House Bill hb1515

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    Florida House of Representatives - 2001                HB 1515

        By Representatives McGriff, Waters and Wiles






  1                      A bill to be entitled

  2         An act relating to insurance; amending s.

  3         215.555, F.S.; revising definitions; amending

  4         s. 624.155, F.S.; revising time periods for

  5         notice for bringing certain actions; amending

  6         s. 624.307, F.S.; authorizing the Department of

  7         Insurance to adopt rules; amending s. 624.310,

  8         F.S.; proscribing conflict of interest

  9         activities of licensee-affiliated parties under

10         certain circumstances; requiring

11         licensee-affiliated parties to disclose certain

12         personal interests; specifying certain

13         restrictions for licensee-affiliated parties;

14         providing voting rights limitations; providing

15         standards for identifying certain hazardous

16         insurers; providing department authority to

17         determine an insurer's financial condition and

18         issue certain orders to a hazardous insurer;

19         authorizing the department to adopt rules;

20         amending s. 624.315, F.S.; revising specified

21         contents of certain reports; amending s.

22         624.408, F.S.; deleting obsolete provisions;

23         amending ss. 624.423, 626.742, 626.8736,

24         626.907, and 634.161, F.S.; providing for

25         alternative methods of service of process;

26         amending s. 624.424, F.S.; exempting certain

27         insurers from certain annual statement

28         requirements; providing exceptions; renumbering

29         s. 624.4435, F.S., as s. 624.4242, F.S.;

30         amending s. 625.340, F.S.; requiring certain

31         foreign insurers to comply with certain

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  1         provisions; amending s. 626.8805, F.S.;

  2         exempting certain administrators from

  3         certificate of authority requirements; amending

  4         s. 627.4615, F.S.; increasing the minimum rate

  5         for certain interest calculations; amending s.

  6         627.482, F.S.; specifying a rate of simple

  7         interest for certain cash surrenders of

  8         policies; amending s. 627.613, F.S.; increasing

  9         a specified rate of simple interest; amending

10         s. 627.914, F.S.; clarifying application of

11         time of payment requirements to self-insurance

12         funds; deleting provisions relating to certain

13         required information relating to workers'

14         compensation insurance; amending s. 627.915,

15         F.S.; revising certain private passenger

16         automobile insurance information reporting

17         requirements; amending s. 641.19, F.S.;

18         defining "health care risk contract"; amending

19         s. 641.26, F.S.; revising health maintenance

20         organization annual reporting requirements;

21         creating s. 641.263, F.S.; providing for

22         risk-based capital for health maintenance

23         organizations; providing for risk-based capital

24         reports; providing requirements for health

25         maintenance organizations upon the occurrence

26         of certain events; providing notice

27         requirements; requiring a risk-based capital

28         plan for such events; providing duties and

29         responsibilities of the department; providing

30         for department hearings of challenges by health

31         maintenance organizations; providing notice

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  1         requirements; authorizing the department to

  2         adopt rules; authorizing the department to

  3         exempt certain health maintenance

  4         organizations; providing for effect of certain

  5         notices; providing for alternative requirements

  6         for certain time periods; creating s. 641.265,

  7         F.S.; requiring health maintenance

  8         organizations to file certain comprehensive

  9         business plans; providing requirements;

10         amending s. 641.35, F.S.; including under

11         liabilities the amounts of certain claims in

12         determinations of financial health of health

13         maintenance organizations; amending ss.

14         641.2018, 641.495, 817.234, and 817.50, F.S.;

15         correcting cross references; repealing s.

16         641.2342, F.S., relating to contract providers;

17         providing effective dates.

18

19  Be It Enacted by the Legislature of the State of Florida:

20

21         Section 1.  Paragraph (c) of subsection (2) of section

22  215.555, Florida Statutes, is amended, and paragraph (n) is

23  added to said subsection, to read:

24         215.555  Florida Hurricane Catastrophe Fund.--

25         (2)  DEFINITIONS.--As used in this section:

26         (c)  "Covered policy" means any insurance policy

27  covering residential property in this state, including, but

28  not limited to, any homeowner's, mobile home owner's, farm

29  owner's, condominium association, condominium unit owner's,

30  tenant's, or apartment building policy, or any other policy

31  covering a residential structure or its contents issued by any

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  1  authorized insurer, including any joint underwriting

  2  association or similar entity created pursuant to law or a

  3  transferred policy as defined in paragraph (n). Additionally,

  4  covered policies include policies covering the peril of wind

  5  removed from the Florida Residential Property and Casualty

  6  Joint Underwriting Association, created pursuant to s.

  7  627.351(6), or from the Florida Windstorm Underwriting

  8  Association, created pursuant to s. 627.351(2), by an

  9  authorized insurer under the terms and conditions of an

10  executed assumption agreement between the authorized insurer

11  and either such association. Each assumption agreement between

12  either association and such authorized insurer must be

13  approved by the Florida Department of Insurance prior to the

14  effective date of the assumption, and the Department of

15  Insurance must provide written notification to the board

16  within 15 working days after such approval. "Covered policy"

17  does not include any policy that excludes wind coverage or

18  hurricane coverage or any reinsurance agreement and does not

19  include any policy otherwise meeting this definition which is

20  issued by a surplus lines insurer or a reinsurer.

21         (n)  "Transferred policy" means a policy originally

22  written by an authorized insurer or joint underwriting

23  association which has been assumed by another authorized

24  insurer pursuant to an assumption and reinsurance agreement,

25  and meets all of the following conditions:

26         1.  The policy was covered under a contract with the

27  fund immediately prior to the assumption.

28         2.  The assumption and reinsurance agreement was

29  approved in advance by the Department of Insurance.

30         3.  The assuming insurer is obligated to pay 100

31  percent of the losses of the policy.

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  1         4.  An assumption notice that identifies the assuming

  2  insurer is provided to each of the policyholders.

  3         5.  All premiums and assessments due to the fund from

  4  the ceding insurer have been paid in full.

  5         6.  The assumption agreement provides for the full

  6  payment of any premiums due to the fund for the transferred

  7  policies for the balance of the contract period.

  8         7.  The assumption agreement clearly identifies

  9  policies transferred and provides for the collection of any

10  data necessary for the fund to determine reimbursement under

11  the contract.

12         8.  In the case of an authorized insurer, the

13  assumption agreement provides for the transfer of all policies

14  covered under the existing contract with the fund.

15         9.  The assumption agreement provides for the full

16  payment of any future assessments associated with the exposure

17  from the transferred policies.

18         10.  The assumption agreement is filed with the fund by

19  the assuming insurer within 15 days after approval by the

20  department.

21         Section 2.  Subsection (2) of section 624.155, Florida

22  Statutes, is amended to read:

23         624.155  Civil remedy.--

24         (2)(a)  As a condition precedent to bringing an action

25  under this section, the department and the insurer must have

26  been given 60 days' written notice of the violation.  If the

27  department returns a notice for lack of specificity, the

28  60-day time period shall not begin until a proper notice is

29  filed.

30         (b)  The notice shall be on a form provided by the

31  department and shall state with specificity the following

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  1  information, and such other information as the department may

  2  require:

  3         1.  The statutory provision, including the specific

  4  language of the statute, which the insurer allegedly violated.

  5         2.  The facts and circumstances giving rise to the

  6  violation.

  7         3.  The name of any individual involved in the

  8  violation.

  9         4.  Reference to specific policy language that is

10  relevant to the violation, if any.  If the person bringing the

11  civil action is a third party claimant, she or he shall not be

12  required to reference the specific policy language if the

13  insurer has not provided a copy of the policy to the third

14  party claimant pursuant to written request.

15         5.  A statement that the notice is given in order to

16  perfect the right to pursue the civil remedy authorized by

17  this section.

18         (c)  Within 20 days of receipt of the notice, the

19  department may return any notice that does not provide the

20  specific information required by this section, and the

21  department shall indicate the specific deficiencies contained

22  in the notice. A determination by the department to return a

23  notice for lack of specificity shall be exempt from the

24  requirements of chapter 120.

25         (c)(d)  No action shall lie if, within 60 days after

26  filing notice, the damages are paid or the circumstances

27  giving rise to the violation are corrected.

28         (d)(e)  The insurer that is the recipient of a notice

29  filed pursuant to this section shall report to the department

30  on the disposition of the alleged violation.

31

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  1         (e)(f)  The applicable statute of limitations for an

  2  action under this section shall be tolled for a period of 65

  3  days by the mailing of the notice required by this subsection

  4  or the mailing of a subsequent notice required by this

  5  subsection.

