House Bill 1411

AN ACT TO BRING FORWARD SECTIONS 83-47-1 THROUGH 83-47-25, MISSISSIPPI CODE OF 1972, WHICH IS THE LAW GOVERNING NONPROFIT MEDICAL LIABILITY INSURANCE CORPORATIONS, FOR THE PURPOSE OF AMENDMENT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 83-47-1, Mississippi Code of 1972, is brought forward as follows:

83-47-1. The public health and welfare requires the adoption of this chapter providing for the organization and operation of nonprofit medical liability insurance corporations.

SECTION 2. Section 83-47-3, Mississippi Code of 1972, is brought forward as follows:

83-47-3. Any seven (7) or more physicians licensed to practice in Mississippi who are residents of this state, may form a nonprofit corporation under this chapter for the purpose of providing medical, professional, general and other liability insurance to health care providers, health care facilities and managed care organizations in Mississippi and any other state or jurisdiction. The term "health care provider," when used in this chapter, shall mean a physician, dentist, pharmacist, osteopath, psychologist, podiatrist, optometrist, chiropractor, nurse, medical technician or other health care provider licensed by the State of Mississippi or any other state or jurisdiction. The term "health care facility," when used in this chapter, shall mean a medical clinic, nursing home, outpatient surgical center, laboratory, pharmacy, dialysis clinic, hospital or other health care facility licensed, if necessary, by the State of Mississippi or any other state or jurisdiction. The term "managed care organization," when used in this chapter, shall mean a health maintenance organization (HMO), individual practice association (IPA), preferred provider organization (PPO), competitive medical plan (CMP), exclusive provider organization (EPO), integrated delivery system (EDS), independent physician/provider organization (IPO), management service organization (MSO), physician hospital/provider organization (PHO) and any other type of managed care organization. Members of the corporation shall consist of only individuals under contracts which entitle such individuals to medical liability insurance. Health care facilities and managed care organizations need not be owned by or comprised of members of the corporation in order to be insured by the corporation. All such corporations shall be governed by this chapter and shall be exempt from all other provisions of the insurance laws of this state, unless otherwise specifically provided herein. Such a corporation may be formed under this chapter in the following manner:

(a) The proposed incorporators shall subscribe articles of incorporation in which shall be stated:

(i) The proposed corporate name of the corporation, which shall not so closely resemble the name of any other corporation already transacting business in this state as to mislead the public or lead to confusion;

(ii) The domicile of the proposed corporation;

(iii) The names and post office addresses of the incorporators;

(iv) The fact that application for charter is being made under this chapter and the corporation proposed to operate under and subject to the provisions of this chapter;

(v) The purposes of the corporation.

(b) Such articles of incorporation shall be filed with the Commissioner of Insurance, who shall refer the same to the Attorney General for his opinion as to whether the same meet the requirements of this chapter and are not otherwise violative of the Constitution or laws of this state or of the United States. The Attorney General shall examine the same and endorse his opinion thereon and return the same to the Commissioner of Insurance for approval. The Commissioner of Insurance shall (if the same be approved by the Attorney General) thereupon endorse his certificate of approval upon such articles of incorporation, record the same in his office, and refer the same to the office of the Secretary of State to be there recorded, whereupon said corporation shall become and be considered an existing entity. The articles of incorporation as thus approved and recorded shall be and constitute the charter of incorporation of such corporation. It shall not be necessary that such charter be published, nor shall it be necessary that it be recorded in the office of the chancery clerk.

