The Commissioner of Insurance adopts new Subchapter AA, §§11.2601-11.2612, relating to delegation agreements entered into by Health Maintenance Organizations (HMOs) with certain delegated entities. Sections 11.2604 and 11.2612 are adopted with changes to the proposed text as published in the March 22, 2002 issue of the Texas Register (27 TexReg 2182). Sections 11.2601 11.1603 and 11.2605 - 11.2611 are adopted without changes and will not be republished.
This adoption is necessary to implement provisions of Insurance Code Article 20A.18C, which was reenacted and amended by HB 2828 in the 77 th Texas Legislative Session. HB 2828 amends the definition of "delegated entity" in the Texas HMO Act, Texas Insurance Code, Article 20A.02(ee) and adds definitions for "delegated network," "delegated third party" and "limited provider network." HB 2828 clarifies the requirements in the statute that must be met in order for an HMO to delegate certain functions to delegated entities. The statute defines a "delegated entity" as any non-HMO entity to which an HMO delegates the responsibility to arrange for or to provide medical care or health care to an enrollee in exchange for a predetermined payment on a prospective basis and that accepts responsibility to perform on behalf of the HMO any function regulated by the Texas HMO Act. The statute requires that delegation contracts between HMOs and delegated entities, as well as contracts between delegated entities and other third parties involved in the delegation chain, contain clauses that require the delegated entity to provide sufficient information to the HMO to allow the HMO to monitor the solvency of the delegated entity and the ability of the delegated entity and any delegated third parties to perform the functions delegated by the HMO in the contract.
These contracts must also allow the department to conduct on-site examinations of the delegated entity and any delegated third parties to obtain information that the department believes is relevant to the issue of the delegated entity or the delegated third party's solvency or ability to carry out any function delegated by the HMO. These examinations may be conducted based on information received from the HMO as a result of its monitoring or upon the department's own initiative if the department believes that circumstances so warrant. The statute also sets out specific solvency requirements that must be met by a delegated network taking on full financial responsibility for the provision of more than one category of services on behalf of the HMO.
Article 20A.18C provides that an HMO remains ultimately responsible for ensuring that any function delegated under Art. 20A.18C, including claims payment, is performed in compliance with the statutes and rules governing that function. This does not mean that the HMO would be responsible for directing the day to day management and operations of a delegated entity or its delegated third parties. However, the HMO must develop and maintain a monitoring plan that enables the HMO to determine that all delegated functions are being performed appropriately and that all delegated entities and/or third parties performing delegated functions have the financial ability to continue to perform the delegated functions. If an HMO cannot determine this through its monitoring plan, the HMO should either end the agreement or, if it chooses, reach an agreement with a delegated entity that includes an effective monitoring plan. If the HMO does not or cannot comply with its responsibilities under the subchapter, the statute clarifies that the commissioner is authorized to take any action necessary, including the ability to order an HMO to resume any delegated function, up to and including the payment of claims that a delegated entity has failed to pay. HB 2828 did not make available to the commissioner new enforcement authority. However, upon requesting corrective action by a delegated entity, the commissioner is authorized to enter an order requiring an HMO to take action that will ensure the HMO´s compliance with the HMO Act.
Section 11.2601 explains the purpose and scope of the subchapter. Section 11.2602 defines terms within the subchapter. Section 11.2603 describes the requirements for an HMO that delegates any function pursuant to Art. 20A.18C of the Texas Insurance Code. Section 11.2604 describes the requirements that must be included in any delegation agreement entered into by an HMO as well as the information that must be provided to the HMO by the entity with which the HMO has entered into a delegation agreement. Section 11.2604 has been changed from the proposed language in response to a comment to clarify that a delegated entity must report IBNR reserves to an HMO with which it contracts. Section 11.2605 describes the information that an HMO must provide to an entity with which the HMO has entered into a delegation agreement. Section 11.2606 sets forth the actions an HMO must take if, as a result of its monitoring of the delegated entity or for any other reason, the HMO becomes aware that the delegated entity is not operating in accordance with the delegation agreement or is operating in a condition that may impair its ability to perform its duties under the agreement. Section 11.2607 sets forth the manner in which the department performs examinations of delegated entities or delegated third parties pursuant to this subchapter and has been changed to clarify that complaints filed with the department may also trigger an examination, as described in the statute. Section 11.2608 describes the types of actions the department may take to ensure that: (1) delegated functions are being performed in compliance with the department's statutory and regulatory requirements; (2) the delegating HMO is performing in compliance with statutory and regulatory requirements that relate to the matters delegated by an HMO; and (3) delegated functions are being performed by an entity with the solvency to carry out those functions. Section 11.2609 sets forth the reserve requirements for delegated networks as defined by HB 2828. Section 11.26 10 sets forth penalties for non-compliance with the subchapter. Section 11.2611 relates to the filing of delegation agreements entered into by an HMO. Section 11.2612 establishes a compliance date for the subchapter. Section 11.2612 has been changed from the proposed language to include only contracts that are entered into or renewed on or after the effective date of this rule. The phrase "or amended" has been removed.
General: Some commenters support adoption of the rule. One commenter remarks that the rule simply restates the statute.
Agency Response: The department appreciates the support. As to the second comment, many of the sections actually restate the statutory requirements in terms that clarify the department's interpretation of the statute rather than repeat verbatim the language of the statute. Some provisions in the statute are included in the rule to allow the reader to more easily understand how the requirements of the statute relate to the requirements established by the rule.
General: A commenter believes that the statute requires inclusion of a provision stating that HMOs retain responsibility to pay physicians in all circumstances in which the delegated entity fails to pay as required. The commenter believes this interpretation is mandatory in order to give meaning to Art. 20A.18C(a)(4), which states that delegation agreements may not be construed to limit an HMO's responsibility, including financial responsibility, to comply with all statutory and regulatory requirements. Another commenter recommends clarifying the rule to make it clear that HMOs have financial responsibility for payment to physicians so that HMOs will better communicate with delegated entities in order to avoid double payment.
