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Subchapter C. Application for Certificate of Authority

28 TAC §11.204

The Commissioner of Insurance adopts the amendment to§11.204(15)(A), concerning the notice that an insurer is required to give the commissioner and a health maintenance organization (HMO) prior to the termination or reduction of coverage by the insurer of any reinsurance agreement and any other agreement covering excess of loss, stop-loss, and/or catastrophes as prescribed in Insurance Code Article 20A.05(a)(4)(C). The section is adopted without change to the proposed text as published in the February 8, 2002 issue of the Texas Register (27 TexReg 868) and will not be republished.

The amendment to §11.204 is necessary to correct an incorrect cite to the Insurance Code contained in §11.204(15)(A). Section 11.204(15)(A) currently refers to any reinsurance agreement and any other agreement described in Insurance Code Article 20A.05(b)(2)(C)(iii). No such provision exists in the Insurance Code. Section 11.204(15)(A) should cite to Insurance Code Article 20A.05(a)(4)(C), which states that the commissioner consider any agreement that an HMO enters into with an insurer, group hospital service corporation, a political subdivision of government, or any other organization for insuring the payment of the cost of health care services or the provision for automatic applicability of alternative coverage in the event of discontinuance of the plan.

The amendment to §11.204(15)(A) correctly references Insurance Code Article 20A.05(a)(4)(C), and thereby provides that the contents of an application for an HMO certificate of authority must include any reinsurance agreement and any other agreement described in Insurance Code Article 20A.05(a)(4)(C), covering excess of loss, stop-loss, and/or catastrophes. Section 11.204(15)(A) requires that an agreement entered into between an HMO and an insurer provide that the commissioner and the HMO will be notified no less that 60 days prior to termination or reduction of coverage by the insurer.

No comments were received.

The amendment is adopted under Insurance Code Article 20A.22 and §36.001. Article 20A.22 authorizes the commissioner to adopt rules as necessary to carry out the provisions of Insurance Code, Chapter 20A. Section 36.001 provides the Commissioner of Insurance with the authority to adopt rules for the conduct and execution of the powers and duties of the department as authorized by statute.

§11.204. Contents.

Contents of the application must include the following items in the order listed:

(1) a completed name application form along with any certificate of reservation of corporate name issued by the secretary of state;

(2) a completed application for a certificate of authority;

(3) the basic organizational documents and all amendments thereto, complete with the original incorporation certificate with charter number and seal indicating certification by the secretary of state, if applicable;

(4) the bylaws, rules and regulations, or any similar document regulating the conduct of the internal affairs of the applicant;

(5) information about officers, directors, and staff:

(A) a completed officers and directors page; and

(B) biographical data forms for all persons who are to be responsible for the day-to-day conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee or other governing body or committee, the principal officers, and controlling shareholders of the applicant if a corporation, or all partners or members in the case of partnership or association. Any relationship between the HMO and any affiliate or other organization in which a shareholder with 10% or more interest also has an interest must be clearly identified;

(6) separate organizational charts or list, as described in subparagraphs (A)-(C) of this paragraph:

(A) a chart or list clearly identifying the relationships between the applicant and any affiliates, and a list of any currently outstanding loans or contracts to provide services between the applicant and the affiliates;

(B) a chart showing the internal organizational structure of the applicant´s management and administrative staff;

(C) a chart showing contractual arrangements of the health care delivery system;

(7) fidelity bond or deposit for officers and employees, which must comply with either subparagraph (A) or (B) of this paragraph, as appropriate.

(A) A bond must be in compliance with the Insurance Code Article 20A.30, and must be either the original bond or a copy of the bond. The bonds shall not contain a deductible.

(B) A cash deposit must be held by the Comptroller of the State of Texas in the same amount and subject to the same conditions as a bond.

(8) information related to out-of-state licensure and service of legal process for all applicants must be submitted by using the attorney for service form.

