Mass. Gen. Laws ch. 176G, § 28 – Registration with commissioner

(a) Every health maintenance organization which may do business in the commonwealth and which is a member of a health maintenance organization holding company system, shall register with the commissioner. Notwithstanding the foregoing, a foreign health maintenance organization shall not be required to register with the commissioner if the foreign health maintenance organization is subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in subsection (a) to subsection (m), inclusive, subsection (q) and subsection (s). Any health maintenance organization which is subject to registration under this section shall register within 15 days after it becomes subject to registration, or 180 days after the effective date of this section, whichever is later, and annually thereafter for the previous calendar year, unless the commissioner for good cause shown extends the time for registration, and then within such extended time. The commissioner may require any foreign health maintenance organization authorized to do business in the commonwealth that is a member of a health maintenance organization holding company system and that is not subject to registration under this section to furnish a copy of the registration statement, the summary specified in subsection (c), or other information filed by such health maintenance organization with the insurance regulatory authority of the jurisdiction of its domicile.
(b) Every health maintenance organization subject to registration shall file the registration statement on a form prescribed by the commissioner, which shall contain the following current information:
1. (1) any material change to the information submitted pursuant to section 14;
2. (2) the identity and relationship of every member of the health maintenance organization holding company system;
3. (3) the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between such health maintenance organization and any affiliates:
(i) loans, other investments, or purchases, sales or exchanges of securities of any affiliates by the health maintenance organization or of the health maintenance organization by its affiliates;
(ii) purchases, sales or exchange of assets;
(iii) transactions not in the ordinary course of business;
(iv) guarantees or undertakings for the benefit of an affiliate which result in an actual or contingent exposure of the health maintenance organization's assets to liability, other than health maintenance contracts entered into in the ordinary course of the health maintenance organization's business;
(v) all management agreements, service contracts and cost-sharing arrangements; but, all records and information regarding contracts entered into with providers disclosed under this clause shall be confidential and open only to the inspection of the commissioner, his examiners and assistants. Nothing herein shall be construed to prohibit the required production of the records, and information contained in the reports of the health maintenance organization, before a court of the commonwealth or a master or auditor appointed by the court, in a criminal or civil proceeding, affecting the health maintenance organization, its officers, directors or employees;
(vi) reinsurance agreements;
(vii) dividends and other distributions to shareholders or members; and
(viii) consolidated tax allocation agreements;
(4) any pledge of the health maintenance organization's stock or assets, including stock or assets of any subsidiary or controlling affiliate, for a loan made to any member of a health maintenance organization holding company system; and
(5) other matters concerning transactions between the health maintenance organization and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner.
(c) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
(d) No information need be disclosed on the registration statement filed pursuant to subsection (b) if such information is not material for the purposes of this section. Unless the commissioner by rule, regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments or guarantees or any transaction involving one-half of one percent or less of a health maintenance organization's admitted assets as of the next preceding December 31 shall not be deemed material for purposes of this section.
(e) Subject to subsection (q), each domestic health maintenance organization shall report to the commissioner all dividends and other distributions to its shareholders or members within 5 business days following the declaration thereof, and at least 10 business days, commencing from the date of receipt by the commissioner, prior to the payment thereof. No domestic health maintenance organization shall pay any dividend or make any distribution to its shareholders or members from other than unassigned funds unless the commissioner shall have approved such dividend or distribution. For purposes of this section, the term ''unassigned funds'' shall have the same meaning as that term is used in the latest applicable form approved by the National Association of Insurance Commissioners.
(f) Any person within a health maintenance organization holding company system subject to registration shall be required to provide complete and accurate information to a health maintenance organization, where such information is reasonably necessary to enable the health maintenance organization to comply with sections 27 to 29, inclusive.
(g) The commissioner may require or allow 2 or more affiliated health maintenance organizations subject to registration hereunder to file a consolidated registration statement.
(h) The commissioner may allow a health maintenance organization that is authorized to do business in the commonwealth and that is part of a health maintenance organization holding company system to register on behalf of any affiliated health maintenance organization that is required to register under subsection (a) and to file all information and material required to be filed under this section.
(i) This section shall not apply to any health maintenance organization, information or transaction if and to the extent that the commissioner by rule, regulation or order shall exempt the same from the provisions of this section.
