WSR 02-16-092

PROPOSED RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Filed August 7, 2002, 10:52 a.m. ]

     Original Notice.

     Preproposal statement of inquiry was filed as WSR 01-18-038.

     Title of Rule: Holding Company Act for health care service contractors and health maintenance organizations.

     Purpose: Chapter 48.31C RCW requires health care service contractors and health maintenance organizations to submit and file certain information with the insurance commissioner. This proposed regulation will set forth the instructions, methods and forms by which this information will be filed with the insurance commissioner and further implement chapter 48.31C RCW.

     Other Identifying Information: Insurance Commissioner Matter No. R 2001-08.

     Statutory Authority for Adoption: RCW 48.02.060, 48.44.050, 48.46.200, chapter 48.31C RCW.

     Statute Being Implemented: Chapter 48.31C RCW.

     Summary: This proposed regulation will set forth the instructions, methods and forms by which this information will be filed with the insurance commissioner and further implement chapter 48.31C RCW.

     Reasons Supporting Proposal: Chapter 48.31C RCW requires health care service contractors and health maintenance organizations to submit and file certain information with the insurance commissioner. This proposed regulation will set forth the instructions, methods and forms by which this information will be filed with the insurance commissioner and further implement chapter 48.31C RCW.

     Name of Agency Personnel Responsible for Drafting and Implementation: Jim Tompkins, P.O. Box 40259, Olympia, WA 98504-0255, (360) 407-0537; and Enforcement: James Odiorne, P.O. Box 40259, Olympia, WA 98504-0255, (360) 407-0420.

     Name of Proponent: Mike Kreidler, Insurance Commissioner, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: Chapter 48.31C RCW requires health care service contractors and health maintenance organizations to submit and file certain information with the insurance commissioner. This proposed regulation will set forth the instructions, methods and forms by which this information will be filed with the insurance commissioner and further implement chapter 48.31C RCW.

     Proposal does not change existing rules.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

Small Business Economic Impact Statement

     Background: In the 2001 session, the legislature adopted the Holding Company Act for health care service contractors (HCSCs) and health maintenance organizations (HMOs), chapter 179, Laws of 2001. The law was codified as chapter 48.31C RCW. The law included an emergency clause (RCW 48.31C.901) making the law effective immediately upon signing.

     After the signing of the bill, the commissioner began to develop rules to implement the new law. On August 28, 2001, the commissioner adopted emergency rules necessary to implement the law. Drafts of those emergency rules were distributed to industry and interested parties prior to the filing for comments and changes were made based on some of the comments received by the OIC. Also on August 28, 2001, a CR-101 was filed announcing the agency's intent to begin permanent rule making in this area. Both the emergency rules and the CR-101 were mailed to affected parties and posted on the agency website. The OIC has been able to evaluate the industry experience under the emergency and make some changes based on that experience.

     Requirements of Federal Law or Federal Regulation: This rule is not required by federal law or regulation.

     Industry Affected by the Proposed Rule: The rules affect health care service contractors (HCSCs) and health maintenance organizations (HMOs). The industry code that would be affected by the proposed rules is Hospital and Medical Service Plans, #6324.

     Percentage of the Industries in the Four-Digit Standard Industrial Classification Affected by the Rule: The proposed rule would affect 100% of the health care service contractors (HCSCs) and health maintenance organizations (HMOs). The industry code that would be affected by the proposed rules is Hospital and Medical Service Plans, #6324.

     Requirements of the Proposed Rule That May Impose a Cost to Business: The rules establish the forms and mechanisms to fulfill the requirements of chapter 48.31C RCW. The rules parallel the Holding Company Act rules for insurers, chapter 284-18 WAC. It is not believed that the rules add costs or requirements that are not traceable back to the underlying statutes and that are essential to accomplish the goals and requirements of chapter 48.31C RCW. An overview of the sections of the rule is below.

     WAC 284-18A-300 sets forth the forms and the general requirements to fulfill the requirements of RCW 48.31C.020 through 48.31C.060.

     WAC 284-18A-310 allows carriers to incorporate other filed information by reference to meet the information requirements of Form A, Form B, Form D, and Form E. This includes documents filed with a government authority if it is filed as an exhibit. Documents filed with the OIC in the last thee years do not need to be filed as an exhibit. Also, if an item must be summarized or outlined, it requires only a brief summary of the relevant or pertinent information and allows incorporation by reference. WAC 284-18A-320 requires only the filing of information known or reasonably available to the person filing the statement. If providing the information is burdensome, the filer may not have to obtain the information or may be able to file the information later.

