Section 43.06 - Net Worth Requirements(1)Initial Net Worth. The Commissioner shall require upon issuance of an initial license under this chapter that a HMO shall have an initial adjusted net worth of $1,500,000.(2)Ongoing Net Worth. Except as provided by 211 CMR 43.06(3), the adjusted net worth of a HMO shall be maintained subsequent to initial licensure in an amount equal to the greater of the following amounts: (b) 2% of annual premium revenues as reported on the most recent annual financial statement filed with the Commissioner on the first $150,000,000 of premium and 1% of annual premium on the premium in excess of $150,000,000;(c) An amount equal to the sum of three months uncovered expenditures as reported on the most recent financial statement filed with the Commissioner;(d) An amount equal to the sum of: 1. 8% of annual health care expenditures except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner; and2. 4% of annual hospital expenditures paid on a managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner.(3) In determining adjusted net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the Commissioner, which shall at a minimum meet the following requirements:(a) The effective date, amount, interest and parties involved in such debt are clearly set forth;(b) The principal sum and any interest accrued thereon are subject to and subordinate to all other liabilities of the HMO, and upon dissolution or liquidation, no payment of any kind shall be made until all other liabilities of the HMO have been paid;(c) The instrument states that the parties agree that the HMO must obtain written approval from the Commissioner prior to any payment of interest or repayment of principal; and(d) The debt is deemed fully subordinated by the Commissioner in his or her discretion.(4) Any debt incurred by a note meeting the requirements of 211 CMR 43.06(4) shall not be considered a liability and shall be recorded as equity.Amended by Mass Register Issue 1349, eff. 10/6/2017.