A copy of a certificate of incorporation of a hospital service corporation may be filed in the Department of Insurance as aforesaid only when there shall be indorsed on or appended to the original thereof the approval of the Commissioner of Insurance, who is hereby authorized to grant such approval if, in his judgment, the operation of a nonprofit hospital service plan by such corporation is in the public interest. No certificate of authority shall be issued to any such corporation unless the bylaws provide that the board of directors of such hospital service corporation subject to the provisions of this act shall be composed of persons who are representative of the member hospitals of such corporation, its subscribers and the general public. Not more than one-third of the directors of any hospital service corporation shall be persons who are licensed to practice medicine and surgery in this State (other than physicians employed on a full-time basis in the fields of public health, public welfare, medical research or medical education) or who are trustees, directors or employees of a corporation organized for hospital purposes. Of the directors not included in the classification set forth in the preceding sentence, one-half in number, as nearly as possible, shall be persons (1) who have coverage under a contract or contracts issued by such hospital service corporation, (2) who are generally representative of broad segments of the subscribers covered under contracts issued by such corporation, and (3) who, or whose spouse or minor children, are not officers, directors or owners of more than 10% of the stock of a corporation whose aggregate sales to hospitals exceed 5% of its total sales, and one-half in number, as nearly as possible, shall be persons (a) whose background and experience indicate that they are qualified to act in the broad public interest, (b) who may or may not have coverage under a contract or contracts issued by such hospital service corporation, and (c) who, or whose spouse or minor children, are not officers, directors or owners of more than 10% of the stock of a corporation whose aggregate sales to hospitals exceed 5% of its total sales. Each such hospital service corporation shall have an executive committee the members of which shall be composed, as nearly as possible, of an equal number of representatives of the member hospitals of such corporation, its subscribers and general public. Compliance with the provisions of this section shall be under the supervision of the Commissioner of Insurance. Within 10 days after a vacancy in the board of directors of a hospital service corporation shall occur, such corporation shall notify the Commissioner of Insurance in writing that such vacancy exists. Not more than 10 days after the election of a person as a director of a hospital service corporation, such corporation shall furnish, in writing, the following information to the Commissioner of Insurance: the name and address of the person so elected; whether such person is representative of the member hospitals of such corporation, or its subscribers, or the general public and qualified to serve under the provisions of this section; and a biographical statement concerning such person. In the event that the Commissioner of Insurance shall find, after hearing, that the composition of the board of directors of a hospital service corporation is not in compliance with the provisions of this section, he may direct that such board of directors be reconstituted in accordance with his finding. The provisions of this section shall apply only to directors of hospital service corporations elected or re-elected after the effective date of this act.

L.1938, c. 366, p. 926, s. 5. Amended by L.1967, c. 19, s. 1, eff. March 21, 1967; L.1970, c. 109, s. 1, eff. June 26, 1970.