     WAC 284-18A-330 requires filing material information additional to what is required by Forms A through E if it is necessary to avoid the information provided from misleading the OIC and the public.

     WAC 284-18A-340 provides definitions.

     WAC 284-18A-350 provides that a person required by RCW 48.31C.030 shall use a Form A.

     WAC 284-18A-360 provides that applicants must promptly advise the commissioner of changes in submitted in a Form A which occur after the Form A is filed but prior to action on the application by the commissioner.

     WAC 284-18A-370 provides that carriers required to file an annual registration under RCW 48.31C.040 shall file a Form B.

     WAC 284-18A-380 provides that carriers required to register under RCW 48.31C.040 shall also file a Form C.

     WAC 284-18A-390 provides that carriers have fifteen days to amend Form B after the end of any month where there is a material change to the information in the annual Form B.

     WAC 284-18A-400 provides the processes for alternative and consolidated registrations under RCW 48.31C.040.

     WAC 284-18A-410 sets standards for disclaimers and termination of registration.

     WAC 284-18A-420 provides that carriers required to obtain from the commissioner under RCW 48.31C.050 shall use Form D.

     WAC 284-18A-430 established the information and processes necessary for approval of an extraordinary dividend or distribution under RCW 48.31C.060.

     WAC 284-18A-440 provides a mechanism for carriers to indicate the information that they consider proprietary and confidential as allowed in RCW 48.31C.130.

     WAC 284-18A-910 is Form A.

     WAC 284-18A-920 is Form B.

     WAC 284-18A-930 is Form C.

     WAC 284-18A-940 is Form D.

     WAC 284-18A-950 is Form E.

     WAC 284-18A-960 is the form required to notify of dividends and distributions.

     Professional Services That May Be Needed to Comply with the Requirements of the Proposed Rule: It is expected that no new professional services will be needed by carriers, including smaller carriers. Again, the services and costs that may be incurred are traceable to the requirements of chapter 48.31C RCW.

     Cost of equipment: There is no anticipated additional cost of equipment attributable to the proposed rules.

     Cost of supplies: There are minimal anticipated additional costs of supplies for the filings.

     Cost of labor: There may be some minimal costs associated with reading and comprehending the new rule. As noted, the rules parallel the Holding Company Act rules for insurers so there are some opportunities to avoid potential labor costs. OIC staff welcomes suggestions to lessen potential costs.

     Cost of increased administration: There may be some minimal costs associated with reading and comprehending the new rule. As noted, the rules parallel the Holding Company Act rules for insurers so there are some opportunities to avoid potential administration costs. OIC staff welcomes suggestions to lessen potential costs.

     Reporting, Record-Keeping, and Other Compliance Requirements of the Proposed Rule: The rules establish the forms and mechanisms to fulfill the reporting requirements established in chapter 48.31C RCW. An overview of the sections is included above.

     Compliance Costs for the Industries Affected by the Proposed Rules: The drafters do not anticipate any costs attributable to the rule beyond the time spent in reading and comprehending the rule. Chapter 48.31C RCW requires filing of certain types of financial information. Proposed chapter 284-18A WAC provides the forms and processes to implement the RCW chapter. Costs inherent in the regulation are believed to be traceable to the goals and requirements of the underlying statutes.

     The Proportionality of the Cost of Compliance: No. The proposed rule will not impose a disproportionately higher economic burden on smaller carriers. The rules themselves should not impose economic burdens for any carrier or insurer. Costs and reporting requirements are traceable to the underlying statutes.

     Mitigation Measures That Could Be Used to Reduce the Economic Impact of the Rule on Smaller Carriers and Still Meet the Objectives: No additional mitigation appears to be possible and none should be necessary. It does not appear that the goals of the rule making and of chapter 48.31C RCW can be achieved in any more efficient fashion. The commissioner welcomes any comments or suggestions of industry regarding mitigation.

     Steps the Commissioner Will Take to Reduce the Costs of the Rule on Smaller Carriers: See above. The commissioner would like to particularly encourage smaller carriers to contact the OIC with any suggestions to mitigate costs. The commissioner will consider those comments and seek to incorporate any of those that improve the rules and further the goals of the statute.