  6         Section 3.  Subsection (8) is added to section 624.307,

  7  Florida Statutes, to read:

  8         624.307  General powers; duties.--

  9         (8)  The department may by rule specify the format

10  whereby any records, documents, or filings required pursuant

11  to the provisions of the Florida Insurance Code are to be

12  furnished to the department by licensees and

13  certificateholders.  The rules may include provisions

14  governing electronic methodologies for use in furnishing such

15  records, documents, or filings.

16         Section 4.  Subsections (4), (5), (6), and (7) of

17  section 624.310, Florida Statutes, are renumbered as

18  subsections (5), (6), (8), and (9), respectively, new

19  subsections (4) and (7) are added to said section, and present

20  subsection (6) of said section is amended, to read:

21         624.310  Enforcement; cease and desist orders; removal

22  of certain persons; fines.--

23         (4)  LICENSEE-AFFILIATED PARTIES.--

24         (a)  A licensee-affiliated party may not engage or

25  participate, directly or indirectly, in any business or

26  transaction conducted on behalf of or involving the licensee,

27  subsidiary, or service corporation which would result in a

28  conflict of the party's own personal interests with those of

29  the licensee, subsidiary, or service corporation with which he

30  or she is affiliated, unless:

31

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  1         1.  Such business or transactions are conducted in good

  2  faith and are honest, fair, and reasonable to the licensee,

  3  subsidiary, or service corporation and are on terms no more

  4  favorable than would be offered to a disinterested third

  5  party.

  6         2.  A full disclosure of such business or transaction

  7  and the nature of the licensee-affiliated party's interest is

  8  made to the board of directors.

  9         3.  Such business or transactions are approved in good

10  faith by the board of directors, any interested director

11  abstaining, and such approval is recorded in the minutes.

12         4.  Any profits inuring to the licensee-affiliated

13  party are not at the expense of the state financial

14  institution, subsidiary, or service corporation and do not

15  prejudice the best interests of the licensee, subsidiary, or

16  service corporation in any way.

17         5.  Such business or transactions do not represent a

18  breach of the licensee-affiliated party's fiduciary duty and

19  are not fraudulent, illegal, or ultra vires.

20         (b)  Without limitation by any of the specific

21  provisions of this section, the department may require the

22  disclosure by licensee-affiliated parties of their personal

23  interests, directly or indirectly, in any business or

24  transactions on behalf of or involving the licensee,

25  subsidiary, or service corporation and of their control of or

26  active participation in enterprises having activities related

27  to the business of the state financial institution,

28  subsidiary, or service corporation.

29         (c)  The following restrictions governing the conduct

30  of licensee-affiliated parties are expressly specified, but

31  such specification is not to be construed in any manner as

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  1  excusing such parties from the observance of any other aspect

  2  of the general fiduciary duty owed by them to the licensee

  3  which they serve:

  4         1.  A director of a licensee may not accept director

  5  fees unless the director fees have been previously approved by

  6  the board of directors and such fees represent reasonable

  7  compensation for service as a director or member of a

  8  committee.  This subparagraph does not limit or preclude

  9  reasonable compensation as otherwise authorized by paragraph

10  (a) for a director who also provides goods or services to the

11  licensee.

12         2.  Except as provided in ss. 657.039 and 658.48, a

13  licensee-affiliated party may not have any interest, directly

14  or indirectly, in the proceeds of a loan or investment or of a

15  purchase or sale made by the licensee, subsidiary, or service

16  corporation unless such loan, investment, purchase, or sale is

17  authorized expressly by resolution of the board of directors

18  and unless such resolution is approved by vote of at least a

19  majority of the directors of the licensee with all interested

20  parties taking no part in such vote.

21         3.  A licensee-affiliated party may not have any

22  interest, direct or indirect, in the purchase at less than the

23  face value of any evidence of a savings account, deposit, or

24  other indebtedness issued by the state financial institution,

25  subsidiary, or service corporation.

26         4.  A licensee-affiliated party acting as proxy for a

27  stockholder of a licensee, subsidiary, or service corporation

28  may not exercise, transfer, or delegate such vote or votes in

29  any consideration of a private benefit or advantage, direct or

30  indirect.  The voting rights of stockholders and directors may

31  not be the subject of sale, barter, exchange, or similar

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  1  transaction, either directly or indirectly. Any

  2  licensee-affiliated party who violates the provisions of this

  3  subparagraph is accountable to the licensee, subsidiary, or

  4  service corporation for any increment.

  5         (7)  CORRECTIVE ACTION.--

  6         (a)  The purpose of this subsection is to set forth the

  7  standards the department may use for identifying insurers

  8  found to be in such condition as to render the continuance of

  9  their business hazardous to the public or to holders of their

10  policies or certificates of insurance.  This subsection shall

11  not be interpreted to limit the powers granted the department

12  by any other laws of this state, nor shall this subsection be

13  interpreted to supersede any laws or parts of laws of this

14  state.

15         (b)  The following standards may be considered by the

16  department to determine whether the continued operation of any

17  insurer transacting an insurance business in this state might

18  be deemed to be hazardous to policyholders, creditors, or the

19  general public:

20         1.  Adverse findings reported in financial condition

21  and market conduct examination reports.

22         2.  The National Association of Insurance Commissioners

23  Insurance Regulatory Information System and its related

24  reports.

25         3.  The ratios of commission expense, general insurance

26  expense, policy benefits, and reserve increases as to annual

27  premium and net investment income which could lead to an

28  impairment of capital and surplus.

29         4.  Whether the insurer's asset portfolio, when viewed

30  in light of current economic conditions, is of sufficient

31

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  1  value, liquidity, or diversity to assure the insurer's ability

  2  to meet its outstanding obligations as they mature.

  3         5.  The ability of an assuming reinsurer to perform and

  4  whether the insurer's reinsurance program provides sufficient

  5  protection for the insurer's remaining surplus after taking

  6  into account the insurer's cash flow and the classes of

  7  business written as well as the financial condition of the

  8  assuming reinsurer.

  9         6.  Whether the insurer's operating loss in the last

10  12-month period or any shorter period of time, including, but

11  not limited to, net capital gain or loss, change in

12  non-admitted assets, and cash dividends paid to shareholders,

13  is greater than 50 percent of the insurer's remaining surplus

14  as regards policyholders in excess of the minimum required.

15         7.  Whether any affiliate, subsidiary, or reinsurer is

16  insolvent, threatened with insolvency, or delinquent in

17  payment of its monetary or other obligation.

18         8.  Contingent liabilities, pledges, or guaranties that

19  either individually or collectively involve a total amount

20  that in the opinion of the department may affect the solvency

21  of the insurer.

22         9.  Whether any controlling person of an insurer is

23  delinquent in the transmitting to, or payment of, net premiums

24  to such insurer.

25         10.  The age and collectibility of receivables.

26         11.  Whether the management of an insurer, including

27  officers, directors, or any other person who directly or

28  indirectly controls the operation of such insurer, fails to

29  possess and demonstrate the competence, fitness, and

30  reputation deemed necessary to serve the insurer in such

31  position.

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  1         12.  Whether the management of an insurer has failed to

  2  respond to inquiries relative to the condition of the insurer

  3  or has furnished false and misleading information concerning

  4  an inquiry.

  5         13.  Whether the management of an insurer has filed any

  6  false or misleading sworn financial statement, has released a

  7  false or misleading financial statement to lending

  8  institutions or to the general public, or has made a false or

  9  misleading entry or omitted an entry of material amount in the

10  books of the insurer.

11         14.  Whether the insurer has grown so rapidly and to

12  such an extent that the insurer lacks adequate financial and

13  administrative capacity to meet its obligations in a timely

14  manner.

15         15.  Whether the insurer has experienced or will

16  experience in the foreseeable future cash flow liquidity

17  problems.

18         (c)1.  For the purposes of making a determination of an

19  insurer's financial condition under this subsection, the

20  department may:

21         a.  Disregard any credit or amount receivable resulting

22  from transactions with a reinsurer which is insolvent,

23  impaired, or otherwise subject to a delinquency proceeding.

24         b.  Make appropriate adjustments to asset values

25  attributable to investments in or transactions with parents,

26  subsidiaries, or affiliates.

27         c.  Refuse to recognize the stated value of accounts

28  receivable if the ability to collect receivables is highly

29  speculative in view of the age of the account or the financial

30  condition of the debtor.

31

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  1         d.  Increase the insurer's liability in an amount equal

  2  to any contingent liability, pledge, or guarantee not

  3  otherwise included if there is a substantial risk that the

  4  insurer will be called upon to meet the obligation undertaken

  5  within the next 12-month period.

