P.L.1999, c.0409 (S2094 SCS)

CHAPTER 409

An Act concerning organized delivery systems for health care services or benefits.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

C.17:48H-1 Definitions relative to organized delivery systems for health care services, benefits.

1. As used in this act:

"Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the organized delivery system.

"Capitation" means a fixed per member, per month, payment or percentage of premium payment for which the provider assumes the risk for the cost of contracted services without regard to the type, value or frequency of the services provided.

"Carrier" means an insurer authorized to transact the business of health insurance as defined at N.J.S.17B:17-4, a hospital service corporation authorized to transact business in accordance with P.L.1938, c.366 (C.17:48-1 et seq.), a medical service corporation authorized to transact business in accordance with P.L.1940, c.74 (C.17:48A-1 et seq.), a health service corporation authorized to transact business in accordance with P.L.1985, c.236 (C.17:48E-1 et seq.) or a health maintenance organization authorized to transact business pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).

"Certified organized delivery system" means an organized delivery system that is compensated on a basis which does not entail the assumption of financial risk by the organized delivery system and that is certified in accordance with this act.

"Comprehensive health care services" means the basic benefits provided under a health benefits plan, including medical and surgical services provided by licensed health care providers who may include, but are not limited to, family physicians, internists, cardiologists, psychiatrists, rheumatologists, dermatologists, orthopedists, obstetricians, gynecologists, neurologists, endocrinologists, radiologists, nephrologists, emergency services physicians, ophthalmologists, pediatricians, pathologists, general surgeons, osteopathic physicians, physical therapists and chiropractors. Basic benefits may also include inpatient or outpatient services rendered at a licensed hospital, covered services performed at an ambulatory surgical facility and ambulance services.

"Financial risk" means exposure to financial loss that is attributable to the liability of an organized delivery system for the payment of claims or other losses arising from covered benefits for treatment or services other than those performed directly by the person or organized delivery system liable for payment, including a loss sharing arrangement. A payment method wherein a provider accepts reimbursement in the form of a capitation payment for which it undertakes to provide health care services on a prepayment basis shall not be considered financial risk.

"Health benefits plan" means a benefits plan which pays or provides hospital and medical expense benefits for covered services, and is delivered or issued for delivery in this State by or through a carrier. Health benefits plan includes, but is not limited to, Medicare supplement coverage and risk contracts to the extent not otherwise prohibited by federal law. For the purposes of this act, health benefits plan shall not include the following plans, policies or contracts: accident only, credit, disability, long-term care, CHAMPUS supplement coverage, coverage arising out of a workers' compensation or similar law, automobile medical payment insurance, personal injury protection insurance issued pursuant to P.L.1972, c.70 (C.39:6A-1 et seq.) or hospital confinement indemnity coverage.

"Licensed organized delivery system" means an organized delivery system that is compensated on a basis which entails the assumption of financial risk by the organized delivery system and that is licensed in accordance with this act.

"Limited health care services" means a health service or benefit which a carrier has elected to subcontract for as a separate service, which may include, but shall not be limited to, substance abuse services, vision care services, mental health services, podiatric care services, chiropractic services or rehabilitation services. Limited health care services shall not include pharmaceutical services, case management services or employee assistance plan services.

"Organized delivery system" or "system" means an organization with defined governance that:

a. is organized for the purpose of and has the capability of contracting with a carrier to provide, or arrange to provide, under its own management substantially all or a substantial portion of the comprehensive health care services or benefits under the carrier's benefits plan on behalf of the carrier, which may or may not include the payment of hospital and ancillary benefits; or

b. is organized for the purpose of acting on behalf of a carrier to provide, or arrange to provide, limited health care services that the carrier elects to subcontract for as a separate category of benefits and services apart from its delivery of benefits under its comprehensive benefits plan, which limited services are provided on a separate contractual basis and under different terms and conditions than those governing the delivery of benefits and services under the carrier's comprehensive benefits plan.

An organized delivery system shall not include an entity otherwise authorized or licensed in this State to provide comprehensive or limited health care services on a prepayment or other basis in connection with a health benefits plan or a carrier.

"Provider" means a physician, health care professional, health care facility, or any other person who is licensed or otherwise authorized to provide health care services or other benefits in the state or jurisdiction in which they are furnished.