SECTION 3. Section 83-47-5, Mississippi Code of 1972, is brought forward as follows:

83-47-5. Corporations organized under this chapter shall not have capital stock, but shall have members as prescribed and contemplated by the terms and provisions of this chapter; and such members shall have the privileges provided for in this chapter. The subscribers to the articles of incorporation as the organizers of the corporation shall have power to elect the first board of directors, who shall serve for the terms prescribed in the next sentence of this section, or until their successors are elected and qualified. One-third (1/3) of the members of the first board of directors shall be elected for a term of one (1) year, one-third (1/3) for a term of two (2) years, and one-third (1/3) for a term of three (3) years. Thereafterwards, directors shall be elected for terms of three (3) years. Provisions shall be made for subsequent elections of directors, including the time and place of such elections and notice thereof to the membership by (a) resolution of the directors entered upon the minutes not less than sixty (60) days before such election, designating the time and place of such election, such minutes to be open to the membership as hereinafter provided, or (b) by the time and place of such election being fixed by resolution of the directors, and notice thereof being mailed to the members at least fifteen (15) days before the time fixed for such election. All minutes of the corporation with respect to the time and place fixed for any such election of directors shall be open to members at all reasonable times, but no notice of elections shall be necessary, other than as herein provided. Each member shall be entitled to one (1) vote in the election of directors. It shall be the duty of the directors to provide for elections as the terms of office of directors expire, and it shall be the duty of the Commissioner of Insurance as a part of his supervisory jurisdiction over such corporations to see that the directors faithfully perform this duty. If such directors shall fail to so provide for the election of directors, it shall be the duty of the Commissioner of Insurance to report this fact to the membership of the corporation and himself call a meeting of the membership for the election of directors; and the corporation shall forthwith, upon demand of the commissioner, reimburse him for all expenses incurred in the performance of these duties. A majority vote of the members present in person (or by proxy, if proxy be provided for) and voting shall be required and shall be sufficient for the election of directors.

The membership of the corporation shall consist of any individual who has applied for, or been granted, a license to practice medicine in the State of Mississippi, or any other state or jurisdiction, provided he has first applied for membership on the form prescribed by the board of directors and paid the requisite fees, charges and premiums in advance therefor, and agreed to comply with and be bound by the charter and bylaws and amendments thereto, and the rules, regulations and guidelines adopted from time to time by the board of directors or any committee authorized by the board of directors to so act.

No person may own more than one (1) membership in the corporation, nor shall any member be entitled to more than one (1) vote upon any matter submitted to a vote at the meeting of the members.

Membership shall not be granted until a membership certificate in the form prescribed by the board of directors shall have been duly issued.

The event of (a) death, or (b) revocation of license to practice medicine, or (c) nonpayment of membership fees, dues, assessments or premiums, or (d) failure to comply with and abide by all provisions of the charter and bylaws and amendments thereto, and the rules, regulations and guidelines adopted from time to time by the board of directors or (e) termination of insurance with the corporation for any reason, shall operate ipso facto to terminate membership in the corporation, and all interest of any such member in the assets of the corporation shall then and thereby terminate and cease, except for the right to receive benefits provided for under contracts or the bylaws of the corporation.

The directors shall have power to adopt bylaws, elect officers and manage the affairs of the corporation. They shall also have the power to determine whether voting in the election of directors may be done by proxy and, if so, the manner and method thereof.

SECTION 4. Section 83-47-7, Mississippi Code of 1972, is brought forward as follows:

83-47-7. (1) Each corporation established under the provisions of this chapter shall furnish to the Commissioner of Insurance all information that he may request concerning the number of members of any such corporation and the type of practice of each such member. After considering the number of members and the type of practice of each such member, the Commissioner of Insurance shall require a minimum capital of Five Hundred Thousand Dollars ($500,000.00) and a minimum surplus of Five Hundred Thousand Dollars ($500,000.00) for such corporation. All dues, fees and assessments to any member of the corporation shall be set and maintained at the lowest possible cost subject to sound business practice and shall be subject to review and approval of the Commissioner of Insurance. No corporation established under the provisions of this chapter shall transact any other business than that specified in its charter and articles of incorporation; and it shall not begin operation until it has fully complied with all rules and regulations promulgated by the Commissioner of Insurance with respect to such corporations and until it has established the capital and reserve set for it by the commissioner.