Agency Response: The department disagrees that such a provision is necessary or that the section requires clarification. The department interprets claims payment to physicians and providers to be the ultimate responsibility of the HMO in instances in which physicians and providers have not been paid, except where an HMO can prove fraud by the physician or provider or other compelling circumstances to the contrary. Article 20A.18C clearly requires delegating HMOs to continue to comply with all applicable statutes and regulations. Delegation does not relieve an HMO of the duty of compliance. If a delegated entity is not complying with applicable statutes and regulations, §11.2603(g) deems the HMO itself in violation. Sections 11.2603(f) and (g) reflect the department´s long-standing interpretation of Article 20A.18C that an HMO may not contract away the ultimate responsibility for compliance with all applicable statutes and regulations. Nor does the department concur with the commenter´s interpretation of the term "financial responsibility" in Article 20A.18C(a)(4). The 76th Texas Legislature added this provision as part of SB 890. Article 20A.18C(l) was added by HB 2828 during the 77 th Legislative session. The department believes the phrase "including financial responsibility" in SB 890 clarifies that the regulatory requirements with which the HMO must comply include all applicable financial solvency requirements. This interpretation recognizes that the quoted term was added before the enactment of Article 20A.18C(l). Communication between delegated entities and HMOs is addressed in the rule through the exchange of information in the monitoring plan. A lack of monitoring by the HMO is a factor the Commissioner may consider in exercising the discretion to order a necessary corrective action by the HMO.
General: A commenter believes there are consumer-oriented provisions in the statute that are not contained in the rule.
Agency Response: The department disagrees. While there are some aspects of the statute that are not included in the rules, these provisions deal with limited provider networks which are not within the scope of the rules. The department believes that the statutory provisions pertaining to limited provider networks are sufficiently prescriptive in nature and do not need clarification. As noted in the preamble to the proposed rules, the purpose of the rule is to clarify the responsibilities and accountability that an HMO retains for all delegated functions, thereby ensuring the quality of health care provided to consumers. For example, §11.2603(d) requires a delegating HMO to have a written contingency plan to maintain quality and continuity of care for enrollees.
General: A commenter suggests that the delegated entity be required to obtain an actuarial certification of the IBNR estimates, at least annually, to assist the HMO in validating the estimates of outstanding liabilities.
Agency Response: The department disagrees that an actuarial certification of the IBNR estimates would be necessary in all instances. The rule is designed to provide flexibility for HMOs and delegated entities and sets a minimum level of information to be exchanged between the parties. If an HMO desires additional information, the parties may include additional standards, such as an actuarial certification of IBNR estimates, in the delegation agreement.
§11.2601: A commenter recommends adding a provision stating that this subchapter does not apply to delegated entity contracts that do not undertake to arrange for or to provide medical care or health care services to an enrollee in exchange for a determined payment on a prospective basis, such as delegation of credentialing to HMOs.
Agency Response: The department disagrees this is necessary. The applicability provision states that the subchapter applies only to delegation agreements entered into pursuant to Article 20A.18C. The definition of delegated entity in both the statute and the rule indicates that a delegated entity does not include HMOs and only includes entities that undertake to arrange for or to provide medical care or health care services to an enrollee in exchange for a predetermined payment on a prospective basis and that accept responsibility to perform on behalf of the HMO a function regulated by the HMO Act. The department would need to review an individual fact pattern to determine whether an entity may be considered a delegated entity.
§11.2601(a)(3): A commenter suggested that the language in this paragraph would more clearly reflect legislative intent if it indicated that the HMO was ultimately responsible for delegated functions and compliance with applicable rules and statutes.
Agency Response: The department disagrees. The language in §11.2601(a)(3) addresses the scope of the rule. Section 11.2603(f) addresses responsibilities retained by an HMO in language substantially similar to the commenter's proposal.
§11.2602: A commenter requested clarification that the assumption of risk by an IPA for outpatient radiology services does not result in the IPA being a delegated entity.
Agency Response: The department disagrees that this clarification is needed. The rule contains a specific definition of "delegated entity" in §11.2602(2). The department would need to review an individual fact pattern to determine whether an entity may be considered a delegated entity.
§11.2603: A commenter requested that the term "delegated entity" in this section be replaced with the term "delegated network." The commenter believes that use of the term "delegated entity" may encompass a scope beyond what the statute contemplates.
Agency Response: The department disagrees. This section reflects legislative intent, per the definition of "delegated entity," that HMOs remain responsible for any and all delegated functions. Use of the term "delegated network" in place of "delegated entity" would render this section inapplicable to delegation agreements that are not a total transfer of risk for more than one category of health care services.
§11.2603: A commenter noted that although HMOs can monitor delegated entities and conduct audits and oversight activities, HMOs cannot be expected to guarantee, and have no authority to require, compliance by the delegated entity.
Agency Response: The department disagrees. The statute makes clear that an HMO retains its responsibility for regulatory compliance, even when it has delegated a function. The statute also requires contracts between an HMO and a delegated entity to include a provision requiring the delegated entity to comply with all applicable statutes and regulations. Further, the statute requires the HMO to monitor the delegated entity´s compliance.
§11.2603(c): A commenter believes that by requiring the HMO to evaluate the "projected financial effects of the agreement upon the delegated entity" the rule imposes a higher standard than is required in statute and one that is impossible for the HMO to attain. The commenter believes the rule tasks the HMO with responsibility for financial oversight of delegated entities above those required by statute. The commenter also believes that the rule should require audited financial statements because, unless the statements are audited, the HMO cannot accept any higher level of responsibility.