C.17:48H-2 Certification, licensure, required.

2. a. Beginning one year after the enactment of this act, no person, corporation, partnership, or other entity shall operate an organized delivery system in this State without obtaining certification or licensure pursuant to this act.

b. Any person, corporation, partnership, or other entity offering health care services to a carrier in a manner substantially provided for in this act shall be subject to the provisions of this act unless the entity is otherwise regulated under P.L.1973, c. 337 (C.26:2J-1 et seq.), Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes or P.L.1970, c.102 (C.18A:64G-1 et seq.).

C.17:48H-3 Application for certification.

3. a. An organized delivery system which is not subject to licensure requirements pursuant to this act shall submit an application for certification to the Commissioner of Health and Senior Services. The organized delivery system may continue to operate during the pendency of its application, but in no case longer than 12 months after the date of submission of the application to the Department of Health and Senior Services, unless the commissioner, by regulation, extends the 12-month limitation. In the event the application is denied, the applicant shall be treated as an organized delivery system whose certification has been revoked pursuant to sections 7 and 8 of this act.

Notwithstanding the obligations imposed by this act regarding certification requirements, nothing in this subsection shall operate to impair any contract in force on the effective date of this act, but this act shall apply to any contract renewed on or after the effective date of this act.

b. The certification shall be valid for a period of three years.

c. A certified organized delivery system shall not directly issue health benefits plans.

C.17:48H-4 Form, contents of application.

4. Application for certification to operate an organized delivery system shall be made to the Commissioner of Health and Senior Services on a form prescribed by the commissioner, shall be certified by an officer or authorized representative of the applicant and shall include the following:

a. A copy of the applicant's basic organizational documents. For purposes of this subsection, "basic organizational documents" means the articles of incorporation, articles of association, partnership agreement, management agreement, trust agreement, or other applicable documents as appropriate to the applicant's form of business entity, and all amendments to those documents;

b. A copy of the executed bylaws, rules and regulations, or similar documents, regulating the conduct of the applicant's internal affairs;

c. A list, in a form approved by the Commissioner of Health and Senior Services, of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including, but not limited to, the members of the board of directors, executive committee or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities of the applicant; in the case of a partnership or association, the names of the partners or members; and a statement of any criminal convictions or civil, enforcement or regulatory action, including actions relating to professional licenses, taken against any person who is a member of the board, the executive committee or other governing board or committee, the principal officers, or the persons who are responsible for the conduct of the affairs of the applicant;

d. A statement generally describing the applicant, its facilities, personnel, and the health care services to be offered by the organized delivery system;

e. A copy of the standard form of any provider agreement made or to be made between the applicant and any providers relative to the provision of health care services;

f. A copy of the form of any contract made or to be made between the applicant and any carrier for the provision of or arrangement to provide health care services, which contract shall contain provisions establishing the respective duties of the carrier and the applicant with respect to compliance with P.L.1997, c.192 (C.26:2S-1 et seq.);

g. With respect to each contract made or to be made between the applicant and any other person who will provide comprehensive or limited health care services:

(1) A list of the persons who are to provide the health care services, and the geographical area in which they are located and in which the services are to be performed;

(2) A list of any affiliate of the applicant which provides services to the applicant in this State and a description of any material transaction between the affiliate and the applicant;

(3) A description of the health care services or benefits to be offered or proposed to be offered by the applicant;

(4) A description of the means which will be utilized to assure the availability and accessibility of the health care services to enrollees or contract holders; and

(5) A description of the means by which the organized delivery system shall be compensated for each contract entered into with a carrier; and

h. A list of all administrative, civil or criminal actions and proceedings to which the applicant, or any of its affiliates, or persons who are responsible for the conduct of the affairs of the applicant or affiliate, have been subject and the resolution of those actions and proceedings. If a license, certificate or other authority to operate has been refused, suspended or revoked by any jurisdiction, the applicant shall provide a copy of any orders, proceedings and determinations relating thereto.

In addition to the information required pursuant to this section, the Commissioner of Health and Senior Services or the Commissioner of Banking and Insurance may establish additional reporting requirements or make detailed reporting requirements for any class of certified organized delivery system.

C.17:48H-5 Review of application.

