Premium payment; reserves.

A. Each group shall establish to the satisfaction of the director a premium payment plan that shall include: (1) an initial payment by each member of at least twenty-five percent of that member's annual premium before the start of the group's fund year; and (2) payment of the balance of each member's annual premium in monthly or quarterly installments during that fund year. B. Upon approval by the director, a group may establish an alternative premium payment plan that shall include: (1) provision by each member of premium security by surety bond in an amount equal to at least twenty-five percent of the member's annual premium; provided that the surety bond shall be in a form acceptable to the group, shall be issued by a corporate surety company authorized to transact business in this state and shall be effective before the start of the group's fund year; and (2) payment by each member of the member's annual premium in monthly or quarterly installments during the group's fund year. C. Each group shall establish and maintain actuarially appropriate loss reserves that shall include reserves for: (1) known claims and associated expenses; and (2) claims incurred but not reported and associated expenses. D. Each group shall establish and maintain bad debt reserves based on the historical experience of the group or other groups.