Agency Response: The department disagrees. Both the statute and the rule require an HMO to make some determination that the entity to which it delegates has the ability and solvency to perform the delegated functions. A preliminary evaluation of a delegated entity´s ability to perform under the contract is the first aspect of this determination. Further, an HMO must develop and maintain a monitoring plan that enables the HMO to determine that all delegated entities and/or third parties performing delegated functions are performing appropriately and are sufficiently solvent to be able to continue to do so. If an HMO cannot adequately determine that the delegated entity can do so through its monitoring plan, the HMO should either end its agreement with the delegated entity or, if it chooses, reach an agreement with a delegated entity that includes an effective monitoring plan. Finally, although the rule does not require that an agreement contain a provision that the delegated entity supply audited financial statements, nothing prohibits an HMO from requiring that the financial statements be audited or refusing to enter into a delegation agreement with an entity that will not agree to submit audited financial statements.
§11.2603(g): A commenter recommends deletion of the provision that a violation of the HMO Act or rules by a delegated entity constitutes a violation by the HMO, on the grounds that an HMO has no prior control over what the delegated entity does.
Agency Response: The department disagrees. Article 20A.18C requires delegating HMOs to continue to comply with all applicable statutes and regulations. Section 11.2603(g) reflects the department´s long-standing interpretation of Article 20A.18C that an HMO may not contract away the ultimate responsibility for compliance with all applicable statutes and regulations. As to the HMO´s lack of control over a delegated entity, the HMO´s agreement with a delegated entity must allow the HMO to monitor whether and in what degree delegated functions are performed. If the HMO cannot do so, or if monitoring indicates that the delegated entity is not complying with the applicable statute or rules, the HMO is responsible for correcting the arrangement. This provision is intended to prevent an HMO from using a delegation agreement as a means of disavowing its responsibility to comply with all statutes and regulations governing the HMO as a condition of its licensure by the department as an HMO.
§11.2603(i): A commenter suggested requiring a more definite time frame for the reporting of penalties assessed by an HMO for the delegated entity´s failure to provide information as required in §11.2604(b)(4). The commenter suggested replacing "within a reasonable time" with "no less than quarterly."
Agency Response: The department disagrees. The rule provides flexibility in reporting penalties assessed to encourage more expeditious handling of breaches of greater severity. In more serious situations, quarterly reporting may not be adequate.
§11.2603(j): A commenter believes that requiring an HMO to resume delegated functions in the event that the HMO cannot ensure compliance by the delegated entity is unreasonable and could result in unnecessary disruptions to members.
Agency Response: The department disagrees. The statute makes clear that an HMO may cancel delegation in order to ensure full compliance with all applicable statutes and regulations. The rule requires an HMO to resume delegated functions in the event that the HMO cannot ensure compliance by the delegated entity. Where appropriate, an HMO should follow the procedure in §11.2606 to determine whether the delegated entity is in compliance. The HMO is always ultimately responsible for compliance and the HMO´s efforts at making such a determination should reflect this. As to the point concerning disruption to members, §11.2603(d) requires an HMO to have in place a written contingency plan that will minimize disruption in the event that the delegation agreement is terminated.
§11.2604: A commenter believes that since Article 20A.18G requires a limited provider network or delegated entity to comply with all statutory and regulatory requirements relating to any function, duty, responsibility, or delegation assumed by or carried out by the limited provider network or delegated entity, there is no need for a rule requiring an HMO to monitor a delegated entity's ability to maintain the solvency required to perform delegated functions.
Agency Response: The department disagrees. Article 20A.18C requires an HMO to develop and maintain a monitoring plan that enables the HMO to determine that all delegated functions are being performed appropriately and that all delegated entities and/or third parties performing delegated functions have the financial ability to continue to perform the delegated functions. Article 20A.18C(r) provides the department with specific authority to adopt rules to enforce Art. 20A.18C.
§11.2604(b): A commenter believes the rule exceeds statutory authority by requiring a delegated entity to provide the same financial information for each function being delegated without regard for the particular risk being assumed.
Agency Response: The department disagrees. The rule is designed to ensure that whatever functions a delegated entity may take on, the delegated entity or any subsequent delegated third party actually performing the function must have and maintain financial resources to ensure that it can perform each delegated function adequately. The rule requires an HMO to obtain, at a minimum, basic information relating to an entity's financial viability, such as cash flow records and balance sheets. In order to appropriately monitor delegation of complex financially-based transactions, such as claims payment, an HMO will likely need to obtain more detailed information such as an entity's cash reserves and outstanding financial obligations than the HMO would need to determine if an entity can perform, for example, credentialing. The statute specifically requires monitoring of a delegated entity´s ability to perform the delegated functions. The rule simply clarifies the minimum information necessary for an HMO to adequately monitor a delegated entity. Parties may contract for the exchange of further information where appropriate.
§11.2604(b)(2)(A): A commenter requested that the rule require monthly unaudited financial statements with a quarterly lag following the fiscal year. Additionally, the commenter believes that annual financial statements required by the rule should be audited financial statements.
Agency Response: The department disagrees. The rule is designed to provide flexibility for HMOs and delegated entities and sets a minimum level of information to be exchanged between the parties. If an HMO desires additional information, such as audited financial statements, the parties are free to contract for such an exchange.
§11.2604(b)(3): A commenter suggested that the requirement of periodic signed statements from an officer designated by the HMO and by the chief financial officer of the HMO acknowledging review of the monitoring plan information would be impossible to comply with due to the busy schedule of these individuals.
Agency Response: The department disagrees. The statute requires an HMO to monitor the delegated entity by making use of the required monitoring plan. The requirement of a signature is a reasonable method of ensuring accountability. In order to comply with the rule, the officer must actually review the monitoring information. The addition of a signature upon completing the review does not unreasonably add to this requirement.
§11.2604(b)(3)(A) and (B): Two commenters suggested the rule should specify the frequency with which an HMO´s chief financial officer must review a delegated entity´s financial statements, as required in the monitoring plan. The commenter suggested that "quarterly" be used in place of "periodic" as used in the proposal. Another commenter recommended that the department clarify the frequency with which the department expects signed statements to be made indicating that the information submitted by the delegated entity has been reviewed by the HMO.
