE GROUPS

Table of Contents

Sec. 38a-175. (Formerly Sec. 33-179a). Definitions.

Sec. 38a-176. (Formerly Sec. 33-179b). Applicable statutes. Activities and purposes of health care center.

Sec. 38a-177. (Formerly Sec. 33-179c). Manner of providing health care.

Sec. 38a-178. (Formerly Sec. 33-179e). Organization.

Sec. 38a-179. (Formerly Sec. 33-179g). Management of health care center. Directors.

Sec. 38a-180. (Formerly Sec. 33-179h). Clinics. Liability of practitioners to reprimand or discipline. Choice in selection of practitioner.

Sec. 38a-181. (Formerly Sec. 33-179i). Acceptance of payments, grants and loans for cost of operation.

Sec. 38a-182. (Formerly Sec. 33-179j). Agreements with subscribers. Agreement requirements. Evidence of coverage.

Sec. 38a-183. (Formerly Sec. 33-179k). Approval by commissioner of amounts to be paid subscribers and agreements. Component of rate. Capital reserve fund. Methods of protecting members from liability for uncovered expenditures.

Sec. 38a-184. (Formerly Sec. 33-179l). Expenditure of funds.

Sec. 38a-185. (Formerly Sec. 33-179m). Appeal from commissioner. Resolution of dispute between community member and corporation.

Sec. 38a-186. (Formerly Sec. 33-179n). Disposition of property on termination. Prohibitions re stock transactions and mergers.

Sec. 38a-187. (Formerly Sec. 33-179o). Investments. Use of ancillary equipment and facilities.

Sec. 38a-188. (Formerly Sec. 33-179p). Health care centers. Applicability of certain insurance statutes. Exemption from certain taxes. Evaluation of financial resources.

Sec. 38a-189. (Formerly Sec. 33-179q). Workers’ Compensation Act not affected.

Sec. 38a-190. (Formerly Sec. 33-179r). Inapplicability of other laws.

Sec. 38a-191. (Formerly Sec. 33-179s). Authority of insurance companies not affected.

Sec. 38a-192. (Formerly Sec. 33-179u). Regulations by Insurance Commissioner.

Sec. 38a-193. Protection against insolvency.

Sec. 38a-193a. Uncovered expenditures insolvency deposit by health care center. Requirements. Withdrawal of deposit. Regulations.

Sec. 38a-194. Enrollment period. Replacement coverage in the event of insolvency.

Secs. 38a-195 to 38a-198. Reserved

Sec. 38a-199. (Formerly Sec. 33-157). Definition. Powers. Exemption from insurance laws. Reserves.

Sec. 38a-200. (Formerly Sec. 33-158). Incorporation. Representation of policyholders on board of directors.

Sec. 38a-201. (Formerly Sec. 33-159). Form of contract.

Sec. 38a-202. (Formerly Sec. 33-160). Reports and examinations.

Sec. 38a-203. (Formerly Sec. 33-161). Investments.

Sec. 38a-204. (Formerly Sec. 33-162). Liquidation or rehabilitation. Mergers.

Sec. 38a-205. (Formerly Sec. 33-163). Workers’ compensation law not affected.

Sec. 38a-206. (Formerly Sec. 33-164). Fraternal benefit societies and life or accident insurance companies not affected.

Sec. 38a-207. (Formerly Sec. 33-165). Exemption from taxation.

Sec. 38a-208. (Formerly Sec. 33-166). Rates and contracts to be approved.

Sec. 38a-209. (Formerly Sec. 33-167). Appeal.

Secs. 38a-210 to 38a-213. Reserved

Sec. 38a-214. (Formerly Sec. 33-168). Definition. Powers. Exemption from insurance laws. Reserves.

Sec. 38a-215. (Formerly Sec. 33-169). Formation.

Sec. 38a-216. (Formerly Sec. 33-170). Incorporation. Representation of policyholders on board of directors.

Sec. 38a-217. (Formerly Sec. 33-171). Form of contract.

Sec. 38a-218. (Formerly Sec. 33-172). Rates and contracts to be approved.

Sec. 38a-219. (Formerly Sec. 33-173). Reports and examinations. Insurance Commissioner’s supervision.

Sec. 38a-220. (Formerly Sec. 33-174). Investments.

Sec. 38a-221. (Formerly Sec. 33-175). Liquidation or rehabilitation. Mergers.

Sec. 38a-222. (Formerly Sec. 33-176). Workers’ compensation law not affected.

Sec. 38a-223. (Formerly Sec. 33-177). Fraternal benefit societies and life or accident insurance companies not affected.

Sec. 38a-224. (Formerly Sec. 33-178). Exemption from taxation.

Sec. 38a-225. (Formerly Sec. 33-179). Appeal.

Secs. 38a-226 to 38a-226d. Definitions. Annual licensure; fees; complaints re utilization review companies; certification and release of information; compliance. Violations; notice and hearing; penalties; appeal. Utilization review company minimum standards: Determinations, notification, appeals and expedited review; reports to commissioner; penalties; regulations. Standards of utilization review companies.

Secs. 38a-227 to 38a-229. Reserved


PART I*

HEALTH CARE CENTERS

*See Sec. 19a-7j re assessment of health and welfare fee on domestic insurers and health care centers doing life or health insurance business in state.

Sec. 38a-175. (Formerly Sec. 33-179a). Definitions. As used in sections 38a-175 to 38a-194:

(1) “Healing arts” means the professions and occupations licensed under the provisions of chapters 370, 372, 373, 375, 378, 379, 380, 381 and 383.

(2) “Carrier” means a health care center, insurer, hospital service corporation, medical service corporation or other entity responsible for the payment of benefits or provision of services under a group contract.

(3) “Commissioner” means the Insurance Commissioner, except when explicitly stated otherwise.

(4) “Evidence of coverage” means a statement of essential features and services of the health care center coverage which is given to the subscriber by the health care center or by the group contract holder.

(5) “Federal Health Maintenance Organization Act” means Title XIII of the Public Health Service Act, 42 USC Subchapter XI, as from time to time amended, or any successor thereto relating to qualified health maintenance organizations.

(6) “Group contract” means a contract for health care services which by its terms limits eligibility to members of a specified group. The group contract may include coverage for dependents.

(7) “Group contract holder” means the person to which a group contract has been issued.

(8) “Health care” includes, but shall not be limited to, the following: Medical, surgical and dental care provided through licensed practitioners, including any supporting and ancillary personnel, services and supplies; physical therapy service provided through licensed physical therapists upon the prescription of a physician; psychological examinations provided by registered psychologists; optometric service provided by licensed optometrists; hospital service, both inpatient and outpatient; convalescent institution care and nursing home care; nursing service provided by a registered nurse or by a licensed practical nurse; home care service of all types required for the health of a person; rehabilitation service required or desirable for the health of a person; preventive medical services of all and any types; furnishing necessary appliances, drugs, medicines and supplies; educational services for the health and well-being of a person; ambulance service; and any other care, service or treatment related to the prevention or treatment of disease, the correction of defects and the maintenance of the physical and mental well-being of human beings. Any diagnosis and treatment of diseases of human beings required for health care as defined in this section, if rendered, shall be under the supervision and control of the providers.

(9) “Health care center” means either: (A) A person, including a profit or a nonprofit corporation organized under the laws of this state for the purpose of carrying out the activities and purposes set forth in subsection (b) of section 38a-176, at the expense of the health care center, including the providing of health care, as herein defined, to members of the community, including subscribers to one or more plans under an agreement entitling such subscribers to health care in consideration of a basic advance or periodic charge and shall include a health maintenance organization, or (B) a line of business conducted by an organization that is formed, pursuant to the laws of this state for the purposes of, but not limited to, carrying out the activities and purposes set forth in subsection (b) of section 38a-176.

(10) “Individual contract” means a contract for health care services issued to and covering an individual. The individual contract may include dependents of the subscriber.

(11) “Individual practice association” means a partnership, corporation, association, or other legal entity which has entered into a services arrangement with health care professionals licensed in this state to provide services to enrollees of a health care center.

(12) “Insolvent” or “insolvency” means that the organization has been declared insolvent and placed under an order of liquidation by a court of competent jurisdiction.

(13) “Net worth” means the excess of total admitted assets over total liabilities, but the liabilities shall not include fully subordinated debt as defined in section 38a-193.

(14) “Member” or “enrollee” means an individual who is enrolled in a health care center.

(15) “Person” means an individual, corporation, limited liability company, partnership, association, trust or any other legal entity.

(16) “Uncovered expenditures” means the cost of health care services that are covered by a health care center, for which an enrollee would also be liable in the event of the center’s insolvency, and for which no alternative arrangements have been made that are acceptable to the commissioner. Uncovered expenditures shall not include expenditures for services when a provider has agreed not to bill the enrollee even though the provider is not paid by the health care center or for services that are guaranteed, insured or assumed by a person other than the health care center.

(17) “Enrolled population” means a group of persons, defined as to probable age, sex and family composition, which receives health care from a health care center in consideration of a basic advance or periodic charge.

(18) “Participating provider” means a provider who, under an express or implied contract with the health care center or with its contractor or subcontractor, has agreed to provide health care services to enrollees with an expectation of receiving payment, other than copayment or deductible, directly or indirectly from the health care center.

(19) “Provider” means any licensed health care professional or facility, including individual practice associations.

(20) “Subscriber” means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the health care center, or in the case of an individual contract, the person in whose name the contract is issued.

(1971, P.A. 445, S. 1; P.A. 82-415, S. 1, 18; P.A. 90-68, S. 1, 16; P.A. 95-79, S. 141, 189; P.A. 11-19, S. 20.)

History: P.A. 82-415 substituted “practitioners” for “physicians or dentists” in definition of “health care”, expanded the definition of health care center to include a corporation organized for profit and a health maintenance organization and added definitions of “person”, “individual practice association”, “member”, “uncovered expenditures”, “enrolled population” and “provider”; P.A. 90-68 amended the definitions re “healing arts”, “health care”, “health care center”, “individual practice association”, “person”, “uncovered expenditures” and “enrolled population” and added definitions of “carrier”, “commissioner”, “evidence of coverage”, “federal health maintenance organization act”, “group contract”, “group contract holder”, “individual contract”, “insolvent or insolvency”, “net worth”, “participating provider” and “subscriber”; Sec. 33-179a transferred to Sec. 38a-175 in 1991; P.A. 95-79 redefined “person” to include a limited liability company, effective May 31, 1995; P.A. 11-19 made a technical change in Subdiv. (2).

Sec. 38a-176. (Formerly Sec. 33-179b). Applicable statutes. Activities and purposes of health care center. (a) Each such health care center shall be governed by sections 38a-175 to 38a-192, inclusive, and by the other applicable laws of the state to the extent not inconsistent with the provisions of said sections.

(b) The nature of the activities to be conducted and the purposes to be carried out by a health care center include, but are not limited to: (1) Establishing, maintaining and operating facilities whereby health care, as hereinbefore defined, may be provided at the expense of the health care center; (2) providing health care directly by its health care center employees who, when required by law, shall be duly licensed to render such service or by agreement or by indemnity arrangement with any hospital, hospital service corporation, medical service corporation, medical group clinic or person qualified and licensed to render any health care service or by both methods; (3) entering into agreements with any governmental agency, or any provider for the training of personnel under the direction of persons licensed to practice any healing art; (4) establishing, operating and maintaining a medical service center, clinic or any such other facility as shall be necessary for the prevention, study, diagnosis and treatment of human ailments and injuries and to promote medical, surgical, dental and general health education, scientific education, research and learning; (5) marketing, enrolling and administering a health care plan; (6) contracting with insurers licensed in this state, including hospital and medical service corporations; (7) offering, in addition to health services, benefits covering out-of-area or emergency services; (8) providing health services not included in the health care plan on a fee-for-service basis; and (9) entering into contracts in furtherance of the purposes of sections 38a-175 to 38a-192.