5. Following receipt of an application for certification, the Commissioner of Health and Senior Services shall review it in consultation with the Commissioner of Banking and Insurance and notify the applicant of any deficiencies contained therein.

a. The Commissioner of Health and Senior Services shall issue a certification to an organized delivery system if the commissioner finds that the system meets the standards provided for in this act, including, but not limited to:

(1) All of the material required by section 4 of this act has been filed;

(2) The persons responsible for conducting the applicant's affairs are competent, trustworthy and possess good reputations, and have had appropriate experience, training and education;

(3) The persons who are to perform the health care services are properly qualified;

(4) The organized delivery system has demonstrated the ability to assure that health care services will be provided in a manner which will assure the availability and accessibility of the services;

(5) The standard forms of provider agreements to be used by the organized delivery system are acceptable; and

(6) The organized delivery system's contracts to provide services do not entail or will not result in the assumption of financial risk by the system.

b. The commissioner may deny an application for certification if the applicant fails to meet any of the standards provided in this act or on any other reasonable grounds. If certification is denied, the commissioner shall notify the applicant and shall set forth the reasons for the denial in writing. The applicant may request a hearing by notice to the commissioner within 30 days of receiving the notice of denial. Upon such denial, the applicant shall submit to the commissioner a plan for bringing the organized delivery system into compliance or providing for the closing down of its business.

C.17:48H-6 Notice of change, modification.

6. a. A certified organized delivery system, unless otherwise provided for in this act, shall not materially modify any matter or document furnished to the Commissioner of Health and Senior Services pursuant to section 4 of this act unless the organized delivery system files with the commissioner, at least 60 days prior to use or adoption of the change, a notice of the change or modification, together with that information required by the commissioner to explain the change or modification. If the commissioner fails to affirmatively approve or disapprove the change or modification within 60 days of submission of the notice, the notice of modification shall be deemed approved. The commissioner may extend the 60-day review period for not more than 30 additional days by giving written notice of the extension before the expiration of the 60-day period. If a change or modification is disapproved, the commissioner shall notify the system in writing and specify the reason for the disapproval.

b. Prior to entering into any contract with a carrier, a certified organized delivery system shall file with the commissioner, for the commissioner's approval, a copy of that contract. The filing shall be made no later than 60 days prior to the date that the contract is intended to be in effect. If the contract is not disapproved prior to the effective date by the commissioner, the contract shall be deemed approved.

C.17:48H-7 Suspension, revocation of certification, grounds.

7. The Commissioner of Health and Senior Services may suspend or revoke a certification issued to an organized delivery system pursuant to this act upon the commissioner's determination that:

a. The certified organized delivery system is operating in contravention of its basic organizational documents;

b. The certified organized delivery system is unable to fulfill its obligations to the carriers with whom it contracts;

c. The continued operation of the certified organized delivery system would be hazardous to the health and welfare of the enrollees or contract holders to whom it is obligated to provide health care services or detrimental to a carrier with whom it has contracted to provide the services;

d. The certified organized delivery system is unable to maintain the standards as set forth by the commissioner by regulation;

e. The certified organized delivery system has failed, as provided by the contract, to comply with the provisions of P.L.1997, c.192 (C.26:2S-1 et seq.);

f. The certified organized delivery system has failed to provide the health care services for which it has been certified or has provided health care services which are in contravention of the contract or contracts filed with the commissioner;

g. The certified organized delivery system has otherwise failed to comply with this act or with other applicable law; or

h. There are other reasonable grounds that warrant suspension or revocation.

C.17:48H-8 Notification of grounds for suspension, revocation of certification.

8. a. If the Commissioner of Health and Senior Services has cause to believe that grounds exist for the suspension or revocation of the certification issued to an organized delivery system, the commissioner shall notify the system, in writing, specifically stating the grounds for suspension or revocation and fixing a time for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). If the certification is revoked, the organized delivery system shall submit a plan to the commissioner within 15 days of the revocation, for the winding up of its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of its business. The commissioner may, by written order, permit such further operation of the organized delivery system as the commissioner finds to be in the best interest of individuals receiving health care services from the system.

b. The commissioner shall notify all carriers with contracts with the system that are on file with the Department of Health and Senior Services of the proceedings.

C.17:48H-9 Fees.

9. A certified organized delivery system shall pay to the Commissioner of Health and Senior Services those application and examination fees as are established by the commissioner by regulation.

