Section Ins 9.04 - Financial requirementsThe following are the minimum financial requirements for compliance with this section unless a different amount is ordered by the commissioner:
(1) CAPITAL. Unless otherwise ordered by the commissioner the minimum capital or permanent surplus of:(a) A health maintenance organization insurer first licensed or organized on or after July 1, 1989, is $750,000;(b) A health maintenance organization insurer first licensed or organized prior to July 1, 1989, is $200,000;(c) The minimum capital or permanent surplus requirement for an insurer licensed to write only limited service health organization business shall be not less than $75,000. The commissioner may accept the deposit or letter of credit under sub. (3) to satisfy the minimum capital or permanent surplus requirement under this par. (c), if the insurer licensed to write only limited service health organization business demonstrates to the satisfaction of the commissioner that it does not retain any risk of financial loss because all risk of loss has been transferred to providers through provider agreements.(d) Any other insurer writing health maintenance organization or limited service health organization business, is the amount of capital or required surplus required under the statutes governing the organization of the insurer.(2) COMPULSORY SURPLUS. (a) An insurer, including an insurer organized under ch. 613, Stats., writing health maintenance organization or limited service health organization business, except for a health maintenance organization insurer or an insurer licensed to write only limited service health organization business, is subject to s. Ins 51.80.(b) A health maintenance organization insurer shall maintain a compulsory surplus as follows, or a greater amount required by order of the commissioner: the greater of $750,000 or an amount equal to the sum of: 1. 10% of premiums earned in the previous 12 months for policies that include coverages that are considered other insurance business under s. 609.03(3) (a) 3, Stats., plus;2. 3% of other premiums earned in the previous 12 months except that if the percentage of the liabilities of the health maintenance organization insurer that are covered liabilities is less than 90%, 6% of other premiums earned in the previous 12 months.(c) Each insurer licensed to write only limited service health organization business shall maintain a compulsory surplus to provide security against contingencies that affect its financial position but which are not fully covered by provider contracts, insolvency insurance, reinsurance, or other forms of financial guarantees. The compulsory surplus shall be the greater of 3% of the premiums earned by the limited service health organization in the previous 12 months, or $75,000.(d) The commissioner may accept a deposit of securities or letter of credit with the same terms and conditions as required under sub. (3) to satisfy the compulsory surplus requirement if the limited service health organization demonstrates to the satisfaction of the commissioner that it does not retain any risk of financial loss because all risk of loss has been transferred to providers through provider agreements. The commissioner may, by order, require a higher or lower compulsory surplus or may establish additional factors for determining the amount of compulsory surplus required for a particular limited service health organization.(3) DEPOSIT OR LETTER OF CREDIT. Each limited service health organization shall maintain either a deposit of securities with the state treasurer or an acceptable letter of credit on file with the commissioner's office. The amount of the deposit or letter of credit shall be not less than $75,000 for limited service health organizations. The letter of credit shall be payable to the commissioner whenever rehabilitation or liquidation proceedings are initiated against the limited service health organization.(4) RISKS. Risks and factors the commissioner may consider in determining whether to require greater compulsory surplus by order include, but are not limited to, those described under s. 623.11(1) (a) and (b), Stats., and the extent to which the insurer effectively transfers risk to providers. A health maintenance organization insurer may transfer risk through any mechanism including, but not limited to, those provided under s. Ins 9.05(4).(5) SECURITY SURPLUS. (a) An insurer, including an insurer organized under ch. 613, Stats., writing health maintenance organization insurance or limited service health organization business, except for a health maintenance organization insurer or an insurer licensed to write only limited service health organization business, is subject to s. Ins 51.80.(b) Health maintenance organization insurers and insurers licensed to write only limited service health organization business should maintain a security surplus to provide an ample margin of safety and clearly assure a sound operation. The security surplus of a health maintenance organization insurer shall be the greater of: 1. Compulsory surplus plus 40% reduced by 1% for each $33 million of premium in excess of $10 million earned in the previous 12 months; or2. 110% of its compulsory surplus.(c) The security surplus of an insurer licensed to write only limited service health organization business shall be not less than 110% of compulsory surplus.(6) INSOLVENCY PROTECTION FOR POLICYHOLDERS. (a) Each health maintenance organization insurer is required to either maintain compulsory surplus as required for other insurers under s. Ins 51.80 or to demonstrate that in the event of insolvency all of the following shall be met: 1. Enrollees hospitalized on the date of insolvency will be covered until discharged.2. Enrollees will be entitled to similar, alternate coverage that does not contain any medical underwriting or pre-existing limitation requirements.(b) Each insurer licensed to write only limited service health organization business that provides hospital benefits shall demonstrate that, in the event of an insolvency, enrollees hospitalized at the time of an insolvency will be covered until discharged.Wis. Admin. Code Office of the Commissioner of Insurance Ins 9.04
Cr. Register, February, 2000, No. 530, eff. 3-1-00.