Application for Certificate of Incorporation
and Certificate of Authority For
Domestic, For Profit, Limited Service Health
Organizations Licensed Under Ch. 611, Wis. Stat.

To view any of the listed statutes, see the Wisconsin Revisor of Statutes Web site.

INTRODUCTION

All persons who wish to do an insurance business in Wisconsin must first obtain a Certificate of Incorporation and a Certificate of Authority from the Insurance Commissioner's Office.

This packet summarizes the procedures for obtaining a Certificate of Incorporation and a Certificate of Authority for a domestic, for profit, limited service health organization (LSHO) licensed in Wisconsin under ch. 611, Wis. Stat. Ch. 609, Wis. Stat., as created by 1985 Wisconsin Act 29, Wis. Stat., defines an LSHO as "a health care plan offered by an organization established under chs. 185, 611, and 613, Wis. Stat., or issued a Certificate of Authority under ch. 618, Wis. Stat., that makes available to its enrolled participants in consideration for predetermined periodic fixed payments, a limited range of health care services performed by providers selected by the organization." A limited service health organization organized under ch. 611, Wis. Stat., is the appropriate vehicle for providers such as dentists, optometrists mental health providers, nurses or chiropractors who wish to operate a for profit, prepaid health care plan which operates with selected providers. Providers who wish to form a nonprofit plan which is not limited to selected providers may do so under ch. 611, Wis. Stat., without forming a limited service health organization.

INITIAL APPLICATION

Section 611.13, Wis. Stat., describes the information which must be filed with this office to obtain a Certificate of Incorporation and a Certificate of Authority for a service insurance corporation. All other provisions of ch. 611, Wis. Stat., should be reviewed carefully for reference to other sections and chapters of the Wisconsin Statutes. Information on how to obtain the Wisconsin insurance laws and regulations is included on the Web page entitled Wisconsin Insurance Laws and Regulations.

In addition to the items included as attachments to this packet, the application should include a letter of transmittal with an index using the numerical identification system shown below. An explanation for the omission of any material should accompany the application.

After review of all the materials filed with the application, and a determination that the applicant is eligible for incorporation, a Certificate of Incorporation will be issued by the Insurance Commissioner's Office. Written instructions will accompany the Certificate of Incorporation outlining any additional information necessary before a Certificate of Authority will be issued.

A statutory fee of $400.00 must be filed with the initial application to help defray the costs of examining the filing. There is also an initial Certificate of Authority fee of $400.00. The applicant will be billed for this when the Certificate of Authority is issued. Checks should be made out to the Office of the Commissioner of Insurance.

Complete NAIC Company Code Application and return to NAIC as indicated.

Questions about application procedure and licensing requirements should be addressed to:

Richard Hinkel
Insurance Examiner Supervisor
Bureau of Financial Analysis and Examinations
(608) 267-7910
richard.hinkel@wisconsin.gov
or Kristin Forsberg
Licensing Specialist
Bureau of Financial Analysis and Examinations
(608) 266-9896
kristin.forsberg@wisconsin.gov

Please file the following material with the Bureau of Financial Examinations in the following order:

I. ARTICLES OF INCORPORATION AND BYLAWS

Proposed Articles and Bylaws should be prepared in accordance with s. 611.12, Wis. Stat.

II. APPLICATION INFORMATION

  1. Application for Certificate of Incorporation and Certificate of Authority.
  2. Authority of the Commissioner to Make Inquiry into the affairs of the company.

III. BIOGRAPHICAL SKETCHES AND COMPENSATION INFORMATION

  1. Biographical Form - Form A should be filed for all initial incorporators, proposed directors and officers. Form B should be filed for any new director, trustee, or officer within 15 days after appointment or election.
  2. The proposed compensation of directors and officers.

IV. AFFILIATED ORGANIZATIONS

  1. Copies of all management, exclusive agency, administrative services or other operating contracts with affiliates or sponsors.
  2. A copy of the latest prospectus of any affiliate required to file under the Federal Securities Act.
  3. A copy of the organization chart showing the relationship and percentage of ownership among affiliated companies and a brief description of the principal business of affiliates within the organization.
  4. Financial statements of any controlling affiliates or sponsors, including a balance sheet as of the end of each fiscal year, and an operating statement for each year for the most recent three years. "Control" is defined in s. 600.03 (13), Wis. Stat.

