PURPOSE: This regulation describes the method of establishment and computation of reserves for health services corporations. This regulation is adopted pursuant to section 354.120, RSMo 1986 and to implement section 354.080, RSMo 1986.

1. (1) Reserves Computed.

   1. (A) Any corporation subject to Chapter 354, RSMo which has been in existence more than twelve (12) months must file all financial statements necessary to document its dues income and benefit payments and administrative expenses for the preceding fiscal year with its application for a certificate of authority.
   2. (B) Any such corporation with a corporate history of less than twelve (12) months must file this information for the period of its existence with a projection to cover the remainder of a twelve (12)-month period from its inception. If the corporation has been in existence less than three (3) months, a six (6)- month projection will be acceptable for these purposes.
   3. (C) The information submitted should also describe any factors which would allow proration of the amounts payable under the terms of the health service contracts or any other factors having a bearing upon the reserve computation.

2. (2) Factors to be Considered in Reducing this Reserve Requirement.

   1. (A) The primary consideration in any reductions of reserves must be the security for payment of the benefits stated in the membership contract. Any factors which would provide security for payment comparable to the reserve shall be considered.
   2. (B) The director will consider the fact that a newly formed corporation might increase its membership rapidly for a short initial period tending to over-inflate apparent reserve requirements. A membership increasing steadily could be a factor in support of the reduction or suspension of the reserve requirement.
   3. (C) Other factors to be considered include any long-term prepayment of dues or longterm membership contracts; contractual waiver by providers of health services of certain claims against the health services corporation; the size of the membership of such a corporation; and any provisions to increase dues on large group contracts over a period of time.

3. (3) Reduction of Reserves.

   1. (A) Any health service corporation subject to Chapter 354, RSMo may petition the director of insurance to reduce or suspend the financial reserves required by section 354.080, RSMo. The director shall give ten

4. (10) days’ notice of the hearing to the petitioning corporation and hear the matter pursuant to the provisions of 20 CSR 800-1.010.

   1. (B) The director shall issue an order subsequent to the hearing based upon the best interests of the members and beneficiaries of the petitioning corporation. The order must state the factual bases and any other factors considered in permitting or refusing any decrease or suspension of reserve requirements.

AUTHORITY: sections 354.080 and 354.120, RSMo 1986.* This rule was previously filed as 4 CSR 190-15.010. Original rule filed Sept. 19, 1974, effective Sept. 29, 1974.

*Original authority: 354.080, RSMo 1973 and 354.120, RSMo 1973.