Current through Register Vol. 56, No. 24, December 18, 2024
(a) In order to
obtain a certificate of authority, every HMO shall deposit with the
Commissioner no less than $ 300,000, adjusted annually by the CPI beginning on
July 1, 1997 in accordance with N.J.A.C. 11:2-32, Custodial Deposits.
(b) In order to maintain a certificate of
authority, every HMO shall annually adjust the deposit specified in (a) above
to equal 20 percent of its minimum net worth, except that such deposit shall be
no less than $ 300,000 and no more than $ 1,000,000 (as the minimum and maximum
amounts are adjusted by the CPI).
(c) The deposit required by (a) above,
adjusted in accordance with (b) above, shall be subject to the following:
1. The deposit shall be and remain an
admitted asset of the HMO for purposes of determining net worth of the
HMO.
2. The Commissioner shall use
the deposit for administrative costs directly attributable to the
rehabilitation, conservation or liquidation of the HMO.
3. All interest and other investment income
derived from the deposit made shall be paid to the HMO annually upon written
request.
4. An HMO may withdraw the
deposit, or any part thereof, after making a substitute deposit of cash,
securities, or other instruments permissible under N.J.A.C. 11:2-32, of equal
amount and value.
(d)
Every HMO shall, except as (d)4iii below may apply, maintain a deposit with the
Commissioner. The deposit shall be held in trust as a restricted asset to
offset reserves required pursuant to
N.J.A.C. 11:24-11.3(a)1.
The deposit shall be made in accordance with N.J.A.C. 11:2-32 except that the
HMO may request permission from the Commissioner to use a custodian other than
the custodian appointed pursuant to
N.J.A.C. 11:2-32.3(a).
Notwithstanding the requirements of
N.J.A.C. 11:2-32.3(b), the
securities deposited with the custodian may be those which constitute eligible
investments for life insurance companies pursuant to N.J.S.A. 17B:20-1a.
1. The required deposit amount shall be the
equivalent of 50 percent of the highest calendar quarterly premium of the most
recent four quarters.
i. The initial or
incremental premium-based deposit due following June 21, 1999 may be payable
over a two-year (two-deposit) period pursuant to a plan approved by the
Commissioner. HMOs may request an additional maximum one-year extension. An
extension request shall be in writing and filed with the HMO's quarterly report
due March 1 of the second year of the two-year phase-in period. The
Commissioner shall grant an extension if the HMO is determined to be in
"hazardous financial condition" as that term is defined at
N.J.A.C. 11:2-27.2.
ii. Recalculation of the deposit amount shall
occur no more frequently than annually.
2. The deposit and the accumulated investment
income thereof shall be and remain an admitted asset of the HMO for purposes of
determining net worth of the HMO.
3. The Commissioner shall use this deposit of
the HMO for costs of rehabilitation and/or liquidation of the HMO.
4. An HMO may withdraw its deposit or any
part thereof, subject to the prior written approval of the Commissioner, if:
i. A substitute deposit of cash, securities
or other instruments permissible under paragraph (d) above is made of equal
amount and value;
ii. The fair
market value of the deposit exceeds the amount required to be held on deposit
determined in accordance with (d)1 above; or
iii. The required deposit amount is reduced
by the Commissioner as a result of discontinuance or sale of a line of
business.
5. All income
from the deposit made shall be an asset of the HMO, and the HMO may withdraw
the income from such deposit on an annual basis, if the deposit and accumulated
investment income exceeds the amount required to be held on deposit, subject to
the prior written approval of the Commissioner.
6. The HMO shall record the dedicated reserve
for accounting purposes as "Assets as Restricted Cash and Other
Assets."
(e) HMOs shall
determine when incremental deposits are necessary (based on the most recently
filed SAP annual financial report) to assure that the required amount of
deposits are maintained and shall make any necessary incremental deposit
annually by June 30.