  6         2.  If the department determines that the continued

  7  operation of the insurer licensed to transact business in this

  8  state may be hazardous to policyholders, creditors, or the

  9  general public, the department may, upon its determination,

10  issue an order requiring the insurer to:

11         a.  Reduce the total amount of present and potential

12  liability for policy benefits by reinsurance.

13         b.  Reduce, suspend, or limit the volume of business

14  being accepted or renewed.

15         c.  Reduce general insurance and commission expenses by

16  specified methods.

17         d.  Increase the insurer's capital and surplus.

18         e.  Suspend or limit the declaration and payment of

19  dividend by an insurer to its stockholders or to its

20  policyholders.

21         f.  File reports in a form acceptable to the department

22  concerning the market value of an insurer's assets.

23         g.  Limit or withdraw from certain investments or

24  discontinue certain investment practices to the extent the

25  department deems necessary.

26         h.  Document the adequacy of premium rates in relation

27  to the risks insured.

28         i.  File, in addition to regular annual statements,

29  interim financial reports on the form adopted by the National

30  Association of Insurance Commissioners or in such format as

31  adopted by the department.

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  1

  2  If the insurer is a foreign insurer, the department's order

  3  may be limited to the extent provided by law.

  4         3.  Any insurer subject to an order under subparagraph

  5  2. may request a hearing to review that order pursuant to the

  6  applicable provisions of chapter 120.

  7         (d)  The department may adopt any rules necessary to

  8  implement the provisions of this subsection and in so doing

  9  may consider revisions by the National Association of

10  Insurance Commissioners to the model regulation or act upon

11  which this subsection is based or upon any similar association

12  model regulation or act.

13         (8)(6)  ADMINISTRATIVE PROCEDURES.--All administrative

14  proceedings under subsections (3), (4), and (5), and (6) shall

15  be conducted in accordance with chapter 120.  Any service

16  required or authorized to be made by the department under this

17  code shall be made by certified mail, return receipt

18  requested, delivered to the addressee only; by personal

19  delivery; or in accordance with chapter 48.  The service

20  provided for herein shall be effective from the date of

21  delivery.

22         Section 5.  Subsections (1) and (2) of section 624.315,

23  Florida Statutes, are amended to read:

24         624.315  Department; annual report.--

25         (1)  As early as reasonably possible, the department

26  shall annually prepare a report to the Speaker and Minority

27  Leader of the House of Representatives, the President and

28  Minority Leader of the Senate, the chairs of the legislative

29  committees with jurisdiction over matters of insurance, and

30  the Governor showing, with respect to the preceding calendar

31  year:

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  1         (a)  Names of the authorized insurers transacting

  2  insurance in this state, with abstracts of their financial

  3  statements including assets, liabilities, and net worth.

  4         (b)  Names of insurers whose business was closed during

  5  the year, the cause thereof, and amounts of assets and

  6  liabilities as ascertainable.

  7         (c)  Names of insurers against which delinquency or

  8  similar proceedings were instituted, and a concise statement

  9  of the circumstances and results of each such proceeding.

10         (d)  The receipts and estimated expenses of the

11  department for the year.

12         (d)(e)  Such other pertinent information and matters as

13  the department deems to be in the public interest.

14         (e)(f)  Annually after each regular session of the

15  Legislature, a compilation of the laws of this state relating

16  to insurance.  Any such publication may be printed, revised,

17  or reprinted upon the basis of the original low bid.

18         (f)(g)  An analysis and summary report of the state of

19  the insurance industry in this state evaluated as of the end

20  of the most recent calendar year.

21         (2)  The department shall maintain the following

22  information and make such information available upon request:

23         (a)  Calendar year profitability, including investment

24  income from policyholders' unearned premium and loss reserves

25  (Florida and countrywide).

26         (b)  Aggregate Florida loss reserves.

27         (c)  Premiums written (Florida and countrywide).

28         (d)  Premiums earned (Florida and countrywide).

29         (e)  Incurred losses (Florida and countrywide).

30         (f)  Paid losses (Florida and countrywide).

31         (g)  Allocated Florida loss adjustment expenses.

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  1         (h)  Renewal ratio (countrywide).

  2         (i)  Variation of premiums charged by the industry as

  3  compared to rates promulgated by the Insurance Services Office

  4  (Florida and countrywide).

  5         (j)  An analysis of policy size limits (Florida and

  6  countrywide).

  7         (k)  Insureds' selection of claims-made versus

  8  occurrence coverage (Florida and countrywide).

  9         (h)(l)  A subreport on the involuntary market in

10  Florida encompassing such joint underwriting plans and

11  assigned risk plans operating in the state.

12         (i)(m)  A subreport providing information relevant to

13  emerging markets and alternate marketing mechanisms, such as

14  self-insured trusts, risk retention groups, purchasing groups,

15  and the excess-surplus lines market.

16         (n)  Trends; emerging trends as exemplified by the

17  percentage change in frequency and severity of both paid and

18  incurred claims, and pure premium (Florida and countrywide).

19         (o)  Fast track loss ratios as defined and assimilated

20  by the Insurance Services Office (Florida and countrywide).

21         Section 6.  Paragraph (b) of subsection (1) of section

22  624.408, Florida Statutes, is amended to read:

23         624.408  Surplus as to policyholders required; new and

24  existing insurers.--

25         (1)

26         (b)  For any property and casualty insurer holding a

27  certificate of authority on December 1, 1993, the following

28  amounts apply instead of the $4 million required by

29  subparagraph (a)5.:

30         1.  On December 31, 1999, and until December 30, 2000,

31  $2.5 million.

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  1         1.2.  On December 31, 2000, and until December 30,

  2  2001, $2.75 million.

  3         2.3.  On December 31, 2001, and until December 30,

  4  2002, $3 million.

  5         3.4.  On December 31, 2002, and until December 30,

  6  2003, $3.25 million.

  7         4.5.  On December 31, 2003, and until December 30,

  8  2004, $3.6 million.

  9         5.6.  On December 31, 2004, and thereafter, $4 million.

10         Section 7.  Subsection (1) of section 624.423, Florida

11  Statutes, is amended, and subsection (4) is added to said

12  section, to read:

13         624.423  Serving process.--

14         (1)  Service of process upon the Insurance Commissioner

15  and Treasurer as process agent of the insurer (under s.

16  624.422) shall be made by serving copies in triplicate of the

17  process upon the Insurance Commissioner and Treasurer or upon

18  her or his assistant, deputy, or other person in charge of her

19  or his office.  Upon receiving such service, the Insurance

20  Commissioner and Treasurer shall file one copy in her or his

21  office, return one copy with her or his admission of service,

22  and promptly forward one copy of the process by registered or

23  certified mail or by such other method of expeditious delivery

24  determined to be appropriate by the department to the person

25  last designated by the insurer to receive the same, as

26  provided under s. 624.422(2).

27         (4)  The department may prescribe by rule the method to

28  be used by the department in forwarding the process to the

29  person designated by the insurer and in returning a copy with

30  the admission of service as described in this section.

31

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  1         Section 8.  Paragraph (b) of subsection (1) of section

  2  624.424, Florida Statutes, is amended to read:

  3         624.424  Annual statement and other information.--

  4         (1)

  5         (b)1.  Each insurer's annual statement must contain a

  6  statement of opinion on loss and loss adjustment expense

  7  reserves made by a member of the American Academy of Actuaries

  8  or by a qualified loss reserve specialist, under criteria

  9  established by rule of the department. In adopting the rule,

10  the department must consider any criteria established by the

11  National Association of Insurance Commissioners. The

12  department may require semiannual updates of the annual

13  statement of opinion as to a particular insurer if the

14  department has reasonable cause to believe that such reserves

15  are understated to the extent of materially misstating the

16  financial position of the insurer. Workpapers in support of

17  the statement of opinion must be provided to the department

18  upon request. This subparagraph paragraph does not apply to

19  life insurance or title insurance.

20         2.  Any authorized insurer otherwise subject to this

21  paragraph having direct premiums written in this state of less

22  than $1 million in any calendar year and less than 1,000

23  policyholders or certificateholders of directly written

24  policies nationwide at the end of such calendar year is exempt

25  from this section for such year unless the department makes a

26  specific finding that compliance is necessary in order for the

27  department to carry out its statutory responsibilities.

28  However, any insurer having assumed premiums pursuant to

29  contracts or treaties or reinsurance of $1 million or more is

30  not exempt.  Any insurer subject to an exemption must submit,

31  by March 1 following the year to which the exemption applies,

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  1  an affidavit sworn to by a responsible officer of the insurer

  2  specifying the amount of direct premiums written in this state

  3  and number of policyholders or certificateholders.

