1374.64
. (a) Only a plan that has been licensed under this chapter
and in operation in this state for a period of five years or more, or
a plan licensed under this chapter and operating in this state for a
period of five or more years under a combination of (1) licensure
under this chapter and (2) pursuant to a certificate of authority
issued by the Department of Insurance may offer a point-of-service
contract. A specialized health care service plan shall not offer a
point-of-service plan contract unless this plan was formerly
registered under the Knox-Mills Health Plan Act (Article 2.5
(commencing with Section 12530) of Chapter 6 of Part 2 of Division 3
of Title 2 of the Government Code), as repealed by Chapter 941 of the
Statutes of 1975, and offered point-of-service plan contracts
previously approved by the director on July 1, 1976, and on September
1, 1993.
(b) A plan may offer a point-of-service plan contract only if the
director has not found the plan to be in violation of any
requirements, including administrative capacity, under this chapter
or the rules adopted thereunder and the plan meets, at a minimum, the
following financial criteria:
(1) The minimum financial criteria for a plan that maintains a
minimum net worth of at least five million dollars ($5,000,000) shall
be:
(A) (i) Initial tangible net equity so that the plan is not
required to file monthly reports with the director as required by
Section 1300.84.3(d)(1)(G) of Title 28 of the California Code of
Regulations and then have and maintain adjusted tangible net equity
to be determined pursuant to either of the following:
(I) In the case of a plan that is required to have and maintain a
tangible net equity as required by Section 1300.76(a)(1) or (2) of
Title 28 of the California Code of Regulations, multiply 130 percent
times the sum resulting from the addition of the plan's tangible net
equity required by Section 1300.76(a)(1) or (2) of Title 28 of the
California Code of Regulations and the number that equals 10 percent
of the plan's annualized health care expenditures for out-of-network
services for point-of-service enrollees.
(II) In the case of a plan that is required to have and maintain a
tangible net equity as required by Section 1300.76(a)(3) of Title 28
of the California Code of Regulations, recalculate the plan's
tangible net equity under Section 1300.76(a)(3) of Title 28 of the
California Code of Regulations excluding the plan's annualized health
care expenditures for out-of-network services for point-of-service
enrollees, add together the number resulting from this recalculation
and the number that equals 10 percent of the plan's annualized health
care expenditures for out-of-network services for point-of-service
enrollees, and multiply this sum times 130 percent, provided that the
product of this multiplication must exceed 130 percent of the
tangible net equity required by Section 1300.76(a)(3) of Title 28 of
the California Code of Regulations so that the plan is not required
to file monthly reports to the director as required by Section
1300.84.3(d)(1)(G) of Title 28 of the California Code of Regulations.
(ii) The failure of a plan offering a point-of-service plan
contract under this article to maintain adjusted tangible net equity
as determined by this subdivision shall require the filing of monthly
reports with the director pursuant to Section 1300.84.3(d) of Title
28 of the California Code of Regulations, in addition to any other
requirements that may be imposed by the director on a plan under this
article and chapter.
(iii) The calculation of tangible net equity under any report to
be filed by a plan offering a point-of-service plan contract under
this article and required of a plan pursuant to Section 1384, and the
regulations adopted thereunder, shall be on the basis of adjusted
tangible net equity as determined under this subdivision.
(B) Demonstrates adequate working capital, including (i) a current
ratio (current assets divided by current liabilities) of at least
1:1, after excluding obligations of officers, directors, owners, or
affiliates, or (ii) evidence that the plan is now meeting its
obligations on a timely basis and has been doing so for at least the
preceding two years. Short-term obligations of affiliates for goods
or services arising in the normal course of business that are payable
on the same terms as equivalent transactions with nonaffiliates
shall not be excluded. For purposes of this subdivision, an
obligation is considered short term if the repayment schedule is 30
days or fewer.
(C) Demonstrates a trend of positive earnings over the previous
eight fiscal quarters.