(1971, P.A. 445, S. 2; P.A. 82-415, S. 2, 18; P.A. 90-68, S. 2, 16.)

History: P.A. 82-415 expanded the activities and purposes of health care centers by adding Subdivs. (5) to (9), inclusive, and specified that health care centers are governed by applicable laws outside of chapter rather than by “the provisions of the nonstock corporation act”; P.A. 90-68 expanded the nature of the activities to be conducted and the purposes to be carried out by a health care center and included clinics in provision re negotiation of indemnity agreements in forming a health care arrangement and substituted “provider” for hospitals or individuals licensed to practice healing arts to refer to those entities providing a health care service; Sec. 33-179b transferred to Sec. 38a-176 in 1991.

Sec. 38a-177. (Formerly Sec. 33-179c). Manner of providing health care. Health care may be provided (a) directly by a health care center or by its employees or contractors licensed by this state to render such services, or by contract or by indemnity arrangement with any hospital, hospital service corporation, medical service corporation or person qualified and licensed to render any health care service or by both methods; and (b) by other methods to the extent permitted under the Federal Health Maintenance Organization Act and the regulations adopted thereunder from time to time unless otherwise determined by the commissioner by regulation. A health care center may also enter into agreements with hospitals or individuals approved by their respective state regulating board, licensed to practice any of the healing arts, for the training of personnel under the direction of persons licensed to practice the profession or healing art. A health care center may also maintain a clinic or clinics for the prevention, study, diagnosis and treatment of human ailments and injuries by licensed persons and to promote medical, surgical, dental and scientific research and learning.

(1971, P.A. 445, S. 3; P.A. 90-68, S. 3, 16.)

History: P.A. 90-68 added a provision allowing the federal health maintenance organization act through preemption or the insurance commissioner through regulations to establish the method or the manner in which health care is provided; Sec. 33-179c transferred to Sec. 38a-177 in 1991.

Sec. 38a-178. (Formerly Sec. 33-179e). Organization. Persons desiring to form a health care center may organize under the general law of the state governing corporations, partnerships, associations or trusts, but subject to the following provisions: (1) The certificate of incorporation or other organizational document of each such organization shall have endorsed thereon or attached thereto the consent of the commissioner if he finds the same to be in accordance with the provisions of sections 38a-175 to 38a-192, inclusive; and (2) the certificate or other document shall include a statement of the area in which the health care center will operate and the services to be rendered by such organization.

(1971, P.A. 445, S. 5; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 226, 348; P.A. 82-415, S. 3, 18; P.A. 90-68, S. 4, 16.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 82-415 deleted references to incorporation and substituted references to organization, in addition to making several technical changes; P.A. 90-68 substituted “organization” for “health care center” to reflect the expansion of the definition and the manner of providing health care; Sec. 33-179e transferred to Sec. 38a-178 in 1991.

Sec. 38a-179. (Formerly Sec. 33-179g). Management of health care center. Directors. (a) If the health care center is organized as a nonprofit, nonstock corporation, the care, control and disposition of the property and funds of each such corporation and the general management of its affairs shall be vested in a board of directors. Each such corporation shall have the power to adopt bylaws for the governing of its affairs, which bylaws shall prescribe the number of directors, their term of office and the manner of their election, subject to the provisions of sections 38a-175 to 38a-192, inclusive. The bylaws may be adopted and repealed or amended by the affirmative vote of two-thirds of all the directors at any meeting of the board of directors duly held upon at least ten days’ notice, provided notice of such meeting shall specify the proposed action concerning the bylaws to be taken at such meeting. The bylaws of the corporation shall provide that the board of directors shall include representation from persons engaged in the healing arts and from persons who are eligible to receive health care from the corporation, subject to the following provisions: (1) One-quarter of the board of directors shall be persons engaged in the different fields in the healing arts at least two of whom shall be a physician and a dentist; (2) one-quarter of the board of directors shall be subscribers who are eligible to receive health care from the health care center, but no such representative need be seated until the first annual meeting following the approval by the commissioner of the initial agreement or agreements to be offered by the corporation, and there shall be only one representative from any group covered by a group service agreement.

(b) If the health care center is not organized as a nonprofit, nonstock corporation, management of its affairs shall be in accordance with other applicable laws of the state, provided that the health care center shall establish and maintain a mechanism to afford its members an opportunity to participate in matters of policy and operation such as an advisory panel, advisory referenda on major policy decisions or other similar mechanisms.

(1971, P.A. 445, S. 7; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 227, 348; P.A. 82-415, S. 4, 18; P.A. 90-68, S. 5, 16.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 82-415 set forth two methods by which to manage the affairs of a health care center, depending on whether or not it is a nonprofit, nonstock corporation, applying previous provisions to nonprofit, nonstock corporations and adding Subsec. (b) applicable to other corporations; P.A. 90-68 made technical changes such that the health care representatives need not be seated until the first annual meeting, replacing requirement that health care representatives need not be elected until the first annual meeting; Sec. 33-179g transferred to Sec. 38a-179 in 1991.

Sec. 38a-180. (Formerly Sec. 33-179h). Clinics. Liability of practitioners to reprimand or discipline. Choice in selection of practitioner. (a) Any clinic established hereunder, including a clinic which is a part of a medical service center or other facility, shall be subject to approval as a clinic by the Commissioner of Public Health pursuant to the standards established by him for approved clinics.

(b) Any person licensed to practice any of the healing arts or occupations employed by a health care center governed by sections 38a-175 to 38a-192, inclusive, shall not be subject to reprimand or discipline because he is an employee of the health care center or because such center may be engaged in rendering health care or related care through its own employees, provided such person shall otherwise remain subject to reprimand or discipline for his act or acts for unlawful, unprofessional or immoral conduct by the state regulating board governing such profession or occupation as provided by law.

(c) No health care center which contracts with an individual practice association may prohibit any practitioner of the healing arts from participating in such center solely on the basis of his profession. No person may interfere with the exercise by any other person of his free choice in the selection of a practitioner in the healing arts in the health care center.

(1971, P.A. 445, S. 8; P.A. 77-614, S. 323, 610; P.A. 78-303, S. 73, 136; P.A. 82-415, S. 5, 18; P.A. 83-587, S. 51, 96; P.A. 84-546, S. 85, 173; P.A. 88-362, S. 19; P.A. 93-381, S. 9, 39; P.A. 95-257, S. 12, 21, 58.)

History: P.A. 77-614 replaced commissioner of health with commissioner of health services, effective January 1, 1979; P.A. 78-303 replaced standards established by public health council with standards established by commissioner; P.A. 82-415 substituted references to health care centers for references to corporations and amended Subsec. (c) by inserting an antidiscrimination provision to protect practitioners of the healing arts; P.A. 83-587 made a technical amendment to Subsec. (b); P.A. 84-546 made technical change in Subsec. (b); P.A. 88-362 amended Subsec. (c) by substituting “health care center which contracts with an individual practice association” for “individual practice association”; Sec. 33-179h transferred to Sec. 38a-180 in 1991; P.A. 93-381 replaced commissioner of health services with commissioner of public health and addiction services, effective July 1, 1993; P.A. 95-257 replaced Commissioner and Department of Public Health and Addiction Services with Commissioner and Department of Public Health, effective July 1, 1995.

Sec. 38a-181. (Formerly Sec. 33-179i). Acceptance of payments, grants and loans for cost of operation. A health care center governed by sections 38a-175 to 38a-192, inclusive, may accept from governmental agencies, or from private agencies, corporations, associations, groups or individuals, payments, grants, loans or anything of value concerning all or part of the cost of its operation or agreements entered into between such health care center and its subscribers or other persons to be served by the health care center, or its employees, suppliers or contractors.

(1971, P.A. 445, S. 9.)

History: Sec. 33-179i transferred to Sec. 38a-181 in 1991.

Sec. 38a-182. (Formerly Sec. 33-179j). Agreements with subscribers. Agreement requirements. Evidence of coverage. (a) An agreement issued by a health care center governed by sections 38a-175 to 38a-192, inclusive, may be issued for health care or the costs thereof to a subscriber, to a subscriber and spouse, to a subscriber and family, to a subscriber and dependent or dependents related by blood, marriage or adoption or to a subscriber and ward. Such agreement or evidence of coverage document shall be in writing and a copy thereof furnished to the group contract holder or individual contract holder, as appropriate.

(b) Each such agreement shall contain the following provisions: (1) Name and address of the health care center; (2) eligibility requirements; (3) a statement of copayments, deductibles or other out-of-pocket expenses payment payable by the subscriber; (4) a statement of the nature of the health care services or benefits to be furnished and the period during which they will be furnished, and, if there are any services or benefits to be excepted, a detailed statement of such exceptions provided that such services or benefits to be furnished conform at a minimum to the requirements of the Federal Health Maintenance Organization Act; (5) a statement of terms and conditions upon which the agreement may be cancelled or otherwise terminated at the option of either party; (6) claims procedures; (7) enrollee grievance procedures; (8) continuation of coverage; (9) conversion; (10) extension of benefits, if any; (11) subrogation, if any; (12) description of the service area, out-of-area benefits and services, if any; (13) a statement of the amount payable to the health care center by the subscriber and by others on his behalf and the manner in which such amount is payable; (14) a statement that the agreement includes the endorsement thereon and attached papers, if any, and contains the entire agreement; (15) a statement that no statement by the subscriber in his application for an agreement shall void the agreement or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to such agreement; and (16) a statement of the period of grace which will be allowed the subscriber for making any payment due under the agreement, which period shall not be less than ten days.

(c) Every subscriber shall receive an evidence of coverage from the group contract holder or the health care center. The evidence of coverage shall not contain provisions or statements which are unfair, inequitable, misleading, deceptive or which encourage misrepresentation. The evidence of coverage shall contain a clear statement of the provisions set forth in subdivisions (1) to (12), inclusive, of subsection (b) of this section.

(1971, P.A. 445, S. 10; P.A. 82-415, S. 6, 18; P.A. 90-68, S. 6, 16.)

History: P.A. 82-415 provided that services or benefits furnished to subscribers must conform to federal law requirements in Subdiv. (b) and substituted “health care center” for “corporation”; P.A. 90-68 divided section into Subsecs., made various technical corrections, outlined the provisions required for health care agreements and added Subsec. (c) re guidelines for the subscriber’s evidence of coverage; Sec. 33-179j transferred to Sec. 38a-182 in 1991.

Sec. 38a-183. (Formerly Sec. 33-179k). Approval by commissioner of amounts to be paid subscribers and agreements. Component of rate. Capital reserve fund. Methods of protecting members from liability for uncovered expenditures. (a) A health care center governed by sections 38a-175 to 38a-192, inclusive, shall not enter into any agreement with subscribers unless and until it has filed with the commissioner a full schedule of the amounts to be paid by the subscribers and has obtained the commissioner’s approval thereof. The commissioner may refuse such approval if he finds such amounts to be excessive, inadequate or discriminatory. Each such health care center shall not enter into any agreement with subscribers unless and until it has filed with the commissioner a copy of such agreement or agreements, including all riders and endorsements thereon, and until the commissioner’s approval thereof has been obtained. The commissioner shall, within a reasonable time after the filing of any request for an approval of the amounts to be paid, any agreement or any form, notify the health care center of either his approval or disapproval thereof.