C.17:48H-10 Civil administrative penalty.

10. The Commissioner of Health and Senior Services may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $10,000 for each day that a certified organized delivery system is in violation of this act. Penalties imposed by the commissioner pursuant to this section may be in lieu of, or in addition to, suspension or revocation of a certification pursuant to this act. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

C.17:48H-11 Application for licensure.

11. a. An organized delivery system which receives compensation on a basis that entails the assumption of financial risk shall submit an application for licensure to the Commissioner of Banking and Insurance. The organized delivery system may continue to operate during the pendency of its application, but in no case longer than 12 months after the date of submission of the application to the Department of Banking and Insurance, unless the commissioner, by regulation, extends the 12-month limitation. In the event the application is denied, the applicant shall be treated as an organized delivery system whose license has been revoked pursuant to sections 23 and 24 of this act.

Notwithstanding the obligations imposed by this act regarding licensure requirements, nothing in this subsection shall operate to impair any contract in force on the effective date of this act, but this act shall apply to any contract renewed on or after the effective date of this act.

b. An organized delivery system which receives compensation on a basis that entails the assumption of financial risk, but meets the criteria set forth in this subsection, may apply to the commissioner for an exemption from the licensure requirements of this act based on the system's current contractual arrangements.

The commissioner may grant the exemption for such period of time that the commissioner determines that the financial risk of the organized delivery system is de minimis because the organized delivery system's exposure to financial loss is limited in amount or likelihood to the degree that it reasonably will not prevent the system from satisfying the liabilities imposed under the terms of its contracts.

The commissioner may revoke the organized delivery system's exemption from licensure, after notice and an opportunity to be heard, if the commissioner determines that the system's contracts no longer meet the requirements for exemption set forth in this subsection. Upon revocation of the exemption, the system shall be required to obtain licensure from the department within 90 days.

c. An organized delivery system that is granted an exemption from licensure shall apply to and obtain certification as an organized delivery system from the Department of Health and Senior Services pursuant to the provisions of this act.

d. A licensed organized delivery system shall not directly issue health benefits plans.

C.17:48H-12 Form, contents of application.

12. Application for a license to operate an organized delivery system shall be made to the Commissioner of Banking and Insurance and the Commissioner of Health and Senior Services on a form prescribed by the commissioners, shall be certified by an officer or authorized representative of the applicant, and shall include the following:

b. A copy of the executed bylaws, rules and regulations, or similar documents, regulating the conduct of the applicant's internal affairs;

c. A list, in a form approved by the Commissioner of Banking and Insurance, of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including, but not limited to, the members of the board of directors, executive committee or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities of the applicant; in the case of a partnership or association, the names of the partners or members; each person who has loaned funds to the applicant for the operation of its business; and a statement of any criminal convictions or civil, enforcement or regulatory action, including actions relating to professional licenses, taken against any person who is a member of the board, the executive committee or other governing board or committee, or the principal officers, or the persons who are responsible for the conduct of the affairs of the applicant;

d. A statement generally describing the applicant, its facilities, personnel, and the health care services to be offered by the organized delivery system;

e. A copy of the standard form of any provider agreement made or to be made between the applicant and any providers relative to the provision of health care services;

g. A copy of the applicant's most recent financial statements audited by an independent certified public accountant. If the financial affairs of the applicant's parent company are audited by an independent certified public accountant, but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant's parent company, audited by an independent certified public accountant, shall be submitted. A consolidated financial statement of the applicant and its parent company shall satisfy this requirement unless the Commissioner of Banking and Insurance determines that additional or more recent financial information is required for the proper administration of this act;

h. A copy of the applicant's financial plan, including a three-year projection of anticipated operating results, a statement of the sources of working capital and any other sources of funding and provisions for contingencies;

i. With respect to each contract made or to be made between the applicant and any other person who will provide comprehensive or limited health care services:

(1) A list of the persons who are to provide the health care services, and the geographical area in which they are located and in which the services are to be performed;

(2) A list of any affiliate of the applicant which provides services to the applicant in this State and a description of any material transaction between the affiliate and the applicant;

(3) A description of the health care services or benefits to be offered or proposed to be offered;

(4) A description of the means which will be utilized to assure the availability and accessibility of the health care services to enrollees or contract holders;

