AB 107

This bill allows a health care cooperative to convert into a service insurance corporation.

Under current law, a cooperative may be formed by filing articles of incorporation with the Department of Financial Institutions. A cooperative is organized and owned by its members and managed by a board of directors. Under current law, a cooperative may be organized primarily to establish and operate nonprofit plans or programs for health care for their members and their members’ dependents.

Also under current law, a service insurance corporation, sometimes referred to as a “nonprofit service plan,” may be formed by following many of the same procedures that apply to nonstock corporations, like filing articles of incorporation and bylaws, except that service insurance corporations are regulated by the Office of the Commissioner of Insurance instead of DFI. A service insurance corporation is a corporation incorporated in this state to provide insured service benefits, like health care, to consumers within a flexible legal framework.

Under this bill, a health care cooperative may convert into a service insurance corporation. To convert into a service insurance corporation, a health care cooperative seeking conversion must adopt a plan of conversion, obtain the commissioner’s approval of the plan of conversion, have the members of the health care cooperative agree to the conversion as provided under current law, and submit evidence to the commissioner that the members of the cooperative association approve of the plan of conversion. The bill requires the commissioner to approve any submitted plan of conversion unless the commissioner concludes, after a hearing, that the plan is contrary to law, the surplus of the resulting service insurance corporation or the contracts that the resulting service insurance corporation possesses with providers are inadequate to support the plan, or the plan is contrary to the interests of members of the health care cooperative seeking conversion or to the interests of the public. If all requirements for conversion are met, the bill provides that the commissioner must issue a certificate of authority to the new service insurance corporation and that, immediately after issuing the certificate of authority, the legal existence of the health care cooperative ceases. The bill provides that the new service insurance corporation has all the assets and is liable for all of the obligations of the converted health care cooperative.