PROPOSED RULES
INSURANCE COMMISSIONER
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.
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
HEALTH CARE SERVICE CONTRACTOR AND HEALTH MAINTENANCE HOLDING COMPANY REGULATION
(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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(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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(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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(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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(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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(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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(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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(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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(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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