Chapter 9.6. Consumer Operated And Oriented Plans of California Insurance Code >> Division 2. >> Part 2. >> Chapter 9.6.
For purposes of this chapter, the following definitions
shall apply:
(a) "Consumer operated and oriented plan" means a nonprofit member
organization or nonprofit member corporation that has been
established consistent with the requirements of Section 1322 of PPACA
and Subpart F (commencing with Section 156.500) of Part 156 of
Subchapter B of Subtitle A of Title 45 of the Code of Federal
Regulations and remains in full compliance with those requirements. A
consumer operated and oriented plan shall also be known as a "CO-OP."
(b) "Formation board" means the initial board of directors of a
CO-OP before it has begun accepting enrollment and had an election by
the members of the CO-OP to the board of directors.
(c) "Member" includes all individuals, including dependents, 18
years of age or older covered under health insurance policies issued
by the CO-OP insurer.
(d) "Operational board" means the board of directors elected by
the members of the CO-OP after it has begun accepting enrollment
under its health insurance policies.
(e) "PPACA" means the federal Patient Protection and Affordable
Care Act (Public Law 111-148), as amended by the Health Care and
Education Reconciliation Act of 2010 (Public Law 111-152), and any
rules or regulations issued thereunder.
(f) "Nonprofit member organization" or "nonprofit member
corporation" means a nonprofit public benefit corporation organized
under Part 2 (commencing with Section 5110) of Division 2 of Title 1
of the Corporations Code, a nonprofit mutual benefit corporation
organized under Part 3 (commencing with Section 7110) of Division 2
of Title 1 of the Corporations Code, or a similar entity organized
under applicable provisions of the Corporations Code, or in the case
of a foreign corporation, a nonprofit public benefit corporation, a
mutual benefit corporation, or a similar entity organized under
nonprofit laws in a state other than California.
(g) "Solvency loan" means a loan provided by the federal Centers
for Medicare and Medicaid Services to a nonprofit member organization
or nonprofit member corporation seeking to become licensed as a
CO-OP insurer, to be used to assist in meeting the state's solvency
and reserve requirements.
(h) "Start-up loan" means a loan provided by the federal Centers
for Medicare and Medicaid Services to a nonprofit member organization
or nonprofit member corporation seeking to become licensed as a
CO-OP insurer, to be used for allowed expenses associated with
establishing a CO-OP, as further specified by PPACA.
(a) The commissioner shall have the authority to issue a
certificate of authority as a disability insurer to a CO-OP that has
been organized as a nonprofit member organization or nonprofit member
corporation under the laws of this state. The commissioner may also
issue a certificate of authority as a disability insurer to a foreign
CO-OP that has been organized as a nonprofit member organization or
nonprofit member corporation under the laws of another state,
provided that the entity meets the requirements governing CO-OPs
under PPACA and this chapter. A CO-OP seeking or maintaining a
certificate of authority pursuant to this chapter shall be subject to
the same fees that are imposed on mutual insurers.
(b) A CO-OP admitted as a CO-OP insurer shall be subject to the
same premium taxes as are imposed on for-profit health insurers with
a certificate of authority from the commissioner.
A domestic or foreign insurer admitted as a CO-OP insurer
shall be subject to the same "paid-in capital" or "capital paid-in"
requirements as are imposed on domestic and foreign mutual insurers
pursuant to Sections 36 and 4011.
(a) A domestic or foreign CO-OP admitted as a CO-OP
insurer shall be subject to all of the provisions of this code that
are applicable to insurers issuing policies of health insurance in
the state and all applicable rules and regulations of the
commissioner, including, but not limited to, the general provisions
governing issuance of a certificate of authority in Article 3
(commencing with Section 699) of, the examination provisions in
Article 4 (commencing with Section 729) of, the risk-based capital
requirements in Article 4.1 (commencing with Section 739) of, and the
financial statement filing requirements in Article 10 (commencing
with Section 900) of, Chapter 1 of Part 2 of Division 1.
(b) In compliance with Section 1322(c)(5) of PPACA (42 U.S.C. Sec.
18042(c)(5)), and any rules or regulations issued under that
section, a domestic or foreign CO-OP admitted as a CO-OP insurer
shall be subject to any state laws that do not prevent the
application of requirements under PPACA.
(a) A solvency loan obtained by a CO-OP shall be treated
as a surplus note and shall be subject to the same requirements as
are imposed on mutual insurers pursuant to Article 4 (commencing with
Section 4040) of Chapter 4 of Part 1 of Division 2. The commissioner
may request any documentation relating to a CO-OP's start-up loan or
solvency loan.
