REPRESENTATIVES Martin, McGregor, Kearns, Seitz, Husted, Schaffer, Webster, Gibbs, Walcher, Carano

To amend sections 1739.02, 1739.99, 1751.02, 1751.28,

1

3901.78, and 3999.99 and to enact sections 1739.27

2

and 3999.18 of the Revised Code to change the

3

assets that are considered to be admitted assets

4

for purposes of meeting the statutory minimum for

5

health insuring corporations, to provide for

6

criminal and financial penalties for persons

7

establishing or operating unlicensed insurers, and

8

to amend provisions governing the issuance of

9

certificates of compliance to insurers.

10

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1739.02, 1739.99, 1751.02, 1751.28,	11
3901.78, and 3999.99 be amended and sections 1739.27 and 3999.18	12
of the Revised Code be enacted to read as follows:	13

Sec. 1739.02.  (A) A trade association, industry association,	14
or professional association that has been organized and maintained	15
in good faith for a continuous period of one year or more for	16
purposes other than obtaining insurance may establish, maintain,	17
or operate a group self-insurance program under a multiple	18
employer welfare arrangement that is chartered and created in this	19
state under sections 1739.01 to 1739.22 of the Revised Code.	20

(B) Except as provided in section 9.833 and sections 1739.01	21
to 1739.22 of the Revised Code, no multiple employer welfare	22
arrangement or other entity by which two or more employers jointly	23
participate in a common employee welfare benefit plan shall	24
operate a group self-insurance program in this state after four	25
months after the effective date of this section.	26

(C) Sections 1739.01 to 1739.22 of the Revised Code do not	27
apply to any entity that establishes, maintains, or operates a	28
fully-insured program.	29

(D) No person shall establish, operate, or maintain a	30
multiple employer welfare arrangement providing benefits through a	31
group self-insurance program in this state unless the multiple	32
employer welfare arrangement has a valid certificate of authority	33
from the superintendent of insurance.	34

Sec. 1739.27.  No insurance agent, broker, or other person	35
shall advertise, solicit, negotiate, collect a premium on, or sell	36
any enrollment in, a group self-insurance program in this state,	37
unless the multiple employer welfare arrangement has a valid	38
certificate of authority from the superintendent of insurance.	39

Sec. 1739.99. (A) Whoever violates division (B) of section	40
1739.02 of the Revised Code is guilty of a felony of the fourth	41
degree.	42

(B) Whoever violates division (D) of section 1739.02 of the	43
Revised Code is guilty of a felony of the fourth degree.	44

(C) Whoever violates section 1739.27 of the Revised Code is	45
guilty of a felony of the fifth degree.	46

(D) If a person is found guilty under this section, the court	47
may award restitution in accordance with section 2929.18 of the	48
Revised Code.	49

Sec. 1751.02.  (A) Notwithstanding any law in this state to	50
the contrary, any corporation, as defined in section 1751.01 of	51
the Revised Code, may apply to the superintendent of insurance for	52
a certificate of authority to establish and operate a health	53
insuring corporation. If the corporation applying for a	54
certificate of authority is a foreign corporation domiciled in a	55
state without laws similar to those of this chapter, the	56
corporation must form a domestic corporation to apply for, obtain,	57
and maintain a certificate of authority under this chapter.	58

(B) No person shall establish, operate, or perform the	59
services of a health insuring corporation in this state without	60
obtaining a certificate of authority under this chapter.	61

(C) Except as provided by division (D) of this section, no	62
political subdivision or department, office, or institution of	63
this state, or corporation formed by or on behalf of any political	64
subdivision or department, office, or institution of this state,	65
shall establish, operate, or perform the services of a health	66
insuring corporation. Nothing in this section shall be construed	67
to preclude a board of county commissioners, a county board of	68
mental retardation and developmental disabilities, an alcohol and	69
drug addiction services board, a board of alcohol, drug addiction,	70
and mental health services, or a community mental health board, or	71
a public entity formed by or on behalf of any of these boards,	72
from using managed care techniques in carrying out the board's or	73
public entity's duties pursuant to the requirements of Chapters	74
307., 329., 340., and 5126. of the Revised Code. However, no such	75
board or public entity may operate so as to compete in the private	76
sector with health insuring corporations holding certificates of	77
authority under this chapter.	78

