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§194-A. Nonprofit hospital and medical service organizations


Published: 2015

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§194-A. Nonprofit hospital and medical service organizations








1. Definitions. 
As used in this section, unless the context otherwise indicates, the following terms
have the following meanings.





A. "Affiliate" means a person who directly or indirectly controls or is controlled
by or is under common control with the person specified. [1997, c. 344, §1 (NEW).]










B. "Charitable authority" means the Attorney General's authority over charities under
section 194, under the Attorney General's corresponding common law authority and under
the Maine Nonprofit Corporation Act, Title 13-B. [1997, c. 344, §1 (NEW).]










C. "Charitable trust" means the entity described in subsection 5, paragraph B, subparagraph
(1). [1997, c. 344, §1 (NEW).]










D. "Contract holder" means the employer, labor union, association, trustee, creditor
or other entity to which a group contract evidencing coverage is issued. [1997, c. 344, §1 (NEW).]










E. "Control" means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the ownership
of voting securities, by contract other than a commercial contract for goods or nonmanagement
services or otherwise unless the power is solely the result of an official position
with or a corporate office held by the person. [1997, c. 344, §1 (NEW).]










F. "Conversion" means the process by which a nonprofit hospital and medical service
organization, with the approval of the superintendent pursuant to Title 24, section
2301, subsection 9-D, converts to a domestic stock insurer. [1997, c. 344, §1 (NEW).]










G. "Fair market value" means the value of an organization or an affiliate or of the
assets of such an entity determined, consistent with Title 24, section 2301, subsection
9-D, as if the entity had voting stock outstanding and 100% of its stock were freely
transferrable and available for purchase without restrictions. In determining fair
market value, consideration must be given to value as a going concern, market value,
investment or earnings value, net asset value and a control premium, if any. If a
charitable trust receives, at the time of conversion, 100% of the shares of the then-outstanding
stock of the converted domestic stock insurer, the charitable trust is regarded as
having acquired the fair market value of the organization unless the superintendent
finds that such outstanding stock does not represent the fair market value of the
organization. [1997, c. 344, §1 (NEW).]










H. "Health insurance affiliate" means any domestic for-profit stock insurer required
to be authorized under Title 24-A, section 404 to provide health insurance or any
domestic for-profit health maintenance organization required to be licensed under
Title 24-A, chapter 56 that is formed, acquired, invested in or otherwise established,
whether directly or indirectly, by a nonprofit hospital and medical service organization. [1997, c. 344, §1 (NEW).]










I. "Materially changes its form" or "material change in form" means any transaction
that the superintendent or Attorney General determines has transferred control of
the organization to a person other than a public charity as defined in section 194,
substantially changed the organization's legal or regulatory status or substantially
changed the organization's purposes, including, but not limited to, conversion, dissolution,
merger, division, consolidation, amalgamation, disposition of substantially all of
an organization's business, line of business or assets, lease, exchange, restructuring
or bulk reinsurance transfer. [2003, c. 171, §2 (AMD).]










J. "Member" means a member of the nonprofit hospital and medical service organization
entitled to vote under the articles or bylaws of the organization. [1997, c. 344, §1 (NEW).]










K. "Nonprofit hospital and medical service organization" or "organization" means a
corporation or other entity authorized by the superintendent or organized pursuant
to Title 24 for the purpose of providing nonprofit hospital service plans within the
meaning of Title 24, section 2301, subsection 1, nonprofit medical service plans within
the meaning of Title 24, section 2301, subsection 2 and any organization that provides
only nonprofit health care plans within the meaning of Title 24, section 2301, subsection
3. [2001, c. 550, Pt. B, §1 (AMD).]










L. "Subscriber" means an individual who has subscribed to one or more of the hospital,
medical or health care service plans or contracts offered by the organization or health
insurance affiliate as defined in Title 24, section 2308-A through an individual or
family policy or group policy. [1997, c. 344, §1 (NEW).]










M. "Superintendent" means the Superintendent of Insurance. [1997, c. 344, §1 (NEW).]







[
2003, c. 171, §2 (AMD)
.]








