45-06-13-04. Minimum net worth requirements.

Prior to the issuance of a certificate of authority, a provider-sponsored organization must have a minimum net worth amount of:

1. At least one million five hundred thousand dollars except as provided in subsection 2.

2. No less than one million dollars based on evidence from the organization's financial plan demonstrating to the department's satisfaction that the organization has available to it an administrative infrastructure that the department considers appropriate to reduce, control, or eliminate startup administrative costs. a. After the effective date of a provider-sponsored organization's certificate of authority, a provider-sponsored organization shall maintain a minimum net worth amount equal to the greater of: (1) One million dollars; (2) Two percent of annual premium revenues as reported on the most recent annual financial statement filed with the department for up to and including the first one hundred fifty million dollars of annual premiums and one percent of annual premium revenues on premiums in excess of one hundred fifty million dollars; (3) An amount equal to the sum of three months of uncovered health care expenditures as reported on the most recent financial statement filed with the department; or (4) Using the most recent annual financial statement filed with the department, an amount equal to the sum of: (a) Eight percent of annual health care expenditures paid on a noncapitated basis to nonaffiliated providers; (b) Four percent of annual health care expenditures paid on a capitated basis to nonaffiliated providers plus annual health care expenditures paid on a noncapitated basis to affiliated providers; and (c) Annual health care expenditures that are paid on a capitated basis to affiliated providers are not included in the calculation of the net worth requirement under subsection 1 and this paragraph. b. The minimum net worth amount shall be calculated as follows: (1) Cash requirement: (a) At the time of the application for a certificate of authority, the provider-sponsored organization shall maintain at least seven hundred fifty

thousand dollars of the minimum net worth amount in cash or cash equivalents.

1. (b) After the effective date of a provider-sponsored organization's certificate of authority, a provider-sponsored organization shall maintain the greater of seven hundred fifty thousand dollars or forty percent of the minimum net worth amount in cash or cash equivalents.
2. (2) Intangible assets. An organization may include intangible assets, the value of which is based on generally accepted accounting principles, in the minimum net worth amount calculation subject to the following limitations:
3. (a) At the time of application:
   1. [1] Up to twenty percent of the minimum net worth amount, provided at least one million dollars of the minimum net worth amount is met through cash or cash equivalents; or
   2. [2] Up to ten percent of the minimum net worth amount, if less than one million dollars of the minimum net worth is met through cash or cash equivalents, or if the department has used its discretion under this subsection.
4. (b) From the effective date of the provider-sponsored organization's certificate of authority:
   1. [1] Up to twenty percent of the minimum net worth amount if the greater of one million dollars or sixty-seven percent of the minimum net worth is met by cash or cash equivalents; or
   2. [2] Up to ten percent of the minimum net worth amount if the greater of one million dollars or sixty-seven percent of the minimum net worth amount is not met by cash or cash equivalents.
5. (3) Health care delivery assets. Subject to the other provisions of this section, a provider-sponsored organization may apply one hundred percent of the generally accepted accounting principles depreciated value of health care delivery assets to satisfy the minimum net worth amount.
6. (4) Other assets. A provider-sponsored organization may apply other assets not used in the delivery care provided that those assets are valued according to statutory accounting practices as defined by the department.
7. (5) Subordinated debts and subordinated liabilities. Fully subordinated debt and subordinated liabilities are excluded from the minimum net worth amount calculation.
8. (6) Deferred acquisition costs. Deferred acquisition costs are excluded from the calculation of the minimum net worth amount.

History: Effective August 1, 2000.

General Authority: NDCC 26.1-01-07.6

Law Implemented: NDCC 26.1-01-07.6