(b) A health care center may establish rates of payment by any method permitted by the Federal Health Maintenance Organization Act and the regulations adopted thereunder from time to time unless otherwise determined by the commissioner by regulation.

(c) Each such health care center may include as a component of its rate a sum up to ten per cent of such rate to be used for the objects and purposes set forth in section 38a-184. An amount not exceeding ten per cent of the annual net premium income of such center may be set aside annually as a capital reserve fund and may be accumulated from year to year by such health care center, to be expended for the objects and purposes as set forth and in accordance with said section.

(1971, P.A. 445, S. 11; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 228, 348; P.A. 82-415, S. 7, 18; P.A. 90-68, S. 7, 16.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 82-415 substituted references to health care centers for references to corporations, added Subsec. (c), requiring health care centers to prove to the insurance commissioner that members are protected from liability for uncovered expenditures; P.A. 90-68 made various technical corrections, inserted a new Subsec. (b) allowing health care centers to establish rates of payment which are permitted by the Federal Health Maintenance Organization Act provided the commissioner has not made such a determination by regulation, deleted former Subsec. (c) which required health care centers to prove to the commissioner that members are protected from liability for uncovered expenditures and redesignated former Subsec. (b) as Subsec. (c); Sec. 33-179k transferred to Sec. 38a-183 in 1991.

Sec. 38a-184. (Formerly Sec. 33-179l). Expenditure of funds. Each health care center governed by sections 38a-175 to 38a-192, inclusive, may expend sums, including sums in the capital reserve fund as provided in subsection (c) of section 38a-183, for the following objects and purposes: (1) To purchase or lease real property for the purpose of construction of a medical service facility or center, an office building, or other facility useful or necessary in the implementation of its program; (2) to purchase, lease or renovate all or part of an existing medical service facility or center, an office building, or other facility useful or necessary in the implementation of its program or to lease a part of an existing hospital; (3) to amortize capital costs for the purchase, construction or renovation of a medical service facility or center, an office building, or other facility useful or necessary in the implementation of its program; (4) to purchase or lease equipment and such property as may be required in the delivery of health care and the transaction of business of the health care center; (5) to construct facilities, including a medical service facility or center, an office building, or other facility useful or necessary in the implementation of its program, and to alter, improve or enlarge such facilities; (6) to make loans, including loans to a corporation under its control, for any of the objects and purposes heretofore prescribed; (7) to do any or all of the foregoing jointly or in association with another health care center, or jointly or in association with any other person, including any other corporation affiliated with a health care center.

(1971, P.A. 445, S. 12; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 229, 348; P.A. 82-415, S. 8, 18; 82-472, S. 157, 183; P.A. 90-68, S. 8, 16.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 82-415 substituted references to health care centers for references to corporations, eliminated the powers of health care centers with respect to hospitals, except for leasing apart of an existing hospital, and deleted provision which specified that corporations governed by the chapter may be organized and operated only for charitable, educational and scientific purposes; P.A. 82-472 made technical correction in Subsec. (a); P.A. 90-68 amended Subsec. (a) to include expenditures of funds for lease or renovation of real property, inserted new Subdiv. (4) to allow the purchase or lease of property required to transact the business of the health care center, renumbering as necessary, and deleted former Subsec. (b) which had stated that capital reserve fund moneys not to be considered a limitation in commissioner’s determination whether or not to approve expenditures; Sec. 33-179l transferred to Sec. 38a-184 in 1991.

Sec. 38a-185. (Formerly Sec. 33-179m). Appeal from commissioner. Resolution of dispute between community member and corporation. From any order or decision of the commissioner relating to any health care center governed by sections 38a-175 to 38a-192, inclusive, an appeal may be taken by any person or organization aggrieved thereby in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain. Any dispute which arises between a member of the community including subscribers eligible to receive health care from the health care center and each such center shall be referred, at the request of either party to such dispute, to the commissioner, who shall have the power to hear and decide the same, subject to appeal as herein provided.

(1971, P.A. 445, S. 13; 1972, P.A. 108, S. 7; P.A. 76-436, S. 626, 681; P.A. 77-603, S. 23, 125; 77-614, S. 163, 610; P.A. 78-280, S. 5, 127; P.A. 80-482, S. 230, 348; P.A. 82-415, S. 9, 18; P.A. 88-230, S. 1, 12; P.A. 90-68, S. 9, 16; 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-215, S. 24, 29.)

History: 1972 act replaced superior court with court of common pleas, effective September 1, 1972, except that courts with cases pending retain jurisdiction; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-603 replaced previous appeal provisions with requirement that appeals be made in accordance with Sec. 4-183 but retained venue in Hartford county; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 78-280 substituted “judicial district of Hartford-New Britain” for “Hartford county”; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 82-415 substituted references to health care centers for references to corporations; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-68 made technical changes; P.A. 90-98 changed effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 33-179m transferred to Sec. 38a-185 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain”, effective June 29, 1999.

Sec. 38a-186. (Formerly Sec. 33-179n). Disposition of property on termination. Prohibitions re stock transactions and mergers. (a) In the event of the dissolution, liquidation or termination of the corporate existence of a health care center which is organized as a nonprofit, nonstock corporation, no part of the property or assets of the health care center shall inure to the benefit of any director, officer, subscriber or employee of the corporation, each of whom by holding such position shall be deemed to have waived and relinquished all rights conferred by statute or otherwise upon subscribers of a corporation without capital stock to share in such assets upon dissolution, liquidation or termination. After the payment of all lawful claims against the corporation, all its remaining assets shall be devoted permanently and exclusively to the purposes for which the corporation is formed, or paid over to an organization organized and operated exclusively for charitable, educational and scientific purposes, and in such amount and proportions, as the board of directors in its discretion shall determine.

(b) No person may (1) make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health care center, (2) enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such center, or (3) enter into an agreement to merge or consolidate with or otherwise to acquire control of a health care center, unless, at the time any offer, request or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the Insurance Commissioner and has mailed or delivered to the health care center, such information as is required by the commissioner and the offer, request, invitation, agreement or acquisition has been approved by the commissioner.

(1971, P.A. 445, S. 14; P.A. 82-415, S. 10, 18.)

History: P.A. 82-415 deleted provision requiring center to hold all property and assets in perpetuity, limited the provisions of Subsec. (a) to centers organized as nonprofit, nonstock corporations and listed prohibitions re stock transactions, mergers and consolidations in new Subsec. (b); Sec. 33-179n transferred to Sec. 38a-186 in 1991.

Sec. 38a-187. (Formerly Sec. 33-179o). Investments. Use of ancillary equipment and facilities. A health care center governed by sections 38a-175 to 38a-192, inclusive, may purchase, lease, construct, renovate, operate and maintain medical facilities and equipment ancillary to such facilities and such other property as may be reasonably required for its principal office and for such purposes as may be necessary in the transaction of the business of the health care center, and may otherwise invest in other securities permitted by the general statutes for the investment of trust funds, and in such other securities alone.

(1971, P.A. 445, S. 15; P.A. 90-68, S. 10, 16.)

History: P.A. 90-68 allowed the health care centers to purchase, lease, construct, renovate, operate or maintain ancillary equipment or facilities necessary to their operation, replacing provision prohibiting investments in real estate mortgages; Sec. 33-179o transferred to Sec. 38a-187 in 1991.

Sec. 38a-188. (Formerly Sec. 33-179p). Health care centers. Applicability of certain insurance statutes. Exemption from certain taxes. Evaluation of financial resources. Each health care center governed by sections 38a-175 to 38a-192, inclusive, shall be exempt from the provisions of the general statutes relating to insurance in the conduct of its operations under said sections and in such other activities as do constitute the business of insurance, unless expressly included therein, and except for the following: Sections 38a-11, 38a-17, 38a-51, 38a-52, 38a-56, 38a-57, 38a-129 to 38a-140, inclusive, 38a-147 and 38a-815 to 38a-819, inclusive, provided a health care center shall not be deemed in violation of sections 38a-815 to 38a-819, inclusive, solely by virtue of such center selectively contracting with certain providers in one or more specialties, and sections 38a-80, 38a-492b, 38a-518b, 38a-543, 38a-702j, 38a-703 to 38a-718, inclusive, 38a-731 to 38a-735, inclusive, 38a-741 to 38a-745, inclusive, 38a-769, 38a-770, 38a-772 to 38a-776, inclusive, 38a-786, 38a-790, 38a-792 and 38a-794, provided a health care center organized as a nonprofit, nonstock corporation shall be exempt from sections 38a-146, 38a-702j, 38a-703 to 38a-718, inclusive, 38a-731 to 38a-735, inclusive, 38a-741 to 38a-745, inclusive, 38a-769, 38a-770, 38a-772 to 38a-776, inclusive, 38a-786, 38a-790, 38a-792 and 38a-794. If a health care center is operated as a line of business, the foregoing provisions shall, where possible, be applied only to that line of business and not to the organization as a whole. The commissioner may adopt regulations, in accordance with chapter 54, stating the circumstances under which the resources of a person which controls a health care center, or operates a health care center as a line of business will be considered in evaluating the financial condition of a health care center. Such regulations, if adopted, shall require as a condition to the consideration of the resources of such person which controls a health care center, or operates a health care center as a line of business to provide satisfactory assurances to the commissioner that such person will assume the financial obligations of the health care center. During the period prior to the effective date of regulations issued under this section, the commissioner shall, upon request, consider the resources of a person which controls a health care center, or operates a health care center as a line of business, if the commissioner receives satisfactory assurances from such person that it will assume the financial obligations of the health care center and determines that such person meets such other requirements as the commissioner determines are necessary. A health care center organized as a nonprofit, nonstock corporation shall be exempt from the sales and use tax and all property of each such corporation shall be exempt from state, district and municipal taxes. Each corporation governed by sections 38a-175 to 38a-192, inclusive, shall be subject to the provisions of sections 38a-903 to 38a-961, inclusive. Nothing in this section shall be construed to override contractual and delivery system arrangements governing a health care center’s provider relationships.

(1971, P.A. 445, S. 16; P.A. 81-101, S. 5; P.A. 82-415, S. 11, 18; P.A. 86-154, S. 1; P.A. 88-364, S. 97; P.A. 90-68, S. 11, 16; 90-243, S. 171; P.A. 01-113, S. 25, 42; P.A. 04-49, S. 1; P.A. 12-145, S. 4.)

History: P.A. 81-101 required that the Insurers Supervision, Rehabilitation and Liquidation Act (Ch. 694) be applicable to health care centers; P.A. 82-415 limited the exemption from taxes to centers organized as nonprofit, nonstock corporations, where previously exemption applied to all centers; P.A. 86-154 listed certain sections of the general statutes relating to insurance which shall be applicable to health care centers and specified that nothing in section overrides contractual and delivery system arrangements governing a health care center’s provider relationships; P.A. 88-364 added reference to Sec. 38-174gg; P.A. 90-68 allowed the health care center an exemption from the insurance provisions of the general statutes, established a provision that health care centers shall not be in violation of the unfair practices provisions of the insurance statutes by selectively contracting with certain providers in a variety of specialties and added a provision by which the commissioner may adopt regulations regarding the evaluation of the resources of an owner or operator of a health care center in determining the financial condition of the health care center; P.A. 90-243 made technical changes for statutory consistency; Sec. 33-179p transferred to Sec. 38a-188 in 1991; P.A. 01-113 deleted references to Secs. 38a-702 and 38a-795, and substituted “section 38a-702j” for “section 38a-783”, effective September 1, 2002; P.A. 04-49 added references to Secs. 38a-492b and 38a-518b and made technical changes; P.A. 12-145 replaced references to Sec. 38a-777 with references to Sec. 38a-776, effective June 15, 2012.