(5) A plan, in the event of the insolvency of the organized delivery system, for continuation of the health care services to be provided for under the contract; and

(6) A description of the means by which the organized delivery system shall be compensated for each contract entered into with a carrier;

j. A power of attorney, duly executed by the applicant, if not domiciled in this State, appointing the Commissioner of Banking and Insurance and the commissioner's successors in office as the true and lawful attorney of the applicant in and for this State upon whom all lawful process in any legal action or proceeding against the organized delivery system in a cause of action arising in this State may be served;

k. A list of all administrative, civil or criminal actions and proceedings to which the applicant, or any of its affiliates, or persons who are responsible for the conduct of the affairs of the applicant or affiliate, have been subject and the resolution of those actions and proceedings. If a license, certificate or other authority to operate has been refused, suspended or revoked by any jurisdiction, the applicant shall provide a copy of any orders, proceedings and determinations relating thereto; and

l. Other information as may be required by the Commissioner of Banking and Insurance or the Commissioner of Health and Senior Services.

C.17:48H-13 Review of application.

13. Following receipt of an application for licensure, the Commissioner of Banking and Insurance shall review it in consultation with the Commissioner of Health and Senior Services and notify the applicant of any deficiencies contained therein.

a. The Commissioner of Banking and Insurance shall issue a license to an organized delivery system if the commissioner finds that the system meets the standards provided for in this act, including, but not limited to:

(1) All of the material required by section 12 of this act has been filed;

(2) The persons responsible for conducting the applicant's affairs are competent, trustworthy and possess good reputations, and have had appropriate experience, training and education;

(3) The persons who are to perform the health care services are properly qualified;

(4) The organized delivery system has demonstrated the ability to assure that health care services will be provided in a manner which will assure the availability and accessibility of the services;

(5) The standard forms of provider agreements to be used by the organized delivery system are acceptable;

(6) The applicant is financially sound and may reasonably be expected to meet its obligations to enrollees, contract holders and carriers. In making this determination, the commissioner shall consider:

(a) The financial soundness of the applicant's compensation arrangements for the provision of health care services;

(b) The adequacy of working capital, other sources of funding and provisions for contingencies; and

(c) Whether any deposit of cash or securities, or any other evidence of financial protection submitted, meets the requirements set forth in this act or by the commissioner by regulation;

(7) Any deficiencies identified by the commissioner have been corrected; and

(8) Any other factors determined by the commissioner to be relevant have been addressed to the satisfaction of the commissioner.

b. The Commissioner of Banking and Insurance shall refer all standard forms of provider agreements, quality assurance programs and utilization management programs to be used by the organized delivery system to the Commissioner of Health and Senior Services for review. The Commissioner of Banking and Insurance shall consult with the Commissioner of Health and Senior Services regarding provider agreements, quality assurance programs and utilization management programs in determining whether the applicant for a license:

(1) Has demonstrated the potential ability to assure that health care services will be provided in a manner that will assure the availability and accessibility of the services;

(2) Has adequate arrangements for an ongoing quality assurance program, where applicable;

(3) Has established acceptable forms for provider agreements to be used by the system; and

(4) Has demonstrated that the persons who are to perform the health care services are properly qualified.

c. The Commissioner of Banking and Insurance, in consultation with the Commissioner of Health and Senior Services, may deny an application for a license if the applicant fails to meet any of the standards provided in this act or on any other reasonable grounds. If the license is denied, the Commissioner of Banking and Insurance shall notify the applicant and shall set forth the reasons for the denial in writing. The applicant may request a hearing by notice to the commissioner within 30 days of receiving the notice of denial. Upon such denial, the applicant shall submit to the commissioner a plan for bringing the organized delivery system into compliance or providing for the closing down of its business.

C.17:48H-14 Notice of change, modification.

14. a. A licensed organized delivery system, unless otherwise provided in this act, shall not materially modify any matter or document furnished pursuant to section 12 of this act, unless the system files with the Commissioner of Banking and Insurance, at least 60 days prior to use or adoption of the change, a notice of the change or modification, together with that information required by the commissioner to explain the change or modification. If the commissioner fails to affirmatively approve or disapprove the change or modification within 60 days of submission of the notice, the notice of modification shall be deemed approved. The commissioner may extend the 60-day review period for not more than 30 additional days by giving written notice of the extension before the expiration of the 60-day period. If a change or modification is disapproved, the commissioner shall notify the system in writing and specify the reason for the disapproval.

b. Prior to entering into any contract with a carrier, a licensed organized delivery system shall file with the commissioner, for the commissioner's approval, a copy of the contract. The filing shall be made no later than 60 days prior to the date that the contract is intended to be in effect. The commissioner shall either approve the contract or state in writing the commissioner's reasons for disapproval within 60 days of receipt of the filing.