     Mitigation Techniques That Have Been Considered and Incorporated into the Proposed Rule: The rules parallel the Holding Company Act for insurers. Some carriers have subsidiaries or sister entities that currently are required to file under chapter 284-18 WAC, the rules provide some familiarity. The rules attempt to provide flexibility in reporting requirements. For example, WAC 284-18A-310 allows incorporation by reference to other filings with the OIC or even other governmental entities if the documents are attached as exhibits. Documents filed with the OIC in the last three years can be referred to and not attached. Extensive documents can be excerpted. WAC 284-18A-320 does not require filers to seek out information if it involves unreasonable effort or expense. WAC 284-18A-330 may require information additional to the information filed on Forms A through E, the purpose is to provide flexibility and lessen costs rather than require all information from all carriers.

     The adoption of emergency rules was not intended to be any sort of mitigatory measure. However, the discussions leading up to the filing of the emergency rules and the discussions during the filings under the emergency rules have allowed the OIC to consider options, make changes, and refine language in the proposed rules in this rule making.

     Mitigation Techniques That Were Considered for Incorporation into the Proposed Rule but Were Rejected: The OIC received numerous comments regarding the emergency rules and the proposed rules. Many of those comments were incorporated in the drafts that lead to the rules proposed in this rule making. Many of those comments were not mitigatory in the sense that they directly reduced cost; some involved possible questions or requests to clarify. The OIC has attempted to clarify the rules to address the concerns. Other uncertainties have been resolved during the implementation of the emergency rules. If a carrier believes that a concern that has not been addressed or has a suggestion to mitigate costs, the commissioner encourages submitting those comments.

     Informing and Involving Affected Carriers: The commissioner began discussing statutory issues with carriers after the law was enacted. The OIC developed drafts of the emergency rules and solicited comments prior to adoption. The OIC made changes to the emergency rules based on carrier comments, including comments from smaller carriers. As the filings occurred under the emergency rules, OIC staff assisted in compliance and engaged in an ongoing dialogue with the carriers regarding the standards. The proposed rules take advantage of these discussions with industry.

     The CR-103 adopting the rules were mailed to all carriers, e-mailed to the e-mail list and posted on the website.

     Informing and Involving Affected Smaller Carriers: See above.

     A copy of the statement may be obtained by writing to Kacy Scott, P.O. Box 40255, Olympia, WA 98504-0255, e-mail Kacys@oic.wa.gov, fax (360) 586-3109.

     RCW 34.05.328 applies to this rule adoption. The rule is a "significant legislative rule" for the purpose of RCW 34.05.328.

     Hearing Location: 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on September 10, 2002, at 2:00 p.m.

     Assistance for Persons with Disabilities: Contact Lori Villaflores by September 6, 2002, TDD (360) 664-3154 or (360) 407-0198.

     Submit Written Comments to: Kacy Scott, P.O. Box 40255, Olympia, WA 98504-0255, e-mail Kacys@oic.wa.gov, fax (360) 586-3109, by September 9, 2002.

     Date of Intended Adoption: September 11, 2002.

August 7, 2002

Mike Kreidler

Insurance Commissioner

OTS-5061.8

Chapter 284-18A WAC

HEALTH CARE SERVICE CONTRACTOR AND HEALTH MAINTENANCE HOLDING COMPANY REGULATION


NEW SECTION
WAC 284-18A-300   Forms -- General requirements.   (1) Forms A, B, C, D, and E are intended to be guides in the preparation of the statements required by RCW 48.31C.020 through 48.31C.060. They are not intended to be blank forms which are to be filled in. These statements when filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or an answer is in the negative, an appropriate statement to that effect shall be made.

     (2) Two complete copies of Form A, and one copy of Forms B, C, and D, and E, including exhibits and all other papers and documents filed as a part shall be filed with the commissioner by:

     (a) Personal delivery to: Insurance Commissioner of the State of Washington, 5000 Capitol Blvd., Tumwater, WA 98501; or

     (b) Mailed to: Insurance Commissioner of the State of Washington, Post Office Box 40259, Olympia, Washington 98504-0259.

     At least one of the copies shall be manually signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority shall also be filed with the statement.

     (3) Statements should be prepared on paper 8 1/2" x 11" in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of any statement, financial statements, or exhibits shall be clear, easily readable, and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall be converted into United States currency.

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NEW SECTION
WAC 284-18A-310   Forms -- Incorporation by reference, summaries, and omissions.   (1) Information required by any item of Form A, Form B, Form D, or Form E may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B, Form D, or Form E provided such document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the commissioner which were filed within three years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear, or confusing.

     (2) Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the commissioner which was filed within three years and may be qualified in its entirety by such reference.

