(1) Every prepaid health clinic shall comply with one of the following paragraphs:(a) The prepaid health clinic shall secure insurance to the satisfaction of the office to protect subscribers in the event the prepaid health clinic is unable to meet its obligations to subscribers under the terms of any prepaid health clinic contract issued to a subscriber.
(b) The prepaid health clinic shall file with the office a surety bond issued by an authorized surety insurer. The bond shall be for the same purpose as the insurance in lieu of which the bond is filed. The office shall not approve any bond under the terms of which the protection afforded against insolvency is not equivalent to the protection afforded by such insurance. The bond shall guarantee that the prepaid health clinic will faithfully and truly perform all the conditions of any prepaid health clinic contract. No such bond shall be canceled or subject to cancellation unless at least 60 days’ notice of the cancellation, in writing, is filed with the office. In the event that the notice of termination of the bond is filed with the office, the prepaid health clinic insured under the bond shall, within 30 days of the filing of the notice of termination, provide the office with a replacement bond meeting the requirements of this part or secure insurance as required by paragraph (a). The cancellation of a bond does not relieve the obligation of the issuer of the bond for claims arising out of contracts issued prior to the cancellation of the bond unless a replacement bond or insurance is secured. In no event shall the issuer’s aggregate liability under the bond exceed the face amount of the bond. If, within 30 days of filing the notice of termination, a replacement bond or insurance has not been secured and filed with the office, the office shall suspend the certificate of the prepaid health clinic until the deposit requirements are satisfied. Whenever the prepaid health clinic ceases to do business in this state and furnishes to the office satisfactory proof that it has discharged or otherwise adequately provided for all of its obligations to its subscribers, the office shall release any bond filed by the prepaid health clinic.
(2) In determining the sufficiency of the insurance required under paragraph (1)(a) or the surety bond required under paragraph (1)(b), the office may consider the number of subscribers, the basic services included in subscriber contracts, and the cost of providing such basic services to subscribers in the geographic area served.
(3) Every prepaid health clinic shall deposit with the department a cash deposit in the amount of $30,000 to guarantee that the obligations to the subscribers will be performed.