(2) The minimum financial criteria for a plan that maintains a
minimum net worth of at least one million five hundred thousand
dollars ($1,500,000) but less than five million dollars ($5,000,000)
shall be:
(A) (i) Initial tangible net equity so that the plan is not
required to file monthly reports with the director as required by
Section 1300.84.3(d)(1)(G) of Title 28 of the California Code of
Regulations and then have and maintain adjusted tangible net equity
to be determined pursuant to either of the following:
(I) In the case of a plan that is required to have and maintain a
tangible net equity as required by Section 1300.76(a)(1) or (2) of
Title 28 of the California Code of Regulations, multiply 130 percent
times the sum resulting from the addition of the plan's tangible net
equity required by Section 1300.76(a)(1) or (2) of Title 28 of the
California Code of Regulations and the number that equals 10 percent
of the plan's annualized health care expenditures for out-of-network
services for point-of-service enrollees.
(II) In the case of a plan that is required to have and maintain a
tangible net equity as required by Section 1300.76(a)(3) of Title 28
of the California Code of Regulations, recalculate the plan's
tangible net equity under Section 1300.76(a)(3) excluding the plan's
annualized health care expenditures for out-of-network services for
point-of-service enrollees, add together the number resulting from
this recalculation and the number that equals 10 percent of the plan'
s annualized health care expenditures for out-of-network services for
point-of-service enrollees, and multiply this sum times 130 percent,
provided that the product of this multiplication must exceed 130
percent of the tangible net equity required by Section 1300.76(a)(3)
of Title 28 of the California Code of Regulations so that the plan is
not required to file monthly reports to the director as required by
Section 1300.84.3(d)(1)(G) of Title 28 of the California Code of
Regulations.
(ii) The failure of a plan offering a point-of-service plan
contract under this article to maintain adjusted tangible net equity
as determined by this subdivision shall require the filing of monthly
reports with the director pursuant to Section 1300.84.3(d) of Title
28 of the California Code of Regulations, in addition to any other
requirements that may be imposed by the director on a plan under this
article and chapter.
(iii) The calculation of tangible net equity under any report to
be filed by a plan offering a point-of-service plan contract under
this article and required of a plan pursuant to Section 1384, and the
regulations adopted thereunder, shall be on the basis of adjusted
tangible net equity as determined under this subdivision.
(B) Demonstrates adequate working capital, including (i) a current
ratio (current assets divided by current liabilities) of at least
1:1, after excluding obligations of officers, directors, owners, or
affiliates or (ii) evidence that the plan is now meeting its
obligations on a timely basis and has been doing so for at least the
preceding two years. Short-term obligations of affiliates for goods
or services arising in the normal course of business that are payable
on the same terms as equivalent transactions with nonaffiliates
shall not be excluded. For purposes of this subdivision, an
obligation is considered short term if the repayment schedule is 30
days or fewer.
(C) Demonstrates a trend of positive earnings over the previous
eight fiscal quarters.
(D) Demonstrates to the director that it has obtained insurance
for the cost of providing any point-of-service enrollee with
out-of-network covered health care services, the aggregate value of
which exceeds five thousand dollars ($5,000) in any year. This
insurance shall obligate the insurer to continue to provide care for
the period in which a premium was paid in the event a plan becomes
insolvent. Where a plan cannot obtain insurance as required by this
subparagraph, then a plan may demonstrate to the director that it has
made other arrangements, acceptable to the director, for the cost of
providing enrollees out-of-network health care services; but in this
case the expenditure for total out-of-network costs for all
enrollees in all point-of-service contracts shall be limited to a
percentage, acceptable to the director, not to exceed 15 percent of
total health care expenditures for all its enrollees.
(c) Within 30 days of the close of each month a plan offering
point-of-service plan contracts under paragraph (2) of subdivision
(b) shall file with the director a monthly financial report
consisting of a balance sheet and statement of operations of the
plan, which need not be certified, and a calculation of the adjusted
tangible net equity required under subparagraph (A). The financial
statements shall be prepared on a basis consistent with the financial
statements furnished by the plan pursuant to Section 1300.84.2 of
Title 28 of the California Code of Regulations. A plan shall also
make special reports to the director as the director may from time to
time require. Each report to be filed by a plan pursuant to this
subdivision shall be verified by a principal officer of the plan as
set forth in Section 1300.84.2(e) of Title 28 of the California Code
of Regulations.
(d) If it appears to the director that a plan does not have
sufficient financial viability, or organizational and administrative
capacity to ensure the delivery of health care services to its
enrollees, the director may, by written order, direct the plan to
discontinue the offering of a point-of-service plan contract. The
order shall be effective immediately.