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NEW SECTION
WAC 284-18A-320   Forms -- Information unknown or unavailable and extension of time to furnish.   (1) Information required need be given only insofar as it is known or reasonably available to the person filing the statement. If any required information is unknown and not reasonably available to the person filing, either because obtaining the information would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions:

     (a) The person filing shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources; and

     (b) The person filing shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.

     (2) If it is impractical to furnish any required information, document, or report at the time it is required to be filed, there may be filed with the commissioner a separate document:

     (a) Identifying the information, document, or report in question;

     (b) Stating why the filing at the time required is impractical; and

     (c) Requesting an extension of time for filing the information, document, or report to a specified date. The request for extension shall be deemed granted unless the commissioner denies the request within sixty days of receipt.

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NEW SECTION
WAC 284-18A-330   Forms -- Additional information and exhibits.   In addition to the information expressly required to be included in Form A, Form B, Form C, Form D, and Form E, there shall be added such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer. Changes to Forms A, B, C, D, or E shall include on the top of the cover page the phrase: "Change No. (insert number) to" and shall indicate the date of the change and not the date of the original filing.

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NEW SECTION
WAC 284-18A-340   Definitions.   (1) "The act" means Holding Company Act for Health Care Service Contractors and Health Maintenance Organizations RCW 48.31C.010 through 48.31C.901.

     (2) "Executive officer" means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

     (3) "Ultimate controlling person" means that person who is not controlled by any other person.

     (4) Unless the context otherwise requires, other terms found in these regulations and in RCW 48.31C.010 are used as defined in RCW 48.31C.010. Other terminology is according to Title 48 RCW, or industry usage if not defined by Title 48 RCW.

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NEW SECTION
WAC 284-18A-350   Acquisition of control -- Form A Statement filing.   A person required to file a statement under RCW 48.31C.030, shall provide the required information on Form A, hereby made a part of this regulation.

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NEW SECTION
WAC 284-18A-360   Amendments to Form A.   The applicant shall promptly advise the commissioner of any changes in the information so furnished on Form A arising after the date upon which the information was provided but prior to the commissioner's disposition of the application.

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NEW SECTION
WAC 284-18A-370   Annual registration of health carriers -- Form B Statement filing.   (1) A health carrier required to file an annual registration statement under RCW 48.31C.040, shall provide the required information on Form B.

     (2) The Form B must be filed within fifteen days after the health carrier becomes subject to registration, and annually on or before May 15th of each year for the previous calendar year.

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NEW SECTION
WAC 284-18A-380   Summary of registration -- Form C Statement filing.   A health carrier required to file an annual registration statement under RCW 48.31C.040 is also required to furnish information required on Form C.

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NEW SECTION
WAC 284-18A-390   Amendments to Form B.   (1) An amendment to Form B shall be filed within fifteen days after the end of any month in which there is a material change to the information provided in the annual registration statement.

     (2) Amendments shall be filed in the Form B format with only those items which are being amended reported. Each such amendment shall include at the top of the cover page "Amendment No. (insert number) to Form B for (insert year)" and shall indicate the date of the change and not the date of the original filings.

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NEW SECTION
WAC 284-18A-400   Alternative and consolidated registrations.   (1) Any authorized health carrier may file a registration statement on behalf of any affiliated health carrier or health carriers which are required to register under RCW 48.31C.040. A registration statement may include information not required by the act regarding any health carrier in the health carrier holding company system even if the health carrier is not authorized to do business in this state. In lieu of filing a registration statement on Form B, the registered health carrier may file a copy of the registration statement or similar report which it is required to file in its state of domicile, provided:

     (a) The statement or report contains substantially similar information required to be provided on Form B; and

     (b) The filing health carrier is the principal health carrier in the health carrier holding company system.

     (2) The question of whether the filing health carrier is the principal health carrier in the health carrier holding company system is a question of fact and a health carrier filing a registration statement or report instead of Form B on behalf of an affiliated health carrier, shall set forth a brief statement of facts which will substantiate the filing health carrier's claim that it, in fact, is the principal health carrier in the health carrier holding company system.

     (3) Any health carrier may take advantage of the provisions of RCW 48.31C.040 (7) or (8) without obtaining the prior approval of the commissioner. The commissioner, however, reserves the right to require individual filings if he or she deems such filings necessary in the interest of clarity, ease of administration, or the public good.