Agency Response: The department declines to make the suggested changes. The choice of "periodic" instead of a more definite term recognizes the variety of functions a delegation agreement may include. Quarterly reviews may not be necessary in every delegation context. Signed statements are required to ensure that an HMO has assigned the responsibility for monitoring the actions of the delegated entity to a specific individual and continues to monitor the performance of the delegated function throughout the time in which the agreement is in place. The HMO must maintain the signed statements as evidence that it is conducting ongoing monitoring.
§§11.2604(b)(8) and 11.2608(b)(1): A commenter believes these subsections exceed the scope of the statute in that they would allow the Commissioner to order double payment in situations where the HMO has made full capitation payment to a delegated entity.
Agency Response: The department disagrees. Article 20A.18C has always contained a provision stating that a delegation agreement may not be construed to limit an HMO´s responsibility to comply with any and all applicable statutes and regulations. Where circumstances exist that would require restitution to physicians and providers for services provided to HMO enrollees, the Insurance Code has always recognized that the department may impose such a remedy. In circumstances in which reassuming delegated claims payment, as well as other actions, are necessary to ensure that an HMO is continuing to comply with applicable statutes, §11.2608(b) and the statute permit the commissioner to order the HMO to take steps to achieve ongoing compliance with the HMO Act. The commissioner´s decision to enter such an order includes the discretion to order claims payment by the HMO for services previously rendered to enrollees under the delegation agreement. Whether this is necessary and appropriate will depend upon individual circumstances, including the HMO´s attempts to appropriately monitor the actions of the delegated entity.
§11.2604(b)(9): A commenter inquires whether permitting the HMO to terminate delegation prior to determining the reason for noncompliance with applicable statutes, rules or monitoring standards provides due process.
Agency Response: Section 11.2606 requires, in the event of a potential breach or hazardous situation, an HMO to notify the delegated entity of its concern and request a written explanation. The rule also recognizes, however, that in some situations an HMO may need to exercise its authority under §11.2604(b)(9), which requires that the agreement allow the HMO to terminate delegation in the event of failure by the delegated entity to comply with applicable statutes and rules or monitoring standards. This is a statutory requirement and the language must be in the delegation agreement. Moreover, in such instances delaying the HMO´s action could disrupt services, hinder the quality of care, and result in other harms to consumers. The department thus declines to change the rule. Consistent with these rules, the department notes that the parties to the agreement may include provisions related to the HMO providing notice or other analogous provisions prior to termination not for cause.
§§11.2604(b)(15) and 11.2611: A commenter recommends the term "executed" be deleted and requests clarification as to when agreements must be filed.
Agency Response: The department disagrees with the suggested change. An HMO must file executed contracts in order to allow the department to ascertain the terms governing the delegation of functions. An HMO must file executed copies of all subsequent amendments to the agreement as well as subsequent delegation of any function to a third party. The burden is on the HMO to negotiate and file contracts that comply with the rule.
§11.2604(b)(19): A commenter recommends that the department clarify that the HMO may seek information concerning financial arrangements, but cannot seek information concerning actual payments to physicians and providers. The commenter believes that, where a risk sharing arrangement between the delegated entity and its providers includes financial incentives, the section as drafted will prohibit the HMO from obtaining information concerning the risk sharing arrangements.
Agency Response: The department disagrees this change is necessary. Both the statute, at Article 20A.18C(a)(13)(A)(i) and (ii), and the rule, at §11.2604(b)(20)(A)(i) and (ii), require that only a summary description of this information be provided to the HMO.
§11.2604(b)(20)(B): A commenter believes the term "health care services" should be used in place of the term "health care." The commenter also believes that this provision requires an HMO to ensure that the delegated entity remains solvent, a task that is impossible without full financial information from the delegated entity, including the financial arrangements between delegated entities and providers. The commenter believes the provisions hold the HMO responsible for ensuring a delegated entity remains solvent.
Agency Response: The department believes that the term "health care" as used in HB 2828 is intended to refer to the term "health care services" as defined in the HMO Act. The rule defines health care, for purposes of Art. 20A.18C and this subchapter" as defined at Art. 20A.02(m): "Any services, including the furnishing to any individual of pharmaceutical services, medical, chiropractic, or dental care, or hospitalization or incir, to have the same meaning as "health care services to the furnishing of such services, care, or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing or healing human illness or injury." Therefore, the reference in the rule to "health care" is correct. In regard to solvency, the department does not agree that this provision requires an HMO to ensure the delegated entity´s solvency. Instead, the HMO must develop and maintain a monitoring plan that enables the HMO to determine that all delegated functions are being performed appropriately and that all delegated entities and/or third parties performing delegated functions are solvent enough to be able to continue to perform the delegated functions. If an HMO cannot determine this through its monitoring plan, the HMO should either end its agreement with the delegated entity or, if it chooses, reach an agreement with a delegated entity that includes an effective monitoring plan.
§11.2604(b)(20)(C): A commenter requests clarification as to whether the provision applies only to processed and unpaid claims or to an IBNR estimate that includes estimates of IBNR claims.
Agency Response: The department notes that the intent of §11.2604(b)(20)(C) is to require the transmission of aggregate information about all unpaid obligations owed to any physician and provider, which would include IBNR estimates. In response to the comment, the department has clarified §11.2604(b)(20)(C) to read as follows: "(C) the aggregate dollar amount of claims and other obligations for health care owed by the delegated entity to any physician and provider, including estimates for incurred but not reported obligations."
§11.2604(b)(24): A commenter requests that additional language be added to provide that if the parties cannot reach an agreement as to cost-bearing in the contract, each party shall bear its own expenses.
