                                 CODE OF VIRGINIA

ESTABLISHMENT OF HEALTH MAINTENANCE ORGANIZATIONS (§ 38.2-4301)

A. No person shall establish or operate a health maintenance organization in the
Commonwealth without obtaining a license from the Commission. Any person,
including a foreign corporation, may apply to the Commission for a license to
establish and operate a health maintenance organization in compliance with this
chapter.

B. Each application for a license shall be verified by an officer or authorized
representative of the applicant, shall be in a form prescribed by the
Commission, and shall set forth or be accompanied by the following:

   1. A copy of any basic organizational document of the applicant including, but
   not limited to, the articles of incorporation, articles of association,
   partnership agreement, trust agreement, or other applicable documents, and all
   amendments to those documents;

   2. A copy of the bylaws, rules and regulations, or any similar document
   regulating the conduct of the internal affairs of the applicant;

   3. A list of the names, addresses, and official positions, and biographical
   information on forms acceptable to the Commission of each member of the
   governing body and any person with authority to manage or establish policy;
   and a full disclosure in the application of (i) any financial interest between
   such persons or any provider, organization or corporation owned or controlled
   by such person and the health maintenance organization and (ii) the extent and
   nature of the financial arrangements between such persons and the health
   maintenance organization;

   4. A disclosure of any person owning or having the right to acquire five
   percent or more of the voting securities or subordinated debt of the
   applicant;

   5. A copy of any contract made or to be made between any providers, sponsors,
   or organizers of the health maintenance organization, or persons listed in
   subdivision 3 of this subsection and the applicant;

   6. A copy of the evidence of coverage form to be issued to subscribers;

   7. A copy of any group contract form that is to be issued to employers,
   unions, trustees, or other organizations. All group contracts shall set forth
   the right of subscribers to convert their coverages to an individual contract
   issued by the health maintenance organization;

   8. Financial statements showing the applicant&#8217;s assets, liabilities, and
   sources of financial support and, if the applicant&#8217;s financial affairs
   are audited by independent certified public accountants, a copy of the
   applicant&#8217;s most recent certified financial statement unless the
   Commission directs that additional or more recent financial information is
   required for the proper administration of this chapter;

   9. A complete description of the health maintenance organization and its
   method of operation, including (i) the method of marketing the plan, (ii) a
   statement regarding the sources of working capital as well as any other
   sources of funding, and (iii) a description of any insurance, reinsurance, or
   alternative coverage arrangements proposed, including excess insurance or stop
   loss insurance;

   10. A description of the mechanism by which enrollees will be given an
   opportunity to participate in matters of policy and operation as provided in
   subsection B of &#xA7; 38.2-4304;

   11. A financial feasibility plan which includes, but is not limited to, (i)
   detailed enrollment projections, (ii) the methodology for determining premium
   rates to be charged during at least the first three years of operations and
   extending one year beyond the anticipated break-even point certified by an
   actuary, and (iii) a projection, along with material assumptions, of balance
   sheets, cash flow statements showing capital expenditures and purchase and
   sale of investments, income statements, and statements of anticipated covered
   and uncovered expenses on a quarterly basis for at least three years and
   extending one year beyond the anticipated break-even point; and

   12. Any other information the Commission may require to make the
   determinations required pursuant to &#xA7; 38.2-4302.

C. Notwithstanding any other provision of this title, no license shall be
required of a health maintenance organization duly licensed in a state
contiguous to the Commonwealth that contracts on a limited basis with health
care providers in the Commonwealth for the provision of health care services to
enrollees covered under a group contract neither delivered nor issued for
delivery in the Commonwealth, provided that:

   1. The number of Virginia residents receiving such health care services shall
   not exceed 500 enrollees of such health maintenance organization; and

   2. The contracts with such providers shall contain a hold harmless clause that
   is not less favorable in any respect to any enrollee that is a Virginia
   resident than the &#8220;hold harmless clause&#8221; set forth in subdivision
   C 9 of &#xA7; 38.2-5805.

HISTORY: 1980, c. 720, § 38.1-864; 1986, c. 562; 1998, c. 891; 2000, cc. 503,
753; 2004, c. 175.