Sec. 38a-189. (Formerly Sec. 33-179q). Workers’ Compensation Act not affected. No provision of sections 38a-175 to 38a-192, inclusive, nor any contract for health care by a health care center governed by said sections shall, in any way, affect the operation of the Workers’ Compensation Act.

(1971, P.A. 445, S. 17; P.A. 79-376, S. 56.)

History: P.A. 79-376 replaced “workmen’s compensation” with “workers’ compensation”; Sec. 33-179q transferred to Sec. 38a-189 in 1991.

Sec. 38a-190. (Formerly Sec. 33-179r). Inapplicability of other laws. Any provisions of the statutes of this state regulating group medical, dental or other professions or occupations dealing with health care which is in conflict with sections 38a-175 to 38a-192, inclusive, shall not apply to a health care center governed by said sections.

(1971, P.A. 445, S. 18.)

History: Sec. 33-179r transferred to Sec. 38a-190 in 1991.

Sec. 38a-191. (Formerly Sec. 33-179s). Authority of insurance companies not affected. Nothing in sections 38a-175 to 38a-192, inclusive, shall preclude an insurance company authorized to conduct an accident and health insurance business in this state from performing marketing, enrollment, administration and other functions and from providing hospitalization insurance, including but not limited to emergency and out-of-area benefits, in conjunction with a plan providing health care to subscribers under existing provisions of the general statutes.

(1971, P.A. 445, S. 19.)

History: Sec. 33-179s transferred to Sec. 38a-191 in 1991.

Sec. 38a-192. (Formerly Sec. 33-179u). Regulations by Insurance Commissioner. The commissioner may adopt such regulations, in accordance with the provisions of chapter 54, as shall be necessary to carry out the provisions of sections 38a-175 to 38a-192, inclusive.

(P.A. 86-154, S. 2; P.A. 90-68, S. 12, 16.)

History: P.A. 90-68 substituted commissioner for insurance commissioner; Sec. 33-179u transferred to Sec. 38a-192 in 1991.

Sec. 38a-193. Protection against insolvency. (a) Net worth requirements. (1) Before issuing any certificate of authority to any health care center on or after July 1, 1990, the commissioner shall require that a health care center have: (A) An initial net worth of one million five hundred thousand dollars, and (B) agree to thereafter maintain the minimum net worth required under subdivision (4) of this subsection.

(2) No health care center shall be licensed to transact business in this state or remain so licensed unless, (A) its net worth bears a reasonable relationship to its liabilities based upon the type, volume and nature of business transacted, and (B) its risk-based capital related to its total adjusted capital is adequate for the type of business transacted. As used in this subsection, “total adjusted capital” means the sum of a health care center’s net worth and any other item in the nature of capital as deemed appropriate by the commissioner; and “risk-based capital” means the net worth of the health care center adjusted to recognize the level of risk inherent in its business, including (i) risk with respect to the health care center’s assets, (ii) the risk of adverse underwriting experience with respect to the health care center’s liabilities and obligations, (iii) the credit risk with respect to the health care center’s business, and (iv) all other business risks and such other relevant risks as the commissioner may determine.

(3) (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 must be similarly subordinated. (B) The interest expenses relating to the repayment of any fully subordinated debt shall not be considered uncovered expenditures. (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) Except as provided in subdivision (3) and subdivisions (5) to (7), inclusive, of this subsection, each health care center shall maintain a minimum net worth equal to the greater of: (A) One million dollars; or (B) two per cent of its annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first one hundred fifty million dollars of premium revenues plus one per cent of annual premium revenues in excess of one hundred fifty million dollars. No health care center authorized by the commissioner to do business in this state, on July 1, 1990, shall be required to comply with the provisions of subparagraph (B) of this subdivision until January 1, 1995.

(5) Each health care center that offers or proposes to offer out-of-network benefits shall either:

(A) Enter into an agreement with a duly licensed insurance company to provide coverage to subscribers and enrollees outside of the health care center’s established network, subject to approval by the commissioner; or

(B) Implement an out-of-network benefit system to be operated by the health care center, subject to approval by the commissioner, provided the health care center establishes and maintains its net worth at an amount equal to the greater of (i) three million dollars, (ii) two per cent of its annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first one hundred fifty million dollars of premium revenues plus one per cent of annual premium revenues in excess of one hundred fifty million dollars, or (iii) two months of its cost of uncovered expenditures. For purposes of this subsection, “annual premium revenues” does not include revenue earned as a result of an arrangement between a health care center and the federal Centers for Medicare and Medicaid Services, on a cost or risk basis, for services to a Medicare beneficiary, or revenue earned as a result of an arrangement between a health care center and a Medicaid state agency, for services to a Medicaid beneficiary. For the purposes of this subsection, the uncovered expenditures of the health care center for the requisite two-month period shall be calculated as follows:

(X + Y − Z)

UE =

—————

6

Where:

UE = Uncovered expenditures of the health care center for the requisite two-month period.

X = Total year-to-date uncovered expenditures reported in the health care center’s most recent statutory quarterly or annual statement.

Y = Total year-to-date uncovered expenditures reported in the health care center’s annual statement for the prior calendar year.

Z = Total year-to-date uncovered expenditures reported in the health care center’s statutory quarterly or annual statement for the current calendar quarter of the prior calendar year.

(6) The total cost of the out-of-network benefits of a health care center shall not exceed ten per cent of the total cost of the health care center’s claims and expenses on a quarterly basis without the prior approval of the commissioner and the effectuation of an uncovered expenditures insolvency deposit established with the commissioner pursuant to section 38a-193a.

(7) Any health care center that provides out-of-network benefits pursuant to this subsection shall provide a quarterly report concurrent with filing of the required quarterly and annual financial statements which shall demonstrate compliance with the provisions of this subsection.

(8) The commissioner may adopt regulations, in accordance with chapter 54, to implement the purposes of this subsection, including, but not limited to, provisions concerning: (A) The preparation and filing of reports by health care centers relating to risk-based capital levels and the calculation thereof; (B) the preparation and filing of comprehensive financial plans when such capital levels are reduced below minimum threshold levels; (C) the confidentiality of such reports and plans; and (D) the regulatory corrective actions the commissioner may take in the event minimum risk-based capital levels are not maintained, or the health care center’s financial plans filed with the commissioner are deficient, or the health care center fails to otherwise comply with the provisions of the regulations.

(b) Liabilities. Every health care center shall, when determining liabilities, include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which such organization is or may be liable, and to provide for the expense of adjustment or settlement of such claims. Such liabilities shall be calculated in accordance with those accounting procedures and practices prescribed by the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, version effective January 1, 2001, and subsequent revisions and the National Association of Insurance Commissioners Annual Statement Instructions, subject to any deviations prescribed by the commissioner.

(c) Required provisions in every contract between health care centers and participating providers. (1) Every contract between a health care center and a participating provider of health care services shall be in writing and shall contain the following provisions or variations approved by the commissioner:

“(A) (Name of provider or facility) .... hereby agrees that in no event, including, but not limited to, nonpayment by (name of health care center) ...., (name of health care center’s) .... insolvency, or breach of this contract shall (name of provider or facility) .... bill, charge, collect a deposit from, seek compensation, remuneration, or reimbursement from, or have any recourse against a covered person or person acting on their behalf, other than (name of health care center) ...., for services provided pursuant to this contract. This provision shall not prohibit collection of cost-sharing amounts, or costs for noncovered services, which have not otherwise been paid by a primary or secondary carrier in accordance with regulatory standards for coordination of benefits, from covered persons in accordance with the terms of the covered person’s health plan.

(B) (Name of provider or facility).... agrees, in the event of (name of health care center’s) .... insolvency, to continue to provide the services promised in this contract to covered persons of (name of health care center) .... for the duration of the period for which premiums on behalf of the covered person were paid to (name of health care center) .... or until the covered person’s discharge from inpatient facilities, whichever time is greater.

(C) Notwithstanding any other provision in this contract, nothing in this contract shall be construed to modify the rights and benefits contained in the covered person’s health plan.

(D) (Name of provider or facility).... may not bill the covered person for covered services, except for cost-sharing amounts, where (name of health care center) .... denies payment because the provider or facility has failed to comply with the terms or conditions of this contract.

(E) (Name of provider or facility) .... further agrees (i) that the provisions of subparagraphs (A), (B), (C) and (D) of this subdivision (or citations appropriate to the contract form) .... shall survive termination of this contract regardless of the cause giving rise to termination and shall be construed to be for the benefit of (name of health care center’s) .... covered persons, and (ii) that this provision supersedes any oral or written contrary agreement now existing or hereafter entered into between (name of provider or facility) .... and covered persons or persons acting on their behalf.

(F) If (name of provider or facility) .... contracts with other providers or facilities who agree to provide covered services to covered persons of (name of health care center) .... with the expectation of receiving payment directly or indirectly from (name of health care center) ...., such providers or facilities shall agree to abide by the provisions of subparagraphs (A), (B), (C), (D) and (E) of this subsection (or citations appropriate to the contract form) .....”

(2) In the event that the participating provider contract has not been reduced to writing as required by this subsection or that the contract fails to contain the provisions required by subdivision (1) of this subsection, the participating provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the health care center.

(3) No participating provider, or agent, trustee or assignee thereof, may: (A) Maintain any action at law against a subscriber or enrollee to collect sums owed by the health care center; or (B) request payment from a subscriber or enrollee for such sums. For purposes of this subdivision “request payment” includes, but is not limited to, submitting a bill for services not actually owed or submitting for such services an invoice or other communication detailing the cost of the services that is not clearly marked with the phrase “THIS IS NOT A BILL”. The contract between a health care center and a participating provider shall inform the participating provider that pursuant to section 20-7f, it is an unfair trade practice in violation of chapter 735a for any health care provider to request payment from an enrollee, other than a copayment or deductible, for covered medical services, or to report to a credit reporting agency an enrollee’s failure to pay a bill for medical services when a health care center has primary responsibility for payment of such services.

(d) Continuation of benefits. The commissioner shall require that each health care center have a plan for handling insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined to inpatient facilities on the date of insolvency until their discharge or expiration of benefits. In considering such a plan, the commissioner may approve one or more of the following: (1) Insurance to cover the expenses to be paid for continued benefits after an insolvency; (2) provisions in provider contracts that obligate the provider to provide services after the health care center’s insolvency for the duration of the period for which premium payment has been made and until the enrollees’ discharge from inpatient facilities; (3) insolvency reserves; (4) acceptable letters of credit; or (5) any other arrangements to assure that benefits are continued as specified above.

(e) Notice of termination. Every agreement to provide health care services between a provider and a health care center shall require the provider to provide at least sixty days’ advance notice to the health care center to terminate the agreement.

(f) Deposit for the protection of enrollees in the event health care center is in rehabilitation or conservation. (1) Unless otherwise provided in this subsection, each health care center shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which a custodian or controlled account is utilized, cash, securities or any combination of cash or securities or other measures that are acceptable to the commissioner, which at all times shall have a value of not less than five hundred thousand dollars.

(2) A health care center that is in operation on October 1, 2007, shall make a deposit equal to two hundred fifty thousand dollars. In the second year, the amount of the additional deposit for a health care center that is in operation on October 1, 2007, shall be equal to two hundred fifty thousand dollars, for a total of five hundred thousand dollars.

(3) The deposit shall be an admitted asset of the health care center in the determination of net worth.