2. Charitable status of organization. 
Any nonprofit hospital and medical service organization is a charitable and benevolent
institution and a public charity and its assets are held for the purpose of fulfilling
the charitable purposes of the organization. The charitable purposes may include,
but are not limited to, the following: providing access to medical care through affordable
health insurance and affordable managed care products for persons of all incomes;
identifying and addressing the State's unmet health care needs, particularly with
regard to medically uninsured and underserved populations; making services and care
available through participating providers; and improving the quality of care for medically
uninsured and underserved populations.





A. If the organization materially changes its form and the ownership of an organization
is at issue or is relevant in any proceeding in court or before the superintendent,
then 100% of the fair market value of the organization as of the date of the material
change in form must be owned by the charitable trust upon the approval or approval
with modifications of the charitable trust plan or modified charitable trust plan
by the court pursuant to subsection 5 or 6 and must be dedicated to the fulfillment
of the charitable trust. [2003, c. 171, §3 (AMD).]










B.
[2003, c. 171, §3 (RP).]










C.
[2003, c. 171, §3 (RP).]







[
2003, c. 171, §3 (AMD)
.]








3. Determination of ownership interest and charitable purposes by the Superior Court. 




[
2003, c. 171, §4 (RP)
.]








4. Representation of charitable interests. 
Except as provided in this subsection, the Attorney General is the sole person authorized
to represent the charitable interests of beneficiaries of the charitable obligations
of a nonprofit hospital and medical service organization and any health insurance
affiliate in any proceeding before any court or any administrative agency. The Attorney
General may enforce the organization's charitable obligations in an action in Superior
Court under the Attorney General's charitable authority. Nothing in this subsection
may be construed to limit the superintendent's authority with respect to the interests
of subscribers or the public in enforcing the provisions of Title 24 and Title 24-A.





A. The board of directors of a nonprofit hospital and medical service organization
has the responsibility to fulfill the organization's charitable obligation, subject
only to the Attorney General's authority to represent the charitable interests of
beneficiaries of the organization's charitable obligation, any applicable law and
the superintendent's authority to enforce Title 24 and Title 24-A. [1997, c. 344, §1 (NEW).]










B. A nonprofit hospital and medical service organization shall reimburse the Attorney
General and the superintendent for the costs of any experts or consultants retained
by the Attorney General or the superintendent in connection with any matter before
any court or any administrative agency relating to the organization's charitable value
and charitable obligations. [1997, c. 344, §1 (NEW).]







[
1997, c. 344, §1 (NEW)
.]








5. Charitable trust plan required prior to conversion. 
A nonprofit hospital and medical service organization shall submit a charitable
trust plan to the Attorney General at the same time that it submits a conversion plan
to the superintendent for approval of a conversion to a domestic stock insurer pursuant
to Title 24, section 2301, subsection 9-D.





A. Within 60 days of the organization's submission of the charitable trust plan to
the Attorney General, the Attorney General shall file an action under the Attorney
General's charitable authority in Superior Court seeking approval, approval with modifications,
or disapproval of the charitable trust plan or of any amended charitable trust plan
submitted to the Attorney General by the organization with the consent of the Attorney
General. [1997, c. 344, §1 (NEW).]










B. An organization may not convert to a domestic stock insurer under Title 24, section
2301, subsection 9-D until the Superior Court has approved or approved with modifications
the organization's charitable trust plan. The court may not approve or approve with
modifications the charitable trust plan unless it finds that the charitable trust
plan meets the following requirements.



(1) The plan must describe the charitable trust or trusts that will receive the
ownership interest in the organization following its conversion to a domestic stock
insurer. For purposes of this section, a charitable trust:




(a) Must be a new or existing trust or public benefit corporation formed under the
laws of this State, but may not include the organization or any person controlled
by the organization;







(b) Must be a charitable entity that qualifies for federal income tax exemption
under the United States Internal Revenue Code of 1986, as amended, Section 501 (c)(3)
or (c)(4);







(c) May not be controlled by the converted domestic stock insurer;






(d) May not have more than one of its directors serve as a director of the domestic
stock insurer;







(e) May not have as a director any person who has been a director or officer of
the organization, the domestic stock insurer or any affiliate of either during the
3-year period preceding the date of appointment as a director of the charitable trust;
and







(f) Must have a board of directors representing the people of the State including,
but not limited to, persons representing the interests of the medically uninsured
and underserved populations.