Agency Response: The department disagrees that the proposed additional language is necessary. The statute directs the parties to determine which party shall bear the expense of compliance and examinations. Therefore, both the statute and the rules require the parties to reach an agreement on this issue.
§11.2605(a)(3) & (4): A commenter requests the addition of the dates of service to these paragraphs.
Agency Response: The department notes that §11.2605(a)(3) & (4) contemplate the exchange of nonproprietary information, which would include dates of service. While the department declines to require the parties to include particular nonproprietary information, such as dates of service, the parties should negotiate for the exchange of information appropriate to each delegation agreement.
§11.2608: A commenter believes the language of this section calls for an immediate solution that may not allow for correction of perceived non-compliance.
Agency Response: The department disagrees. This section is intended to allow the department to order an immediate solution when the Commissioner deems immediate action necessary to protect the interest of enrollees. Sections 11.2606 & 11.2607 allow for a less immediate solution under less urgent circumstances.
§11.2609: A commenter believes that Article 20A.18D eliminates the need for the HMO to monitor a delegated network´s compliance with this section as it requires the delegated network to comply with the solvency requirement set forth in the statute.
Agency Response: The department disagrees. Although Article 20A.18D sets forth specific reserve requirements for delegated networks, this does not eliminate the need for HMO oversight as required by Article 20A.18C.
§11.2611: A commenter suggests deletion of the requirement that the agreement contain a table of contents, in favor of a standard checklist to submit with the filings. The commenter inquires about the term "certified copies."
Agency Response: The department disagrees, as it believes that the table of contents will facilitate review of agreements by the department and help the HMO verify that the agreement includes all of the applicable statutory and regulatory requirements. The department currently posts a checklist on its website based on the requirements of Article 20A.18C. The department will revise this checklist to correspond to the rule and will facilitate an HMO´s creation of the table of contents required by this section. Section 11.2611 does not require certified copies; however, an HMO must file a copy of executed delegation agreements.
§11.2611(c): A commenter inquired as to whether the department will be developing a template for the required table of contents.
Agency Response: Because the department has not mandated a specific format for delegation agreements, development of a template for the table of contents of such an agreement is not necessary. As previously noted, a checklist of applicable requirements is available on the website.
§11.2612: A commenter recommends removal of the phrase "or amended," as it is not referenced in the statute.
Agency Response: The department agrees that the phrase "or amended" is not included in the statute and has deleted this phrase. However, the department believes that HB 2828 was intended to clarify the requirements for any delegation involving risk transfer, and will construe the term "renewal" to include any change to an agreement that has the effect of creating a new agreement. For example, if an agreement were changed to add or delete the delegation of a particular function, or if an agreement was altered to change the nature of the risk being transferred, or if the terms of the compensation are altered so as to fundamentally change the risk being transferred, these would be considered to constitute a renewal and the agreement would need to comply with the rule. Minor changes such as addition or deletion of contact persons for each party, on the other hand, would not constitute a "renewal."
§11.2612: A commenter suggested that "all renewal language should be addressed by the department as a relationship renewal date." The commenter defines this as a single date on which all delegation agreements between the two parties would be considered to be renewed.
Agency Response: The department disagrees. HB 2828 states that it applies to every contract that is entered into or renewed on or after January 1, 2002. The department reminds affected parties that the changes in law provided by HB 2828 cannot be avoided by restricting the concept of renewals to renewals of relationships that may be indefinite in duration.
For: Office of Public Insurance Counsel, Renaissance Physicians Organization.
For with changes: Aetna US Healthcare, AmCare Health Plans, Inc., Community First Health Care Plans, Inc., Dallas County Medical Society, Texas Association of Health Plans, Texas Hospital Association, Texas Medical Association.
Neither For nor Against: Consumers Union.
The sections are adopted under the Insurance Code Article 20A.18C and Section 36.001. Article 20A.18C provides that the commissioner shall adopt reasonable rules to implement this article as it relates to the delegation of certain functions by an HMO. Section 36.001 provides that the Commissioner of Insurance may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.
§11.2601. General Provisions.
(a) Purpose. The purpose of this subchapter is to set forth the requirements that must be met by any HMO that delegates any function as described in Texas Insurance Code Art. 20A.18C. These requirements are designed to ensure that a delegating HMO:
(1) identifies all responsibilities relating to the function being delegated;
(2) creates an agreement that enables the HMO and department to monitor both the delegated entity's financial solvency and performance or subsequent delegation of all delegated functions; and
(3) retains ultimate responsibility for ensuring that all delegated functions are performed in accordance with applicable statutes and rules.
(b) Severability. Where any terms or sections of this subchapter are determined by a court of competent jurisdiction to be inconsistent with the Act, as identified by this subchapter, the Act will apply and the remaining terms and provisions of this subchapter shall continue in effect.
(c) Applicability to Group Model HMO. This subchapter does not apply to a group model HMO, as defined by Texas Insurance Code Art. 20A.06A.
§11.2602. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Act--The HMO Act, Texas Insurance Code, Chapter 20A.
(2) Delegated entity--An entity, other than an HMO authorized to do business under the Act, that by itself, or through subcontracts with one or more entities, undertakes to arrange for or to provide medical care or health care to an enrollee in exchange for a predetermined payment on a prospective basis and that accepts responsibility to perform on behalf of the HMO any function regulated by the Act. The term does not include an individual physician or a group of employed physicians practicing medicine under one federal tax identification number and whose total claims paid to providers not employed by the group is less than 20 percent of the total collected revenue of the group calculated on a calendar year basis.
(3) Delegated network--Any delegated entity that assumes total financial risk for more than one of the following categories of health care services: medical care, hospital or other institutional services, or prescription drugs, as defined by Section 551.003, Occupations Code. The term does not include a delegated entity that shares risk for a category of services with an HMO.