V. FINANCIAL REQUIREMENTS

  1. LSHOs must have permanent surplus of at least $75,000. The Commissioner may accept a letter of credit or deposit with the state treasurer in satisfaction of this standard if the Commissioner is satisfied that the LSHO transfers all insurance risk to providers through provider agreements. The Commissioner may set a higher permanent surplus requirement on finding that the proposed organization's financial stability requires it.
  2. Initial Deposit or Letter of Credit. Each LSHO is required to maintain at all times either a $75,000 letter of credit with the Commissioner or a deposit with the state treasurer of at least $75,000. The Commissioner may accept this letter of credit or deposit in satisfaction of the initial permanent surplus requirement when the Commissioner is satisfied that the LSHO transfers all insurance risk to providers through provider contracts. Letters of credit must be clean, irrevocable, and automatically renewable on an annual basis for a term of three years unless notice is given to the Commissioner at least 60 days prior to a renewal date. The letter of credit shall be payable to the Commissioner when liquidation or rehabilitation proceedings have been initiated.
  3. Compulsory Surplus. Compulsory surplus is an ongoing financial standard. It is the amount of surplus (net worth) a LSHO is required to maintain at all times. Compulsory surplus is the greater of $75,000 or 3% of premiums earned in the previous twelve months. An LSHO with an initial capital of $75,000 will satisfy the requirement provided it maintains this $75,000 of surplus and its premium volume in the previous 12 months does not exceed $2,500,000 and it transfers all insurance risks to providers through provider agreements.
  4. Security Surplus. Security surplus is a financial standard which should be met to provide an ample margin of safety and to assure a sound operation. It should be between 110% and 140% of compulsory surplus depending on the amount of premium.

    To meet the security surplus requirements the security surplus of an LSHO shall be the compulsory surplus plus 40% for insurers with premiums of $10 million or less. For insurers with more than $10 million in premiums, the security surplus is reduced by 1% for each additional $33 million of premiums. However, in no case will security surplus be less than 10% of compulsory surplus.

    Security surplus is a tool used by the Commissioner's Office to monitor the solvency of insurers.

  5. Operating Funds. The limited service health organization shall make arrangements satisfactory to the Commissioner to provide sufficient funds to finance any operating deficits in the business and to prevent impairment of the organization's permanent and compulsory surplus. In determining the acceptability of these arrangements the Commissioner will take into account reasonable projections of enrollment, claims and administrative costs, financial guarantees, financial conditions of guarantors, and other relevant information.
  6. Financial Guarantees. Financial guarantee information should include a summary of all financial guarantees by providers, sponsors, controlling affiliates or parents, or any other guarantee which is intended to insure the financial success of the plan. Such guarantees may include, but are not limited to, hold-harmless agreements by providers, solvency insurance, reinsurance, or other guarantees.
  7. Financial Projections. Financial projections should include projected enrollment, premiums and other income, benefits, administrative, and other costs and the projected point of break-even in terms of income compared to disbursements and enrollment. The method of funding the accumulated losses until break-even and a summary of the assumptions that are made in developing projected operating results should be included.

VI. BUSINESS PLAN

All applications for Certificates of Incorporation and Certificates of Authority for limited service health organizations shall include a proposed business plan. In addition to the items listed in ss. 611.13 and 613.13, Wis. Stat., the following information shall be contained in the business plan:

  1. Organization Type. The type of organization, including whether the limited service health organization is to be a staff model, group model, individual practice association, or a variation of these types.
  2. Feasibility Studies and Marketing Surveys. A summary of feasibility studies or marketing surveys which support the financial and enrollment projections for the plan. These should include the potential number of enrollees for the first five years, the underwriting standards to be applied, and the method of marketing the organization.
  3. Geographical Service Area. The geographical service area by county including a chart showing the number of primary and specialty care providers with locations and service areas by county, the method of handling emergency care, with locations of emergency care facilities, and the method of handling claims for out-of-area services.
  4. Provider Agreements. A draft of provider agreements with sufficient detail to determine the extent of risk assumed by the provider; the method of reimbursing both primary and specialty providers, including any hold harmless provisions; the terms for modifying or canceling the agreement; and any method of sharing profits or recovering operating losses through assessing providers or adjusting the capitation or fee-for-service rates. Any contractual arrangements intended to cover liabilities or provide health care services must be filed with the Commissioner in final form with signatures of the parties to the agreement before the initial Certificate of Authority will be issued. In cases where identical contracts are used for several providers the names of those who have signed the contract will suffice.
  5. Plan Administration. A summary of how administrative services will be provided, including the size and qualifications of the administrative staff and the projected cost of administration in relation to premium income. If management authority for a major corporate function is delegated to a person outside an organization, the business plan shall include a copy of the contract. The contract shall include the services to be provided, the standards of performance for the manager, the method of payment including any provisions for the administrator to participate in the profit or losses of the plan, the duration of the contract and any provisions for modifying, terminating or renewing the contract. Contracts for delegated management authority shall be filed with the Commissioner under s. 611.67, Wis. Stat. The Commissioner may disapprove a contract only if the Commissioner makes one of the findings specified in s. 618.22, Wis. Stat.
  6. Contracts with Enrollees. A summary of benefits to be offered enrollees including any limitations and exclusions and the renewability of all contracts to be written, and rates and classes of subscribers.

