17:48-10. Solicitation and administrative expenses; investment of funds; surplus

No corporation subject to the provisions of this chapter shall during any one year disburse more than 10% of the aggregate amount of the payments received from subscribers during that year as expenditures for the soliciting of subscribers, except that during the first year after the issuance of a certificate of authority such corporation may so disburse not more than 20% of such amount and during the second year not more than 15%.

No such corporation shall, during any one year, disburse a sum greater than 20% of the payments received from subscribers during that year as administrative expenses. The term, "administrative expenses," as used in this section, shall include all expenditures for nonprofessional services and in general all expenses not directly connected with the furnishing of hospital services, but not including expenses of soliciting subscribers.

The funds of any hospital service corporation may be invested only in accordance with the requirements now or hereafter provided by law for the investment of funds of life insurance companies. Every hospital service corporation after the first full calendar year of doing business after the effective date of this chapter, shall accumulate and maintain a special contingent surplus over and above its reserves and liabilities at the rate of 2% annually of its net premium income until such surplus shall be not less than $100,000.00. Thereafter for any subsequent calendar year, such special contingent surplus shall be maintained at 2 1/2 % of the net premium income received during that year as determined by reference to the statement of financial condition filed pursuant to R.S. 17:48-11. The special contingent surplus as herein provided shall be contributed by each of the following two categories: 1) community rated, excluding open enrollment and conversion groups; and 2) experience rated subscribers, in the ratio that the net premium income of each category bears to the total net premium income of the corporation and by contributions from the category that gives rise to a diminution of the surplus required to be maintained under this act. Whenever it shall appear that such special contingent surplus has deviated from the amount required to be maintained by more than 2% of the aggregate amount of the net premium income received during that year, the Commissioner of Insurance shall approve and promulgate a plan reasonably calculated to return such special contingent surplus to the amount required to be maintained, within 2 years from the date of implementation of the plan specified above. Approval and promulgation of said plan by the Commissioner of Insurance shall not abrogate the responsibilities of corporate officers with regard to the reporting of financial conditions pursuant to section 11 of the act which that act amends.

L.1938, c. 366, p. 929, s. 10. Amended by L.1978, c. 94, s. 3, eff. January 1, 1981.