(4) Delegated third party--A third party other than a delegated entity that contracts with a delegated entity, either directly or through another third party, to:
(A) accept responsibility to perform any function regulated by the Act; or
(B) receive, handle, or administer funds, if the receipt, handling, or administration of the funds is directly or indirectly related to a function regulated by the Act.
(5) Health care--Any services, including the furnishing to any individual of pharmaceutical services, medical, chiropractic, or dental care, or hospitalization, or incident to the furnishing of such services, care, or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing or healing human illness or injury.
§11.2603. Requirements for Delegation by HMOs.
(a) Any delegation of any function pursuant to Texas Insurance Code Art. 20A.18C by an HMO shall comply with this subchapter.
(b) Oversight by the department does not relieve the HMO of responsibility for monitoring and oversight of its delegated entities.
(c) Prior to entering into, renewing or amending a delegation agreement, an HMO shall make a reasonable effort to evaluate the delegated entity's current and prospective ability to perform the functions to be delegated, including, but not limited to, the solvency and financial operations of the delegated entity and the projected financial effects of the agreement upon the delegated entity.
(d) An HMO that delegates functions to a delegated entity must have a written contingency plan to resume any and all delegated functions, including, as applicable:
(1) quality of care;
(2) continuity of care, including a plan for transferring enrollees to new providers in the event of termination of the delegation agreement; and
(3) processing, adjudication and payment of claims.
(e) The department may require an HMO to immediately terminate any delegation agreement to ensure that the HMO is in compliance with the Act.
(f) The HMO retains ultimate responsibility for any and all functions delegated.
(g) A delegated entity's failure to comply with applicable statutes or rules constitutes a violation of the Act by the delegating HMO.
(h) An HMO is responsible for monitoring each delegated entity with which it contracts to ensure compliance with all applicable statutes and rules, as well as for solvency.
(i) An HMO shall report to the department, within a reasonable time, all penalties assessed against a delegated entity under the provisions of the delegation agreement.
(j) If an HMO cannot ensure that a delegated entity is performing all delegated functions in accordance with all applicable statutes, rules, or an order issued by the department pursuant to this subchapter, the HMO shall resume all delegated functions from the delegated entity.
(k) If a license is required for any function delegated by an HMO, the HMO must ensure that the delegated entity or third party performing the function has a current appropriate license.
(l) Upon termination of a delegation agreement by either party, the HMO shall notify the department.
§11.2604. Delegation Agreements - General Requirements and Information to be Provided to HMO.
(a) An HMO that delegates to a delegated entity any function required by the Act shall execute a written agreement with that delegated entity.
(b) Written agreements shall include the following:
(1) a provision that the delegated entity and any delegated third parties must agree to comply with all statutes and rules applicable to the functions being delegated by the HMO;
(2) a provision that the HMO shall monitor the acts of the delegated entity through a monitoring plan. The monitoring plan shall be set forth in the delegation agreement, and must contain, at a minimum:
(A) provisions for the review of the delegated entity's solvency status and financial operations. This shall include, at a minimum, review of the delegated entity's financial statements, consisting of at least a balance sheet, income statement, and statement of cash flows for the current and preceding year;
(B) provisions for the review of the delegated entity's compliance with the terms of the delegation agreement as well as with all applicable statutes and rules affecting the functions delegated by the HMO under the delegation agreement;
(C) a description of the delegated entity's financial practices in sufficient detail that will ensure that the delegated entity tracks and timely reports to the HMO liabilities including incurred but not reported obligations;
(D) a method by which the delegated entity shall report monthly a summary of the total amount paid by the delegated entity to physicians and providers under the delegation agreement; and
(E) a monthly log, maintained by the delegated entity, of oral and written complaints from physicians, providers, and enrollees regarding any delay in payment of claims or nonpayment of claims pertaining to the delegated function, including the status of each complaint;
(3) a statement that the HMO shall utilize the monitoring plan on an ongoing basis. Compliance with this requirement shall be documented by the HMO maintaining, at a minimum:
(A) periodic signed statements from the individual identified by the HMO in paragraph (23) of this subsection that the HMO has reviewed the information required in the monitoring plan; and
(B) periodic signed statements from the chief financial officer of the HMO acknowledging that the most recent financial statements of the delegated entity have been reviewed.