(2) The charitable mission of the charitable trust must include, but is not limited
to, serving the State's unmet health care needs for the type of care historically
covered by the organization, particularly with regard to medically uninsured and underserved
populations and providing access to care and improving quality of care for those populations.






(3) The charitable trust plan must provide for the fair and equitable use by the
charitable trust of its ownership interest in the organization to fulfill the charitable
mission of the charitable trust.






(4) The charitable trust plan must require the charitable trust to report annually
to the Attorney General as to its charitable activities and grant making relating
to the use of its ownership interest in the organization and to make that annual report
available to the public at both the Department of the Attorney General and the office
of the charitable trust.






(5) The charitable trust plan must require the charitable trust, at all times when
the charitable trust owns stock in any converted stock insurer and for 5 calendar
years after any such ownership, to provide audited financial statements on a calendar-year
basis and other reports, as may be required, to the superintendent and the Attorney
General at the time and in the manner as either the Attorney General or the superintendent
prescribes.






(7) The charitable trust must have in place procedures and policies to prohibit
conflicts of interest, including those associated with grant-making activities that
may benefit the converted stock insurer, its affiliates, any person who owns or controls
any ownership interest in either the converted stock insurer or its affiliates and
any directors or officers of the converted stock insurer or its affiliates. [2003, c. 171, §5 (AMD).]













C. The superintendent has the right to intervene in the Superior Court proceeding. [1997, c. 344, §1 (NEW).]










D. In approving, disapproving or approving with modification the charitable trust plan,
the Superior Court may not review or decide the fair market value of the organization,
including the methodologies for determining, allocating and transferring the fair
market value of the organization. This paragraph does not in any way limit the appeal
rights of any person under the Maine Rules of Civil Procedure, Rule 80(c) or under
the Maine Administrative Procedure Act from the superintendent's final agency action
on these matters pursuant to Title 24, section 2301, subsection 9-D. [2003, c. 171, §6 (AMD).]







[
2003, c. 171, §§5, 6 (AMD)
.]








6. Modified charitable trust plan required for a material change in form. 
An organization shall notify the Attorney General and the superintendent of the
organization's intent to engage in any transaction described in subsection 1, paragraph
I at least 60 days prior to engaging in that transaction. Upon the superintendent's
or the Attorney General's determination that a transaction described in subsection
1, paragraph I is a material change in form, notice must be given to the organization
and the Attorney General or superintendent, as applicable. Within 90 days after the
superintendent or the Attorney General issues a notice of the determination that a
transaction described in subsection 1, paragraph I is a material change in form, other
than through conversion to a domestic stock insurer pursuant to Title 24, section
2301, subsection 9-D, the Attorney General shall file an action in Superior Court
under the Attorney General's charitable authority requesting the court to order the
organization to submit to the superintendent, the court and the Attorney General a
modified charitable trust plan containing the provisions set forth in subsection 5,
paragraph I as the court determines are reasonable under the circumstances, together
with any additional provisions as the court determines are reasonably required to
coordinate the modified charitable trust plan with any proceeding instituted or to
be instituted by the superintendent in connection with the material change in form.
The Superior Court, after hearing, shall approve, approve with modifications or disapprove
the modified charitable trust plan. The superintendent has the right to intervene
in the Superior Court proceeding. In the event that either the superintendent or
the court determines that a valuation of the organization is necessary, the superintendent
shall conduct the valuation consistent with Title 24, section 2301, subsection 9-D.
The superintendent may hold proceedings as the superintendent determines necessary
to review an organization's proposal to materially change its form. If the modified
charitable trust plan includes the creation of a charitable trust or public benefit
corporation, the charitable trust or public benefit corporation may not include the
organization or any person controlled by the organization.


[
2003, c. 171, §7 (AMD)
.]








7. Affiliates providing health insurance. 
This subsection governs health insurance affiliates.





A. A nonprofit hospital and medical service organization shall notify the Attorney
General at least 60 days prior to directly or indirectly forming, acquiring, investing
in or otherwise establishing a health insurance affiliate. [1997, c. 344, §1 (NEW).]










B. Each health insurance affiliate shall expressly have corporate purposes that are
consistent with or are in furtherance of the charitable and benevolent purposes of
its public charity owners.