(b) A CO-OP shall be subject to the same securities permit
requirements as are imposed upon mutual insurers pursuant to Section
4042; however, the commissioner shall have the authority to waive the
requirements under Section 4042 upon a determination that they are
not applicable following a full review of the CO-OP's plan of
operations and any other documents as requested by the commissioner
prior to the admission of the CO-OP.
The provisions of Section 699.5 shall apply to any insurer
admitted as a CO-OP insurer; however, any loans received by the
CO-OP in the form of a solvency or start-up loan shall not be
construed as any form of subsidy, ownership, or financial control of
the CO-OP insurer within the meaning of Section 699.5.
(a) A CO-OP shall be subject at all times to the
prohibitions in PPACA against converting or selling to a for-profit
or nonconsumer-operated entity at any time after receiving a solvency
loan.
(b) A CO-OP shall do all of the following, in addition to any
other requirements imposed under Section 156.515 of Title 45 of the
Code of Federal Regulations:
(1) Implement policies and procedures to foster and ensure member
control of the organization. For purposes of this paragraph, a CO-OP
shall meet the following requirements:
(A) The CO-OP shall have governing documents that incorporate
governing rules that ensure that the directors of the operational
board are elected by a majority vote of a quorum of the CO-OP
members.
(B) All members of the CO-OP shall be eligible to vote for each
director on the CO-OP's operational board.
(C) Each member of the CO-OP shall have one vote in the election
of each director of the CO-OP's operational board.
(D) The first elected directors of the CO-OP's operational board
shall be elected no later than one year after the effective date on
which the CO-OP provides coverage to its first member; the entire
operational board shall be elected no later than two years after the
same date.
(E) Elections of the directors on the CO-OP's operational board
shall be contested so that the total number of candidates for vacant
positions on the operational board exceeds the number of vacant
positions, except in cases where a seat is vacated midterm due to
death, resignation, or removal.
(F) A majority of the voting directors on the operational board
shall be members of the CO-OP.
(2) Have an operational board of directors that meets the
following requirements:
(A) Each director shall have one vote unless he or she is a
nonvoting director.
(B) Positions on the board of directors may be designated for
individuals with specialized expertise, experience, or affiliation
(for example, providers, employers, including small business
consortia, and unions); however, those positions shall not constitute
a majority of the operational board even if the individuals in those
positions are also members of the CO-OP.
(C) (i) No representative of any federal, state, or local
government, or of any political subdivision or instrumentality
thereof, and no representative of any organization described in
Section 156.510(b)(1)(i) of Title 45 of the Code of Federal
Regulations may serve as staff of the CO-OP or on the CO-OP's
formation board or operational board.
(ii) No board member or staff of the CO-OP shall enter into an
agreement or transaction that would jeopardize member control as
required by Section 156.515 of Title 45 of the Code of Federal
Regulations. A board member or staff of the CO-OP shall only enter
into arm's length transactions as described in Section 156.510(b)(2)
(ii) of Title 45 of the Code of Federal Regulations.
(3) Have governing documents that incorporate ethics, conflict of
interest, and disclosure standards. These standards shall protect
against insurance industry involvement and interference. In addition,
these standards shall ensure that each director acts in the sole
interest of the CO-OP, its members, and its local geographic
community, as appropriate, and acts consistently with the terms of
the CO-OP's governance documents and applicable state and federal
law. At a minimum, these standards shall include the following:
(A) A mechanism to identify potential ethical or other conflicts
of interest.
(B) A duty on the CO-OP's executive officers and directors to
publicly disclose all potential conflicts of interest pursuant to the
same standards required for state boards or commissions.
(C) A process to determine the extent to which a conflict exists.
(D) A process to address any conflict of interest.
(E) A process to be followed in the event a director or executive
officer of the CO-OP violates the standards described in this
paragraph.
(c) A violation of any of the requirements of this section shall
constitute grounds for revocation of the CO-OP insurer's certificate
of authority, in addition to any other grounds in this code for
revocation of the certificate.
A CO-OP insurer is insolvent if its surplus becomes less
than the amount of paid-in capital required of a capital stock
company to qualify to transact the class of disability and health
insurance. The conservation and liquidation provisions of Article 14
(commencing with Section 1010) of Chapter 1 of Part 2 of Division 1
shall apply to CO-OP insurers.
In addition to any applicable requirements in this code
for maintaining a certificate of authority, a CO-OP is required at
all times to be in full compliance with the requirements of PPACA
governing CO-OPs. The commissioner may request the federal government'
s certification that a CO-OP is in compliance with the requirements
of PPACA governing CO-OPs, as well as the status of the CO-OP's
compliance with its obligations under any loan or loan modification
agreement.
The department may adopt regulations implementing this
chapter pursuant to the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code).