26.1-17-33.1. Nonprofit health service corporation - Conversion to nonprofit mutual
insurance company - Application of law.
1. Any nonprofit health service corporation organized under chapter 26.1-17, having
admitted assets in excess of all liabilities at least equal to the original surplus required
of a mutual insurance company by section 26.1-12-10, without reincorporation, and
upon adoption of a resolution by its board of directors, may petition the insurance
commissioner for an order to become a nonprofit mutual insurance company subject to
chapter 26.1-12. For the purpose of obtaining approval from the insurance
commissioner, conversion to a nonprofit mutual insurance company under this section
is deemed a consolidation pursuant to chapter 26.1-07 and the procedure described
therein must be followed.
2. Upon becoming subject to chapter 26.1-12, the company may continue to provide
health care and related services to its present or future members and subscribers by
health care contracts and may make provision for the payment of health care services
directly to hospitals and other agencies or institutions or persons rendering health care
services or related services or may make direct payment to the member or subscriber.
The conversion of a nonprofit health service corporation into a mutual insurance
company must not impair the rights or obligations or any existing contractual rights of a
health care service corporation or its members. Except as provided in this section, the
laws that apply to mutual insurance companies, and insurance companies generally,
apply to a nonprofit mutual insurance company converted from a nonprofit health
service corporation pursuant to this section.
3. The nonprofit corporation laws apply to the operation and control of a nonprofit mutual
insurance company converted from a nonprofit health service corporation under this
section and supersede any conflicting provisions in title 26.1 unless title 26.1 is more
restrictive.
4. The funds of a nonprofit mutual insurance company may be invested in those
investments authorized to be made by domestic insurance companies under section
26.1-05-19, as limited by section 26.1-05-18.
5. A nonprofit mutual insurance company may form a wholly owned company for the
purpose of administering Medicare claims and engaging in other business activities
that do not accept insurance risk. A company established under this subsection may
form a joint venture or subsidiary to conduct one or more of the functions the nonprofit
mutual insurance company could conduct directly. An officer, a director, or a
management employee of the nonprofit mutual insurance company may not directly or
indirectly own an interest in a subsidiary.
6. Except as authorized under subsection 12, a nonprofit mutual insurance company may
not demutualize. A nonprofit mutual insurance company may not be converted to a
for-profit mutual company or to a for-profit stock company.
7. A nonprofit mutual insurance company may avail itself of the additional investment
authority under chapter 26.1-10. Upon approval by the commissioner after a showing
of good cause by the nonprofit mutual insurance company, aggregate investments in
all subsidiaries of the company under subsection 20 of section 26.1-05-19 and under
chapter 26.1-10 may exceed an amount equal to twenty-five percent of the company's
admitted assets.
8. A conversion of a nonprofit health service corporation to a nonprofit mutual insurance
company under this section or the restructuring of a nonprofit mutual insurance
company under subsection 12, to the extent that any assets of the nonprofit health
service corporation or the restructured nonprofit mutual insurance company and the
restructured nonprofit mutual insurance company's nonprofit holding corporation
parent formed pursuant to subsection 12 are impressed with a charitable trust
immediately before the conversion or restructuring, does not give rise to a breach of
the charitable trust or violate any fiduciary duty laws, and does not constitute grounds
for disapproval of the petition to convert to a nonprofit mutual insurance company, the
articles of incorporation of the company under section 26.1-12-04, or application for
restructuring of a nonprofit mutual insurance company under subsection 12. A
conversion or restructuring authorized by this section does not diminish the application
of charitable trust or fiduciary duty laws that may apply to the converted or restructured
company immediately before the conversion.
9. A nonprofit mutual insurance company may not engage in the practice of medicine,
dentistry, optometry, or any other profession for which a license or registration is
required.
10. Each nonprofit mutual insurance company and each nonprofit mutual insurance
company and its nonprofit holding corporation parent are charitable and benevolent
organizations and the laws of this state relating to and affecting nonprofit charitable
and benevolent corporations are applicable to all nonprofit mutual insurance
companies and restructured nonprofit mutual insurance companies and their nonprofit
holding corporation parents.
11. Except as authorized under subsection 12, a nonprofit mutual insurance company may
not form a mutual insurance holding company.
