(a) For the purposes of this section, the following terms have the following meanings: (1) AFFILIATE. As defined in Section 27-29-1. (2) CONTROL. As defined in Section 27-29-1. (3) DEPARTMENT. The Department of Insurance of the State of Alabama. (4) INSURER. Any person that meets the definition of insurer in either Section 27-1-2 or Section 27-29-1. (5) MEMBER. As defined in Section 10A-3A-1.02. (6) MEMBERSHIP INTERESTS. As defined in Section 10A-3A-1.02. (7) NONPROFIT HOLDING CORPORATION. A domestic nonprofit corporation formed in connection with a reorganization which operates under Chapter 3A and which, directly or indirectly through another domestic nonprofit corporation that operates under Chapter 3A, holds all the membership interests in a health care service corporation organized under this article. (8) PERSON. As defined in Section 10A-1-1.03. (9) REORGANIZATION. A transaction or series of transactions in which a nonprofit holding corporation is created by or on behalf of a health care service corporation to hold, directly or indirectly through another domestic nonprofit corporation operating under Chapter 3A, a membership interest in the health care service corporation. (10) SUBSIDIARY. As defined in Section 27-29-1. (11) ULTIMATE CONTROLLING PERSON. A person that is not under the control of any other person. (b)(1) Notwithstanding any other provision of this article, a health care service corporation, including a subsidiary of a health care service corporation, by means of one reorganization, may have a nonprofit holding corporation as the ultimate controlling person. (2) The reorganization shall: a. Be deemed an internal restructuring that does not result in a change of control of a health care service corporation or any subsidiary of a health care service corporation, including an insurer; b. Not be deemed an acquisition or change of control of a health care service corporation or any subsidiary of a health care service corporation, including an insurer; and c. Not be subject to Section 27-29-3 or Section 27-29-3.1. (3) Notwithstanding any other provision of law, including this title or Chapter 29 of Title 27, as part of the reorganization, a health care service corporation may make an initial transfer of any combination of cash, investments, or equity ownership interests in an affiliate or a subsidiary to the nonprofit holding corporation or its subsidiary by dividend, distribution, or other means, subject to both of the following conditions: a. The total statutory value of cash, investments, and ownership interests in an affiliate or a subsidiary, net of liabilities, shall not exceed 25 percent of the health care service corporation’s admitted assets as of its most current annual statement filed with the department. b. The transfer shall be subject to any risk-based capital requirements imposed by the department which the health care service corporation is operating under at the time of the reorganization. (4) A director, officer, or employee of the health care service corporation shall not receive any fee, commission, additional compensation, or other valuable consideration for aiding, promoting, or assisting in the reorganization. (5) Compliance with this subsection and subsections (c) and (d) shall be the exclusive means of effecting the reorganization. Notwithstanding any other provision of law, including Chapter 29 of Title 27, no filings, notices, applications, or approvals, other than those filings and notices required in subsection (d), shall be required in connection with the reorganization, including a transfer pursuant to subdivision (b)(3). (c)(1) Notwithstanding any law of this state, or provision to the contrary in the certificate of formation or governing bylaws, a health care service corporation, by action of its board of directors, may authorize the reorganization and undertake the actions provided in this subsection. (2) Take all steps necessary under Chapter 3A to create a nonprofit holding corporation. (3) Adopt amendments to the health care service corporation’s certificate of formation and bylaws to provide for, but not be limited to, any of the following: a. A class of members. b. Characteristics, qualifications, limitations, obligations, and rights of class members, including final distributions. c. Conditions for admission of members and issuance of membership interests. (d) Upon completion of the reorganization, a health care service corporation shall submit a notice of completion to the department, to which shall be attached all of the following: (1) A description of the transactions that effect the reorganization. (2) A copy of the amendments to the health care service corporation’s certificate of formation and bylaws. (3) A copy of the nonprofit holding corporation’s certificate of incorporation. (4) A pro forma balance sheet and income statement for the health care service corporation which demonstrates the financial position of the health care service corporation on the effective date of the reorganization. (5) A pro forma balance sheet and income statement for the nonprofit holding corporation which demonstrates the financial position of the nonprofit holding corporation on the effective date of the reorganization. (e)(1) As a result of being created pursuant to this section, a nonprofit holding corporation is: a. Not deemed to be an insurance company, insurer, or a health care service corporation organized under this article; b. Not otherwise subject to this article; c. A nonprofit corporation that is subject to Chapter 3A and that has no members; and d. The ultimate controlling person of the health care service corporation. (2) No subsidiary or affiliate of a nonprofit holding corporation is subject to this article unless the subsidiary or affiliate is organized under this article as a health care service