(D) A corporation formed by or on behalf of a publicly owned,	79
operated, or funded hospital or health care facility may apply to	80
the superintendent for a certificate of authority under division	81
(A) of this section to establish and operate a health insuring	82
corporation.	83

(E) A health insuring corporation shall operate in this state	84
in compliance with this chapter and Chapter 1753. of the Revised	85
Code, and with sections 3702.51 to 3702.62 of the Revised Code,	86
and shall operate in conformity with its filings with the	87
superintendent under this chapter, including filings made pursuant	88
to sections 1751.03, 1751.11, 1751.12, and 1751.31 of the Revised	89
Code.	90

(F) An insurer licensed under Title XXXIX of the Revised Code	91
need not obtain a certificate of authority as a health insuring	92
corporation to offer an open panel plan as long as the providers	93
and health care facilities participating in the open panel plan	94
receive their compensation directly from the insurer. If the	95
providers and health care facilities participating in the open	96
panel plan receive their compensation from any person other than	97
the insurer, or if the insurer offers a closed panel plan, the	98
insurer must obtain a certificate of authority as a health	99
insuring corporation.	100

(G) An intermediary organization need not obtain a	101
certificate of authority as a health insuring corporation,	102
regardless of the method of reimbursement to the intermediary	103
organization, as long as a health insuring corporation or a	104
self-insured employer maintains the ultimate responsibility to	105
assure delivery of all health care services required by the	106
contract between the health insuring corporation and the	107
subscriber and the laws of this state or between the self-insured	108
employer and its employees.	109

Nothing in this section shall be construed to require any	110
health care facility, provider, health delivery network, or	111
intermediary organization that contracts with a health insuring	112
corporation or self-insured employer, regardless of the method of	113
reimbursement to the health care facility, provider, health	114
delivery network, or intermediary organization, to obtain a	115
certificate of authority as a health insuring corporation under	116
this chapter, unless otherwise provided, in the case of contracts	117
with a self-insured employer, by operation of the "Employee	118
Retirement Income Security Act of 1974," 88 Stat. 829, 29 U.S.C.A.	119
1001, as amended.	120

(H) Any health delivery network doing business in this state,	121
including any health delivery network that is functioning as an	122
intermediary organization doing business in this state, that is	123
not required to obtain a certificate of authority under this	124
chapter shall certify to the superintendent annually, not later	125
than the first day of July, and shall provide a statement signed	126
by the highest ranking official which includes the following	127
information:	128

(1) The health delivery network's full name and the address	129
of its principal place of business;	130

(2) A statement that the health delivery network is not	131
required to obtain a certificate of authority under this chapter	132
to conduct its business.	133

(I) The superintendent shall not issue a certificate of	134
authority to a health insuring corporation that is a provider	135
sponsored organization unless all health care plans to be offered	136
by the health insuring corporation provide basic health care	137
services. Substantially all of the physicians and hospitals with	138
ownership or control of the provider sponsored organization, as	139
defined in division (X) of section 1751.01 of the Revised Code,	140
shall also be participating providers for the provision of basic	141
health care services for health care plans offered by the provider	142
sponsored organization. If a health insuring corporation that is a	143
provider sponsored organization offers health care plans that do	144
not provide basic health care services, the health insuring	145
corporation shall be deemed, for purposes of section 1751.35 of	146
the Revised Code, to have failed to substantially comply with this	147
chapter.	148