12. Upon approval of the nonprofit mutual insurance company's board of directors, the
approval of the commissioner pursuant to this subsection, and any necessary approval
of the nonprofit mutual insurance company's members, a nonprofit mutual insurance
company may restructure, while remaining a nonprofit corporation, by forming a
nonprofit holding corporation that will be the sole member of the restructured company.
a. The restructured company shall retain any additional authority granted to the
restructured company as a nonprofit mutual insurance company under this
section and the restructured company shall remain subject to subsections 3, 4, 5,
6, 7, 8, 9, and 10, except to the extent inconsistent with this subsection and
b. The restructured company must be treated as a mutual insurance company
subject to the provisions of chapter 26.1-12, except for sections 26.1-12-01,
26.1-12-02, 26.1-12-03, 26.1-12-05, 26.1-12-06, 26.1-12-07, 26.1-12-08,
26.1-12-09, 26.1-12-10, 26.1-12-14, 26.1-12-16, 26.1-12-18, 26.1-12-19,
26.1-12-23, 26.1-12-24, 26.1-12-25, 26.1-12-26, 26.1-12-29, and 26.1-12-30.
c. The restructured company may elect to use the term "mutual" in the company's
name, marketing materials, and other communications.
d. The nonprofit holding corporation is subject to the provisions of sections
26.1-12-06, 26.1-12-07, 26.1-12-14, and 26.1-12-16. After restructuring under this
subsection, chapter 26.1-12.1 does not apply to the restructured company or the
restructured company's nonprofit holding corporation parent.
e. The membership interests of the members of the restructuring company must be
converted into membership interests in the nonprofit holding corporation;
however, notwithstanding section 26.1-12-14, upon the effective date of the
restructuring, such membership interests may be weighted or otherwise adjusted
to reflect the number of subscribers covered under a particular policy.
Concomitantly with the restructuring, and without complying with sections
26.1-10-05 and 26.1-10-05.1, the restructuring company may transfer or assign
the restructuring company's shares, membership units, or other incidents of
ownership in one or more of the restructuring company's subsidiaries and
affiliates, as well as the restructuring company's workforce, to the nonprofit
holding corporation.
f. The restructuring company shall submit an application for restructuring,
consisting of revised articles and bylaws, the articles and bylaws of the nonprofit
holding company, any share or membership interest transfer documents,
authorizing resolutions and other materials the restructuring company deems
pertinent to the restructuring to the commissioner. The commissioner shall
approve the restructuring unless, after a public hearing, the commissioner finds:
(1) After the change of control, the domestic insurance company referenced in
subsection 1 would not be able to satisfy the requirements for the issuance
of a certificate of authority to write the lines of insurance for which the
domestic insurance company is presently licensed;
(2) The effect of the merger or other acquisition of control would be to
substantially lessen competition in insurance in this state or tend to create a
monopoly in this state;
(3) The financial condition of any acquiring party might jeopardize the financial
stability of the insurance company or prejudice the interest of the insurance
company's policyholders;
(4) The acquiring party's plans or proposals to liquidate the insurance company,
to sell the insurance company's assets, to consolidate or merge with any
person, or to make any other material change in the insurance company's
business or corporate structure or management are unfair and
unreasonable to policyholders of the company and are not in the public
interest;
(5) The competence, experience, and integrity of those persons that would
control the operation of the insurance company are such that it would not be
in the interest of policyholders of the company and of the public to permit the
merger or other acquisition of control; or
(6) The acquisition is likely to be hazardous or prejudicial to the insurance-
buying public.
g. Within thirty days of submission of the application to the commissioner under this
subsection, the commissioner shall make written findings, conclusions, and a
determination on the application.
13. A merger or consolidation of a nonprofit mutual insurance company that has been
restructured under subsection 12, merger or consolidation of the restructured nonprofit
mutual insurance company's nonprofit holding corporation parent, acquisition of control
of either, or acquisition of another insurer by the restructured company or the
restructured company's nonprofit holding corporation parent is subject to the
provisions of sections 26.1-10-03 and 26.1-10-03.1 and chapter 26.1-07 which would
be applicable to the type of transaction involved.
14. This section does not supersede or impair the rights, powers, or authority of the
attorney general or courts of this state established by statute, case law, or common
law with respect to charitable or benevolent corporations.
