CHAPTER 63. Health Service Corporations
Health service corporations now or hereafter incorporated in this State shall be governed by this chapter, shall be exempt from all other provisions of this title, except as herein expressly provided, and no insurance law hereafter enacted shall be deemed to apply to such corporations unless they be specifically referred to therein.18 Del. C. 1953, § 6301; 56 Del. Laws, c. 380, § 1;
“Health service corporation” means a nonprofit corporation, without capital stock, organized under the laws of this State for the purpose of establishing, maintaining and operating plans to provide hospital, physicians’ or related health services, or indemnity therefor, for such persons as become members or subscribers of any plan of such corporation.18 Del. C. 1953, § 6302; 56 Del. Laws, c. 380, § 1;
This chapter, other than § 6301 of this title, shall not apply to any corporation operating or maintaining a hospital service plan or medical service plan, participation in which is limited to its employees and the employees of other persons or corporations with which such corporation may have contracted to provide such services. As used in this section, the term “employees” may include members of the families of employees and retired employees.18 Del. C. 1953, § 6303; 56 Del. Laws, c. 380, § 1;
(a) No corporation shall engage in the business of a health service corporation without first obtaining a certificate of authority therefor from the Commissioner, except that this provision shall not apply to corporations which are engaged in such business in this State on November 1, 1968.
(b) Application for a certificate of authority as a health service corporation shall be made on forms supplied by the Commissioner and containing such information as the Commissioner shall reasonably deem necessary. The application shall be accompanied by a filing fee of $25 and copies of the following documents:
(1) Certificate of incorporation;
(3) Forms of all proposed contracts between the applicant and participating hospitals, physicians and other providers of health services showing the terms under which services are to be furnished to subscribers or members;
(4) Forms of all proposed contracts and optional riders to be offered for subscribers or members;
(5) Tables of rates to be charged for each such contract or rider or a statement of the rating formulas to be used in lieu of fixed rates;
(6) Financial statement of the corporation, including the amounts of contributions paid or agreed to be paid to the corporation for working capital and the name or names of each contributor and the terms of each contribution;
(7) A statement of the areas in which the corporation proposes to operate; and
(8) A list of the names and addresses of the members of the board of directors or other governing body of the corporation and its principal officers.
(c) Every corporation engaging in the business of a health service corporation pursuant to the exception stated in subsection (a) of this section above, shall, within 30 days after November 1, 1968, file with the Commissioner copies of all the documents referred to in paragraphs (b)(1)-(8) of this section, above, and pay therewith a filing fee of $25.18 Del. C. 1953, § 6304; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1;
The Commissioner shall issue a certificate of authority to the applicant when it is shown to the Commissioner’s satisfaction that:
(1) The applicant is established as a bona fide nonprofit health service corporation;
(2) Arrangements have been made by the applicant reasonably to assure provision of the services covered by its contracts and riders;
(3) The amounts provided as working capital of the corporation are repayable, without interest, only out of operating revenues;
(4) The amount of money actually available for working capital is sufficient to carry on the plan for a period of 2 months from the date of issuance of the certificate of authority.18 Del. C. 1953, § 6305; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1;
No new or changed contract or rider shall be offered to the public and no new or changed rate or rating formula shall be charged or employed, unless documentation with respect thereto as specified in § 6304(b) of this title is first filed with the Commissioner.18 Del. C. 1953, § 6306; 56 Del. Laws, c. 380, § 1;
(a) Not later than March 1 of each year every such corporation shall file with the Commissioner a statement sworn to by at least 2 of its principal officers, showing its financial condition on the last day of the next preceding calendar year. Such statement shall be in the general form as is currently in general and customary use in the United States for health insurance and may be submitted on standard office-size paper.
(b) The Commissioner may appoint an examiner to examine into the affairs of the corporation. Such person shall have the power of visitation and examination, shall have free access to all the books, papers and documents relating to the business of the corporation and may require the officers, agents or employees thereof, or any other persons, to testify under oath concerning the affairs, transactions and conditions at least every 3 years. Except, that the confidentiality of information relating to the diagnosis and treatment of the members of such corporation shall be strictly maintained by the examiner. The reasonable cost of the examination shall be paid by the corporation upon completion of the examination.18 Del. C. 1953, § 6307; 56 Del. Laws, c. 380, § 1; 64 Del. Laws, c. 322, § 1; 69 Del. Laws, c. 343, § 1;
The Commissioner may, after hearing, suspend or revoke the right to do business or the certificate of authority for any of the following causes:
(1) If the corporation is no longer qualified therefor under this chapter;
(2) For a violation by the corporation of a provision of this chapter; or
(3) Upon any applicable ground under this chapter or any of the chapters specified in § 6309 of this title for which the certificate of authority of an insurer may be suspended or revoked.18 Del. C. 1953, § 6308; 56 Del. Laws, c. 380, § 1;
(a) Such corporations shall be subject to this chapter and to the following chapters of this title, to the extent applicable and not in conflict with the express provisions of this chapter:
(1) Chapter 1 (General Definitions and Provisions).
(2) Chapter 3 (The Insurance Commissioner).
(3) Chapter 23 (Unfair Practices in the Insurance Business).
(4) Chapter 25 (Rates and Rating Organizations).
(5) Subchapter II of Chapter 58 (Risk-Based Capital (RBC) for Health Organizations).
(6) Chapter 59 (Rehabilitation and Liquidation).
(7) Chapter 34 (Medicare Supplement Insurance Minimum Standards).
(8) Chapter 36 (Individual Health Insurance Minimum Standards).