Except as specifically provided in this division and in	149
division (C)(A) of section 1751.28 of the Revised Code, the	150
provisions of this chapter shall apply to all health insuring	151
corporations that are provider sponsored organizations in the same	152
manner that these provisions apply to all health insuring	153
corporations that are not provider sponsored organizations.	154

(J) Nothing in this section shall be construed to apply to	155
any multiple employer welfare arrangement operating pursuant to	156
Chapter 1739. of the Revised Code.	157

(K) Any person who violates division (B) of this section, and	158
any health delivery network that fails to comply with division (H)	159
of this section, is subject to the penalties set forth in section	160
1751.45 of the Revised Code.	161

Sec. 1751.28.  (A) As used in this section:

162

(1) "Admitted assets" includes the investments authorized by	163
section 1751.25 of the Revised Code, and, in addition to these	164
investments, only the following:	165

(a) Petty cash and other cash funds that are in the health	166
insuring corporation's principal office or any official branch	167
office and that are under the control of the corporation;	168

(b) Immediately withdrawable funds on deposit in demand	169
accounts in a bank or trust company, or similar funds that are	170
actually in the health insuring corporation's principal office or	171
any official branch office at statement date and that are in	172
transit to the bank or trust company with authentic deposit credit	173
given prior to the close of business on the fifth bank business	174
day following the statement date;	175

(c) The amount fairly estimated as recoverable on cash	176
deposited in a bank or trust company the operations of which have	177
been suspended or for which a receiver has been appointed, if	178
qualifying under this section prior to the suspension of	179
operations of or the appointment of a receiver for the bank or	180
trust company;	181

(d) Bills and accounts receivable collateralized by	182
securities of the kind in which the health insuring corporation	183
may invest;	184

(e) Premiums receivable from groups or individuals that are	185
not more than ninety days past due;	186

(f) Accounts receivable that are not more than ninety days	187
past due;	188

(g) Amounts due under reinsurance arrangements from insurance	189
companies authorized to do business in this state;	190

(h) Tax refunds due from the United States or any state;

191

(i) The interest accrued on mortgage loans that conform to	192
section 3925.08 of the Revised Code, not exceeding on an	193
individual loan an aggregate amount of one year's total due and	194
accrued interest;	195

(j) The rents accrued and owing to the health insuring	196
corporation on real and personal property, directly or	197
beneficially owned, not exceeding on each individual property the	198
amount of one year's total due and accrued rent;	199

(k) Interest or rents accrued on conditional sales	200
agreements, security interests, chattel mortgages, and real or	201
personal property under lease to other corporations, that conform	202
to section 3925.08 of the Revised Code, not exceeding on any	203
individual investment the amount of one year's total due and	204
accrued interest or rent;	205

(l) The fixed and required interest due and accrued on bonds	206
and other similar evidences of indebtedness, that conform to	207
section 3925.08 of the Revised Code, and not in default;	208

(m) Dividends receivable on shares of stock that conform to	209
section 3925.08 of the Revised Code, provided that the market	210
price taken for valuation purposes does not include the value of	211
the dividend;	212

(n) The interest or dividends due and payable, but not	213
credited, on deposits in banks and trust companies or on accounts	214
with savings and loan associations;	215

(o) Interest accrued on secured loans that conform to section	216
3925.08 of the Revised Code, not exceeding the amount of one	217
year's interest on any loan;	218

(p) Interest accrued on tax anticipation warrants;

219

(q) The amortized value of electronic computer or data	220
processing machines or systems purchased for use in connection	221
with the business of the health insuring corporation, including	222
software purchased and developed specifically for the use and	223
purposes of the corporation;	224

(r) The cost of furniture, equipment, and medical equipment,	225
less accumulated depreciation on the furniture and equipment to be	226
applied pro rata over a period not to exceed five years, and of	227
medical and pharmaceutical supplies, that are under the control of	228
the health insuring corporation, provided these assets do not	229
exceed fifteen per cent of admitted assets;	230