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NEW SECTION
WAC 284-18A-410   Disclaimers and termination of registration.   A disclaimer of control or affiliation shall contain the following information:

     (1) The number of authorized, issued, and outstanding voting securities of the health carrier;

     (2) With respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;

     (3) All material relationships and bases for affiliation between the health carrier and the person whose control is denied and all affiliates of such person;

     (4) A statement explaining why such person should not be considered to control the health carrier.

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NEW SECTION
WAC 284-18A-420   Transactions subject to prior approval -- Form D Notice filing.   A health carrier required to obtain the prior approval of the commissioner of a proposed transaction pursuant to RCW 48.31C.050, shall provide the required information on Form D, hereby made a part of these regulations.

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NEW SECTION
WAC 284-18A-430   Extraordinary dividends and other distributions.   (1) Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders or members shall include the following:

     (a) The amount of the proposed dividend or distribution;

     (b) The date established for payment of the dividend or distribution;

     (c) A statement as to whether the dividend or distribution is to be in cash or other property and, if in property, a description, its cost, and its fair market value together with an explanation of the basis for valuation;

     (d) A copy of the calculations determining that the proposed dividend or distribution is extraordinary. The work paper shall include the following information:

     (i) The amounts, dates, and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the health carriers own securities) paid within the period of twelve consecutive months ending on the date fixed for payment of the proposed dividend or distribution for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

     (ii) The net worth of the health carrier as of the 31st day of December next preceding;

     (iii) The net income of the health carrier for the twelve-month period ending the 31st day of December next preceding;

     (iv) The net worth of the health carrier after payment of the dividend or distribution;

     (v) The RBC level of the health carrier after payment of the dividend or distribution;

     (e) A balance sheet and statement of income for the period intervening from the last annual statement filed with the commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and

     (2) Each registered health carrier shall report to the commissioner all other dividends and other distributions to shareholders within five business days following the declaration, and at least fifteen business days before payment, including the same information required by subsection (1)(a) and (d)(i) through (v) of this section.

     (3) The reporting of either dividends or distributions, or both, shall be made under the form in WAC 284-18A-960.

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NEW SECTION
WAC 284-18A-440   Confidential proprietary and trade secret information.   If the health carrier, applicant or other person filing information with the commissioner under chapter 48.31C RCW and this chapter, considers that some of the information being filed is confidential proprietary and trade secret information, then the person submitting the filing must clearly mark those portions of the filing that the person considers to be confidential proprietary and trade secret information as being confidential. The person making the filing shall also state the basis upon which the person considers the information to be confidential proprietary and trade secret information.

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NEW SECTION
WAC 284-18A-910   Form A.  

FORM A
STATEMENT REGARDING THE

ACQUISITION OF CONTROL OF A DOMESTIC HEALTH CARRIER


Name of Domestic Health Carrier

BY

Name of Acquiring Person (Applicant)

Filed with the Insurance Commissioner of the State of Washington
Dated: .
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed:

ITEM 1. HEALTH CARRIER AND METHOD OF ACQUISITION


State the name and address of the domestic health carrier to which this application relates and a brief description of how control is to be acquired.


ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT


     (a) State the name and address of the applicant seeking to acquire control over the health carrier.


     (b) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as such person and any predecessors have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.


     (c) Furnish a chart or listing clearly presenting the identities of the inter-relationships among the applicant and all affiliates of the applicant. No affiliate need be identified if its total assets are equal to less than one-half of one percent of the total assets of the ultimate controlling person affiliated with the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing, indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.


ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT


Furnish biographical information for (1) the applicant if (s)he is an individual or (2) all persons who are directors, executive officers or owners of ten percent or more of the voting securities of the applicant if the applicant is not an individual. Unless otherwise directed by the commissioner, the biographical information shall contain the information required by and be submitted in the format of the current NAIC Biographical Affidavit form.


ITEM 4. NATURE, SOURCE AND AMOUNT OF CONSIDERATION


     (a) Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto.


     (b) Explain the criteria used in determining the nature and amount of such consideration.


     (c) If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, he or she must specifically request that the identity be kept confidential.


ITEM 5. FUTURE PLANS OF HEALTH CARRIER


Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate such health carrier, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management.


ITEM 6. NONPROFIT HEALTH CARRIERS


     If the health carrier or person controlling the health carrier being acquired is a nonprofit corporation:


     (a) Describe who the members of the corporation or person controlling the health carrier are and how they become or are selected as members of the corporation and how this may change as a result of the acquisition.


     (b) Describe who has the authority or power to elect or appoint the board of directors, trustees or other governing body of the health carrier or person controlling the health carrier and how this may change as a result of the acquisition.