Materials and documents filed by existing plans incorporated and licensed under ch. 611, Wis. Stat., are available for your review from the Central Files Section of the Office of the Commissioner of Insurance. All such material may be copied for a minimal fee. You are encouraged to review such files before making application for the incorporation and licensing of a ch. 611, Wis. Stat., corporation.


APPROVAL OF POLICY FORMS

Insurers may not solicit business or market a plan unless their policy forms have been approved by the Bureau of Market Regulation of the Commissioner's Office.

The forms filing procedure is described in the Information for Newly Licensed Limited Service Health Organizations section, along with information on marketing, soliciting, advertising, underwriting, and grievance procedures.

Questions about policy forms, premium rate filings, and marketing practices should be addressed to:

Bureau of Market Regulation
Division of Regulation and Enforcement
(608) 266-3709
ocicomplaints@wisconsin.gov

LICENSING OF AGENTS

Anyone who markets for the insurer must be licensed as an agent and be listed with the Insurance Commissioner's office as a representative for the company.

Questions about licensing agents should be addressed to:

Agent Licensing Section
Division of Administrative Services
(608) 267-1238
ociagentlicensing@wisconsin.gov


The application packet forms are available to be downloaded below. Note, however, that you will need an Adobe Acrobat Reader to view or print the application, which you can download at no cost from Adobe .

Application Packet Forms (opens in new window)

Copies of the following documents are included:

Application for Certificate of Incorporation and Certificate of Authority
Authority of Commissioner to Make Inquiry
Form A - Biographical information for all initial incorporators and proposed directors and principal officers
Form B - Biographical information for new directors, trustees, or officers


INFORMATION FOR NEWLY LICENSED
LIMITED SERVICE HEALTH ORGANIZATIONS

Note: The following address is a link to the administrative code in pdf format:
http://www.legis.state.wi.us/rsb/code/ins/

To link to chapters in the administrative code, add insxxx.pdf to the end of the address. xxx represents the chapter number in three digits (003 for chapter 3).

The following information applies to insurers operating as limited service health organizations and addresses frequently noted problems. Insurers are encouraged to review chs. 600 to 646, Wis. Stat., and the Wisconsin Administrative Code, Rules of the Commissioner of Insurance, before drafting policy forms or developing marketing campaigns in Wisconsin. Chapter 609, Wis. Stat., and s. Ins 3.52, Wis. Adm. Code, contain specific requirements for limited service health organizations. Approved policy forms are available for review in the Commissioner’s Office during regular business hours. Insurers may find it helpful to review approved forms before drafting their own documents.

I. MARKETING, SOLICITATION, AND ADVERTISING

  1. Newly licensed LSHOs should be aware that there are strict requirements regarding advertising and marketing practices in Wisconsin. See s. Ins 3.27, Wis. Adm. Code.
  2. LSHOs may not advertise specific benefits or rates or accept applications until policy forms are filed with and approved by the Market Regulation Bureau. Advertisement is broadly defined in s. Ins 3.27 (5), Wis. Adm. Code. If you are contemplating marketing activities prior to approval of your forms, you may wish to contact the Bureau of Market Regulation staff at (608) 266-0103 for further information.
  3. In most cases, LSHOs must use licensed insurance agents to market policies. See s. 628.02, Wis. Stat., for the definition of who is considered an agent.