  4         Section 9.  Section 624.4435, Florida Statutes, is

  5  renumbered as section 624.4242, Florida Statutes.

  6         Section 10.  Section 625.340, Florida Statutes, is

  7  amended to read:

  8         625.340  Investments of foreign or alien insurers.--The

  9  investment portfolio of a foreign or alien insurer shall be as

10  permitted by the laws of its domicile if of a quality

11  substantially as high as that required under this chapter for

12  similar funds of like domestic insurers. Foreign insurers that

13  are commercially domiciled as defined in s. 624.075 shall

14  comply with parts I and II of this chapter.

15         Section 11.  Subsection (4) of section 626.742, Florida

16  Statutes, is amended to read:

17         626.742  Nonresident agents; service of process.--

18         (4)  Upon receiving such service, the Insurance

19  Commissioner and Treasurer shall forthwith send one of the

20  copies of the process, by registered mail or by such other

21  method of expeditious delivery determined to be appropriate by

22  the department with return receipt requested, to the defendant

23  agent at his or her last address of record with the

24  department.

25         Section 12.  Subsection (4) of section 626.8736,

26  Florida Statutes, is amended to read:

27         626.8736  Nonresident independent or public adjusters;

28  service of process.--

29         (4)  Upon receiving the service, the Insurance

30  Commissioner and Treasurer shall forthwith send one of the

31  copies of the process, by registered mail or by such other

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  1  method of expeditious delivery determined to be appropriate by

  2  the department with return receipt requested, to the defendant

  3  nonresident independent or public adjuster at his or her last

  4  address of record with the department.

  5         Section 13.  Effective January 1, 2002, subsection (7)

  6  is added to section 626.8805, Florida Statutes, to read:

  7         626.8805  Certificate of authority to act as

  8  administrator.--

  9         (7)  An administrator is not required to hold a

10  certificate of authority pursuant to this section if:

11         (a)  The administrator has its principal place of

12  business in another state.

13         (b)  The administrator is not soliciting business as an

14  administrator in this state.

15         (c)  In the case of any group policy or plan of

16  insurance serviced by the administrator, the lesser of 5

17  percent of or 100 certificateholders reside in this state.

18         Section 14.  Subsection (1) of section 626.907, Florida

19  Statutes, is amended to read:

20         626.907  Service of process; judgment by default.--

21         (1)  Service of process upon an insurer or person

22  representing or aiding such insurer pursuant to s. 626.906

23  shall be made by delivering to and leaving with the Insurance

24  Commissioner and Treasurer or some person in apparent charge

25  of his or her office two copies thereof.  The Insurance

26  Commissioner and Treasurer shall forthwith mail, or by such

27  other method of expeditious delivery determined to be

28  appropriate by the department send, by registered mail one of

29  the copies of such process to the defendant at the defendant's

30  last known principal place of business and shall keep a record

31  of all process so served upon him or her.  The service of

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  1  process is sufficient, provided notice of such service and a

  2  copy of the process are sent within 10 days thereafter by

  3  registered mail by plaintiff or plaintiff's attorney to the

  4  defendant at the defendant's last known principal place of

  5  business, and the defendant's receipt, or receipt issued by

  6  the post office with which the letter is registered, showing

  7  the name of the sender of the letter and the name and address

  8  of the person to whom the letter is addressed, and the

  9  affidavit of the plaintiff or plaintiff's attorney showing a

10  compliance herewith are filed with the clerk of the court in

11  which the action is pending on or before the date the

12  defendant is required to appear, or within such further time

13  as the court may allow.

14         Section 15.  Section 627.4615, Florida Statutes, is

15  amended to read:

16         627.4615  Interest payable on death claim

17  payments.--When a policy provides for payment of its proceeds

18  in a lump sum upon the death of the insured, the payment must

19  include interest, at an annual rate equal to or greater than

20  the Moody's Corporate Bond Yield Average-Monthly Average

21  Corporate as of the day the claim was received, from the date

22  the insurer receives written due proof of death of the

23  insured.  If the method of calculating such index is

24  substantially changed from the method of calculation in use on

25  January 1, 1993, the rate must not be less than 12 8 percent.

26         Section 16.  Subsection (1) of section 627.482, Florida

27  Statutes, is amended to read:

28         627.482  Interest payable on cash surrender of

29  policy.--

30         (1)  If an insured requests payment of the cash

31  surrender value of a policy from its insurer, such payment

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  1  shall include simple interest at the rate of 12 percent per

  2  year interest specified in s. 625.121(6)(e), unless such

  3  payment is made by the insurer within 30 days of receipt of

  4  the insurance policy and request for cash surrender.

  5         Section 17.  Subsection (6) of section 627.613, Florida

  6  Statutes, is amended to read:

  7         627.613  Time of payment of claims.--

  8         (6)  All overdue payments shall bear simple interest at

  9  the rate of 12 10 percent per year.

10         Section 18.  Section 627.914, Florida Statutes, is

11  amended to read:

12         627.914  Reports of information by workers'

13  compensation insurers required.--

14         (1)  The department shall promulgate rules and

15  statistical plans which shall thereafter be used by each

16  insurer and self-insurance fund as defined in s. 624.461 in

17  the recording and reporting of loss, expense, and claims

18  experience, in order that the experience of all insurers and

19  self-insurance funds self-insurers may be made available at

20  least annually in such form and detail as may be necessary to

21  aid the department in determining whether Florida experience

22  for workers' compensation insurance is sufficient for

23  establishing rates.

24         (2)  Any insurer authorized to write a policy of

25  workers' compensation insurance shall transmit the following

26  information to the department each year with its annual

27  report, and such information shall be reported on a net basis

28  with respect to reinsurance for nationwide experience and on a

29  direct basis for Florida experience:

30         (a)  Premiums written;

31         (b)  Premiums earned;

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  1         (c)  Dividends paid or credited to policyholders;

  2         (d)  Losses paid;

  3         (e)  Allocated loss adjustment expenses;

  4         (f)  The ratio of allocated loss adjustment expenses to

  5  losses paid;

  6         (g)  Unallocated loss adjustment expenses;

  7         (h)  The ratio of unallocated loss adjustment expenses

  8  to losses paid;

  9         (i)  The total of losses paid and unallocated and

10  allocated loss adjustment expenses;

11         (j)  The ratio of losses paid and unallocated and

12  allocated loss adjustment expenses to premiums earned;

13         (k)  The number of claims outstanding as of December 31

14  of each year;

15         (l)  The total amount of losses unpaid as of December

16  31 of each year;

17         (m)  The total amount of allocated and unallocated loss

18  adjustment expenses unpaid as of December 31 of each year; and

19         (n)  The total of losses paid and allocated loss

20  adjustment expenses and unallocated loss adjustment expenses,

21  plus the total of losses unpaid as of December 31 of each year

22  and loss adjustment expenses unpaid as of December 31 of each

23  year.

24         (3)  A report of the information required in subsection

25  (2) shall be filed no later than April 1 of each year and

26  shall include the information for the preceding year ending

27  December 31. All reports shall be on a calendar-accident year

28  basis, and each calendar-accident year shall be reported at

29  eight stages of development.

30         (2)(4)  Each insurer and self-insurance fund as defined

31  in s. 624.461 authorized to write a policy of workers'

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  1  compensation insurance shall transmit the following

  2  information for paragraphs (a), (b), (d), and (e) annually on

  3  both Florida experience and nationwide experience separately:

  4         (a)  Payrolls by classification.

  5         (b)  Manual premiums by classification.

  6         (c)  Standard premiums by classification.

  7         (d)  Losses by classification and injury type.

  8         (e)  Expenses.

  9

10  A report of this information shall be filed no later than July

11  April 1 of each year.  All reports shall be filed in

12  accordance with standard reporting procedures for insurers,

13  which procedures have received approval by the department, and

14  shall contain data for the most recent policy period

15  available.  A statistical or rating organization may be used

16  by insurers or self-insurance funds to report the data

17  required by this section.  The statistical or rating

18  organization shall report each data element in the aggregate

19  only for insurers and self-insurance funds required to report

20  under this section who elect to have the rating organization

21  report on their behalf. Such insurers and self-insurance funds

22  shall be named in the report.

23         (3)(5)  Individual self-insurers authorized to transact

24  workers' compensation insurance as provided in s.

25  440.02(23)(a) shall report only Florida data as prescribed in

26  paragraphs (a)-(e) of subsection (2)(4) to the Division of

27  Workers' Compensation of the Department of Labor and

28  Employment Security.

29         (a)  The Division of Workers' Compensation shall

30  publish the dates and forms necessary to enable individual

31  self-insurers to comply with this section.