(j) Any person that has in the past filed a registration statement indicating affiliation with any other health maintenance organization or membership in a health maintenance organization holding company system may file with the commissioner a disclaimer of affiliation with any authorized health maintenance organization or such a disclaimer may be filed by such health maintenance organization or any member of a health maintenance organization holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such health maintenance organization as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the health maintenance organization shall not be relieved of any duty to register or report under this section which may arise out of the health maintenance organization's relationship with such person unless and until the commissioner allows such a disclaimer. The commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance.
(k) The failure to file a registration statement or any summary of the registration statement thereto required by this section within the time specified for such filing shall be a violation of this section.
(l) Transactions within a health maintenance organization holding company system to which a health maintenance organization subject to registration is a party shall be subject to the standards specified by the commissioner by rule, regulation or order, including the following:
1. (1) the terms shall be fair and reasonable;
2. (2) charges or fees for services performed shall be reasonable;
3. (3) expenses incurred and payment received shall be allocated to the health maintenance organization in conformity with section 10;
4. (4) the books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and
5. (5) the health maintenance organization's net worth following any dividends or distributions to affiliates shall be reasonable in relation to the health maintenance organization's outstanding liabilities, adequate to its financial needs, and otherwise in conformance with the provisions of this chapter.
(m) The following transactions involving a domestic health maintenance organization and any person in its holding company system may not be entered into unless the health maintenance organization has notified the commissioner in writing of its intention to enter into any such transaction at least 30 days prior thereto, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within such period.
1. (1) sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments provided such transactions are equal to or exceed the lesser of 3 per cent of the health maintenance organization's admitted assets or 25 per cent of net worth as of the next preceding December 31;
2. (2) loans or extensions of credit to any person who is not an affiliate, where the health maintenance organization makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the health maintenance organization making such loans or extensions of credit provided such transactions are equal to or exceed the lesser of 3 per cent of the health maintenance organization's admitted assets or 25 per cent of net worth as of the next preceding December 31;
3. (3) reinsurance agreements or modifications to the agreements in which the reinsurance premium or a change in the health maintenance organization's liabilities equals or exceeds the lesser of 3 per cent of the health maintenance organization's admitted assets or 25 per cent of net worth as of the next preceding December 31, including those agreements which may require as consideration the transfer of assets from a health maintenance organization to a non-affiliate, if an agreement or understanding exists between the health maintenance organization and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the health maintenance organization;
4. (4) all management agreements, service contracts, all cost-sharing arrangements which are not based on statutory accounting principles and all cost-sharing arrangements which would be reportable as transactions on the health maintenance organization's annual report under section 10. The commissioner may exempt from the requirements of this subsection any management agreement, service contract or cost-sharing arrangement; and
5. (5) any transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the health maintenance organization's policyholders or enrolled members.
  Notification shall be provided to the commissioner for transactions in clauses (1) to (5), inclusive, which increase or decrease the health maintenance organization's net worth as of the next preceding December 31 by 5 per cent or more. The notification shall accompany the next quarterly financial statement filing. Nothing in this section shall authorize or permit any transactions which would otherwise be contrary to law, or to relieve any health maintenance organization or other person of any obligation arising under chapter 180.
(n) A domestic health maintenance organization may not enter into transactions that are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the commissioner determines that such separate transactions were entered into over any 12–month period for the purpose of avoiding the statutory threshold amount, he may exercise his authority under subsection (b) of section 29.
(o) The commissioner, in reviewing transactions pursuant to subsections (1) and (m), shall consider whether the transactions comply with the standards set forth in subsection (1) and whether they may adversely affect the interests of policyholders or enrolled members.
(p) The commissioner shall be notified within 30 days of any investment of the domestic health maintenance organization in any one corporation if the total investment in such corporation by the health maintenance organization holding company system of which the health maintenance organization is a member exceeds ten percent of such corporation's voting securities or ownership interest.
