Sec. 16. (a) As used in this section, "net worth" means the excess of total assets over total liabilities, excluding liabilities that have been subordinated in a manner acceptable to the commissioner.

(b) For the purposes of computing net worth, the total assets must be reduced by the value assigned to the following intangible assets:

(1) Goodwill.

(2) Going concern value.

(3) Organizational expense.

(4) Start-up costs.

(5) Long term prepayments of deferred charges.

(6) Nonreturnable deposits.

(7) Obligations of officers, directors, owners, or affiliates, except short term obligations of affiliates for goods or services that:

(A) arise in the normal course of business;

(B) are payable on the same terms as equivalent transactions with nonaffiliates; and

(C) are not past due.

(c) As used in this section, "uncovered expense" means the cost of health care services:

(1) that are the obligation of a limited service health maintenance organization;

(2) for which an enrollee may be liable in the event of the insolvency of the organization; and

(3) for which alternative arrangements acceptable to the commissioner have not been made to cover the costs.

(d) For purposes of the definition of "uncovered expense" set forth in subsection (c), costs incurred by a provider who has agreed in writing not to bill enrollees, except for permissible supplemental charges, shall be considered a covered expense.

(e) Each limited service health maintenance organization must, at all times, have and maintain net worth equal to the greater of:

(1) fifty thousand dollars ($50,000); or

(2) two and one-half percent (2.5%) of the annual gross subscription income of the organization, up to a maximum of two hundred fifty thousand dollars ($250,000).

(f) A limited service health maintenance organization shall maintain as a claim or loss reserve, in cash or obligations of the United States government, assets sufficient to discharge all liabilities on all uncovered expenses arising under policies issued.

(g) The commissioner may adopt rules under IC 4-22-2 to further define whether and to what extent the assets of a limited service health maintenance organization may be considered to be admitted assets for the purposes of complying with the requirements of this chapter.

As added by P.L.26-1994, SEC.25.