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  1         (b)  The Division of Workers' Compensation shall report

  2  the information collected under this section to the Department

  3  of Insurance in a manner prescribed by the department.

  4         (c)  A statistical or rating organization may be used

  5  by individual self-insurers for the purposes of reporting the

  6  data required by this section and calculating experience

  7  ratings.

  8         (4)(6)  The department shall provide a summary of

  9  information provided pursuant to subsection subsections (2)

10  and (4) in its annual report.

11         Section 19.  Subsection (1) of section 627.915, Florida

12  Statutes, is amended to read:

13         627.915  Insurer experience reporting.--

14         (1)  Each insurer transacting private passenger

15  automobile insurance in this state shall report certain

16  information annually to the department.  The information will

17  be due on or before July 1 of each year. The information shall

18  be divided into the following categories:  bodily injury

19  liability; property damage liability; uninsured motorist;

20  personal injury protection benefits; medical payments;

21  comprehensive and collision.  The information given shall be

22  on direct insurance writings in the state alone and shall

23  represent total limits data. The information set forth in

24  paragraphs (a)-(d)(f) is applicable to voluntary private

25  passenger and Joint Underwriting Association private passenger

26  writings and shall be reported for each of the latest 3

27  calendar-accident years, with an evaluation date of March 31

28  of the current year.  The information set forth in paragraphs

29  (e)-(h) (g)-(j) is applicable to voluntary private passenger

30  writings and shall be reported on a calendar-accident year

31

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  1  basis ultimately seven times at seven different stages of

  2  development.

  3         (a)  Premiums earned for the latest 3 calendar-accident

  4  years.

  5         (b)  Loss development factors and the historic

  6  development of those factors.

  7         (b)(c)  Policyholder dividends incurred.

  8         (c)(d)  Expenses for other acquisition and general

  9  expense.

10         (d)(e)  Expenses for agents' commissions and taxes,

11  licenses, and fees.

12         (f)  Profit and contingency factors as utilized in the

13  insurer's automobile rate filings for the applicable years.

14         (e)(g)  Losses paid.

15         (f)(h)  Losses unpaid.

16         (g)(i)  Loss adjustment expenses paid.

17         (h)(j)  Loss adjustment expenses unpaid.

18         Section 20.  Subsection (1) of section 634.161, Florida

19  Statutes, is amended to read:

20         634.161  Service of process; method.--

21         (1)  Service of process upon the Insurance Commissioner

22  and Treasurer as process agent of the company shall be made by

23  serving copies in triplicate of the process upon the Insurance

24  Commissioner and Treasurer or upon her or his assistant,

25  deputy, or other person in charge of her or his office.  Upon

26  receiving such service, the Insurance Commissioner and

27  Treasurer shall file one copy with the department, return one

28  copy with her or his admission of service, and promptly

29  forward one copy of the process by registered or certified

30  mail or by such other method of expeditious delivery

31  determined to be appropriate by the department to the person

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  1  last designated by the company to receive the same, as

  2  provided under s. 634.151.

  3         Section 21.  Subsections (12) through (21) of section

  4  641.19, Florida Statutes, are renumbered as subsections (13)

  5  through (22), respectively, and a new subsection (12) is added

  6  to said section to read:

  7         641.19  Definitions.--As used in this part, the term:

  8         (12)  "Health care risk contract" means a contract

  9  under which a person or entity receives consideration or other

10  compensation in an amount greater than 1 percent of the health

11  maintenance organization's annual gross written premium in

12  exchange for providing to the health maintenance organization

13  a provider network and other services, which may include

14  administrative services.

15         Section 22.  Subsection (1) of section 641.2018,

16  Florida Statutes, is amended to read:

17         641.2018  Limited coverage for home health care

18  authorized.--

19         (1)  Notwithstanding other provisions of this chapter,

20  a health maintenance organization may issue a contract that

21  limits coverage to home health care services only.  The

22  organization and the contract shall be subject to all of the

23  requirements of this part that do not require or otherwise

24  apply to specific benefits other than home care services.  To

25  this extent, all of the requirements of this part apply to any

26  organization or contract that limits coverage to home care

27  services, except the requirements for providing comprehensive

28  health care services as provided in ss. 641.19(4), (12), and

29  (13), and (14), and 641.31(1), except ss. 641.31(9), (12),

30  (17), (18), (19), (20), (21), and (24) and 641.31095.

31

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  1         Section 23.  Subsections (1) and (3) of section 641.26,

  2  Florida Statutes, are amended, and subsection (9) is added to

  3  said section, to read:

  4         641.26  Annual report.--

  5         (1)  Every health maintenance organization shall,

  6  annually by April 1 within 3 months after the end of its

  7  fiscal year, or within an extension of time therefor as the

  8  department, for good cause, may grant, in a form prescribed by

  9  the department, file a report with the department, verified by

10  the oath of two officers of the organization or, if not a

11  corporation, of two persons who are principal managing

12  directors of the affairs of the organization, properly

13  notarized, showing its condition on the last day of the

14  immediately preceding reporting period.  Such report shall

15  include:

16         (a)  A financial statement of the health maintenance

17  organization filed on a computer diskette using a format

18  acceptable to the department.

19         (b)  A financial statement of the health maintenance

20  organization filed on forms acceptable to the department.

21         (c)  An audited financial statement of the health

22  maintenance organization, including its balance sheet and a

23  statement of operations for the preceding year certified by an

24  independent certified public accountant, prepared in

25  accordance with statutory accounting principles.

26         (d)  The number of health maintenance contracts issued

27  and outstanding and the number of health maintenance contracts

28  terminated.

29         (e)  The number and amount of damage claims for medical

30  injury initiated against the health maintenance organization

31  and any of the providers engaged by it during the reporting

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  1  year, broken down into claims with and without formal legal

  2  process, and the disposition, if any, of each such claim.

  3         (f)  An actuarial certification that:

  4         1.  The health maintenance organization is actuarially

  5  sound, which certification shall consider the rates, benefits,

  6  and expenses of, and any other funds available for the payment

  7  of obligations of, the organization.

  8         2.  The rates being charged or to be charged are

  9  actuarially adequate to the end of the period for which rates

10  have been guaranteed.

11         3.  Incurred but not reported claims and claims

12  reported but not fully paid have been adequately provided for,

13  including claims arising for services provided to subscribers

14  if these services are provided under health care risk

15  contracts unless the obligations under such contracts are

16  secured by a financial instrument acceptable to the

17  department. Such instrument shall be certified as complying

18  with the requirements of this subsection. This requirement

19  shall not apply to a contract with a provider where the

20  contract is limited to services provided by such provider

21  under the scope of that provider's license.

22         (g)  A report prepared by the certified public

23  accountant and filed with the department describing material

24  weaknesses in the health maintenance organization's internal

25  control structure as noted by the certified public accountant

26  during the audit.  The report must be filed with the annual

27  audited financial report as required in paragraph (c).  The

28  health maintenance organization shall provide a description of

29  remedial actions taken or proposed to correct material

30  weaknesses, if the actions are not described in the

31  independent certified public accountant's report.

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  1         (h)  Such other information relating to the performance

  2  of health maintenance organizations as is required by the

  3  department.

  4         (3)  Every health maintenance organization shall file

  5  quarterly, within 45 days after each of its quarterly

  6  reporting periods, an unaudited quarterly financial statement

  7  for each quarter except the fourth quarter of the organization

  8  as described in paragraphs (1)(a) and (b). The report shall be

  9  as described in paragraphs (1)(a) and (b) and shall be due

10  within 45 days after the end of the quarter.  The quarterly

11  report shall be verified by the oath of two officers of the

12  organization, properly notarized.

13         (9)  Each health maintenance organization shall

14  annually report, in a form and manner prescribed by the

15  department by rule, a summary of each health risk contract.

16         Section 24.  Section 641.263, Florida Statutes, is

17  created to read:

18         641.263  Risk-based capital.--

19         (1)  For purposes of this section:

20         (a)  "Adjusted risk-based capital report" means a

21  risk-based capital report which has been adjusted by the

22  department in accordance with paragraph (2)(b).

23         (b)  "Association" means the National Association of

24  Insurance Commissioners.

25         (c)  "Corrective order" means an order issued by the

26  department specifying corrective actions which the department

27  has determined are required.

28         (d)  "Risk-based capital instructions" means the

29  risk-based capital report including risk-based capital

30  instructions adopted by the association, as these risk-based

31  capital instructions may be amended by the association from

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  1  time to time in accordance with the procedures adopted by the

  2  association.

