Issuance of certificate of authority.

(a)(1) Upon receipt of an application for issuance of a certificate of authority, the commissioner shall forthwith transmit copies of such application and accompanying documents to the State Health Officer.

(2) The State Health Officer shall determine whether the applicant for a certificate of authority, with respect to health care services to be furnished:

a. Has demonstrated the willingness and potential ability to assure that such health care services will be provided in a manner to assure both availability and accessibility of adequate personnel and facilities and in a manner enhancing availability, accessibility, and continuity of service;

b. Has arrangements, established in accordance with the regulations promulgated by the State Health Officer, for an on-going quality assurance program concerning health care processes and outcomes; and

c. Has a procedure, established in accordance with regulations of the State Health Officer, to develop, compile, evaluate, and report statistics relating to the cost of its operations, the pattern of utilization of its services, the availability and accessibility of its services, and such other matters as may be reasonably required by the State Health Officer.

d. Has demonstrated that the health maintenance organization will effectively provide, or arrange for, the provision of health care services. Such arrangements shall be established in accordance with rules promulgated by the State Health Officer for an on-going quality assurance/utilization review program concerning health care processes and outcomes.

e. Has demonstrated that a copy of the form or group contract which is to be issued to employers, unions, trustees, or other organizations or individuals is in compliance with rules promulgated by the State Health Officer; and

f. Has demonstrated that nothing in the proposed method of operation, as shown by the information submitted pursuant to Section 27-21A-2, or by independent investigation is contrary to the public interest.

(3) Within 90 days of receipt of the application for issuance of a certificate of authority, the State Health Officer shall certify to the commissioner that the proposed health maintenance organization meets the requirements of subdivision (a)(2) or notify the commissioner that the health maintenance organization does not meet such requirements and specify in what respects it is deficient.

(b) After receipt of the certification from the State Health Officer, the commissioner shall issue or deny a certificate of authority to any person filing an application pursuant to Section 27-21A-2. Issuance of a certificate of authority shall be granted upon payment of the application fee prescribed in Section 27-21A-21 if the commissioner is satisfied that the following conditions are met:

(1) The ownership, control, or management of the entity is competent and trustworthy and possesses managerial experience that would make the proposed health maintenance organization beneficial to the subscribers. The commissioner shall not grant or continue to license the business of a health maintenance organization in this state at any time the commissioner has good reason to believe that the ownership, control, or management of the organization is under the control of any person whose business operations are, or have been marked by business practices or conduct that is to the detriment of the public, stockholders, investors, or creditors; by the improper manipulation of assets or of accounts; or by bad faith;

(2) The State Health Officer certifies, in accordance with subdivision (a)(3), that the health maintenance organization's proposed plan of operation meets the requirements of subdivision (a)(2);

(3) Except to the extent of contractually required provisions for copayments, the health maintenance organization will effectively provide or arrange for the provision of basic health care services through insurance, written contractual agreements, or other existing arrangements; and

(4) The contracts for basic health care services contain a provision that providers shall hold the enrollee harmless for the payment of the cost of health care services in any event including, but not limited to, nonpayment of the health maintenance organization, or the health maintenance organization's insolvency. This provision shall not prohibit collection of supplemental charges or copayments on the health maintenance organization's behalf made in accordance with terms of any applicable agreement between the health maintenance organization and the enrollee.

(5) The health maintenance organization is financially responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees. In making this determination, the commissioner shall consider:

a. The financial soundness of the applicant and its arrangements for health care services and the schedule of charges used in connection therewith;

b. The adequacy of working capital;

c. Any agreement with an insurer or other organization for insuring the payment of the cost of health care services or the provision for automatic applicability of an alternative coverage in the event of discontinuance of the health maintenance organization;

d. Any agreement form or contract form with providers for the provision of health care services; and

e. Any deposit of cash or securities submitted in accordance with Section 27-21A-12.

(6) Nothing in the proposed method of operation, as shown by the information submitted pursuant to Section 27-21A-2 or by independent investigation, is contrary to the public interest;

(7) Any deficiencies identified by the State Health Officer have been corrected; and

(8) The form or group contract, if any, which is to be issued to employers, unions, trustees, or other organizations is in compliance with the rules and regulations of the State Insurance Department as such rules and regulations specifically apply to health maintenance organizations. Any provisions of this chapter to the contrary notwithstanding, no provision of this chapter shall exempt any HMO from compliance with the rules and regulations required for licensing or in any way exempt any HMO participant or enrollee from quality care standards and regulations as a condition for licensure. Any HMO under contract as of April 1, 1986, with the Alabama Medicaid Agency that has a grant with a national foundation and is licensed by the Alabama Department of Public Health shall not be responsible for any of the fees, taxes, and other financial regulations so long as the grant is in existence. Any HMO which contracts with the Medicaid Agency shall be exempt from the financial responsibilities and taxes listed in this chapter for that percentage of enrollees that are Medicaid recipients. These HMOs shall also be exempt from any provision necessary for the Medicaid Agency to comply with federal regulations.

(Acts 1986, No. 86-471, p. 854, §3.)