C.17:48H-15 Services provided by licensed organized delivery system.

15. A licensed organized delivery system may:

a. Contract with an insurer licensed in this State for the provision of indemnity coverage against the cost of services provided by the system or other obligations of the system, either on an individual or aggregate attachment basis; and

b. In addition to comprehensive or limited services, as applicable, provided by the system for enrollees or contract holders, provide:

(1) Additional services as approved by the Commissioner of Banking and Insurance, in consultation with the Commissioner of Health and Senior Services;

(2) Indemnity benefits covering urgent care or emergency services;

(3) Coverage for services from providers, other than participating providers, in accordance with the terms of the contract; and

(4) Any other function provided by law, in the system's organizational documents or in the license.

C.17:48H-16 Treatment of organized delivery system as domestic insurer.

16. a. A licensed organized delivery system which is organized under the laws of this State shall be treated as a domestic insurer for the purposes of P.L.1970, c.22 (C.17:27A-1 et seq.) and P.L.1992, c.65 (C.17B:32-31 et seq.).

b. A licensed organized delivery system shall be subject to the provisions of chapter 30 of Title 17B of the New Jersey Statutes.

c. The capital, surplus and other funds of a licensed organized delivery system shall be invested in accordance with the provisions of chapter 20 of Title 17B of the New Jersey Statutes and guidelines established by the Commissioner of Banking and Insurance by regulation.

C.17:48H-17 Examination of licensed organized delivery system.

17. The Commissioner of Banking and Insurance may conduct an examination of a licensed organized delivery system as often as the commissioner deems necessary in order to protect the interests of providers, contract holders, enrollees, and the residents of this State. A licensed organized delivery system shall make its relevant books and records available for examination by the commissioner, and retain its records in accordance with a schedule established by the commissioner by regulation. The reasonable expenses of the examination shall be borne by the licensed organized delivery system being examined. In lieu of such examination, the commissioner may accept the report of an examination made by the commissioner of another state.

C.17:48H-18 Contracts with providers, mandatory terms.

18. All licensed organized delivery system contracts with providers shall contain the following terms and conditions:

a. In the event that the organized delivery system fails to pay or provide for comprehensive or limited health care services for any reason whatsoever, including, but not limited to, insolvency or breach of contract, neither the contract holder nor the covered person shall be liable to the provider for any sums owed to the provider under the contract.

b. No provider, or agent, trustee or assignee thereof may maintain an action at law or attempt to collect from the contract holder or covered person sums owed to the provider by the licensed organized delivery system, except that this subsection shall not be construed to prohibit collection of uncovered charges consented to or lawfully owed to providers by a contract holder or covered person.

C.17:48H-19 Minimum net worth.

19. a. A licensed organized delivery system shall, at all times, have and maintain a minimum net worth, determined on a statutory accounting basis, in an amount established by the Commissioner of Banking and Insurance by regulation, which amount may vary in accordance with the size of the system, the services provided by the system, and the financial liabilities of the system.

b. With respect to any amounts that may be required by the commissioner pursuant to subsection a. of this section, the commissioner shall take into account any limitation on the organized delivery system's exposure to financial loss that results from a contract with a carrier that provides that any liabilities of the system may be satisfied by means of reductions or offsets against monies due to the system from the carrier, which reductions or offsets will not adversely affect the system's ability to meet its contractual obligations.

C.17:48H-20 Deposit of cash, securities.

20. a. A licensed organized delivery system shall deposit with the Commissioner of Banking and Insurance, or with an entity or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that is acceptable to the commissioner in an amount established by the commissioner, by regulation, which amount shall be adjusted annually by the commissioner in accordance with changes in the Consumer Price Index. The deposit shall be deemed an admitted asset of the system in the determination of net worth.

b. All income from deposits shall be an asset of the licensed organized delivery system. A licensed organized delivery system may withdraw a deposit or any part thereof after making a substitute deposit of equal amount and value, except that a security may not be substituted unless it has been approved by the commissioner.

c. If a licensed organized delivery system is placed in rehabilitation or liquidation, the deposit shall be treated as an asset subject to the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.).