  3         (e)  "Risk-based capital level" means a health

  4  maintenance organization's company action level risk-based

  5  capital, regulatory action level risk-based capital,

  6  authorized control level risk-based capital, or mandatory

  7  control level risk-based capital. For purposes of this

  8  section:

  9         1.  "Company action level risk-based capital" means the

10  product of 2.0 and the health maintenance organization's

11  authorized control level risk-based capital.

12         2.  "Regulatory action level risk-based capital" means

13  the product of 1.5 and the health maintenance organization's

14  authorized control level risk-based capital.

15         3.  "Authorized control level risk-based capital" means

16  the number determined under the risk-based capital formula in

17  accordance with the risk-based capital instructions.

18         4.  "Mandatory control level risk-based capital" means

19  the product of .70 and the authorized control level risk-based

20  capital.

21         (f)  "Risk-based capital plan" means a comprehensive

22  financial plan containing the elements specified in paragraph

23  (3)(b). If the department rejects the risk-based capital plan,

24  and the plan is revised by the health maintenance

25  organization, with or without the department's recommendation,

26  the plan shall be called the "revised risk-based capital

27  plan."

28         (g)  "Risk-based capital report" means the report

29  required in subsection (2).

30         (h)  "Total adjusted capital" means the sum of:

31

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  1         1.  A health maintenance organization's net worth,

  2  consisting of its statutory capital and surplus, as determined

  3  in accordance with the statutory accounting applicable to the

  4  annual financial statements required to be filed under s.

  5  641.26; and

  6         2.  Such other items, if any, as the risk-based capital

  7  instructions may provide.

  8         (2)(a)  A health maintenance organization shall, on or

  9  prior to April 1 of each year, prepare and submit to the

10  department a report of its risk-based capital levels as of the

11  end of the calendar year just ended, in a form and containing

12  such information as is required by the risk-based capital

13  instructions. In addition, a health maintenance organization

14  shall file its risk-based capital report:

15         1.  With the association in accordance with the

16  risk-based capital instructions; and

17         2.  With the chief insurance regulatory official in any

18  state in which the health maintenance organization is

19  authorized to do business, if such official has notified the

20  health maintenance organization of his or her request in

21  writing, in which case the health maintenance organization

22  shall file its risk-based capital report not later than the

23  later of 15 days after the receipt of notice to file its

24  risk-based capital report with that state or April 1.

25         (b)  A health maintenance organization's risk-based

26  capital shall be determined in accordance with the formula set

27  forth in the risk-based capital instructions. The formula

28  shall take into account and may adjust for the covariance

29  between:

30         1.  Asset risks;

31         2.  Credit risks;

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  1         3.  Underwriting risks; and

  2         4.  All other business risks and such other relevant

  3  risks as are set forth in the risk-based capital instructions,

  4

  5  determined in each case by applying the factors in the manner

  6  set forth in the risk-based capital instructions.

  7         (c)  The Legislature finds that an excess of capital

  8  over the amount produced by the risk-based capital

  9  requirements contained in this section and the formulas,

10  schedules, and instructions referenced in this section is

11  desirable in the health maintenance organization business.

12  Accordingly, health maintenance organizations should seek to

13  maintain capital above the risk-based capital levels required

14  by this section. Additional capital is used and useful in the

15  health maintenance organization business and helps to secure a

16  health maintenance organization against various risks inherent

17  in, or affecting, said business and not accounted for or only

18  partially measured by the risk-based capital requirements

19  contained in this section.

20         (d)  If a health maintenance organization files a

21  risk-based capital report that in the judgment of the

22  department is inaccurate, the department shall adjust the

23  risk-based capital report to correct the inaccuracy and shall

24  notify the health maintenance organization of the adjustment.

25  The notice shall contain a statement of the reason for the

26  adjustment. A risk-based capital report as so adjusted is

27  referred to as an "adjusted risk-based capital report."

28         (3)(a)  A company action level event includes:

29         1.  The filing of a risk-based capital report by a

30  health maintenance organization that indicates that the health

31  maintenance organization's total adjusted capital is greater

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  1  than or equal to its regulatory action level risk-based

  2  capital but less than its company action level risk-based

  3  capital;

  4         2.  Notification by the department to the health

  5  maintenance organization of an adjusted risk-based capital

  6  report that indicates the event described in subparagraph 1.,

  7  provided the health maintenance organization does not

  8  challenge the adjusted risk-based capital report under

  9  subsection (7); or

10         3.  If, pursuant to the provisions of subsection (7), a

11  health maintenance organization challenges an adjusted

12  risk-based capital report that indicates the event described

13  in subparagraph 1., the notification by the department to the

14  health maintenance organization that the department has, after

15  a hearing, rejected the health maintenance organization's

16  challenge.

17         (b)  If a company action level event occurs, the health

18  maintenance organization shall prepare and submit to the

19  department a risk-based capital plan that shall:

20         1.  Identify the conditions that contribute to the

21  company action level event.

22         2.  Contain proposals of corrective actions that the

23  health maintenance organization intends to take and that would

24  be expected to result in the elimination of the company action

25  level event.

26         3.  Provide projections of the health maintenance

27  organization's financial results in the current year and at

28  least the 2 succeeding years, both in the absence of proposed

29  corrective actions and giving effect to the proposed

30  corrective actions, including projections of statutory balance

31  sheets, operating income, net income, capital and surplus, and

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  1  risk-based capital levels. The projections for both new and

  2  renewal business might include separate projections for each

  3  major line of business and separately identify each

  4  significant income, expense, and benefit component.

  5         4.  Identify the key assumptions impacting the health

  6  maintenance organization's projections and the sensitivity of

  7  the projections to the assumptions.

  8         5.  Identify the quality of, and problems associated

  9  with, the health maintenance organization's business,

10  including, but not limited to, its assets, anticipated

11  business growth and associated surplus strain, extraordinary

12  exposure to risk, mix of business, and use of reinsurance, if

13  any, in each case.

14         (c)  The risk-based capital plan shall be submitted:

15         1.  Within 45 days after a company action level event;

16  or

17         2.  If the health maintenance organization challenges

18  an adjusted risk-based capital report pursuant to the

19  provisions of subsection (7), within 45 days after

20  notification to the health maintenance organization that the

21  department has, after a hearing, rejected the health

22  maintenance organization's challenge.

23         (d)  Within 60 days after the submission by a health

24  maintenance organization of a risk-based capital plan to the

25  department, the department shall notify the health maintenance

26  organization whether the risk-based capital plan shall be

27  implemented or is, in the judgment of the department,

28  unsatisfactory. If the department determines the risk-based

29  capital plan is unsatisfactory, the notification to the health

30  maintenance organization shall set forth the reasons for the

31  determination and may set forth proposed revisions which will

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  1  render the risk-based capital plan satisfactory in the

  2  judgment of the department. Upon notification from the

  3  department, the health maintenance organization shall prepare

  4  a revised risk-based capital plan, which may incorporate by

  5  reference any revisions proposed by the department, and shall

  6  submit the revised risk-based capital plan to the department:

  7         1.  Within 45 days after the notification from the

  8  department; or

  9         2.  If the health maintenance organization challenges

10  the notification from the department under the provisions of

11  subsection (7), within 45 days after a notification to the

12  health maintenance organization that the department has, after

13  a hearing, rejected the health maintenance organization's

14  challenge.

15         (e)  If the department notifies a health maintenance

16  organization that the health maintenance organization's

17  risk-based capital plan or revised risk-based capital plan is

18  unsatisfactory, the department may, at its discretion, subject

19  to the health maintenance organization's right to a hearing

20  under the provisions of subsection (7), specify in the

21  notification that the notification constitutes a regulatory

22  action level event.

23         (f)  Each domestic health maintenance organization that

24  files a risk-based capital plan or revised risk-based capital

25  plan with the department shall file a copy of the risk-based

26  capital plan or revised risk-based capital plan with the

27  insurance department in any state in which the health

28  maintenance organization is authorized to do business if:

29         1.  The state has a risk-based capital provision

30  substantially similar to the provisions of s. 641.264; and

31

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  1         2.  The insurance department of that state has notified

  2  the health maintenance organization of its request for the

  3  filing in writing, in which case the health maintenance

  4  organization shall file a copy of the risk-based capital plan

  5  or revised risk-based capital plan in that state no later than

  6  the later of:

  7         a.  Fifteen days after the receipt of notice to file a

  8  copy of its risk-based capital plan or revised risk-based

  9  capital plan with the state; or

10         b.  The date on which the risk-based capital plan or

11  revised risk-based capital plan is filed under paragraph (c)

12  or paragraph (d).