(4) All income from deposits shall be an asset of the organization. A health care center that has made a securities deposit may withdraw such deposit or any part thereof after making a substitute deposit of cash, securities or any combination of cash or securities or other measures of equal amount and value. Any securities shall be approved by the commissioner before being deposited.

(5) The deposit shall be used to protect the interests of the health care center’s enrollees and to assure continuation of health care services to enrollees of a health care center that is in rehabilitation or conservation. The commissioner may use the deposit for administrative costs directly attributable to a receivership or liquidation. If the health care center is placed in rehabilitation or liquidation, the deposit shall be an asset subject to the provisions of the Insurers Rehabilitation and Liquidation Act.

(P.A. 90-68, S. 13, 16; P.A. 98-163, S. 2; P.A. 99-9, S. 4, 6; P.A. 00-30, S. 11, 14; P.A. 03-19, S. 89; P.A. 07-178, S. 1.)

History: P.A. 98-163 added Subsec. (c)(3)(B) prohibiting providers from requesting payment from subscribers or enrollees of sums owed by health care centers and to define “request payment”; P.A. 99-9 amended Subsec. (a) to insert new Subdiv. (2) re requirements for license, redesignated former Subdiv. (2) as Subdiv. (4), added new Subdivs. (5) to (7) re out-of-network benefits and added new Subdiv. (8) re regulations, amended Subsec. (b) to substitute National Association of Insurance Commissioners Accounting Practices and Procedures Manual and Annual Statement Instructions for regulations adopted by the commissioner and amended Subsec. (d) to add “or” before Subdiv. (5), effective May 12, 1999; P.A. 00-30 amended Subsec. (b) to substitute “calculated” for “computed” and to add “version effective January 1, 2001, and subsequent revisions” re the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, effective January 1, 2001; P.A. 03-19 replaced “Health Care Financing Administration” with “Centers for Medicare and Medicaid Services” in Subsec. (a)(5)(B), effective May 12, 2003; P.A. 07-178 amended Subsec. (a)(1) to make a technical change and Subsec. (a)(6) to allow total cost of out-of-network benefits to exceed 10% of total expenditures if health care center obtains the prior approval of commissioner and makes an uncovered expenditures insolvency deposit pursuant to Sec. 38a-193a, amended Subsec. (c)(1) to require every contract between a health care center and a participating provider to contain provisions specified in Subparas. (A) to (F) or a variation approved by commissioner, amended Subsec. (c)(2) to substitute “provisions required by subdivision (1) of this subsection” for “required prohibition”, amended Subsec. (c)(3) to require contract between a health care center and participating provider to inform such provider that it is an unfair trade practice to request payment from an enrollee, other than a copayment or deductible, for covered medical services or to report an enrollee to a credit reporting agency for not paying a bill for which the health care center is responsible, and added Subsec. (f) re required deposit by each health care center with commissioner of cash, securities or any combination thereof or other measures acceptable to commissioner, which shall have a value of not less than $500,000 at all times.

Sec. 38a-193a. Uncovered expenditures insolvency deposit by health care center. Requirements. Withdrawal of deposit. Regulations. (a) If at any time uncovered expenditures exceed ten per cent of total health care expenditures, a health care center shall place an uncovered expenditures insolvency deposit with the Insurance Commissioner or with an organization or trustee acceptable to the commissioner through which a custodial or controlled account is maintained, cash or securities that are acceptable to the commissioner. The deposit shall at all times have a fair market value in an amount of one hundred twenty per cent of the health care center’s outstanding liability for uncovered expenditures for enrollees in this state, including incurred but not reported claims, and shall be calculated as of the first day of the month and maintained for the remainder of the month. If a health care center is not otherwise required to file a quarterly report, it shall file a report not later than forty-five days after the end of the calendar quarter with information sufficient to demonstrate compliance with this section.

(b) The deposit required under this section is in addition to the deposit required under subsection (f) of section 38a-193 and is an admitted asset of the health care center in the determination of net worth. All income from deposits or trust accounts shall be assets of the health care center and may be withdrawn from the deposit or account quarterly with the approval of the commissioner.

(c) A health care center that has made a deposit, may withdraw such deposit or any part of such deposit, if (1) a substitute deposit of cash or securities of equal amount and value is made, (2) the fair market value exceeds the amount of the required deposit, or (3) the required deposit under subsection (a) of this section is reduced or eliminated. Deposits, substitutions or withdrawals may be made only with the prior written approval of the commissioner.

(d) The deposit required under this section shall be held in trust separate and apart from all other moneys, funds and accounts and may be used only as provided under this section. The commissioner may use the deposit of an insolvent health care center for administrative costs associated with administering the deposit and payment of claims of enrollees of this state for uncovered expenditures in this state. Claims for uncovered expenditures shall be paid on a pro rata basis based on assets available to pay the ultimate liability for incurred expenditures. Partial distribution may be made pending final distribution. Any amount of the deposit remaining shall be paid into the liquidation or receivership of the health care center.

(e) The commissioner may, by regulation adopted in accordance with chapter 54, prescribe the time, manner and form for filing claims under subsection (d) of this section.

(f) The commissioner may, by regulation adopted in accordance with chapter 54, or by order, require a health care center to file annual, quarterly or more frequent reports deemed necessary to demonstrate compliance with this section. The commissioner may require that the reports include liability for uncovered expenditures as well as an audit opinion.

(P.A. 07-178, S. 2.)

Sec. 38a-194. Enrollment period. Replacement coverage in the event of insolvency. (a) Enrollment period. In the event of an insolvency of a health care center, upon order of the commissioner, all other carriers that participated in the enrollment process with the insolvent health care center at a group’s last regular enrollment period shall offer such group’s subscribers of the insolvent health care center a thirty-day enrollment period commencing upon the date of insolvency. Each carrier shall offer such subscribers of the insolvent health care center the same coverages and rates that such carrier had offered to the subscribers of the group at its last regular enrollment period for the remainder of the term of the original group contract. An open enrollment shall not be required where the group contract holder participates in a self-insured, self-funded or other health plan exempt from the regulation of the commissioner, unless the plan administrator and group contract holder voluntarily agree to offer a simultaneous open enrollment and extend coverage under the same enrollment terms and conditions as are applicable to carriers under sections 38a-175 to 38a-178, inclusive, subsection (a) of section 38a-179, sections 38a-182 to 38a-185, inclusive, 38a-187, 38a-188 and 38a-192 to 38a-194, inclusive, and the regulations adopted hereunder.

(b) Replacement coverage allocated among centers within service area. If no other carrier has been offered to one or more groups enrolled in the insolvent health care center, or if the commissioner determines that the other carrier or carriers lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group enrollees of the insolvent health care center, then the commissioner shall allocate equitably the insolvent health care center’s group contracts for such groups among all health care centers which operate within a portion of the insolvent health care center’s service area, taking into consideration the health care delivery resources of each health care center. Each health care center, to which a group or groups are so allocated, shall offer such group or groups the health care center’s existing coverage which is most similar to the group’s coverage with the insolvent health care center at rates determined in accordance with the successor health care center’s existing rating methodology. No offering by a carrier shall be required where the group contract holder participates in a self-insured, self-funded or other health plan exempt from regulation by the commissioner. The commissioner shall also allocate equitably the insolvent health care center’s nongroup enrollees who are unable to obtain other coverage among all health care centers which operate within a portion of the insolvent health care center’s service area, taking into consideration the health care delivery resources of each such health care center. Each health care center to which nongroup enrollees are allocated, shall offer each such nongroup enrollee, the health care center’s existing coverage for individual or conversion coverage as determined by his type of coverage in the insolvent health care center at rates determined in accordance with the successor health care center’s existing rating methodology. Successor health care centers which do not offer direct nongroup enrollment may aggregate all of the allocated nongroup enrollees into one group for rating and coverage purposes.

(c) Replacement coverage extended to all subscribers. Exception. (1) ”Discontinuance” shall mean the termination of the contract between the group contract holder and a health care center due to the insolvency of the health care center, and does not refer to the termination of any agreement between any individual enrollee and the health care center.

(2) Any carrier providing replacement coverage with respect to group hospital, medical or surgical expense or service benefits within a period of sixty days from the date of discontinuance of a prior health care center contract or policy providing such hospital, medical or surgical expense or service benefits shall immediately cover all subscribers and subscribers’ beneficiaries who were validly covered under the previous health care center contract or policy at the date of discontinuance and who would otherwise be eligible for coverage under the succeeding carrier’s contract, regardless of any provisions of the contract relating to active employment or hospital confinement or pregnancy.

(3) Except to the extent benefits for the condition would have been reduced or excluded under the prior carrier’s contract or policy, no provision in a succeeding carrier’s contract of replacement coverage which would operate to reduce or exclude benefits on the basis that the condition giving rise to benefits, preexisted the effective date of the succeeding carrier’s contract, shall be applied with respect to those subscribers and subscribers’ beneficiaries validly covered under the prior carrier’s contract or policy on the date of discontinuance.

(d) Insolvency. Priority of distribution. In the event of the insolvency of a health care center, for purposes of determining the priority of distribution of the general assets of the health care center, claims of enrollees, enrollees’ beneficiaries, subscribers and subscribers’ beneficiaries shall have the same priority as established by section 38a-944 for policyholders and beneficiaries of insureds of insurance companies described in subdivision (3) of subsection (a) of section 38a-944. If an enrollee or subscriber is liable to any provider for services provided pursuant to and covered by the health care center, that liability shall have the status of an enrollee or subscriber claim for distribution of assets. Any provider who is obligated by statute or agreement to hold enrollees or subscribers harmless from liability for services provided pursuant to and covered by a health care center shall have a priority of distribution of the general assets immediately following that of enrollees, enrollees’ beneficiaries, subscribers and subscribers’ beneficiaries as described in this subsection, and immediately preceding the priority of distribution described in subdivision (4) of subsection (a) of section 38a-944.

(P.A. 90-68, S. 14, 16; P.A. 99-9, S. 5, 6.)

History: P.A. 99-9 substituted “subscribers” for “enrollees” in Subsec. (a), substituted “subscribers and subscribers’ beneficiaries” for “enrollees” in Subsec. (c) and added new Subsec. (d) re priority of distribution in the event of insolvency, effective May 12, 1999.

Secs. 38a-195 to 38a-198. Reserved for future use.

PART II*

HOSPITAL SERVICE CORPORATIONS

*See chapter 698b (Sec. 38a-230 et seq.) re prepaid legal services and formation of nonprofit legal service plans.

See Sec. 38a-470 re liens on workers’ compensation awards in favor of hospital service corporations.

See Sec. 38a-471 re requirements for third party prescription programs.

See Sec. 38a-495 re Medicare supplement policies.

See Sec. 38a-498 re mandatory coverage for emergency ambulance services.

See Sec. 38a-504 re insurance policy or contract requirements covering surgical removal of tumors and treatment of leukemia.

Annotation to former chapter 592:

Restriction on powers of limited purpose corporations such as those organized under this chapter discussed. 184 C. 352.

