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HB391 INTRODUCED
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HB391
DGM32TT-1
By Representative Pringle
RFD: Insurance
First Read: 05-Feb-26
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DGM32TT-1 02/03/2026 JC (L)JC 2026-469
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First Read: 05-Feb-26
SYNOPSIS:
This bill would authorize a health care service
corporation to reorganize under the ultimate control of
a nonprofit holding corporation.
This bill would permit a nonprofit holding
corporation that controls a health care service
corporation to make and receive certain transfers and
distributions.
This bill would further establish operational
and reporting requirements for nonprofit holding
corporations, their subsidiaries, and the reorganized
health care service corporation.
A BILL
TO BE ENTITLED
AN ACT
Relating to health care service corporations; to add
Section 10A-20-6.17 to the Code of Alabama 1975; to authorize
the formation of a nonprofit holding corporation by a health
care service corporation by means of a reorganization; to
provide for the reorganization process; to require notice of
the reorganization to the Department of Insurance; and to
specify the status and authority of the health care service
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specify the status and authority of the health care service
corporation and the nonprofit holding corporation.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 10A-20-6.17 is added to the Code of
Alabama 1975, to read as follows:
§10A-20-6.17
(a) For the purposes of this section, the following
terms have the following meaning:
(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 that
operates under Chapter 3A and that, 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
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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 a
reorganization, may have a nonprofit holding corporation as
the ultimate controlling person.
(2) A 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;
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 a
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
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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 a reorganization.
(5) Compliance with this subsection and subsections (c)
and (d) shall be the exclusive means of effecting a
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 a 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 a 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
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(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 that 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:
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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 which 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 a 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
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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) A 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 a 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 a
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.
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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 a reorganization shall be governed
by the applicable provisions of Chapter 3A.
d. A health care service corporation that has completed
a 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.
Section 2. This act shall become effective on October
1, 2026.
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