C.17:48H-21. Maintenance of fidelity bond.

21. A licensed organized delivery system shall maintain in force a fidelity bond in its own name on its officers and employees, in an amount established by the Commissioner of Banking and Insurance by regulation.

C.17:48H-22. Annual report.

22. A licensed organized delivery system shall file an annual report with the Commissioner of Banking and Insurance, on or before March 1 of each year, attested to by at least two principal officers, which covers the preceding calendar year. The report shall be on a form prescribed by the commissioner and shall include:

a. A financial statement of the licensed organized delivery system, including its balance sheet, income statement and statement of changes in financial position for the preceding year, certified by an independent public accountant, or a consolidated audited financial statement of its parent company certified by an independent certified public accountant, attached to which shall be consolidating financial statements of the system;

b. At the discretion of the commissioner, a statement by a qualified actuary setting forth the actuary's opinion as to the adequacy of reserves; and

c. Any other information relating to the performance of the licensed organized delivery system as may be required by the commissioner.

The commissioner may assess a civil administrative penalty of up to $100 per day for each day a required report is late. The commissioner may require the submission of additional reports from time to time, as the commissioner deems necessary. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

C.17:48H-23 Suspension, revocation of license, grounds.

23. The Commissioner of Banking and Insurance may suspend or revoke the license issued to an organized delivery system pursuant to this act upon the commissioner's determination that:

a. The licensed organized delivery system is operating in contravention of its basic organizational documents;

b. The licensed organized delivery system is unable to fulfill its obligations to the carriers with whom it contracts;

c. The net worth of the licensed organized delivery system is less than that required by this act, or the licensed organized delivery system has failed to correct any deficiency in its net worth as required by the commissioner;

d. The continued operation of the licensed organized delivery system would be hazardous to the health and welfare of the enrollees or contract holders with whom it has contracted to provide health care services or detrimental to a carrier with whom it has contracted to provide the services;

e. The licensed organized delivery system has failed to file any report required pursuant to this act;

f. The licensed organized delivery system has failed to provide the health care services for which it has been licensed or has provided health care services which are in contravention of the contract or contracts filed with the commissioner;

g. The licensed organized delivery system is unable to maintain the standards set forth by regulation;

h. The licensed organized delivery system has failed, as provided by the contract, to comply with the provisions of P.L.1997, c.192 (C.26:2S-1 et seq.);

i. The licensed organized delivery system has otherwise failed to comply with this act or with other applicable law; or

j. There are other reasonable grounds that warrant suspension or revocation.

C.17:48H-24 Notification of grounds for suspension, revocation of license.

24. a. If the Commissioner of Banking and Insurance has cause to believe that grounds exist for the suspension or revocation of a license, the commissioner shall notify the licensed organized delivery system, in writing, specifically stating the grounds for suspension or revocation and fixing a time for a hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). If a license is revoked, the licensed organized delivery system shall submit a plan to the commissioner within 15 days of the revocation, for the winding up of its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of its business. The commissioner may, by written order, permit such further operation of the system as the commissioner finds to be in the best interest of individuals receiving health care services from the system.

b. The commissioner shall notify all carriers with contracts with the system that are on file with the Department of Banking and Insurance of the proceedings.

C.17:48H-25 Plan for insolvency, insurance.

25. The Commissioner of Banking and Insurance may require, in connection with the plan for insolvency required pursuant to paragraph (5) of subsection i. of section 12 of this act, that a licensed organized delivery system maintain insurance to cover the expenses to be paid for continued benefits following a determination of insolvency, or make other arrangements to ensure that benefits are continued for the period determined in the insolvency plan.

C.17:48H-26 Rehabilitation, liquidation, conservation of licensed organized delivery system.