13         (4)(a)  A regulatory action level event includes, with

14  respect to a health maintenance organization:

15         1.  The filing of a risk-based capital report by the

16  health maintenance organization that indicates that the health

17  maintenance organization's total adjusted capital is greater

18  than or equal to its authorized control level risk-based

19  capital but less than its regulatory action level risk-based

20  capital;

21         2.  Notification by the department to a health

22  maintenance organization of an adjusted risk-based capital

23  report that indicates the event described in subparagraph 1.,

24  provided the health maintenance organization does not

25  challenge the adjusted risk-based capital report under the

26  provisions of subsection (7);

27         3.  If, pursuant to the provisions of subsection (7),

28  the health maintenance organization challenges an adjusted

29  risk-based capital report that indicates the event described

30  in subparagraph 1., the notification by the department to the

31  health maintenance organization that the department has, after

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  1  a hearing, rejected the health maintenance organization's

  2  challenge;

  3         4.  The failure of the health maintenance organization

  4  to file a risk-based capital report by April 1, unless the

  5  health maintenance organization has provided an explanation

  6  for the failure that is satisfactory to the department and has

  7  cured the failure within 10 days after April 1;

  8         5.  The failure of the health maintenance organization

  9  to submit a risk-based capital plan to the department within

10  the time period set forth in paragraph (3)(c);

11         6.  Notification by the department to the health

12  maintenance organization that:

13         a.  The risk-based capital plan or revised risk-based

14  capital plan submitted by the health maintenance organization

15  is, in the judgment of the department, unsatisfactory; and

16         b.  Notification constitutes a regulatory action level

17  event with respect to the health maintenance organization,

18  provided the health maintenance organization has not

19  challenged the determination under subsection (7);

20         7.  If, pursuant to subsection (7), the health

21  maintenance organization challenges a determination by the

22  department under subparagraph 6., the notification by the

23  department to the health maintenance organization that the

24  department has, after a hearing, rejected the health

25  maintenance organization's challenge;

26         8.  Notification by the department to the health

27  maintenance organization that the health maintenance

28  organization has failed to adhere to its risk-based capital

29  plan or revised risk-based capital plan, but only if the

30  failure has a substantial adverse effect on the ability of the

31  health maintenance organization to eliminate the company

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  1  action level event in accordance with its risk-based capital

  2  plan or revised risk-based capital plan and the department has

  3  so stated in the notification, provided the health maintenance

  4  organization has not challenged the determination under

  5  subsection (7); or

  6         9.  If, pursuant to subsection (7), the health

  7  maintenance organization challenges a determination by the

  8  department under subparagraph 8., the notification by the

  9  department to the health maintenance organization that the

10  department has, after a hearing, rejected the health

11  maintenance organization's challenge.

12         (b)  If a regulatory action level event occurs, the

13  department shall:

14         1.  Require the health maintenance organization to

15  prepare and submit a risk-based capital plan or, if

16  applicable, a revised risk-based capital plan.

17         2.  Perform such examination or analysis as the

18  department deems necessary of the assets, liabilities, and

19  operations of the health maintenance organization, including a

20  review of its risk-based capital plan or revised risk-based

21  capital plan.

22         3.  Subsequent to the examination or analysis, issue a

23  corrective order specifying such corrective actions as the

24  department shall determine are required.

25         (c)  In determining corrective actions, the department

26  may take into account factors the department deems relevant

27  with respect to the health maintenance organization based upon

28  the department's examination or analysis of the assets,

29  liabilities, and operations of the health maintenance

30  organization, including, but not limited to, the results of

31  any sensitivity tests undertaken pursuant to the risk-based

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  1  capital instructions. The risk-based capital plan or revised

  2  risk-based capital plan shall be submitted:

  3         1.  Within 45 days after the occurrence of the

  4  regulatory action level event;

  5         2.  If the health maintenance organization challenges

  6  an adjusted risk-based capital report pursuant to subsection

  7  (7) and the challenge is not frivolous in the judgment of the

  8  department, within 45 days after the notification to the

  9  health maintenance organization that the department has, after

10  a hearing, rejected the health maintenance organization's

11  challenge; or

12         3.  If the health maintenance organization challenges a

13  revised risk-based capital plan pursuant to subsection (7) and

14  the challenge is not frivolous in the judgment of the

15  department, within 45 days after the notification to the

16  health maintenance organization that the department has, after

17  a hearing, rejected the health maintenance organization's

18  challenge.

19         (d)  The department may retain actuaries, investment

20  experts, and other consultants as may be necessary in the

21  judgment of the department to review the health maintenance

22  organization's risk-based capital plan or revised risk-based

23  capital plan, examine or analyze the assets, liabilities, and

24  operations, including contractual relationships, of the health

25  maintenance organization, and formulate the corrective order

26  with respect to the health maintenance organization. The fees,

27  costs, and expenses relating to consultants shall be borne by

28  the affected health maintenance organization or such other

29  party as directed by the department.

30         (5)(a)  An authorized control level event includes:

31

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  1         1.  The filing of a risk-based capital report by the

  2  health maintenance organization that indicates that the health

  3  maintenance organization's total adjusted capital is greater

  4  than or equal to its mandatory control level risk-based

  5  capital but less than its authorized control level risk-based

  6  capital;

  7         2.  Notification by the department to the health

  8  maintenance organization of an adjusted risk-based capital

  9  report that indicates the event described in subparagraph 1.,

10  provided the health maintenance organization does not

11  challenge the adjusted risk-based capital report under

12  subsection (7);

13         3.  If, pursuant to subsection (7), the health

14  maintenance organization challenges an adjusted risk-based

15  capital report that indicates the event described in

16  subparagraph 1., notification by the department to the health

17  maintenance organization that the department has, after a

18  hearing, rejected the health maintenance organization's

19  challenge;

20         4.  The failure of the health maintenance organization

21  to respond, in a manner satisfactory to the department, to a

22  corrective order, provided the health maintenance organization

23  has not challenged the corrective order under subsection (7);

24  or

25         5.  If the health maintenance organization has

26  challenged a corrective order under subsection (7) and the

27  department has, after a hearing, rejected the challenge or

28  modified the corrective order, the failure of the health

29  maintenance organization to respond, in a manner satisfactory

30  to the department, to the corrective order subsequent to

31  rejection or modification by the department.

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  1         (b)  If an authorized control level event occurs, with

  2  respect to a health maintenance organization, the department

  3  shall:

  4         1.  Take such actions as are required under paragraph

  5  (4)(b) regarding a health maintenance organization with

  6  respect to which a regulatory action level event has occurred;

  7  or

  8         2.  If the department deems it to be in the best

  9  interests of the subscribers and creditors of the health

10  maintenance organization and of the public, take such actions

11  as are necessary to cause the health maintenance organization

12  to be placed under regulatory control under chapter 631. If

13  the department takes such actions, the authorized control

14  level event shall be deemed sufficient grounds for the

15  department to take action under chapter 631 and the department

16  shall have the rights, powers, and duties with respect to the

17  health maintenance organization as are set forth in such

18  chapter. If the department takes actions under this

19  subparagraph pursuant to an adjusted risk-based capital

20  report, the health maintenance organization shall be entitled

21  to such protections as are afforded to health maintenance

22  organizations under the summary proceedings provisions of s.

23  120.574.

24         (6)(a)  A mandatory control level event includes:

25         1.  The filing of a risk-based capital report by the

26  health maintenance organization that indicates that the health

27  maintenance organization's total adjusted capital is less than

28  its mandatory control level risk-based capital;

29         2.  Notification by the department to the health

30  maintenance organization of an adjusted risk-based capital

31  report that indicates the event described in subparagraph 1.,

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  1  provided the health maintenance organization does not

  2  challenge the adjusted risk-based capital report under

  3  subsection (7); or

  4         3.  If, pursuant to subsection (7), the health

  5  maintenance organization challenges an adjusted risk-based

  6  capital report that indicates the event described in

  7  subparagraph 1., notification by the department to the health

  8  maintenance organization that the department has, after a

  9  hearing, rejected the health maintenance organization's

10  challenge.

11         (b)  If a mandatory control level event occurs, the

12  department shall take such actions as are necessary to place

13  the health maintenance organization under regulatory control

14  under chapter 631. If the department takes such actions, the

15  mandatory control level event shall be deemed sufficient

16  grounds for the department to take action under chapter 631

17  and the department shall have the rights, powers, and duties

18  with respect to the health maintenance organization as are set

19  forth in such chapter.  If the department takes actions under

20  this paragraph pursuant to an adjusted risk-based capital

21  report, the health maintenance organization shall be entitled

22  to the summary proceedings protections of s. 120.574. However,

23  the department may forego action for up to 90 days after the

24  mandatory control level event if the department finds there is

25  a reasonable expectation that the mandatory control level

26  event may be eliminated within the 90-day period.