(A) An applicant licensed as an HMO in another state must furnish a copy of the certificate of authority from the domiciliary state´s licensing authority, and a power of attorney executed by the applicant appointing an agent for service, other than the commissioner as the attorney of such applicant in and for the state, upon whom all lawful processes in any legal action or proceedings against the HMO on a cause of action arising in this state may be served.

(B) All applicants must furnish a statement acknowledging that all lawful process in any legal action or proceeding against the HMO on a cause of action arising in this state is valid if served in accordance with the Insurance Code Article 1.36.

(9) the evidence of coverage to be issued to enrollees; any group agreement which is to be issued to employers, unions, trustees, or other organizations as described in Subchapter F of this chapter (relating to Evidence of Coverage);

(10) financial information, consisting of the following:

(A) a current financial statement, including balance sheet reflecting assets and liabilities, statement of income and expenses, and sources and application of funds;

(B) projected financial statements for the 24-month period from the start of operations using quarterly balance sheet projections based on calendar quarters, quarterly cash flow schedules reflecting capital expenditures, and monthly revenue and expense projections, such financial statements must include the identity and credentials of the person making the projections; and

(C) the most recent audited financial statements of the immediate parent company, the ultimate holding company parent, and any sponsoring organization;

(11) the schedule of charges as defined in §11.2 of this title (relating to Definitions) to be used through the first 12 months of operation including any charges for Medicaid products. If any HMO proposes to write Medicaid and the maximum rates allowed by contracting state agency are proposed to be charged, then the rates published by the contracting state agency must be included with an actuarial certification and supporting documentation showing these rates are adequate in relation to benefits provided. If lesser rates are to be charged, an actuarial certification and supporting documentation must be included evidencing that the rates are adequate for the benefits to be provided. If contracting state agency Medicaid rates are not available, then the anticipated rates used in determining the applicant´s financial projections must be disclosed with an actuarial certification and supporting documentation showing that the anticipated rates are reasonable in relation to the expected benefits to be provided. If a provider HMO proposes to contract to provide prepaid services to a primary HMO, the provider HMO must submit an actuarial certification and supporting documentation evidencing that the anticipated prepayments to be received from the primary HMO are adequate to pay for services to be provided to the primary HMO. All actuarial certifications must meet the qualifications specified in §11.702 of this title (relating to Actuarial Certification).

(12) a description and a map of the service area, with key and scale, which shall identify the county and counties, or portions thereof, to be served. If the map is in color, the original and all four copies must also be in color;

(13) a copy of the form of any contract or monitoring plan between the applicant and:

(A) any person listed on the officers and directors page;

(B) any physician, medical group, or association of physicians, or any other provider, plus a copy of the form of any subcontract between the medical group, physicians´ association, any physician, or provider, who has contracted with any physician, medical group, association of physicians, or any other provider to provide health care services. All contracts shall include a hold-harmless provision, as specified in §11.1102 of this title (relating to Hold-Harmless Clause). Such clause shall be no less favorable to enrollees than that outlined in §11.1102 of this title.

(C) any exclusive agent or agency;

(D) any person who will perform management, marketing, administrative, data processing services, or claims processing services. A bond or deposit meeting the requirements of the Insurance Code Article 20A.18, is required for management contracts. If submitting a bond, the original or a copy shall be submitted. The bond shall not include a deductible;

(E) an ANHC which agrees to arrange for or provide health care services, other than medical care or services ancillary to the practice of medicine, or a provider HMO which agrees to arrange for or provide health care services on a risk-sharing or capitated risk arrangement on behalf of a primary HMO as part of the primary HMO delivery network. A monitoring plan as required by §11.1604 of this title (relating to Requirements for Certain Contracts between Primary HMOs and ANHCs and Primary HMOs and Provider HMOs) must also be submitted; and

(F) any insurer or group hospital service corporation to offer indemnity benefits under a point of service contract.