II. FORMS FILING PROCEDURES

  1. Forms must be filed under s. 631.20, Wis. Stat., and s. Ins 6.05, Wis. Adm. Code. The rule outlines the contents of the filing letter and the use of Certificate of Compliance.
  2. All individual policy forms and group certificate forms must be in simplified language. A certification of readability required by s. Ins 6.07, Wis. Adm. Code, must accompany each filing.
  3. For group policy forms submit the following:
    1. Master policy
    2. Certificate
    3. Policyholder application
    4. Certificate holder enrollment form
    5. Riders, endorsements (if any)
  4. For individual policy forms submit the following:
    1. Policy
    2. Riders, endorsements (if any)
    3. Policyholder application
    4. Premium rates
    5. Anticipated loss ratio

III. REQUIRED CONTRACT PROVISIONS FOR LSHO POLICY FORMS

The list below contains some but not all of the required contract provisions for LSHO policy forms. Review subchapter 6 of ch. 632, Wis. Stat., for more specific requirements and restrictions. If you have a question about the applicability of a contract provision to your particular policy, call the Bureau of Market Regulation at (608) 266-0103 for assistance before drafting your policy forms.

  1. Required definitions: s. Ins 3.52 (9) (a), Wis. Adm. Code.
  2. Required disclosures, including the location of all exclusions, limitations and exceptions in one section: s. Ins 3.52 (9) (b), Wis. Adm. Code.
  3. Grievance procedures: s. 609.15, Wis. Stat., and s. Ins 3.52 (10), Wis. Adm. Code.
  4. Disenrollment procedures: s. Ins 3.52 (12), Wis. Adm. Code.
  5. Coordination of benefits - only applies to group policy forms: s. Ins 3.40, Wis. Adm. Code.
  6. Policy extension for handicapped children: s. 632.88, Wis. Stat.
  7. Coverage for newborn infants: s. 632.895 (5), Wis. Stat., and s. Ins 3.38, Wis. Adm. Code.
  8. Coverage for adopted children: s. 632.896, Wis. Stat.
  9. The following provisions may be required if the LSHO plans to provide coverage for hospital treatment:
    1. Alcoholism, drug abuse and mental/nervous disorders for group policies: s. 632.89, Wis. Stat.
    2. Home health care: s. 632.895 (2), Wis. Stat.
    3. Skilled nursing home coverage: s. 632.895 (3), Wis. Stat.
    4. Kidney disease treatment: s. 632.895 (4), Wis. Stat.
  10. Equipment and supplies for treatment of diabetes: s. 632.895 (6), Wis. Stat. It is the position of the office that insulin is considered to be a supply rather than a drug as far as policy limitations are considered.
  11. Special requirements for individual policies: s. Ins 3.13, Wis. Adm. Code.
  12. Special requirements for group policies: s. Ins 3.14, Wis. Adm. Code.
  13. Grace period for Payment of Premiums: ss. 632.78 and 632.79, Wis. Stat.
  14. Termination and/or change of policy terms: s. 631.36, Wis. Stat.

IV. UNDERWRITING

  1. If the insurer plans to underwrite, the insurer should review ss. Ins 3.28 and Ins 3.31, Wis. Adm. Code, the restrictions on use of genetic test results in s. 631.89, Wis. Stat., and HIV test results in s. 631.90, Wis.. Stat., and s. Ins 3.53, Wis. Adm. Code.
  2. Replacement forms - applies to replacement of individual policies only. See s. Ins 3.29, Wis. Adm. Code.

V. COMPLAINTS AND GRIEVANCES

LSHOs are required to keep records of complaints and grievances for three years, and to file an annual report summarizing the grievances each year: ss. 609.15 (1) and (2), Wis. Stat., and s. Ins 3.52 (10) (g), Wis. Adm. Code.


A Designation of Registered Agent for Service of Process (OCI 12-014) form is available to be downloaded below. Note, however, that you will need an Adobe Acrobat Reader to view or print the application, which you can download at no cost from Adobe .

Designation of Registered Agent for Service of Process (opens in new window)
Fill and Print Version (opens in new window)


NAIC Company Code Application

A link to the NAIC Company Code Application form is provided below for your convenience. Note, however, that you will need an Adobe Acrobat Reader to view or print the application form, which you can download at no cost from Adobe .

NAIC Company Code Application (opens in new window)


Please direct questions to: ocifinancial@wisconsin.gov (please include your name, phone number, and e-mail address).