26. Any rehabilitation, liquidation or conservation of a licensed organized delivery system shall be subject to the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.) and shall be conducted under the supervision of the Commissioner of Banking and Insurance; except that the commissioner shall have the authority to regulate any licensed organized delivery system doing business in this State as a domestic insurer. The commissioner may apply for an order directing the commissioner to rehabilitate, liquidate, reorganize or conserve a licensed organized delivery system upon any one or more applicable grounds as stated for insurers in P.L.1992, c.65 (C.17B:32-31 et seq.), or any other provisions of Title 17B of the New Jersey Statutes, or when, in the commissioner's opinion, the licensed organized delivery system fails to satisfy the requirements for the issuance of a license relating to solvency or the requirements for solvency protection as set forth in this act.

C.17:48H-27 Licensed organized delivery system exempt from guaranty association act, C.17B:32A-1 et seq.

27. A licensed organized delivery system shall not be subject to the "New Jersey Life and Health Insurance Guaranty Association Act," P.L.1991, c.208 (C.17B:32A-1 et seq.), and the New Jersey Life and Health Insurance Guaranty Association established pursuant to that act shall not provide protection to any individuals entitled to receive health care services from a licensed organized delivery system.

C.17:48H-28 Fees.

28. A licensed organized delivery system shall pay to the Commissioner of Banking and Insurance those application and, examination fees as are established by the commissioner by regulation in the same manner as established for insurers and health maintenance organizations licensed or authorized to do business in this State.

C.17:48H-29 Civil administrative penalty.

29. The Commissioner of Banking and Insurance may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $10,000 for each day that a licensed organized delivery system is in violation of this act. Penalties imposed by the commissioner pursuant to this section may be in lieu of, or in addition to, suspension or revocation of a license pursuant to this act. A penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

C.17:48H-30 Confidentiality of data, information; exceptions.

30. Any data or information relating to the diagnosis, treatment or health of an enrollee, prospective enrollee or contract holder obtained by a certified or licensed organized delivery system from the carrier, contract holder, enrollee, prospective enrollee or any provider shall be confidential and shall not be disclosed to any person except:

a. To the extent that it may be necessary to carry out the purposes of this act;

b. Upon the express consent of the enrollee, prospective enrollee or contract holder;

c. Pursuant to statute or court order for the production of evidence or the discovery thereof; or

d. In the event of a claim or litigation between an enrollee, a prospective enrollee or a contract holder and the organized delivery system wherein that data or information is relevant. An organized delivery system shall be entitled to claim any statutory privilege against disclosure which the provider who furnished the information to the system is entitled to claim.

C.17:48H-31 Notification ofchange of means for receipt of compensation.

31. Any certified organized delivery system which intends to change the means by which it receives compensation so that it will be compensated on a basis that entails the assumption of financial risk shall notify the Commissioner of Health and Senior Services and make application for licensure to the Commissioner of Banking and Insurance pursuant to this act.

C.17:48H-32 Rules, regulations.

32. The Commissioners of Banking and Insurance and Health and Senior Services shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the purposes of this act.

The commissioners shall adopt the rules and regulations within 180 days of the date of enactment of this act.

C.17:48H-33 Applicability of health care quality act.

33. An organized delivery system which is either certified by the Department of Health and Senior Services or licensed by the Department of Banking and Insurance shall be subject to the "Health Care Quality Act," P.L.1997, c.192 (C.26:2S-1 et seq.) and the regulations promulgated thereunder.

C.17:48H-34 Provision of data, reports.

34. a. A carrier that contracts with a licensed organized delivery system shall provide that system with any data or reports required by their contractual arrangement on a timely basis, in accordance with the terms of the contract.

b. If a carrier fails to provide a report required pursuant to subsection a. of this section, the Commissioner of Banking and Insurance may, upon notice and hearing, assess a civil administrative penalty in an amount not less than $250 nor more than $1,000 for each day the carrier is in violation of this section. The penalty may be recovered in a summary proceeding pursuant to "The Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

C.17:48H-35 Documents deemed proprietary, confidential.

35. Any documents provided by a organized delivery system to the Department of Banking and Insurance or Health and Senior Services pursuant to this act that are deemed by the Commissioner of Banking and Insurance or the Commissioner of Health and Senior Services to be proprietary, shall be confidential and shall not be considered public documents pursuant to P.L.1963, c.73 (C.47:1A-2).

36. This act shall take effect on the 180th day following enactment, but the Commissioners of Banking and Insurance and Health and Senior Services may take such anticipatory administrative action in advance of the effective date as shall be necessary for the implementation of this act.

Approved January 18, 2000.