(4) a provision establishing the penalties to be paid by the delegated entity for failure to provide information required by this subchapter;
(5) a provision requiring quarterly assessment and payment of penalties under the agreement, if applicable;
(6) a provision that the agreement cannot be terminated without cause by the delegated entity or the HMO without written notice provided to the other party and the department before the 90th day preceding the termination date, provided that the commissioner may order the HMO to terminate the agreement under §11.2608 of this subchapter (relating to Department May Order Corrective Action);
(7) a provision that requires the delegated entity, and any entity or physician or provider with which it has contracted to perform a function of the HMO, to hold harmless an enrollee under any circumstance, including the insolvency of the HMO or delegated entity, for payments for covered services other than copayments and deductibles authorized under the evidence of coverage;
(8) a provision that the delegation agreement may not be construed to limit in any way the HMO's responsibility, including financial responsibility, to comply with all statutory and regulatory requirements;
(9) a provision that any failure by the delegated entity to comply with applicable statutes and rules or monitoring standards shall allow the HMO to terminate delegation of any or all delegated functions;
(10) a provision that the delegated entity must permit the commissioner to examine at any time any information the department reasonably considers is relevant to:
(A) the financial solvency of the delegated entity; or
(B) the ability of the delegated entity to meet the entity's responsibilities in connection with any function delegated to the entity by the HMO;
(11) a provision that the delegated entity, in contracting with a delegated third party directly or through a third party, shall require the delegated third party to comply with the requirements of paragraph (10) of this subsection;
(12) a provision that the delegated entity shall provide the license number of any delegated third party performing any function that requires a license as a third party administrator under Texas Insurance Code Art. 21.07-6, or a license as a utilization review agent under Texas Insurance Code Art. 21.58A, or that requires any other license under the Texas Insurance Code or another insurance law of this state;
(13) if utilization review is delegated, a provision stating that:
(A) enrollees will receive notification at the time of enrollment identifying the entity that will be performing utilization review;
(B) the delegated entity or delegated third party performing utilization review shall do so in accordance with Texas Insurance Code Art. 21.58A and related rules; and
(C) utilization review decisions made by the delegated entity or a delegated third party shall be forwarded to the HMO on a monthly basis;
(14) a provision that any agreement in which the delegated entity directly or indirectly delegates to a delegated third party any function delegated to the delegated entity by the HMO pursuant to Texas Insurance Code Art. 20A.18C, including any handling of funds, shall be in writing;
(15) a provision that upon any subsequent delegation of a function by a delegated entity to a delegated third party, the executed updated agreements shall be filed with the department and enrollees shall be notified of the change of any party performing a function for which notification of an enrollee is required by this chapter or the Act;
(16) an acknowledgment and agreement by the delegated entity that the HMO is not precluded from requiring that the delegated entity provide any and all evidence requested by the HMO or the department relating to the delegated entity's or delegated third party's financial viability;
(17) a provision acknowledging that any delegated third party with which the delegated entity subcontracts will be limited to performing only those functions set forth and delegated in the agreement, using standards approved by the HMO and that are in compliance with applicable statutes and rules;
(18) a provision that any delegated third party is subject to the HMO's oversight and monitoring of the delegated entity's performance and financial condition under the delegation agreement;
(19) a provision that requires the delegated entity to make available to the HMO samples of each type of contract the delegated entity executes or has executed with physicians and providers to ensure compliance with the contractual requirements described by paragraphs (6) and (7) of this subsection, except that the agreement may not require that the delegated entity make available to the HMO contractual provisions relating to financial arrangements with the delegated entity's physicians and providers;
(20) a provision that requires the delegated entity to provide information to the HMO on a quarterly basis and in a format determined by the HMO to permit an audit of the delegated entity and to ensure compliance with the department's reporting requirements with respect to any functions delegated by the HMO to the delegated entity and to ensure that the delegated entity remains solvent to perform the delegated functions, including:
(A) a summary:
(i) describing any payment methods, including capitation or fee-for-services, that the delegated entity uses to pay its physicians and providers and any other third party performing a function delegated by the HMO; and
(ii) of the breakdown of the percentage of physicians and providers and any other third party paid by each payment method listed in clause (i) of this subparagraph;
(B) the period of time that claims and any other obligations for health care filed with the delegated entity, under this and any other delegation agreements to which the delegated entity is a party, have been pending but remain unpaid, divided into categories of 0-45 days, 46-90 days, and 91 or more days. The summary shall include aggregate information for all delegation agreements entered into by the delegated entity and information for the specific delegation agreement entered into between the parties;
(C) the aggregate dollar amount of claims and other obligations for health care owed by the delegated entity to any physician or provider, including estimates for incurred but not reported obligations;
(D) information that the HMO requires in order to file claims for reinsurance, coordination of benefits, and subrogation; and
(E) documentation, except for information, documents, and deliberations related to peer review that are confidential or privileged under Subchapter A, Chapter 160, Occupations Code, that relates to:
(i) any regulatory agency's inquiry or investigation of the delegated entity or of an individual physician or provider with whom the delegated entity contracts that relates to an enrollee of the HMO; and
(ii) the final resolution of any regulatory agency's inquiry or investigation;
(21) a provision relating to enrollee complaints that requires the delegated entity to ensure that upon receipt of a complaint, as defined in the Act, a copy of the complaint shall be sent to the HMO within two business days, except that in a case in which a complaint involves emergency care, as defined in the Act, the delegated entity shall forward the complaint immediately to the HMO, and provided that nothing in this paragraph prohibits the delegated entity from attempting to resolve a complaint;
(22) a provision that the HMO, the delegated entity and any delegated third party shall comply with the provisions of Chapter 22 of this title;
(23) a provision identifying an officer of the HMO as the representative of the HMO for all matters related to the delegation agreement; and
(24) a provision identifying which party to the agreement shall bear the expense of compliance with each requirement set forth in this subsection, including the cost of any examinations performed pursuant to this subchapter.
§11.2605. Delegation Agreements - Information to be Provided by HMO to Delegated Entity.
(a) An HMO shall provide to each delegated entity with which the HMO has a delegation agreement, at least monthly unless otherwise stated in the agreement and provided in standard electronic format agreed to by the parties, the following information:
(1) the name and either the date of birth or social security number of each enrollee of the HMO who is eligible or assigned to receive health care from the delegated entity, including the enrollees added and terminated since the previous reporting period;
(2) the age, sex, evidence of coverage and any riders to that evidence of coverage, and if applicable the name of the employer, for the enrollees of the HMO who are eligible or assigned to receive health care from the delegated entity;
(3) a summary of the number and amount of claims paid by the HMO on behalf of the delegated entity during the previous reporting period. However, an HMO is not precluded from providing, upon request, additional nonproprietary information regarding such claims, if the HMO pays any claims for the delegated entity;
(4) a summary of the number and amount of pharmacy prescriptions paid for each enrollee for which the delegated entity has taken partial risk during the previous reporting period, provided that an HMO is not precluded from providing, upon request, additional nonproprietary information regarding such claims, if the HMO pays any claims for the delegated entity;
(5) information that is needed by the delegated entity to file claims for reinsurance, coordination of benefits, and subrogation; and
(6) patient complaint data that relates to the delegated entity.
(b) An HMO shall provide to each delegated entity with which the HMO has a delegation agreement the following information, as applicable, provided in standard electronic format agreed to by the parties at least quarterly unless otherwise stated in the agreement:
(1) detailed risk-pool data, reported quarterly and on settlement, sufficient to allow the delegated entity to adequately monitor its position in the risk pool; and
(2) the percent of premium attributable to hospital or facility costs, if hospital or facility costs impact the delegated entity's costs and, if there are changes in hospital or facility contracts with the HMO, the projected impact of those changes on the percent of premium attributable to hospital and facility costs within 30 days of such changes.