(b) Such corporations shall also be subject to §§ 3349A, 3365, 3565A and 3571G of this title.18 Del. C. 1953, § 6309; 56 Del. Laws, c. 380, § 1; 60 Del. Laws, c. 388, §§ 5, 6; 63 Del. Laws, c. 262, § 4; 64 Del. Laws, c. 142, § 3; 78 Del. Laws, c. 276, § 3; 79 Del. Laws, c. 425, § 4; 79 Del. Laws, c. 435, § 3;
(a) (1) With respect to any proposed change of control affiliation or transaction between:
a. A health service corporation licensed under this chapter; and
b. Any insurer that administers a Children’s Health Insurance Program buy-in program (“the insurer”),
the Commissioner shall not approve the transaction or affiliation unless the affiliation will result in the Delaware-licensed health service corporation offering an insurance plan with the same benefits and eligibility criteria as the Delaware program created under § 9909(j) of Title 16.
(2) The specific premiums to be initially charged under this section shall be approved by the Commissioner as part of the approval for the transaction or affiliation required by this section, with the analysis required by Chapter 25 of this title and the premiums charged in other regions whose CHIP buy-in programs are administered by the insurer being factors in the Commissioner’s decision.
(3) The plan offered pursuant to this section shall offer to subscribers the same network of health-care providers that is offered to subscribers of the Delaware-licensed entity’s standard health insurance plan.
(b) For purposes of this section, a “change of control affiliation or transaction” is any affiliation or transaction that will ultimately result in any change in effective control of a health service corporation, either as described by the applicant or as determined by the Commissioner.
(c) The obligation imposed under subsection (a) of this section shall exist until such time that the Commissioner finds that a subsequent change in ownership or governance of the affected Delaware health service corporation has negated the change of control affiliation or transaction that triggered the insurer’s obligation under subsection (a) of this section, or until such time that the Commissioner determines that the program has been effectively replaced by federal law, or until such time as the Commissioner determines that the program has become unviable due to insufficient enrollment or unsustainable financial losses. For purposes of this subsection, “unsustainable financial losses” shall require a demonstration of an actual medical loss ratio greater than 90% for each of 2 completed program years in a 3-program-year period.
(d) For purposes of this section, a “children’s health insurance buy-in program” is a state program that allows children who would otherwise be ineligible to participate in the State’s CHIP program by virtue of income to nevertheless participate in the program by paying a monthly premium.
(e) For purposes of this section, “CHIP program” means the federal Children’s Health Insurance Program.
(f) Future adjustments to premiums for any Delaware CHIP buy-in program created pursuant to this section shall be subject to Chapter 25 of this title, with premiums charged in other regions whose CHIP buy-in programs are administered by the insurer being a factor considered under § 2503(a)(3) of this title.
(g) Any program created pursuant to this section shall be actuarially separated from a health service corporation’s other insurance plans, and shall not affect the premiums approved by the Commissioner pursuant to Chapter 25 of this title for those other plans.
(h) The Insurance Commissioner shall provide a report to the Controller General regarding any rate-setting proceeding relating to any CHIP buy-in program created by this section. Such report shall include any request with respect to rates made by the relevant carrier, any analysis performed by the Insurance Commissioner, and the Insurance Commissioner’s ultimate decision with an explanation for that decision. This requirement shall also apply to the initial premium setting required by paragraph (a)(2) of this section. The report shall be furnished within 30 days of a final decision by the Commissioner with respect to any rate.78 Del. Laws, c. 58, § 1;
(a) Any approval by the Commissioner of a change of control of a health service corporation shall be governed under the provisions of Chapter 50 of this title and shall be subject to conditions that ensure compliance with this section. Chapter 50 of this title shall also govern the ongoing affiliation of a health service corporation following a change of control, but only to the extent that the provisions thereof are not inconsistent with any more stringent provision of this title or conditions imposed by the Commissioner in connection with approval of such change of control.
(b) If a health service corporation regulated under this chapter proposes to enter into a transaction in which it will become controlled by another entity, the Insurance Commissioner shall place conditions upon any approval of the change of control intended to preserve that amount, determined in accordance with Delaware law, that constitutes the surplus or reserves of the health service corporation. Such conditions shall include, without limitation, requiring:
(1) Review and approval by the Department of Insurance of any change in the certificate of incorporation of the health service corporation;
(2) Review and approval by the Department of Insurance of any individual expenditure or transfer of funds or coordinated series of expenditures or transfers of funds by the health service corporation in excess of $500,000 to the controlling entity or any affiliate of such controlling entity, which review and approval shall assess the commercial reasonableness of the proposed expenditure or transfer;
(3) A majority of the board of directors of the health service corporation to consist of persons not employed by the health service corporation or any of its affiliates who are residents of Delaware and have been so for at least 5 years prior to appointment; and
(4) Recognition of, and consent to, the ability of Insurance Commissioner to seek appropriate relief from the Court of Chancery or other court of appropriate jurisdiction to prevent the entity controlling the health service corporation from improperly using the assets of the health service corporation for the benefit of the controlling entity rather than the benefit of the health service corporation and its subscribers, or otherwise violating the terms of this section, Chapter 50 of this title, or any agreement between the health service corporation and the controlling entity or affiliate thereof.
(c) Any conditions placed on approval will be enforced by the Insurance Commissioner in accordance with applicable provisions of this title. Whenever approval must be obtained from the Commissioner for any activity described in this section, simultaneous notice thereof shall be provided to the Department of Justice.
(d) A health service corporation in dissolution shall, after the discharge of all obligations, distribute all remaining assets to the foundation created under § 2533 of Title 29.
(e) Terms used in this section shall have the same meaning as defined in Chapter 50 of this title.78 Del. Laws, c. 109, § 2;