Sec. 38a-199. (Formerly Sec. 33-157). Definition. Powers. Exemption from insurance laws. Reserves. (a) A hospital service corporation is defined as a non-profit-sharing corporation without capital stock organized under the laws of the state for the purpose of establishing, maintaining and operating a plan whereby comprehensive health care, which shall include inpatient and outpatient hospital care and home care, provided and billed by an approved general, special or chronic disease hospital, an approved clinic or an approved chronic and convalescent nursing home, and services incidental thereto, may be provided, at the expense of said corporation, to subscribers to such plan under a contract entitling such subscribers to the benefits provided therein. When so determined by any such corporation comprehensive health care shall also include appliances, drugs, medicines, supplies and all other health goods and services, including the services of physicians, doctors of dentistry and other licensed practitioners of the healing arts. Each such corporation shall be governed by sections 38a-199 to 38a-209, inclusive, and shall, except as specifically designated herein, be exempt from the provisions of the general statutes relating to insurance. The provisions of sections 38a-815 to 38a-819, inclusive, except subdivision (9) of section 38a-816, shall be applicable to such corporation. Such hospitals, clinics and chronic and convalescent nursing homes as shall be contained in a list of approved institutions maintained by the Department of Public Health shall be deemed approved for the purposes of sections 38a-199 to 38a-209, inclusive.

(b) A hospital service corporation providing health care benefits to plan subscribers under the provisions of subsection (a) of this section may, upon obtaining the approval of the Insurance Commissioner as provided in section 38a-482: (1) Adjust the rates to be paid by any group or groups of its subscribers based upon past and prospective loss experience and may classify subscribers and groups of subscribers and determine rates with reference to standards for variations or risks or expenses which it may establish; (2) contract for the coordination of benefits with other hospital service corporations, medical service corporations or insurance companies to avoid duplication of benefits to be provided to its group subscribers; (3) make loans, grants or provide anything of value to a health care center covering all or part of the cost of health services provided to members; (4) contract with a health care center to provide insurance or similar protection to cover the cost of care provided through health care centers and to provide coverage in the event of the insolvency of the health care center; and (5) establish, maintain, own and operate health care centers as a line of business, provided that (A) aggregate investments hereafter made by such corporation shall not exceed ten per cent of such corporation’s contingency reserve as of the date of the investment; (B) such investments shall not be repaid or recovered from rates charged by such corporation for its non-health-care-center lines of business, and (C) the commissioner shall find, based upon evidence furnished by such corporation, that the financial condition of such corporation and the rates of its non-health-care-center subscribers are not unduly jeopardized by such investment. Subdivisions (1) and (2) shall be subject to such regulations as may be adopted by the Insurance Commissioner to establish guidelines of eligibility for experience rating and adoption of coordination of benefits clauses in health care contracts.

(c) Each hospital service corporation shall maintain reserves equal in amount to its liabilities under all its policy contracts, as the same are computed in accordance with regulations of the commissioner adopted upon reasonable consideration of ascertained experience for the purpose of adequately protecting the subscriber and securing the solvency of such company. Each such corporation shall maintain a reserve for contingencies which shall not be less than the amount required by companies licensed to transact accident and health insurance, under section 38a-72. The commissioner may adopt regulations prescribing the maximum amount that may be held in the reserve for contingencies, and in adopting such regulations, he shall consider the stability, solvency and interests of the corporation and the interests of the subscribers and other affected persons. The commissioner shall allow a reasonable period of time for compliance with this section, not to exceed five years. On and after October 1, 1974, the commissioner may require a hospital service corporation to adjust its reserve for contingencies to comply with the provisions of this section and to adjust its rates or benefits or both to reflect the adjustment in the reserve for contingencies.

(1949 Rev., S. 5269; February, 1965, P.A. 534, S. 1; 1969, P.A. 686, S. 1; P.A. 74-5, S. 1; P.A. 77-614, S. 163, 323, 587, 610; P.A. 78-303, S. 85, 136; P.A. 80-482, S. 214, 348; P.A. 81-101, S. 1; P.A. 82-415, S. 12, 18; P.A. 83-216, S. 1; P.A. 93-381, S. 9, 39; P.A. 95-257, S. 12, 21, 58.)

History: 1965 act specified what is to be considered as “hospital care”, stated that provisions not to be construed to authorize direct reimbursement for medical services made by nonprofit medical service corporation and replaced provision re list of approved hospitals created by Connecticut medical examining board and Connecticut homeopathic medical examining board acting jointly with provision re list maintained by health department; 1969 act replaced “hospital care” with “comprehensive health care”, deleted provision re construction of provisions added by 1965 act, expanded care to include appliances, drugs, etc. and services of physicians, dentists and other licensed practitioners of healing arts and added Subsec. (b); P.A. 74-5 changed wording of insurance commissioner’s power to make regulations in Subsec. (b) and added Subsec. (c); P.A. 77-614 and P.A. 78-303 made insurance department a division within the department of business regulation with insurance commission as its head and replaced department of health with department of health services, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and deleted reference to abolished department of business regulation; P.A. 81-101 required that the unfair insurance practice provisions (Secs. 38-60 to 38-64) be applicable to hospital service corporations; P.A. 82-415 added Subsecs. (b)(3) and (4), empowering hospital service corporation to make loans, etc. to health care centers and to contract with such centers to provide insurance; P.A. 83-216 amended Subsec. (b) to empower hospital service corporations to establish, maintain, own and operate health care centers as a line of business; Sec. 33-157 transferred to Sec. 38a-199 in 1991; P.A. 93-381 replaced department of health services with department of public health and addiction services, effective July 1, 1993; P.A. 95-257 replaced Commissioner and Department of Public Health and Addiction Services with Commissioner and Department of Public Health, effective July 1, 1995.

See Sec. 38a-504 re insurance policy or contract requirements covering surgical removal of tumors and treatment of leukemia.

See Sec. 38a-538 re employees’ rights to conversion and extension of group coverage and re liability of group employers.

Annotations to former section 33-157:

Cited. 184 C. 352.

Subsec. (a):

Cited. 31 CS 110.

Sec. 38a-200. (Formerly Sec. 33-158). Incorporation. Representation of policyholders on board of directors. Persons desiring to form a hospital service corporation may incorporate under the general law of the state governing corporations, but subject to the following provisions: (1) The certificate of incorporation of each such corporation shall have endorsed thereon or attached thereto the consent of the Insurance Commissioner, if he finds the same to be in accordance with the provisions of sections 38a-199 to 38a-209, inclusive; and (2) said certificate shall include a statement of the territory in which the corporation will operate, the services to be rendered by the corporation and the rates currently to be charged therefor and shall be accompanied by two copies of the contract for services which the corporation proposes to make with subscribers and two copies of the type of contract which such corporation proposes to make with member hospitals. Such corporation shall include in its bylaws provision for the election of at least three of its policyholders to its board of directors by its members, and failure to include such a provision in such bylaws or to abide by such provision shall be grounds for disapproval by the Insurance Commissioner of any contract it may enter into during the period of such noncompliance.

(1949 Rev., S. 5270; 1959, P.A. 559; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 215, 348.)

History: 1959 act required corporation to include in its bylaws provision for election of at least three policyholders to board of directors; P.A. 77-614 made insurance department a division within the department of business regulation with the commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and deleted reference to abolished department of business regulation; Sec. 33-158 transferred to Sec. 38a-200 in 1991.

Sec. 38a-201. (Formerly Sec. 33-159). Form of contract. No contract between any such corporation and subscribers shall entitle more than one person to services, except that such contract may be issued for service to a subscriber and wife, to a subscriber and husband, to a subscriber and family, to a subscriber and dependent or dependents related by blood, marriage or adoption or to a subscriber and ward. Such contract with a subscriber shall be in writing and a copy thereof furnished to each subscriber. Each such contract shall contain the following provisions: (1) A statement of the amount payable to the corporation by the subscriber and the manner in which such amount is payable; (2) a statement of the nature of the services to be furnished and the period during which they will be furnished, and, if there are any services to be excepted, a detailed statement of such exceptions; (3) a statement of terms and conditions upon which the contract may be cancelled or otherwise terminated at the option of either party; (4) a statement that the contract includes the endorsement thereon and attached papers, if any, and contains the entire contract; (5) a statement that no statement by the subscriber in his application for a contract shall void the contract or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to such contract; (6) a statement of the period of grace which will be allowed the subscriber for making any payment due under the contract, which period shall not be less than ten days; and (7) a statement that no action at law based upon or arising out of the physician-patient relationship shall be maintained against a nonprofit hospital service corporation.

(1949 Rev., S. 5271; 1969, P.A. 686, S. 2.)

History: 1969 act required that contract contain statement that no action at law concerning physician-patient relationship shall be maintained against nonprofit hospital service corporation; Sec. 33-159 transferred to Sec. 38a-201 in 1991.

See Sec. 38a-472 re assignment of insurance proceeds to doctor, hospital or state agency.

See Sec. 38a-538 re employees’ rights to conversion and extension of group coverage and re liability of group employers.

Sec. 38a-202. (Formerly Sec. 33-160). Reports and examinations. Each such corporation shall annually, on or before March first, file in the office of the Insurance Commissioner a statement, verified by at least two of its principal officers, showing its condition on the thirty-first day of December then next preceding, which shall be in such form and contain such information as said commissioner prescribes. Examination of the financial condition of each such corporation by the Insurance Commissioner or his representatives shall be made at least once in every five years. Said commissioner, or any deputy or examiner or any other person whom he appoints, shall have the power of visitation and examination into the affairs of any such corporation and free access to all of the books, papers and documents that relate to the business of the corporation, and may summon and qualify as witnesses under oath, for the purpose of examination, its officers, agents or employees or other persons in relation to the affairs, transactions and conditions of the corporation. All costs of acquisition and of management activities shall be under the supervision of the Insurance Commissioner.

(1949 Rev., S. 5273; 1953, S. 2596d; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 216, 348; P.A. 81-101, S. 2.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored division as independent department with commissioner as its head and deleted reference to abolished department of business regulation; P.A. 81-101 required that insurance commissioner examine financial condition of each hospital service corporation every five years, rather than biennially; Sec. 33-160 transferred to Sec. 38a-202 in 1991.

Annotation to former section 33-160:

This section empowers the insurance commissioner as supervisor of costs of management activities. His determination of administrative costs in a Blue Cross rate increase hearing sustained on appeal. 31 CS 257.

Sec. 38a-203. (Formerly Sec. 33-161). Investments. Such corporations shall not invest in real estate mortgages, but may invest in other securities permitted by the general statutes for the investment of trust funds, and in such other securities alone.

(1949 Rev., S. 5274.)

History: Sec. 33-161 transferred to Sec. 38a-203 in 1991.

Annotation to former section 33-161:

Cited. 184 C. 352.

Sec. 38a-204. (Formerly Sec. 33-162). Liquidation or rehabilitation. Mergers. Each such corporation shall be subject to liquidation, dissolution or rehabilitation, and such proceeding shall be under the supervision of the Insurance Commissioner, who shall have such powers hereunder as he possesses in reference to domestic insurance corporations. Any hospital service corporation may merge with any other hospital service corporation or corporations, subject to the approval of the Insurance Commissioner and may consolidate or merge with any medical service corporation organized under sections 38a-214 to 38a-225, inclusive, subject to the approval of the Insurance Commissioner. The new corporation resulting from such consolidation or the surviving corporation resulting from such merger may exercise all of the powers and perform all of the functions of hospital service corporations organized pursuant to sections 38a-199 to 38a-209, inclusive, and medical service corporations organized pursuant to sections 38a-214 to 38a-225, inclusive, and shall be subject to the provisions of said sections. Prior to such approval, the commissioner shall hold a hearing or hearings, in accordance with the procedures of chapter 54 to determine that the terms and conditions of the proposed merger or consolidation are fair and reasonable and that the interests of all parties, subscribers and affected persons are adequately protected. The consolidation or merger shall become effective upon the filing with the Secretary of the State of a certificate of consolidation or merger, endorsed as approved by the Insurance Commissioner.

(1949 Rev., S. 5275; P.A. 74-7, S. 1; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 217, 348.)