corporation. (f) Notwithstanding any other provision of law, in addition to any transfer in connection with the reorganization under subdivision (b)(3), a nonprofit holding corporation may at any time directly or indirectly: (1) Organize, acquire, hold, operate, manage, and invest in any person, including any insurer, subsidiary, or affiliate; and (2) Enter into or engage in any operation, business, transfer, sale, purchase, exchange, loan, agreement, transaction, or other activity subject to compliance with any applicable provision of Chapter 3A or Chapter 29 of Title 27. (g) A nonprofit holding corporation, no later than June 1 of each year, shall file with the department a group capital calculation for the preceding calendar year. (h) The board of directors of a nonprofit holding corporation shall be comprised solely of individuals who are directors of the health care service corporation. No equity or ownership interest in the nonprofit holding corporation or any subsidiary thereof may be granted to any executive officer or any member of the board of directors of the nonprofit holding corporation or the health care service corporation. (i) The department may exercise the authority provided under Section 27-2-7 and Section 27-2-19 for purposes of enforcing the nonprofit holding corporation’s compliance with this section. (j)(1) The reorganization does not change the legal form of a health care service corporation or the health care service corporation’s certificate of authority to do business. (2) All subscriber contracts and certificates issued by the health care service corporation shall remain in full force and effect. (3) Upon reorganization, a health care service corporation shall continue to be subject to this article, except for all of the following: a. Neither the reorganization nor any other transaction permitted by this section shall constitute or require a conversion of the health care service corporation pursuant to any law of this state. b. In addition to a transfer in connection with the reorganization under subdivision (b)(3), the health care service corporation may approve and pay any direct or indirect dividend or distribution to the nonprofit holding corporation if the dividend or distribution satisfies the applicable standards for payment of a dividend or distribution pursuant to Sections 10A-3A-6.40, 27-29-4(e), and 27-29-5. c. To the extent not otherwise addressed in, and not contrary to, the certificate of formation or bylaws of the health care service corporation as amended, or this section, all aspects of the membership relationship between the health care service corporation and its member nonprofit holding corporation resulting from the reorganization shall be governed by the applicable provisions of Chapter 3A. d. A health care service corporation that has completed the reorganization is permitted, pursuant to Section 10A-1-8.02, and subject to any required filings and approvals under Chapter 29 of Title 27, to merge with any domestic or foreign nonprofit corporation if the health care service corporation is the surviving corporation in the merger. (k) As to a person operating one or more hospitals as defined in Section 22-21-20 in the State of Alabama or operating any other direct health care provider in the State of Alabama, a nonprofit holding corporation, including its affiliates, shall not control, directly or indirectly, or own in whole or in part, directly or indirectly, the person. This subsection shall not prohibit the acquisition of such a person that is a foreign entity if the nonprofit holding corporation agrees to have divested the person’s direct health care provider in the State of Alabama within two years after the acquisition closes. As used in this subsection, neither the term “affiliate” nor the term “person” shall mean or include, and the restrictions in this subsection shall not apply with respect to, a health care service corporation organized under this article or a subsidiary thereof. (l) Except if existing before or resulting from the reorganization, the nonprofit holding corporation, including its affiliates, shall not control, directly or indirectly, or own in whole or in part, directly or indirectly, any of the following entities providing health insurance in the State of Alabama: (1) An insurance company licensed pursuant to Chapter 3 of Title 27. (2) A health care service plan formed after calendar year 2025 and licensed pursuant to this article. (3) A fraternal benefit society licensed pursuant to Chapter 34 of Title 27. (4) A health maintenance organization licensed pursuant to Chapter 21A of Title 27. (m) Notwithstanding anything to the contrary, nothing in this section is intended to, nor shall prevent, limit, or restrict in any way, any direct or indirect acquisition, ownership, transaction, business, investment, or other activity that is made, held, or conducted by a health care service corporation or a subsidiary of a health care service corporation that is otherwise permissible for that person under applicable law. (n) Following the reorganization, if a transaction involving a health care service corporation: (i) requires notice to the commissioner of the department pursuant to Section 27-29-5(b)(1)a.1.; and (ii) exceeds five percent of the health care service corporation’s admitted assets as of the 31st day of December next preceding, then in addition to other applicable requirements under Section 27-29-5, the department shall provide the public with notice and an opportunity for a period of 30 days following the date of the public notice to provide written comments to the department on the transaction, and the transaction at issue may be entered into unless the commissioner of the department disapproves the transaction with the 30-day comment period.
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