(2) When necessary to effect the purposes of this section, in addition to all other remedies in law or equity, the Attorney General and Commissioner of Insurance may be and are hereby authorized to petition the chancery court of the county in which a corporation established under this chapter is domiciled for a mandamus or injunction to prevent any violation of the provisions of this section, or the continuance of any such violation, or to enforce compliance herewith. The court is hereby vested with authority to entertain jurisdiction on any such petition to determine the cause and to issue such process as may be necessary to accomplish the purposes of this section.

SECTION 5. Section 83-47-9, Mississippi Code of 1972, is brought forward as follows:

83-47-9. Each member shall pay all dues, fees and assessments in such amounts as may be established from time to time by the resolution of the board of directors. The board of directors shall have the authority to provide for separate and distinct classes of insurance and groupings of members and insureds and to fix assessments and premiums at varying and different amounts for the various classes. No member or insured shall refuse or neglect to pay his or its assessment or premium because the amount thereof differs or varies from the amount of the assessment or premium of members in other classes or groupings. The board of directors shall endeavor to establish and fix assessments and premiums for the various classes and groupings which are reasonable in amount, relative to the benefits to be received by those members and insureds within the classes and groupings involved, and the action of the board of directors in so doing shall be conclusive and final. Each member shall also pay all obligations which may, from time to time, become due and payable by such member to the corporation as and when the same shall become due and payable. Such fees, assessments and premiums required of members and insureds shall contain an amount sufficient to pay three percent (3%) premium tax, the same as levied on all other domestic nonprofit insurance corporations. Such premium taxes shall be collected and paid into the treasury by the State Tax Commission.

SECTION 6. Section 83-47-11, Mississippi Code of 1972, is brought forward as follows:

83-47-11. The private property of the members of the corporation shall be exempt from the execution for the debts of the corporation, and no member shall be individually liable or responsible for any debts or liabilities of the corporation.

SECTION 7. Section 83-47-13, Mississippi Code of 1972, is brought forward as follows:

83-47-13. Every such corporation shall annually, on or before the first day of March, file in the office of the Commissioner of Insurance a statement verified by at least two (2) of the principal officers of said corporation, showing its condition on the thirty-first day of December of the preceding year, which shall be in such form and shall contain such matters as the commissioner shall prescribe.

SECTION 8. Section 83-47-15, Mississippi Code of 1972, is brought forward as follows:

83-47-15. The Commissioner of Insurance may appoint any deputy or examiner or other person who shall have the power of visitation and examination into the affairs of any such corporation and free access to all of the books, papers and documents that relate to the business of the corporation, and may summon and qualify witnesses under oath to examine its officers, agents, employees or other persons in relation to the affairs, transactions and conditions of the corporation.

SECTION 9. Section 83-47-17, Mississippi Code of 1972, is brought forward as follows:

83-47-17. Any dissolution or liquidation of a corporation, subject to the provisions of this chapter, shall be conducted under the supervision of the Commissioner of Insurance, who shall have all power with respect thereto under the provisions of law with respect to the dissolution and liquidation of insurance companies.

SECTION 10. Section 83-47-19, Mississippi Code of 1972, is brought forward as follows:

83-47-19. Every corporation organized pursuant to, or subject to, the provisions of this chapter is hereby declared to be a charitable and benevolent institution, and its funds and property shall be exempt from taxation, except from the premium tax levied in accordance with the provisions of this chapter and ad valorem taxes upon real estate and motor vehicles owned by it.