(s) Amounts due from affiliates to the extent that the	231
affiliate has liquid assets with which to pay the balance and	232
maintain its accounts on a current basis. Any amount outstanding	233
more than three months shall be considered not current.	234

(2) "Liabilities" means the liabilities of the health	235
insuring corporation as determined by the superintendent of	236
insurance.	237

(B) All admitted assets of a health insuring corporation must	238
be held in the health insuring corporation's name and must be free	239
and clear of any encumbrances, pledges, or hypothecation.	240

(C)(1) Every health insuring corporation authorized to	241
provide basic health care services, which health insuring	242
corporation is not a provider sponsored organization, shall	243
maintain total admitted assets equal to at least one hundred ten	244
per cent of the liabilities of the corporation. However, at no	245
time shall the corporation's net worth be less than one million	246
two hundred thousand dollars.	247

(2) Every health insuring corporation authorized to provide	248
only supplemental health care services shall maintain total	249
admitted assets equal to at least one hundred ten per cent of the	250
liabilities of the corporation. However, at no time shall the	251
corporation's net worth be less than five hundred thousand	252
dollars.	253

(3) Every health insuring corporation authorized to provide	254
only specialty health care services shall maintain total admitted	255
assets equal to at least one hundred ten per cent of the	256
liabilities of the corporation. However, at no time shall the	257
corporation's net worth be less than two hundred fifty thousand	258
dollars.	259

(4) Every health insuring corporation authorized to provide	260
both basic health care services and supplemental health care	261
services, which health insuring corporation is not a provider	262
sponsored organization, shall maintain total admitted assets equal	263
to at least one hundred ten per cent of the liabilities of the	264
corporation. However, at no time shall the corporation's net worth	265
be less than one million seven hundred thousand dollars.	266

(5) Every health insuring corporation authorized to provide	267
both basic health care services and specialty health care	268
services, which health insuring corporation is not a provider	269
sponsored organization, shall maintain total admitted assets equal	270
to at least one hundred ten per cent of the liabilities of the	271
corporation. However, at no time shall the corporation's net worth	272
be less than one million four hundred fifty thousand dollars.	273

(6) Every health insuring corporation authorized to provide	274
basic health care services, which health insuring corporation is a	275
provider sponsored organization, shall maintain total admitted	276
assets equal to at least one hundred ten per cent of the	277
liabilities of the corporation. However, at no time shall the	278
corporation's net worth be less than one million dollars.	279

(7) Every health insuring corporation authorized to provide	280
both basic health care services and supplemental health care	281
services, which health insuring corporation is a provider	282
sponsored organization, shall maintain total admitted assets equal	283
to at least one hundred ten per cent of the liabilities of the	284
corporation. However, at no time shall the corporation's net worth	285
be less than one million five hundred thousand dollars.	286

(8) Every health insuring corporation authorized to provide	287
both basic health care services and specialty health care	288
services, which health insuring corporation is a provider	289
sponsored organization, shall maintain total admitted assets equal	290
to at least one hundred ten per cent of the liabilities of the	291
corporation. However, at no time shall the corporation's net worth	292
be less than one million two hundred fifty thousand dollars.	293

(D) The admitted value of any real estate owned by a health	294
insuring corporation, whether used for the accommodation of the	295
health insuring corporation's business operations or otherwise,	296
shall be the original cost plus the cost of improvements, less	297
encumbrances and accumulated depreciation.	298

(E)(B) The net worth otherwise required by this section shall	299
be reduced by an amount representing credit given to reserve	300
liabilities when a health insuring corporation carries reinsurance	301
with an admitted reinsurer. However, such an amount shall not	302
affect the minimum amounts set forth in this section and section	303
1751.27 of the Revised Code.	304

(C) A health insuring corporation may only consider those	305
admitted assets in connection with this section that are	306
consistent with the forms, instructions, and manuals for the	307
preparation and reporting of statutory financial statements and	308
other financial information set forth in section 1751.47 of the	309
Revised Code and any rules adopted under that section.	310

