24-A M.R.S. §4204-A: Surplus requirements

1. Initial minimum surplus. To qualify for authority as a health maintenance organization, an organization shall have an initial minimum surplus of $1,500,000.

2. Surplus maintained. Except as provided in this section, every health maintenance organization must maintain a minimum surplus equal to the greater of:

A. One million dollars;

B. Two percent of the first $150,000,000 of annual premium revenues as reported in the most recent annual financial statement filed with the superintendent by the health maintenance organization, plus 1% of annual premium in excess of $150,000,000;

C. An amount equal to the sum of 3 months' uncovered health care expenditures as reported in the most recent annual financial statement filed with the superintendent by the health maintenance organization;

D. An amount equal to 8% of the health maintenance organization's annual health care expenditures, except those paid on a capitated basis, as reported in the most recent annual financial statement filed with the superintendent by the health maintenance organization; or

E. An amount equal to the company action level risk-based capital as defined in chapter 79.

2-A. Additional surplus. A health maintenance organization that otherwise possesses surplus funds as required under this section shall also maintain surplus in a reasonable amount as determined by the superintendent in relation to indemnity risks assumed through the issuance of a point-of-service product, net of any applicable reinsurance.

3. Exceptions. A health maintenance organization licensed before the effective date of this section must maintain a minimum surplus of:

A. Forty percent of the amount required by subsection 2 until December 31, 1991;

B. Sixty percent of the amount required by subsection 2 until December 31, 1992;

C. Eighty percent of the amount required by subsection 2 until December 31, 1993; and

D. One hundred percent of the amount required by subsection 2 until December 31, 1994.

4. Subordinated debt. Any health maintenance organization that issues a subordinated debt instrument shall structure the debt as follows.

A. In determining surplus, debt may not be considered fully subordinated unless the subordination clause is in a form approved by the superintendent. Any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated.

B. Any debt incurred by a note that meets the requirements of this section, and is otherwise acceptable to the superintendent, may not be considered a liability and must be recorded as equity.