SECTION 11. Section 83-47-21, Mississippi Code of 1972, is brought forward as follows:

83-47-21. Any corporation heretofore or hereafter organized and operating under Chapter 11, Title 79, Mississippi Code of 1972, desiring to become a nonprofit corporation of the kind and character described in this chapter, and to operate under and pursuant to the terms of this chapter, may convert its organization into such nonprofit corporation under this chapter in the following manner, to wit:

(a) File a written application with the Commissioner of Insurance annexing thereto copies of (i) its articles of incorporation or new or amended articles of incorporation; (ii) its bylaws; (iii) its form of contract between the corporation and members, showing the terms under which medical liability insurance is to be furnished to members; (iv) its contracts with members, showing a table of assessments and the benefits to which members are entitled; and (v) a financial statement of the corporation, including the amounts of contributions paid or agreed to be paid to the corporation for working capital, the name or names of each contributor, and the terms of each contribution.

(b) Submit any further data or evidence as may be required by the commissioner.

(c) The commissioner shall refer the corporation's articles of incorporation to the Attorney General for his opinion as to whether the same meet the requirements of this chapter. The Attorney General shall, if in order to do so, endorse his approval thereon and return the same to the Commissioner of Insurance. The commissioner shall thereupon endorse upon said articles of incorporation his certificate of approval, whereupon said corporation shall be deemed to be converted under and existing and operating pursuant to the terms of this chapter. The articles of incorporation bearing such approval of the Attorney General and the commissioner shall be recorded in the offices of the Commissioner of Insurance and of the Secretary of State in like manner as in this chapter provided for recording the articles of incorporation of a corporation organized under this chapter in the first instance.

SECTION 12. Section 83-47-23, Mississippi Code of 1972, is brought forward as follows:

83-47-23. The organization as created under the authority of this chapter shall in no manner be covered under or included in the provisions of Sections 83-23-101 through 83-23-135.

SECTION 13. Section 83-47-25, Mississippi Code of 1972, is brought forward as follows:

83-47-25. (1) A corporation organized under this chapter may become a stock insurance corporation under such plan and procedure as may be approved by the Commissioner of Insurance.

(2) The Commissioner of Insurance shall approve any such plan or procedure if:

(a) It is equitable to the corporation's members;

(b) It is subject to approval by vote of not less than three-fourths (3/4) of the corporation's current members voting thereon in person or by proxy at a meeting of members called for the purpose pursuant to such reasonable notice and procedure as may be approved by the Commissioner of Insurance; right to vote may be limited to members who hold policies at the time of the vote and whose policies have been in force for not less than one (1) policy year;

(c) The equity of each member in the corporation is determinable under a fair formula approved by the Commissioner of Insurance, which such equity shall be based upon not less than the corporation's entire surplus as reported in the corporation's annual statement to the Commissioner of Insurance, after deducting borrowed surplus funds, plus all nonadmitted assets;

(d) The members entitled to participate in the purchase of stock or distribution of assets shall include all current members who hold policies at the time of the vote and whose policies have been in force for not less than one (1) policy year;

(e) The plan gives to each member, as specified in subsection (2)(d) of this section, a preemptive right to acquire his proportionate part of all of the proposed capital stock of the corporation, within a designated reasonable period, and to apply upon the purchase thereof the amount of his equity in the corporation as determined under subsection (2)(c) of this section;

(f) Shares are so offered to members at a price not greater than to be thereafter offered to others;

(g) The plan provides for payment to each member not electing to apply his equity in the corporation for, or upon, the purchase price of stock to which the member is preemptively entitled of cash in the amount of his equity not so used for the purchase of stock, and which case payment, together with stock so purchased, if any, shall constitute full payment and discharge of the member's equity as a member of such corporation; and

(h) The plan, when completed, would provide for the converted corporation paid-in capital stock in an amount not less than the minimum paid-in capital required of a domestic stock insurer transacting like kinds of insurance, together with surplus funds in amount not less than one half (1/2) of such required capital.

(3) Once conversion under this section is complete, the converted corporation shall no longer be governed by this chapter and shall be governed by the provisions of the insurance laws of this state applicable to general liability insurers.

SECTION 14. This act shall take effect and be in force from and after July 1, 2006.