(D) All health insuring corporations must comply with this	311
section, as amended, for calendar year 2004 and each calendar year	312
thereafter.	313

Sec. 3901.78.  Upon the filing of each of its annual	314
statements, or as soon thereafter as practicable, the	315
superintendent of insurance shall issue to each insurance company	316
or association authorized to do business in this state but not	317
incorporated under the laws of this state a certificate that it	318
has complied with the laws of this state. Such certificate of	319
compliance shall also contain a statement of the amounts of the	320
paid-up capital stock, assets, liabilities, income, and	321
expenditures of the company or association for the preceding year,	322
as shown by its annual statement for that year. The superintendent	323
shall issue to each newly-applying company or association that the	324
superintendent finds should be authorized to do business in this	325
state, a certificate that it has complied with the laws of this	326
state, which certificate shall contain a statement of the amounts	327
of its paid-up capital stock, assets, liabilities, income, and	328
expenditures as shown by a financial statement submitted by it,	329
under the oath of its officers.of compliance, an original of	330
which must be published in accordance with section 3901.781 of the	331
Revised Code in every county where the insurance company or	332
association has an agency. Upon request or in any other	333
circumstance that the superintendent determines to be appropriate,	334
the superintendent may issue other certificates of compliance,	335
which certificates are not subject to section 3901.781 of the	336
Revised Code, to insurance companies and associations authorized	337
to do business in this state. Certificates of compliance either	338
must be on forms established by the national association of	339
insurance commissioners or on such other forms as the	340
superintendent may prescribe.	341

Sec. 3999.18.  (A) No person shall establish, operate, or	342
maintain any entity that delivers, issues for delivery, or renews	343
any policy of sickness and accident insurance or contract for	344
health care services in this state if the entity is required to,	345
but does not, have a valid certificate of authority under Chapter	346
1751. or Title XXXIX of the Revised Code.	347

(B) No insurance agent, broker, or other person shall	348
advertise, solicit, negotiate, collect a premium on, or sell any	349
policy of sickness and accident insurance or contract for health	350
care services in this state unless the entity that delivers,	351
issues for delivery, or renews the policy or contract is subject	352
to and has complied with division (A) of this section.	353

Sec. 3999.99.  (A) Whoever violates section 3999.02 of the	354
Revised Code is guilty of a misdemeanor of the second degree.	355

(B) Whoever violates section 3999.03, 3999.07, 3999.13,	356
3999.14, or 3999.15 of the Revised Code is guilty of a misdemeanor	357
of the first degree.	358

(C) Whoever violates section 3999.04, 3999.05, 3999.08, or	359
3999.09 of the Revised Code is guilty of a misdemeanor of the	360
fourth degree.	361

(D) Whoever violates section 3999.10 or 3999.11 of the	362
Revised Code shall be fined five hundred dollars for a first	363
offense and shall be fined one thousand dollars for each	364
subsequent offense.	365

(E) Whoever violates section 3999.12 of the Revised Code	366
shall be fined not less than ten nor more than one thousand	367
dollars.	368

(F) Whoever violates division (F) of section 3999.32,	369
division (B) of section 3999.36, or section 3999.37 or 3999.38 of	370
the Revised Code is guilty of a felony of the fourth degree.	371

(G) Whoever violates division (A) of section 3999.18 of the	372
Revised Code is guilty of a felony of the fourth degree.	373

(H) Whoever violates division (B) of section 3999.18 of the	374
Revised Code is guilty of a felony of the fifth degree.	375

(I) If a person is found guilty under this section, the court	376
may award restitution in accordance with section 2929.18 of the	377
Revised Code.	378

Section 2. That existing sections 1739.02, 1739.99, 1751.02,	379
1751.28, 3901.78, and 3999.99 of the Revised Code are hereby	380
repealed.	381