(14) a description of the quality assurance program, including a peer review program required by the Insurance Code, Article 20A.05. Arrangements for sharing pertinent medical records between physicians and/or providers contracting or subcontracting pursuant to paragraph (13)(B) of this section with the HMO and assuring the record´s confidentiality must be explained;

(15) insurance, guarantees, and other protection against insolvency:

(A) any reinsurance agreement and any other agreement described in the Insurance Code Article 20A.05(a)(4)(C), covering excess of loss, stop-loss, and/or catastrophes. The agreement must provide that the commissioner and HMO will be notified no less than 60 days prior to termination or reduction of coverage by the insurer;

(B) any conversion policy or policies which will be offered by an insurer to an HMO enrollee in the event of the HMO´s insolvency;

(C) any other arrangements offering protection against insolvency, including guarantees, as specified in §11.806 of this title (relating to Liabilities), §11.808 of this title (relating to Guarantee from a Sponsoring Organization), and §11.1804 of this title (relating to Guarantees);

(16) authorization for disclosure to the commissioner of the financial records of the applicant. Disclosure of financial records of affiliates may also be required. The individual to be contacted for a qualifying examination must be identified;

(17) the written description of health care plan terms and conditions made available to any current or prospective group contract holder and current or prospective enrollee of the HMO pursuant to the requirements of the Insurance Code Article 20A.04(13) and §11.1600 of this title (relating to Information to Prospective and Current Group Contract Holders and Enrollees);

(18) network configuration information, including an explanation of the adequacy of the physician and other provider network configuration; the information provided must include the names of primary care physicians, their hospital affiliations, referral specialists, and other providers by zip code or zip code map and indicate whether each physician or other provider is accepting new patients from the HMO;

(19) a written description of the types of compensation arrangements, such as compensation based on fee-for-service arrangements, risk-sharing arrangements, or capitated risk arrangements, made or to be made with physicians and providers in exchange for the provision of, or the arrangement to provide health care services to enrollees, including any financial incentives for physicians and providers; such compensation arrangements shall be confidential and not subject to the open records law, Chapter 552, Government Code;

(20) documentation demonstrating that the HMO will pay for emergency care services performed by non-network physicians or providers at the negotiated or usual and customary rate and that the health care plan contains, without regard to whether the physician or provider furnishing the services has a contractual or other arrangement with the entity to provide items or services to enrollees, the following provisions and procedures for coverage of emergency care services:

(A) any medical screening examination or other evaluation required by state or federal law which is necessary to determine whether an emergency medical condition exists will be provided to enrollees in a hospital emergency facility or comparable facility;

(B) necessary emergency care services will be provided to enrollees, including the treatment and stabilization of an emergency medical condition; and

(C) services originating in a hospital emergency facility or comparable facility following treatment or stabilization of an emergency medical condition will be provided to covered enrollees as approved by the HMO, provided that the HMO is required to approved or deny coverage of post stabilization care as requested by a treating physician or provider within the time appropriate to the circumstances relating to the delivery of the services and the condition of the patient, but in no case to exceed one hour from the time of the request; the HMO must respond to inquiries from the treating physician or provider in compliance with this provision in the HMO´s plan.

(21) a description of the procedures by which:

(A) a member handbook and materials relating to the complaint and appeal process and the availability of the independent review process will be provided to enrollees in any language other than English, pursuant to the Insurance Code Article 20A.11A(a); and

(B) access to a member handbook and materials relating to the complaint and appeal process and the availability of the independent review process will be provided to an enrollee who has a disability affecting the enrollee´s ability to communicate or to read, pursuant to the Insurance Code Article 20A.11A(b).

(22) notification of the physical address in Texas of all books and records described in §11.205 of this title (relating to Documents To Be Available During Examinations);

(23) a description of the information systems in place which demonstrates the applicant has adequate capacity to service enrollees, physicians and providers; and

(24) a notarized certification bearing the original signature of the corporate secretary or corporate president of the applicant that the documents provided in compliance with paragraphs (3), (4) and (7) of this section, and paragraph (13) of this section if applicable, are true, accurate and complete copies of the original documents.



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