§11.2606. Reporting Requirements.
(a) Upon receipt of a financial statement indicating that a delegated entity or delegated third party has an amount of total liabilities greater than its total assets, the HMO shall immediately forward a copy of the financial statement to the department.
(b) An HMO that becomes aware of any information, including the information described in subsection (a) of this section, that suggests or indicates that the delegated entity or delegated third party is not operating in accordance with its written agreement or is operating in a condition that may render the continuance of its business hazardous to the enrollees, shall immediately:
(1) notify the delegated entity in writing of those findings; and
(2) request, in writing, a written explanation with supporting documentation of:
(A) the delegated entity's or delegated third party's apparent noncompliance with the written agreement; or
(B) the existence of the condition that apparently renders the continuance of the delegated entity's or delegated third party's business hazardous to the enrollees.
(c) A delegated entity shall respond in writing to a request from an HMO under subsection (b) of this section not later than the 30th day after the date the request is received. The response shall include a corrective action plan.
(d) A copy of all written communications required by subsections (b) and (c) of this section shall be sent to the department simultaneously with transmission to the HMO or delegated entity or delegated third party.
(e) The HMO shall cooperate with the delegated entity to correct any failure by the delegated entity to comply with the applicable statutes and rules relating to any matters:
(1) delegated to the delegated entity by the HMO; or
(2) necessary for the HMO to ensure compliance with statutory or regulatory requirements.
§11.2607. Examinations of Delegated Entities.
(a) On receipt of complaints, a notice under §11.2606 of this title (relating to Reporting Requirements), or as otherwise permitted under the Texas Insurance Code or rules adopted thereunder, the department may examine any matter relating to the financial solvency of the delegated entity or delegated third party or the delegated entity's ability to meet its responsibilities under the delegation agreement.
(b) The department may request documents, perform on-site examinations and require any other action of the delegated entity and any delegated third party that the department determines necessary to perform an examination under this section.
(c) A delegated entity's failure to comply with a request under subsection (b) of this section may result in:
(1) notification to the HMO that the delegated entity is subject to penalties pursuant to the delegation agreement;
(2) entry of an order by the commissioner to resume or redelegate any functions delegated to the delegated entity or terminate the agreement in its entirety.
(d) The department shall issue a report to the delegated entity and HMO upon completion of the department's examination. The report shall detail the results of the examination and any corrective actions necessary by the delegated entity and/or the HMO.
(e) The delegated entity and the HMO shall respond to the department's report and submit a corrective action plan to the department not later than the 30th day after the date of receipt of the department's report.
§11.2608. Department May Order Corrective Action.
(a) The department shall require at any time that a delegated entity take corrective action to comply with the department's statutory and regulatory requirements that:
(1) relates to any matters delegated by the HMO to the delegated entity;
(2) is necessary to ensure the HMO's compliance with statutory and regulatory requirements; or
(3) relates to the financial solvency and operations of the delegated entity.
(b) The commissioner may order the HMO to take any action the commissioner determines is necessary to ensure that the HMO maintains compliance with the Act, including but not limited to:
(1) resumption of any or all functions delegated to the delegated entity, including claims processing, adjudication, and payments for health care previously rendered to enrollees of the HMO;
(2) temporarily or permanently ceasing assignment of new enrollees to the delegated entity;
(3) temporarily or permanently transferring enrollees to alternative delivery systems to receive health care; or
(4) termination of the HMO's delegation agreement with the delegated entity.
§11.2609. Reserve Requirements for Delegated Networks. In addition to any other requirements set forth in this subchapter, HMOs that contract with delegated networks shall ensure that the delegated network complies with Texas Insurance Code Art. 20A.18D. The HMO's agreement with the delegated network shall include a provision:
(1) that records related to the requirements of Texas Insurance Code Art. 20A.18D shall be accessible at all times to the HMO;
(2) requiring all financial records and related information necessary to show the delegated network's compliance with the requirements of Texas Insurance Code Art. 20A.18D;
(3) making the records described in paragraph (1) of this section available to the department upon request; and
(4) that records be kept providing evidence that the HMO has adequately monitored the delegated network for compliance with the requirements of Texas Insurance Code Art. 20A.18D.
§11.2610. Penalties for Non-Compliance.
(a) Failure of any party to any agreement under this subchapter to comply with any requirement of this subchapter may result in an order from the commissioner that the HMO must terminate the delegation agreement and/or resume or redelegate any or all delegated functions as well as the imposition of penalties provided under the Texas Insurance Code and applicable rules adopted thereunder.
(b) Any action by an HMO relating to a delegation agreement that does not comply with this subchapter or takes place pursuant to a provision of a delegation agreement not in compliance with this subchapter constitutes a violation under this subchapter.
§11.2611. Filing of Delegation Agreements.
(a) An HMO shall file the written executed agreement described in this subchapter and any subsequently executed amendments to the agreement with the department not later than the 30th day after the date the agreement or amendment is executed.
(b) The copy of the executed agreement shall be filed for information in accordance with §11.301 of subchapter D of this title (relating to Filing Requirements).
(c) Every agreement shall include, as an attachment, a table of contents that allows the department to track the agreement's compliance with the requirements of §§11.2604 (relating to Delegation Agreements - General Requirements and Information to be Provided to HMO) and 11.2605 (relating to Delegation Agreements- Information to be Provided by HMO to Delegated Entity) of this subchapter.
(d) Upon notification from the department of a deficiency in a delegation agreement or filing required under this subchapter, the HMO shall respond within ten business days with a proposed correction for the defect.
§11.2612. Applicability. This subchapter applies to all contracts entered into or renewed on and after the effective date of these rules.