History: P.A. 74-7 added provisions re merger and consolidation of medical service corporations and hospital service corporations; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department and abolished department of business regulation; Sec. 33-162 transferred to Sec. 38a-204 in 1991.

Annotation to former section 33-162:

Cited. 184 C. 352.

Sec. 38a-205. (Formerly Sec. 33-163). Workers’ compensation law not affected. No provision of sections 38a-199 to 38a-209, inclusive, nor any contract for hospital or other health service by any such corporation shall, in any way, affect the operation of the Workers’ Compensation Act.

(1949 Rev., S. 5276; 1969, P.A. 686, S. 3; P.A. 79-376, S. 54.)

History: 1969 act included reference to health service other than hospital service; P.A. 79-376 replaced “workmen’s compensation” with “workers’ compensation”; Sec. 33-163 transferred to Sec. 38a-205 in 1991.

Sec. 38a-206. (Formerly Sec. 33-164). Fraternal benefit societies and life or accident insurance companies not affected. Fraternal benefit societies and life and accident insurance companies or accident insurance companies shall not be affected by any provision of sections 38a-199 to 38a-209, inclusive.

(1949 Rev., S. 5278.)

History: Sec. 33-164 transferred to Sec. 38a-206 in 1991.

Sec. 38a-207. (Formerly Sec. 33-165). Exemption from taxation. All property of any such corporation shall be exempt from state, district and municipal taxes.

(1949 Rev., S. 5279.)

History: Sec. 33-165 transferred to Sec. 38a-207 in 1991.

Annotation to former section 33-165:

Cited. 184 C. 352.

Sec. 38a-208. (Formerly Sec. 33-166). Rates and contracts to be approved. No such corporation shall enter into any contract with subscribers unless and until it has filed with the Insurance Commissioner a full schedule of the rates to be paid by the subscribers and has obtained said commissioner’s approval thereof. The commissioner may refuse such approval if he finds such rates to be excessive, inadequate or discriminatory. No hospital service corporation shall enter into any contract with subscribers unless and until it has filed with the Insurance Commissioner a copy of such contract, including all riders and endorsements thereof, and until said commissioner’s approval thereof has been obtained. The Insurance Commissioner shall, within a reasonable time after the filing of any such form, notify such corporation either of his approval or disapproval thereof.

(1949 Rev., S. 5272; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 218, 348.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; Sec. 33-166 transferred to Sec. 38a-208 in 1991.

Annotation to former section 33-166:

Insurance commissioner’s judgment modifying a filed schedule of rates of Blue Cross services is affirmed as record contains sufficient evidence to support same. 31 CS 257.

Sec. 38a-209. (Formerly Sec. 33-167). Appeal. From any order or decision of the Insurance Commissioner, an appeal may be taken by any person or corporation aggrieved thereby in accordance with the provisions of section 4-183. Any dispute which arises between a subscriber and a hospital plan corporation or between a member hospital and the hospital plan corporation, or between two or more hospital plan corporations, shall be referred, at the request of any party to such dispute, to the Insurance Commissioner, who shall have the power to hear and decide the same, subject to appeal in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain.

(1949 Rev., S. 5280; 1971, P.A. 870, S. 90; P.A. 76-436, S. 624, 681; P.A. 77-603, S. 19, 125; 77-614, S. 163, 610; P.A. 78-280, S. 5, 127; P.A. 80-482, S. 219, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-215, S. 24, 29.)

History: 1971 act replaced superior court with court of common pleas effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-603 required that appeals be made in accordance with Sec. 4-183, replacing previous appeal provision; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 78-280 substituted “judicial district of Hartford-New Britain” for “Hartford county”; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 33-167 transferred to Sec. 38a-209 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain”, effective June 29, 1999.

Annotations to former section 33-167:

Cited. 3 CA 627.

Appeals by Blue Cross from rate increase decision of the insurance commissioner under this section and subsection (b) of section 4-183, heard and decided together. 31 CS 257.

Secs. 38a-210 to 38a-213. Reserved for future use.

PART III*

MEDICAL SERVICE CORPORATIONS

*See Sec. 38a-470 re liens on workers’ compensation awards in favor of medical service corporations.

See Sec. 38a-471 re requirements for third party prescription programs.

See Sec. 38a-495 re Medicare supplement policies.

See Sec. 38a-498 re mandatory coverage for emergency ambulance services.

See Sec. 38a-504 re insurance policy or contract requirements covering surgical removal of tumors and treatment of leukemia.

Annotation to former chapter 593:

Restriction on powers of limited purpose corporations such as those organized under this chapter discussed. 184 C. 352.

Sec. 38a-214. (Formerly Sec. 33-168). Definition. Powers. Exemption from insurance laws. Reserves. (a) A nonprofit medical service corporation is defined as a non-profit-sharing corporation without capital stock organized under the laws of the state for the purpose of establishing, maintaining and operating a plan whereby comprehensive health care, which shall include inpatient and outpatient hospital care and home care, provided and billed by an approved general, special or chronic disease hospital, an approved clinic or an approved chronic and convalescent nursing home and services incidental thereto may be provided, at the expense of said corporation, to subscribers to such plan under a contract entitling such subscribers to the benefits provided therein. When so determined by any such corporation, comprehensive health care shall also include appliances, drugs, medicines, supplies and all other health goods and services, including the services of physicians, doctors of dentistry and other licensed practitioners of the healing arts. Any such corporation which provides coverage for the services of physicians shall also provide coverage for the services of chiropractors licensed under chapter 372 and natureopaths licensed under chapter 373. Each such corporation shall, except as specifically designated herein, be exempt from the provisions of the general statutes relating to insurance. The provisions of sections 38a-815 to 38a-819, inclusive, except subdivision (9) of section 38a-816, shall be applicable to such corporation. Such hospitals, clinics and chronic and convalescent nursing homes as shall be contained in a list of approved institutions maintained by the Department of Public Health shall be deemed approved for the purposes of sections 38a-214 to 38a-225, inclusive.

(b) A medical service corporation providing health care benefits to plan subscribers under the provisions of subsection (a) of this section may, upon obtaining the approval of the Insurance Commissioner as provided in section 38a-488: (1) Adjust the rates to be paid by any group or groups of its subscribers based upon past and prospective loss experience and may classify subscribers and groups of subscribers and determine rates with reference to standards for variations of risks or expenses which it may establish; (2) contract for the coordination of benefits with other hospital service corporations, medical service corporations or insurance companies to avoid duplication of benefits to be provided to its group subscribers; (3) make loans, grants or provide anything of value to a health care center covering all or part of the cost of health services provided to members; (4) contract with a health care center to provide insurance or similar protection to cover the cost of care provided through health care centers and to provide coverage in the event of the insolvency of the health care center; and (5) establish, maintain, own and operate health care centers as a line of business, provided that (A) aggregate investments hereafter made by such corporation shall not exceed ten per cent of such corporation’s contingency reserve as of the date of the investment; (B) such investments shall not be repaid or recovered from rates charged by such corporation for its non-health-care-center lines of business, and (C) the commissioner shall find, based upon evidence furnished by such corporation, that the financial condition of such corporation and the rates of its non-health-care-center subscribers are not unduly jeopardized by such investment. Subdivisions (1) and (2) shall be subject to such regulations as may be adopted by the Insurance Commissioner to establish guidelines of eligibility for experience rating and adoption of coordination of benefits clauses in health care benefit contracts.

(c) Each medical service corporation shall maintain reserves equal in amount to its liabilities under all its policy contracts, as the same are computed in accordance with regulations of the commissioner adopted upon reasonable consideration of ascertained experience for the purpose of adequately protecting the subscriber or securing the solvency of such company. Each such corporation shall maintain a reserve for contingencies which shall not be less than the amount required by companies licensed to transact accident and health insurance, under section 38a-72. The commissioner may adopt regulations prescribing the maximum amount that may be held in the reserve for contingencies, and in adopting such regulations, he shall consider the stability, solvency and interests of the corporation, and the interests of the subscribers and other affected persons. The commissioner shall allow a reasonable period of time for compliance with this section, not to exceed five years. On and after October 1, 1974, the commissioner may require a medical service corporation to adjust its reserve for contingencies to comply with the provisions of this section and to adjust its rates or benefits or both to reflect such adjustment in the reserve for contingencies.

(1949 Rev., S. 5282; 1951, 1953, S. 2597d; 1957, P.A. 407; 1963, P.A. 333; 1967, P.A. 775; 1969, P.A. 342; 686, S. 4; 1971, P.A. 587; P.A. 74-5, S. 2; P.A. 75-50; P.A. 77-614, S. 163, 323, 610; P.A. 80-482, S. 220, 348; P.A. 81-101, S. 3; P.A. 82-415, S. 13, 18; P.A. 83-216, S. 2; P.A. 93-381, S. 9, 39; P.A. 95-257, S. 12, 21, 58.)

History: 1963 act authorized payments by nonprofit medical service corporation to chiropractors; 1967 act defined “medical services” as professional services performed by physicians and other health services and supplies, except prescription drugs and services covered as hospital services where previously term was “not to be construed to include hospital services”; 1969 act replaced “medical services” and definition of such services with “comprehensive health care” and provisions specifying what is included in such services, added provision re list of approved institutions and added Subsec. (b); 1971 act specified that corporations providing coverage for physicians’ services shall also provide for chiropractors’ services; P.A. 74-5 added Subsec. (c); P.A. 75-50 required that corporations providing coverage for physicians’ services also provide coverage for natureopaths’ services and referred to chiropractors licensed under chapter 372 rather than under Sec. 20-27; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head and replaced department of health with department of health services, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 81-101 required that the unfair insurance practice provisions (Secs. 38-60 to 38-64) be applicable to medical service corporations; P.A. 82-415 added Subsec. (b)(3) and (4), empowering medical service corporations to make loans, etc. to health care centers and to contract with such centers to provide insurance; P.A. 83-216 amended Subsec. (b) to allow medical service corporations to own, operate and maintain health care centers as a line of business; Sec. 33-168 transferred to Sec. 38a-214 in 1991; P.A. 93-381 replaced department of health services with department of public health and addiction services, effective July 1, 1993; P.A. 95-257 replaced Commissioner and Department of Public Health and Addiction Services with Commissioner and Department of Public Health, effective July 1, 1995.

See Sec. 38a-504 re insurance policy or contract requirements covering surgical removal of tumors and treatment of leukemia.

See Sec. 38a-538 re employees’ rights to conversion and extension of group coverage and re liability of group employers.

Annotations to former section 33-168:

Cited. 184 C. 352.

Cited. 29 CS 474.

Sec. 38a-215. (Formerly Sec. 33-169). Formation. Any number of persons not less than seven, all of whom shall be residents of this state, may form a corporation, under and in conformity with the provisions of sections 38a-214 to 38a-225, inclusive, for the purpose of establishing, maintaining and operating a nonprofit medical service corporation. The Connecticut State Medical Society, the Fairfield County Medical Association, the Hartford County Medical Association, the Litchfield County Medical Association, the Middlesex County Medical Association, the New Haven County Medical Association, the New London County Medical Association, the Tolland County Medical Association and the Windham County Medical Association may jointly or severally incorporate for the purposes of operating a medical service corporation.

(1949 Rev., S. 5281.)

History: Sec. 33-169 transferred to Sec. 38a-215 in 1991.

Annotation to former section 33-169:

Cited. 29 CS 474.

