SECTION 33. Insolvency of health maintenance organization; replacement coverage

(a) For purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:—

''Carrier'', a health maintenance organization authorized under chapter 176G, an insurance company authorized to provide accident and health insurance under chapter 175, a nonprofit hospital service corporation authorized under this chapter, a nonprofit medical service corporation authorized under chapter 176B, or any other entity responsible for the payment of benefits or provision of services under a group contract.

''Replacement'', the benefits provided by a succeeding carrier.

''Discontinuance'', the termination of the contract between the group contract holder and a health maintenance organization authorized under chapter 176G due to the insolvency of the health maintenance organization. The word ''discontinuance'' does not refer to the termination of any agreement between any individual enrollee and the health maintenance organization.

(b) (1) In the event of an insolvency of a health maintenance organization authorized under chapter 176G, upon order of the commissioner, all other carriers that participated in the enrollment process with the insolvent health maintenance organization at a group's last regular enrollment period shall offer such group's enrollees of the insolvent health maintenance organization a 30 day enrollment period commencing upon the date of insolvency. Each carrier shall offer such enrollees of the insolvent health maintenance organization the same coverages and rates that it had offered to the enrollees of the group at its last regular enrollment period.

(2) If no other carrier had been offered to some groups whose members were enrolled in the insolvent health maintenance organization, or if the commissioner determines that the other carriers lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group's enrollees of the insolvent health maintenance organization, then the commissioner shall allocate equitably the insolvent health maintenance organization's group contracts for such groups among all health maintenance organizations that operate within a portion of the insolvent health maintenance organization's service area as provided in paragraph (2) of subsection (b) of section 23 of chapter 176G.

(c) (1) Any carrier providing replacement coverage with respect to group hospital, medical or surgical expense or service benefits within 60 days from the date of discontinuance of a prior health maintenance organization contract or policy providing such hospital, medical or surgical expense or service benefits shall immediately cover all enrollees who were validly covered under the previous health maintenance organization contract or policy at the date of discontinuance and who would otherwise be eligible for coverage under the succeeding carrier's contract, regardless of any provisions of the contract relating to active employment or hospital confinement or pregnancy.

(2) Except to the extent benefits for the condition would have been reduced or excluded under the prior carrier's contract or policy, no provision in a succeeding carrier's contract of replacement coverage that would operate to reduce or exclude benefits on the basis that the condition giving rise to benefits preexisted the effective date of the succeeding carrier's contract shall be applied with respect to those enrollees validly covered under the prior carrier's contract or policy on the date of discontinuance.