(q) No domestic health maintenance organization shall pay any extraordinary dividend or make any other extraordinary distributions to its shareholders, members or officers until 30 days after the commissioner receives notice of the declaration thereof and has not within such period disapproved such payment, or the commissioner approves such payment. For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with other dividends or distributions made within the preceding 12 months exceeds the greater of (i) 10 per cent of such health maintenance organization's net worth as of the next preceding December 31, or (ii) the net income of the health maintenance organization for the 12–month period ending the next preceding December 31.
Notwithstanding any other general law to the contrary, a health maintenance organization may declare an extraordinary dividend or distribution which is conditional on the commissioner's approval thereof, and such a declaration shall confer no rights upon any person until the commissioner has approved the payment of such dividend or distribution or the commissioner has not disapproved such payment within the 30 day period set by this subsection.
(r)
1. (1) Notwithstanding the control of a domestic health maintenance organization by any person, the officers and directors of the health maintenance organization shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the health maintenance organization shall be managed so as to assure its separate operating identity consistent with this chapter, and other applicable law.
2. (2) Nothing herein shall preclude a domestic health maintenance organization from having or sharing a common management or cooperative or joint use of personnel, property or services with one or more other persons under arrangements meeting the standards of subsection (1).
(s) For purposes of sections 27 to 29, inclusive, in determining whether a health maintenance organization's net worth is reasonable in relation to the health maintenance organization's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:
1. (1) the size of the health maintenance organization as measured by its assets, capital and net worth, reserves, premium writings, insurance in force and other appropriate criteria;
2. (2) the nature and extent of the health maintenance organization's reinsurance program;
3. (3) the quality, diversification and liquidity of the health maintenance organization's investment portfolio;
4. (4) the recent past and projected future trend in the size of the health maintenance organization's investment portfolio and net worth;
5. (5) the net worth maintained by other comparable health maintenance organizations;
6. (6) the adequacy of the health maintenance organization's reserves;
7. (7) the quality and liquidity of investments of the health maintenance organization and any members of its holding company system. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of net worth whenever in his judgment such investment so warrants;
8. (8) the quality of the health maintenance organization's earnings and the extent to which the reported earnings include extraordinary items;
9. (9) the extent to which the insurer's business is diversified among the several lines of insurance; and
10. (10) the number and size of risks insured in each line of business.
(t)
1. (1) Subject to the limitation contained in this section and in addition to the powers conferred upon the commissioner by section 10 relating to the examination of health maintenance organizations, the commissioner shall also have the power to order any health maintenance organization approved under this chapter to produce such records, books, or other information papers in the possession of the health maintenance organization or its affiliates as are reasonably necessary to ascertain the financial condition of such health maintenance organization or to determine compliance with this chapter. In the event such health maintenance organization fails to comply with such order, the commissioner shall have the power to examine the health maintenance organization and such affiliates to obtain such information.
2. (2) The commissioner may retain, at the expense of the health maintenance organization, such attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff as shall be reasonably necessary to assist in the conduct of the examination under subparagraph (1). Any persons so retained shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
3. (3) Each registered health maintenance organization producing records, books and papers for said examination pursuant to said subparagraph (1) shall be liable for and shall pay the expense of such examination.
(u) Notwithstanding any other provisions of the General Laws, including clause Twenty-sixth of section 7 of chapter 4 and chapter 66, all information, documents and copies thereof obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to subsection (t) and all information reported pursuant to section 28, shall be given confidential treatment and shall be open only to the inspection of the commissioner, or examiners and assistants. Access to such confidential material may be granted by the commissioner to the National Association of Insurance Commissioners, to the insurance department of any other state or country or to law enforcement officials of the commonwealth or any other state or agency of the federal government at any time, so long as the agency or office receiving the information agrees in writing to hold such material confidential. Such confidential materials shall not be subject to subpoena and shall not be made public by the commissioner, the National Association of Insurance Commissioners, or any other person, without the prior written consent of the health maintenance organization to which it pertains unless the commissioner, after giving the health maintenance organization who would be affected thereby, notice and opportunity to be heard, determines that the interest of policyholders, members, shareholders, enrolled members or the public will be served by the publication thereof, in which event he may publish all or any part thereof in such manner as he may deem appropriate.
(v) The commissioner may, pursuant to chapter 30A, upon notice and opportunity for all interested parties to be heard, issue such rules, regulations and orders as shall be necessary to carry out sections 27 to 29, inclusive.