Sec. 38a-216. (Formerly Sec. 33-170). Incorporation. Representation of policyholders on board of directors. A medical association desiring to form a medical service corporation may incorporate under the general laws of the state governing corporations, but subject to the following provisions: (a) The certificate of incorporation of each such corporation shall have endorsed thereon, or attached thereto, the consent of the Insurance Commissioner, if he finds the same to be in accordance with sections 38a-214 to 38a-225, inclusive, and in the public interest, provided security guaranteeing the performance of the obligations of such corporation shall be furnished in form and amount, not less than five thousand dollars, as the commissioner determines and (b) such certificate shall include a statement of the territory in which the corporation will operate, the services to be rendered by the corporation and the rates currently to be charged therefor and shall be accompanied by two copies of the contract which the corporation proposes to make with the subscribers. Such corporation shall include in its bylaws provision for the election of at least three of its policyholders to its board of directors by its members, and failure to include such a provision in such bylaws or to abide by such provision shall be grounds for disapproval by the Insurance Commissioner of any contract it may enter into during the period of such noncompliance.

(1949 Rev., S. 5283; 1959, P.A. 511; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 221, 348.)

History: 1959 act required that corporation include in bylaws provision for election of at least three policyholders to board of directors; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; Sec. 33-170 transferred to Sec. 38a-216 in 1991.

Annotation to former section 33-170:

Cited. 29 CS 474.

Sec. 38a-217. (Formerly Sec. 33-171). Form of contract. No single contract between any such corporation and its subscribers shall entitle more than one person to indemnity, except that a single contract may be issued to subscriber and wife, to subscriber and husband, to subscriber and family by marriage or adoption or to subscriber and ward. Such contract shall be in writing and a copy thereof shall be furnished to each subscriber and shall contain the following provisions: (a) A statement of the amount payable to the corporation by the subscriber and the manner in which such amount is payable; (b) a statement of the amount of indemnity to be furnished and the period during which it will be furnished, and, if there are to be exceptions, a detailed statement of such exceptions; (c) a statement of terms and conditions upon which the contract may be cancelled or otherwise terminated at the option of either party; (d) a statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract; (e) a statement that no statements by the subscriber in his application for a contract shall void the contract or be used in any legal proceeding thereunder, unless such application or an exact copy thereof is included in or attached to such contract; (f) a statement of the period of grace which will be allowed the subscriber for making any payment due under the contract, which period shall not be less than ten days; (g) a statement that no action at law based upon or arising out of the physician-patient relationship shall be maintained against a nonprofit medical service corporation.

(1949 Rev., S. 5284.)

History: Sec. 33-171 transferred to Sec. 38a-217 in 1991.

See Sec. 38a-472 re assignment of insurance proceeds to doctor, hospital or state agency.

See Sec. 38a-538 re employees’ rights to conversion and extension of group coverage and re liability of group employers.

Sec. 38a-218. (Formerly Sec. 33-172). Rates and contracts to be approved. No such medical service corporation shall enter into any contract with subscribers unless and until it has filed with the Insurance Commissioner a full schedule of the rates to be paid by the subscriber and has obtained said commissioner’s approval thereof. The commissioner may refuse such approval if he finds such rates are excessive, inadequate or discriminatory. No such medical service corporation shall enter into any contract with subscribers unless and until it has filed with the Insurance Commissioner a copy of such contract, including all riders and endorsements thereof, and until said commissioner’s approval thereof has been obtained. The Insurance Commissioner shall, within a reasonable time after the filing of any such form, notify such corporation either of his approval or disapproval thereof.

(1949 Rev., S. 5285; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 222, 348.)

History: P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; Sec. 33-172 transferred to Sec. 38a-218 in 1991.

Annotation to former section 33-172:

Cited. 29 CS 474.

Sec. 38a-219. (Formerly Sec. 33-173). Reports and examinations. Insurance Commissioner’s supervision. Each such medical service corporation shall, annually, on or before the first day of March, file in the office of the Insurance Commissioner a statement, verified by at least two of its principal officers, showing its condition on the thirty-first day of December then next preceding, which shall be in such form and contain such matters as said commissioner prescribes. The Insurance Commissioner or his representative shall make an examination of the financial condition of each such medical service corporation at least once in every five years. The Insurance Commissioner, or any deputy or examiner or any other person whom he appoints, shall have the power of visitation and examination into the affairs of any such corporation and free access to all of the books, papers and documents that relate to the business of the corporation, and may summon and qualify witnesses under oath to examine its officers, agents or employees or other persons in relation to the affairs, transactions and condition of the corporation. All costs of acquisition and of management activities shall be under the supervision of the Insurance Commissioner.

(1949 Rev., S. 5286; 1953, S. 2598d; P.A. 74-1; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 223, 348; P.A. 81-101, S. 4.)

History: P.A. 74-1 specified that all costs of acquisition and of management activities to be under insurance commissioner’s supervision; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as an independent department with commissioner as its head and abolished the department of business regulation; P.A. 81-101 required that insurance commissioner examine financial condition of each medical service corporation every five years, rather than biennially; Sec. 33-173 transferred to Sec. 38a-219 in 1991.

Annotation to former section 33-173:

Cited. 29 CS 474.

Sec. 38a-220. (Formerly Sec. 33-174). Investments. No such medical service corporation shall invest its funds in any security other than those permitted by the laws of the state for trust funds, except that no funds of such medical service corporation shall be invested in real estate mortgages.

(1949 Rev., S. 5287.)

History: Sec. 33-174 transferred to Sec. 38a-220 in 1991.

Annotations to former section 33-174:

Cited. 184 C. 352.

Cited. 29 CS 474.

Sec. 38a-221. (Formerly Sec. 33-175). Liquidation or rehabilitation. Mergers. Each such medical service corporation shall be subject to liquidation, dissolution or rehabilitation, and such proceeding shall be under the supervision of the Insurance Commissioner, who shall have such powers hereunder as he possesses in reference to domestic insurance corporations. Any medical service corporation may merge with any other medical service corporation or corporations, subject to the approval of the Insurance Commissioner and may consolidate or merge with a hospital service corporation organized under sections 38a-199 to 38a-209, inclusive, subject to the approval of the Insurance Commissioner. The new corporation resulting from such consolidation or the surviving corporation resulting from such merger may exercise all of the powers and perform all of the functions of medical service corporations organized pursuant to sections 38a-214 to 38a-225, inclusive, and hospital service corporations organized pursuant to 38a-199 to 38a-209, inclusive, and shall be subject to the provisions of said sections. Prior to such approval, the commissioner shall hold a hearing or hearings, in accordance with the procedures of chapter 54 to determine that the terms and conditions of the proposed merger or consolidation are fair and reasonable and that the interests of all parties, subscribers and affected persons are adequately protected. The consolidation or merger shall become effective upon the filing with the Secretary of the State of a certificate of consolidation or merger, endorsed as approved by the Insurance Commissioner.

(1949 Rev., S. 5288; P.A. 74-7, S. 2; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 224, 348.)

History: P.A. 74-7 authorized merger or consolidation of medical service corporation and hospital service corporation, adding provisions re such mergers or consolidations; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; Sec. 33-175 transferred to Sec. 38a-221 in 1991.

Annotations to former section 33-175:

Cited. 184 C. 352.

Cited. 29 CS 474.

Sec. 38a-222. (Formerly Sec. 33-176). Workers’ compensation law not affected. No provision of sections 38a-214 to 38a-225, inclusive, nor any contract for medical service, hospital or other health services by any such medical service corporation shall, in any way, affect the operation of the Workers’ Compensation Act.

(1949 Rev., S. 5289; 1969, P.A. 686, S. 5; P.A. 79-376, S. 55.)

History: 1969 act included reference to hospital and other health services; P.A. 79-376 replaced “workmen’s compensation” with “workers’ compensation”; Sec. 33-176 transferred to Sec. 38a-222 in 1991.

Annotation to former section 33-176:

Cited. 29 CS 474.

Sec. 38a-223. (Formerly Sec. 33-177). Fraternal benefit societies and life or accident insurance companies not affected. Fraternal benefit societies and life or accident insurance companies shall not be affected by sections 38a-214 to 38a-225, inclusive.

(1949 Rev., S. 5290.)

History: Sec. 33-177 transferred to Sec. 38a-223 in 1991.

Annotation to former section 33-177:

Cited. 29 CS 474.

Sec. 38a-224. (Formerly Sec. 33-178). Exemption from taxation. All property of any such medical service corporation is declared exempt from state, district and municipal taxes.

(1949 Rev., S. 5291.)

History: Sec. 33-178 transferred to Sec. 38a-224 in 1991.

Annotations to former section 33-178:

Cited. 184 C. 352.

Cited. 29 CS 474.

Sec. 38a-225. (Formerly Sec. 33-179). Appeal. An appeal may be taken from any order or decision of the Insurance Commissioner by any person or corporation aggrieved thereby in accordance with the provisions of section 4-183, except venue for such appeal shall be in the judicial district of New Britain. If any dispute arises between a subscriber and such medical service corporation, the same shall be referred, at the request of any party to such dispute, to the Insurance Commissioner, who shall have the power to hear and decide the same, subject to the provision for appeal as provided herein.

(1949 Rev., S. 5292; 1971, P.A. 870, S. 91; P.A. 76-436, S. 625, 681; P.A. 77-603, S. 22, 125; 77-614, S. 163, 610; P.A. 78-280, S. 5, 127; P.A. 80-482, S. 225, 348; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 95-220, S. 4–6; P.A. 99-215, S. 24, 29.)

History: 1971 act replaced superior court with court of common pleas, effective September 1, 1971, except that courts with cases pending retain jurisdiction unless pending matters deemed transferable; P.A. 76-436 replaced court of common pleas with superior court, effective July 1, 1978; P.A. 77-603 replaced previous appeal provision with requirement that appeals be made in accordance with Sec. 4-183 but retained venue in Hartford county; P.A. 77-614 made insurance department a division within the department of business regulation with commissioner as its head, effective January 1, 1979; P.A. 78-280 substituted “judicial district of Hartford-New Britain” for “Hartford county”; P.A. 80-482 restored insurance division as independent department with commissioner as its head and abolished department of business regulation; P.A. 88-230 replaced “judicial district of Hartford-New Britain” with “judicial district of Hartford”, effective September 1, 1991; P.A. 90-98 changed effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; Sec. 33-179 transferred to Sec. 38a-225 in 1991; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 99-215 replaced “judicial district of Hartford” with “judicial district of New Britain”, effective June 29, 1999.

Annotation to former section 33-179:

Cited. 29 CS 474.

Secs. 38a-226 to 38a-226d. Definitions. Annual licensure; fees; complaints re utilization review companies; certification and release of information; compliance. Violations; notice and hearing; penalties; appeal. Utilization review company minimum standards: Determinations, notification, appeals and expedited review; reports to commissioner; penalties; regulations. Standards of utilization review companies. Sections 38a-226 to 38a-226d, inclusive, are repealed, effective July 1, 2011.

(P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 91-305, S. 1–5; P.A. 92-60, S. 24; P.A. 93-142, S. 4, 7, 8; May 25 Sp. Sess. P.A. 94-1, S. 93, 130; P.A. 95-220, S. 4–6; P.A. 97-99, S. 15–19, 32; P.A. 98-27, S. 12; P.A. 99-215, S. 24, 29; P.A. 01-124, S. 3; 01-139, S. 7; 01-174, S. 5; 01-195, S. 179, 181; P.A. 05-94, S. 1; P.A. 06-54, S. 3; 06-188, S. 33; P.A. 08-127, S. 20; 08-178, S. 8, 9; P.A. 09-49, S. 3; 09-74, S. 14; P.A. 11-58, S. 89.)

Secs. 38a-227 to 38a-229. Reserved for future use.