ITEM 7. FOR-PROFIT HEALTH CARRIERS


     If the health carrier being acquired is a for-profit person:


     (a) State the number of shares of the health carrier's voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was determined.


     (b) State the amount of each class of any voting security of the health carrier which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.


     (c) Give a full description of any contracts, arrangements or understandings with respect to any voting security of the health carrier in which the applicant, its affiliates or any person listed in Item 3 is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into.


     (d) Describe any purchases of any voting securities of the health carrier by the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement. Include in such description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any such shares so purchased are hypothecated.


     (e) Describe any recommendations to purchase any voting security of the health carrier made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve calendar months preceding the filing of this statement.


     (f) Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the health carrier for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.


ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS


     (a) Financial statements and exhibits shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.


     (b) The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding five fiscal years (or for such lesser period as such applicant and its affiliates and any predecessors have been in existence), and similar information covering the period from the end of such person's last fiscal year, if such information is available. Such statements may be prepared on either an individual basis, or, unless the commissioner otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.


     The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. If the applicant is a health carrier or an insurer, the annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with statutory accounting principles as set forth in Titles 48 RCW and 284 WAC.


     (c) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the health carrier and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the health carrier, annual reports to the stockholders of the health carrier and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or WAC 284-18A-300 or 284-18A-320.


ITEM 9. SIGNATURE AND CERTIFICATION


Signature and certification required as follows:
SIGNATURE
     Pursuant to the requirements of RCW 48.31C.030 has caused this application to be duly signed on its behalf in the City of and State of on the day of , .
(SEAL)
Name of Applicant
BY

(Name) (Title)
Attest:


(Signature of Officer)


(Title)
CERTIFICATION
     The undersigned deposes and says that (s)he has duly executed the attached application dated , for and on behalf of (Name of Applicant); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)

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NEW SECTION
WAC 284-18A-920   Form B.  

FORM B
HEALTH CARRIER HOLDING COMPANY SYSTEM

ANNUAL REGISTRATION STATEMENT

Filed with the Insurance Commissioner of the State of Washington
BY


Name of Registrant

On Behalf of Following Health Carriers.
Name Address

Dated: .
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed:

ITEM 1. IDENTITY AND CONTROL OF REGISTRANT


Furnish the exact name of each health carrier registering or being registered (hereinafter called "the registrant"), the home office address and principal executive offices of each; the date on which each registrant became part of the health carrier holding company system; and the method(s) by which control of each registrant was acquired and is maintained.


ITEM 2. ORGANIZATIONAL CHART


Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the health carrier holding company system. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing, indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.


ITEM 3. THE ULTIMATE CONTROLLING PERSON


     As to the ultimate controlling person in the health carrier holding company system, furnish the following information:


     (a) Name.

    
     (b) Home office address.


     (c) Principal executive office address.


     (d) The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.


     (e) The principal business of the person.


     (f) If the ultimate controlling person is a for-profit person, the name and address of any person who holds or owns ten percent or more of any class of voting security, the class of such security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.


     (g) If the ultimate controlling person is a nonprofit corporation, list the members of the corporation and the board of directors, trustees or other governing body of the corporation.

     (h) If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced.


ITEM 4. BIOGRAPHICAL INFORMATION


Furnish biographical information for the executive officers and the directors, trustees or other governing body of the ultimate controlling person. Unless otherwise directed by the commissioner, the biographical information shall contain the information required by and be submitted in the format of the current NAIC Biographical Affidavit form.


ITEM 5. TRANSACTIONS AND AGREEMENTS


     Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between the registrant and its affiliates (no information need be disclosed if such information is not material for purposes of RCW 48.31C.040):


     (a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the registrant or of the registrant by its affiliates;


     (b) Purchases, sales or exchanges of assets;


     (c) Transactions not in the ordinary course of business;


     (d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the registrant's business;


     (e) All management agreements, service contracts and all cost-sharing arrangements;


     (f) Reinsurance agreements;


     (g) Dividends and other distributions to shareholders;


     (h) Consolidated tax allocation agreements; and


     (i) Any pledge of the registrant's stock or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.


     The description shall be in a manner as to permit the proper evaluation by the commissioner, and shall include at least the following: The nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to such transaction, relationship of the affiliated parties to the registrant, the date of the transaction or agreement and the date the transaction or agreement was approved by the commissioner if such an approval was required.


ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS


     A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which such litigation or proceeding is or was pending:


     (a) Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party thereto; and


     (b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations.


ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS


     The health carrier shall furnish a statement that it has not entered into separate transactions with persons within the health carrier's holding company system which in the aggregate amount exceed the statutory threshold amounts which would have required the commissioner's prior approval or reporting to the commissioner.


ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS


     (a) Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.


     (b) The financial statements shall include the annual financial statements of the ultimate controlling person in the health carrier holding company system as of the end of the person's latest fiscal year.


     If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Such financial statements may be prepared on either an individual basis, or unless the commissioner otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.


The annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. If the ultimate controlling person is a health carrier or insurer, the annual financial statements of the ultimate controlling person shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with statutory accounting principles as set forth in Titles 48 RCW and 284 WAC.


     (c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person; and any additional documents or papers required by Form B or WAC 284-18A-300 and 284-18A-320.


ITEM 9. FORM C REQUIRED


     A Form C, Summary of Registration Statement, must be prepared and filed with this Form B.


ITEM 10. SIGNATURE AND CERTIFICATION


Signature and certification required as follows:
SIGNATURE
     Pursuant to the requirements of RCW 48.31C.040, the registrant has caused this annual registration statement to be duly signed on its behalf in the City of and State of on the day of .
(SEAL)
Name of Applicant
BY

(Name) (Title)
Attest:


(Signature of Officer)


(Title)
CERTIFICATION
     The undersigned deposes and says that (s)he has duly executed the attached annual registration dated , , for and on behalf of (Name of Company); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)

[]


NEW SECTION
WAC 284-18A-930   Form C.  

FORM C
SUMMARY OF REGISTRATION STATEMENT
Filed with the Insurance Commissioner of the State of Washington

BY



Name of Registrant

On Behalf of Following Health Carriers
Name Address

Date: , .
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed:

     Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description shall be in a manner that permits the proper evaluation by the commissioner, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein.


     Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of ten percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.


     Changes occurring under Item 4 of Form B need only be included where: An individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

    
     If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.


     The health carrier shall furnish a statement that it has not entered into separate transactions with persons within the health carrier's holding company system which in the aggregate amount exceed the statutory threshold amounts which would have required the commissioner's prior approval or reporting to the commissioner.


SIGNATURE AND CERTIFICATION


Signature and certification required as follows:
SIGNATURE
     Pursuant to the requirements of RCW 48.31C.040, the registrant has caused this summary of registration statement to be duly signed on its behalf in the City of and State of on the day of , .
(SEAL)

Name of Applicant
BY

(Name) (Title)
Attest:


(Signature of Officer)


(Title)
CERTIFICATION
     The undersigned deposes and says that (s)he has duly executed the attached summary of registration dated

, , for and on behalf of (Name of Company); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature)
(Type or print name beneath)

[]


NEW SECTION
WAC 284-18A-940   Form D.  

FORM D
PRIOR NOTICE OF A TRANSACTION
Filed with the Insurance Commissioner of the State of Washington
BY


Name of Registrant

On Behalf of Following Health Carriers
Name Address
Date: , .
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed:


ITEM 1. IDENTITY OF PARTIES TO TRANSACTION


     Furnish the following information for each of the parties to the transaction:


     (a) Name.


     (b) Home office address.


     (c) Principal executive office address.


     (d) The organizational structure, i.e., corporation, partnership, individual, trust, etc.


     (e) A description of the nature of the parties' business operations.


     (f) Relationship, if any, of other parties to the transaction to the health carrier filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the health carrier seeking approval, or by the health carrier filing the notice in the affiliated parties.


     (g) Where the transaction is with a nonaffiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.


ITEM 2. DESCRIPTION OF THE TRANSACTION


     Furnish the following information for each transaction for which notice is being given:


     (a) A statement of the nature of the transaction.


     (b) The proposed effective date of the transaction.


ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES, OR INVESTMENTS


     Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the health carrier filing notice, by any party to the transaction, or by any affiliate of the health carrier filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation of the basis for evaluation.


     If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the health carrier will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.


     If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the health carrier's net worth.


ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NONAFFILIATE


     If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the health carrier making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of, or make investments in any affiliate. Describe the amount and source of funds, securities, property, or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the health carrier's net worth.


ITEM 5. REINSURANCE


     If the transaction is a reinsurance agreement or modification thereto, as described by RCW 48.31C.050 (2)(c), furnish a description of the known or estimated amount of liability to be ceded or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the health carrier and nonaffiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the health carrier's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the health carrier's net worth.


ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS, AND COST-SHARING ARRANGEMENTS


     For management and service agreements, furnish:


     (a) A brief description of the managerial responsibilities, or services to be performed.