(1) Subject to subparagraph (2), the health insurance affiliate may further its
purposes as described in this paragraph by:




(a) The provision of direct services that are consistent with or further the charitable
and benevolent purposes of its public charity owners; or







(b) The payment of distributions or dividends to any public charity owner.








(2) The payment by the health insurance affiliate of distributions or dividends
to any owner does not fulfill a health insurance affiliate's purposes as described
in this paragraph if the payment of such distributions or dividends unreasonably interferes
with the health insurance affiliate's ability to fulfill its purposes as described
in this paragraph through the provision of direct services as described in subparagraph
(1), division (a). Payment of dividends and distributions may be made to a for-profit
owner consistent with this subparagraph but may not be considered to fulfill the health
insurance affiliate's purposes as described in this paragraph.






(3) If the nonprofit hospital and medical service organization holding an ownership
interest in a health insurance affiliate materially changes its form and the Superior
Court has approved or approved with modifications a charitable trust plan or modified
charitable trust plan, the purposes as described in this paragraph of the health insurance
affiliate terminate unless the Superior Court determines otherwise. [2003, c. 171, §8 (AMD).]













C. Any public charity that owns or controls an ownership interest in a health insurance
affiliate must be treated as having acquired that ownership interest in furtherance
of the charitable purposes of the public charity. [2003, c. 171, §8 (AMD).]










D. The Attorney General may enforce the purposes as described in paragraph B of a health
insurance affiliate under this subsection under the Attorney General's charitable
authority to the same extent as if the health insurance affiliate were a public charity. [2003, c. 171, §8 (AMD).]










E. A nonprofit hospital and medical service organization shall file with the Attorney
General and the superintendent a charitable activities plan at least 60 days prior
to the organization's sale of any ownership interest in a health insurance affiliate
or the sale or other disposition of substantially all the assets of the health insurance
affiliate.



(1) The charitable activities plan must set forth the charitable activities that
the nonprofit hospital and medical service organization intends to pursue with the
revenues or proceeds received from the sale of any ownership interest in a health
insurance affiliate or the sale or other disposition of substantially all the assets
of the health insurance affiliate.






(2) If the Attorney General concludes that the charitable activities plan does not
fairly and equitably fulfill the nonprofit hospital and medical service organization's
charitable purposes, the Attorney General shall bring an action in Superior Court
under the Attorney General's charitable authority to challenge the charitable activities
plan. The Attorney General shall provide to the superintendent prior written notice
of any such action. The superintendent has the right to intervene in such action.
If the Superior Court determines that the organization's charitable activities plan
does not fairly and equitably fulfill the organization's purposes as described in
paragraph B, the court shall issue orders necessary to remedy the inadequacies in
the charitable activities plan.






(3) If a nonprofit hospital and medical service organization sells its ownership
interest in a health insurance affiliate and the charitable activities plan filed
with the Attorney General in connection with the sale has been approved by the Attorney
General or the Superior Court, then the purposes described in paragraph B of a health
insurance affiliate terminate unless the Superior Court determines otherwise. [1997, c. 344, §1 (NEW).]













F. Each health insurance affiliate shall file an annual report with the Attorney General
at the time and in the manner as the Attorney General shall establish describing the
efforts that the affiliate has undertaken to fulfill its purposes as described in
paragraph B, including, but not limited to, all direct services as described in paragraph
B, subparagraph (1), division (a) and grant making. [1997, c. 344, §1 (NEW).]










G. The sale by an organization of its ownership interest in a health insurance affiliate
for fair market value, as determined by the superintendent, does not constitute a
diversion of charitable assets. [1997, c. 344, §1 (NEW).]







[
2003, c. 171, §8 (AMD)
.]








8. Annual report. 
The organization shall file an annual report with the Attorney General and the superintendent
at the time and in the manner as the Attorney General establishes describing the efforts
that the organization has undertaken to fulfill its charitable and benevolent purposes.


[
1997, c. 344, §1 (NEW)
.]





SECTION HISTORY

1997, c. 344, §1 (NEW).
1997, c. 344, §10 (AFF).
2001, c. 550, §B1 (AMD).
2003, c. 171, §§2-8 (AMD).