27         (7)  Upon the occurrence of any of the following

28  events, the health maintenance organization shall have the

29  right to a confidential departmental hearing, on a record, at

30  which the health maintenance organization may challenge any

31  determination or action by the department. The health

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  1  maintenance organization shall notify the department of its

  2  request for a hearing within 5 days after the notification by

  3  the department under this subsection. Upon receipt of the

  4  health maintenance organization's request for a hearing, the

  5  department shall set a date for the hearing, which shall be no

  6  less than 10 nor more than 30 days after the date of the

  7  health maintenance organization's request. Such events are:

  8         (a)  Notification to a health maintenance organization

  9  by the department of an adjusted risk-based capital report.

10         (b)  Notification to a health maintenance organization

11  by the department that:

12         1.  The health maintenance organization's risk-based

13  capital plan or revised risk-based capital plan is

14  unsatisfactory; and

15         2.  Notification constitutes a regulatory action level

16  event with respect to the health maintenance organization.

17         (c)  Notification to a health maintenance organization

18  by the department that the health maintenance organization has

19  failed to adhere to its risk-based capital plan or revised

20  risk-based capital plan and that the failure has a substantial

21  adverse effect on the ability of the health maintenance

22  organization to eliminate the company action level event with

23  respect to the health maintenance organization in accordance

24  with its risk-based capital plan or revised risk-based capital

25  plan.

26         (d)  Notification to a health maintenance organization

27  by the department of a corrective order with respect to the

28  health maintenance organization.

29         (8)(a)  This section is supplemental to any other

30  provisions of this part and shall not preclude or limit any

31

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  1  other powers or duties of the department as provided in the

  2  insurance code.

  3         (b)  The department may adopt reasonable rules

  4  necessary to implement this section.

  5         (c)  The department may exempt from the application of

  6  this section a health maintenance organization that:

  7         1.  Writes direct business only in this state;

  8         2.a.  Assumes no reinsurance in excess of 5 percent of

  9  direct premium written; and

10         b.  Writes direct annual premiums for comprehensive

11  medical business of $2,000,000 or less; or

12         3.  Is a limited health service organization that

13  covers less than 2,000 lives.

14         (9)  There shall be no liability on the part of, and no

15  cause of action shall arise against, the commissioner or the

16  department or its employees or agents for any action taken by

17  them in the performance of their powers and duties under this

18  section.

19         (10)  All notices by the department to a health

20  maintenance organization that may result in regulatory action

21  under this section shall be effective upon dispatch if

22  transmitted by registered or certified mail, or in the case of

23  any other transmission shall be effective upon the health

24  maintenance organization's receipt of notice.

25         (11)  For risk-based capital reports required to be

26  filed in 2002, 2003, and 2004 by health maintenance

27  organizations with respect to their 2001, 2002, and 2003

28  annual statement data, the following requirements shall apply

29  in lieu of the provisions of subsections (3), (4), (5), and

30  (6):

31

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  1         (a)  If a company action level event occurs with

  2  respect to a health maintenance organization, the department

  3  shall take no regulatory action under this section.

  4         (b)  If a regulatory action level event as provided in

  5  subparagraphs (4)(a)1., 2., or 3. occurs, the department shall

  6  take the actions required under subsection (3).

  7         (c)  If a regulatory action level event as provided in

  8  subparagraphs (4)(a)4., 5., 6., 7., 8., or 9. occurs or an

  9  authorized control level event occurs, the department shall

10  take the actions required under subsection (4) with respect to

11  the health maintenance organization.

12         (d)  If a mandatory control level event occurs with

13  respect to a health maintenance organization, the department

14  shall take the actions required under subsection (5) with

15  respect to the health maintenance organization.

16

17  Nothing in this subsection restricts or otherwise limits the

18  department's authority under other provisions of the insurance

19  code.

20         Section 25.  Section 641.265, Florida Statutes, is

21  created to read:

22         641.265  Comprehensive business plan.--Each health

23  maintenance organization, at the time of its application for

24  licensure, shall file with the department a comprehensive

25  business plan that includes:

26         (1)  A feasibility study and marketing plan.

27         (2)  A description of the proposed service area,

28  provider contracts, provider access, plan administration, and,

29  if applicable, management contracts.

30         (3)  A minimum of 3 years of financial projections and

31  a description of any financial guarantees.

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  1         (4)  A summary of the benefits to be offered.

  2         Section 26.  Paragraph (a) of subsection (3) of section

  3  641.35, Florida Statutes, is amended to read:

  4         641.35  Assets, liabilities, and investments.--

  5         (3)  LIABILITIES.--In any determination of the

  6  financial condition of a health maintenance organization,

  7  liabilities to be charged against its assets shall include:

  8         (a)  The amount, estimated consistently with the

  9  provisions of this part, necessary to pay all of its unpaid

10  losses and claims incurred for or on behalf of a subscriber,

11  on or prior to the end of the reporting period, whether

12  reported or unreported, including claims arising for services

13  provided to subscribers where these services are provided

14  under health care risk contracts unless the obligations under

15  such contracts are secured by a financial instrument

16  acceptable to the department.  This requirement shall not

17  apply to a contract with a provider where the contract is

18  limited to services provided by such provider under the scope

19  of that provider's license.

20

21  The department, upon determining that a health maintenance

22  organization has failed to report liabilities that should have

23  been reported, shall require a corrected report which reflects

24  the proper liabilities to be submitted by the organization to

25  the department within 10 working days of receipt of written

26  notification.

27         Section 27.  Subsection (4) of section 641.495, Florida

28  Statutes, is amended to read:

29         641.495  Requirements for issuance and maintenance of

30  certificate.--

31

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  1         (4)  The organization shall ensure that the health care

  2  services it provides to subscribers, including physician

  3  services as required by s. 641.19(14)(13)(d) and (e), are

  4  accessible to the subscribers, with reasonable promptness,

  5  with respect to geographic location, hours of operation,

  6  provision of after-hours service, and staffing patterns within

  7  generally accepted industry norms for meeting the projected

  8  subscriber needs. The health maintenance organization must

  9  provide treatment authorization 24 hours a day, 7 days a week.

10  Requests for treatment authorization may not be held pending

11  unless the requesting provider contractually agrees to take a

12  pending or tracking number.

13         Section 28.  Paragraph (b) of subsection (2) of section

14  817.234, Florida Statutes, is amended to read:

15         817.234  False and fraudulent insurance claims.--

16         (2)

17         (b)  In addition to any other provision of law,

18  systematic upcoding by a provider, as defined in s.

19  641.19(16)(15), with the intent to obtain reimbursement

20  otherwise not due from an insurer is punishable as provided in

21  s. 641.52(5).

22         Section 29.  Subsection (1) of section 817.50, Florida

23  Statutes, is amended to read:

24         817.50  Fraudulently obtaining goods, services, etc.,

25  from a health care provider.--

26         (1)  Whoever shall, willfully and with intent to

27  defraud, obtain or attempt to obtain goods, products,

28  merchandise, or services from any health care provider in this

29  state, as defined in s. 641.19(16)(15), commits a misdemeanor

30  of the second degree, punishable as provided in s. 775.082 or

31  s. 775.083.

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  1         Section 30.  Section 641.2342, Florida Statutes, is

  2  repealed.

  3         Section 31.  Except as otherwise provided herein, this

  4  act shall take effect July 1, 2001.

  5

  6            *****************************************

  7                          HOUSE SUMMARY

  8
      Revises various provisions relating to insurance. Revises
  9    time periods for notice for bringing actions. Proscribes
      conflict of interest activities of licensee-affiliated
10    parties, requires licensee-affiliated parties to disclose
      personal interests, and specifies restrictions for
11    licensee-affiliated parties. Provides for alternative
      methods of service of process. Requires foreign insurers'
12    code compliance. Provides for an administrator exemption
      from certificate of authority requirements. Revises
13    interest rates and calculations of rates. Provides time
      of payment requirements to self-insurance funds. Revises
14    private passenger automobile insurance information
      reporting requirements and required information relating
15    to workers' compensation insurance. Revises health
      maintenance organization annual reporting requirements.
16    Provides for risk-based capital for health maintenance
      organizations and requires risk-based capital reports and
17    a risk-based capital plan for specified events. Provides
      duties and responsibilities of the Department of
18    Insurance. Requires health maintenance organizations to
      file comprehensive business plans. Includes under
19    liabilities the amounts of specified claims in
      determinations of financial health of health maintenance
20    organizations. See bill for details.

21

22

23

24

25

26

27

28

29

30

31

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