     (b) A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.


     For cost-sharing arrangements, furnish:


     (a) A brief description of the purpose of the agreement.


     (b) A description of the period of time during which the agreement is to be in effect.


     (c) A brief description of each party's expenses or costs covered by the agreement.


     (d) A brief description of the accounting basis to be used in calculating each party's costs under the agreement.


ITEM 7. SIGNATURE AND CERTIFICATION

Signature and certification required as follows:
SIGNATURE
     Pursuant to the requirements of RCW 48.31C.050, the registrant has caused this notice to be duly signed on its behalf in the City of and State of on the day of , .
(SEAL)

Name of Applicant
BY

(Name) (Title)
Attest:


(Signature of Officer)


(Title)
CERTIFICATION
     The undersigned deposes and says that (s)he has duly executed the attached application dated           ,

          , for and on behalf of (Name of Company); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.

(Signature)
(Type or print name beneath)

[]


NEW SECTION
WAC 284-18A-950   Form E.  

FORM E
PREACQUISITION NOTIFICATION FORM

REGARDING THE ACQUISITION OF CONTROL OF A FOREIGN HEALTH

CARRIER DOING BUSINESS IN THIS STATE




Name of Applicant




Name of Other Person

Involved in the Acquisition
Filed with the Insurance Commissioner of the State of Washington
Dated: .
Name, title, address and telephone number of person completing this statement:


ITEM 1. NAME AND ADDRESS


     State the names and addresses of the persons who hereby provide notice of their involvement in a pending acquisition or change in corporate control.


ITEM 2. NAME AND ADDRESSES OF AFFILIATED COMPANIES


     State the names and addresses of the persons affiliated with those listed in Item 1. Describe their affiliations.


ITEM 3. NATURE AND PURPOSE OF THE PROPOSED MERGER OR ACQUISITION


     State the nature and purpose of the proposed merger or acquisition.


ITEM 4. NATURE OF BUSINESS


     State the nature of the business performed by each of the persons identified in response to Item 1 and Item 2.


ITEM 5. MARKET AND MARKET SHARE


     State specifically what market and market share the persons identified in Item 1 and Item 2 currently enjoy in this state. Provide historical market and market share data for each person identified in Item 1 and Item 2 for the past five years and identify the source of such data.


     For purposes of this question, market means direct written premiums in this state for a line of business as contained in the annual statement required to be filed by health carriers licensed to do business in this state.

[]


NEW SECTION
WAC 284-18A-960   Dividends and distributions.  

Notification of dividend or distribution to shareholders/members from Washington health carriers
Company Name:
NAIC Code: Date Mailed: / /
1A. Amount of dividend or distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1B. How will dividend or distribution be paid* (Circle one). . . . . . . . . . . . . . . . Cash / Property
2A. Date dividend or distribution was declared. . . . . . . . . . . . . . . . . . . . . . . . . . / /
2B. Date dividend or distribution is to be paid. . . . . . . . . . . . . . . . . . . . . . . . . . . / /
3A. Dividends paid and distributions made within the previous 12 months from the date on Line 2B:
Date How Paid* Amount
/ / $
/ / $
/ / $
/ / $
/ / $
3B. Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
*If noncash, describe the property to be distributed and the method used to determine its fair market value.
4. Sum of Amounts of Lines 1A and 3B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5A. Net Worth as of the previous year-end. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5B. 10% of Amount on Line 5A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6. Net Income as of the previous year-end. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7. The Lesser of Line 5B or Line 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8. Lines 4 minus Line 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9A. If Line 8 is negative, Line 1A is ordinary dividend or distribution. . . . . . . . .
9B. If Line 8 is positive, Line 1A is extraordinary dividend or distribution. . . . .
If 9A is checked, notification is required within 5 business days of dividend or distribution declaration and at least 15 business days prior to expected payment or distribution.
If 9B is checked, including the above notification requirement, no payment can be made until: The later of (1) 30 days after sufficient notice or if notice is incomplete, then 15 days after receipt of additional information, or (2) 30 days after original receipt; or the commissioner has approved the payment within the 30-day period.
Please note that the payment of any dividend or distribution is prohibited if the payment would reduce the net worth of the health carrier below the greater of: (1) The minimum required by RCW 48.44.037 for a health care service contractor or RCW 48.46.235 for a health maintenance organization or (2) the company action level RBC under RCW 48.43.300 (9)(a).
Certification:

President/Secretary Date

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