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You are here: Home . rules . 2003 . 0415A-059
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SUBCHAPTER X. PROVIDER SPONSORED ORGANIZATIONS

28 TAC §§11.2301, 11.2305, 11.2306 and 11.2315

The Texas Department of Insurance proposes amendments to §§11.2301, 11.2305, 11.2306 and 11.2315 concerning provider sponsored organizations (PSOs). These amendments are necessary to require PSOs to comply with the solvency requirements of health maintenance organizations (HMOs). The federal Medicare+Choice program requires any entity contracting with Centers for Medicare and Medicaid Services (CMS) to be licensed under state law, however, federal law also provided that a PSO could obtain a waiver of solvency requirements if a PSO could not meet state standards. Subchapter X was adopted in 1998 to comply with the federal solvency requirements for PSOs and assure that any entity contracting with CMS under the Medicare+Choice program would be licensed under state law. The federal waiver program expired November 1, 2002, therefore, it is no longer legally permissible to provide solvency standards for PSOs that are different than the solvency standards for HMOs. The proposed amendments provide that PSOs that already have a certificate of authority under Subchapter X have until December 31, 2006, to comply with the solvency requirements for HMOs. PSOs that apply for a certificate of authority after November 1, 2002 must comply with the solvency requirements for an HMO as a condition of obtaining a certificate of authority.

Ms. Betty Patterson, Senior Associate Commissioner, Financial Program, has determined that for each year of the first five years the amended sections will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the rule. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Patterson has determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of the proposed amendments will be improved solvency standards for PSOs and more uniform treatment of managed care organizations. The probable economic cost to persons required to comply with the amendments will be the costs associated with providing additional funds to meet the financial solvency requirements for HMOs. If the funds are generated internally, then the PSO will experience the implicit cost of not being able to invest the funds in other enterprises. If the funds are acquired externally, then the PSO will incur the expense of acquiring the funds from investors. That expense is subject to several variables including the amount of funds, credit worthiness of the PSO, the returns available to investors from similar investment opportunities, and the length of time the funds are required. The costs are the result of the expiration of the federal Medicare+Choice waiver program and Insurance Code Chapter 20A, not the proposed sections. The department finds it neither legal nor feasible to reduce the effect of the proposed sections on micro or small PSOs since the standards established by the proposed sections are minimum standards necessary to protect the public by assuring solvency of the affected PSOs.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on June 2, 2003 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Betty Patterson, Senior Associate Commissioner, Financial Program, Mail Code 305-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of the Chief Clerk.

The amendments are proposed under the Insurance Code Article 20A.22(c) and §36.001. Article 20A.22(c) authorizes the commissioner to promulgate reasonable regulations necessary to meet the requirements of federal law and regulations. The Medicare+Choice Program requires a Medicare+Choice organization to be licensed under state law, however under state law a PSO is an HMO, therefore Subchapter X recognizes PSOs for the purpose of licensing them under state law. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance as authorized by statute.

Insurance Code Chapter 20A is affected by this proposal.

§11.2301. Purpose and Scope. The Social Security Act was amended by Congress in 1997 to create Medicare+Choice. Medicare+Choice recognizes and authorizes provider sponsored organizations to contract with the Health Care Financing Administration to deliver health care services to Medicare recipients in a managed care environment. The purpose of this subchapter is to provide for the licensing and regulation of these provider sponsored organizations by the department. Under state law a PSO would otherwise be a health maintenance organization (HMO). However, the Medicare+Choice program authorized [ authorizes] a PSO to seek a waiver of state licensing from the Health Care Financing Administration if the state's solvency standards for an HMO license were [ are] more stringent than those required of a PSO under the Medicare+Choice program. This subchapter required [ requires] the same solvency standards for a PSO as the Medicare+Choice program until the authority of the Health Care Financing Administration to waive the state licensing requirement expired on November 1, 2002. Otherwise the subchapter [ and otherwise] provides for the licensing of a PSO in the same manner as an HMO. After November 1, 2002, a PSO may apply for a certificate of authority under these provisions, however, the solvency provisions for HMOs must be met as a condition of receiving a certificate of authority. By June 30, 2003, PSOs that received a certificate of authority under this subchapter before November 1, 2002, must demonstrate to the department that they are in compliance with the solvency requirements for an HMO or file a business plan with the department that demonstrates that the PSO will be in compliance with the solvency requirements for an HMO by December 31, 2006. PSOs licensed under this subchapter are only authorized to engage in the delivery of health care services pursuant to a contract with the Health Care Finan cing Administration related to the Medicare+Choice program.

§11.2305. Issuance of Certificate of Authority. The commissioner of insurance may issue a certificate of authority for the purpose of providing health care to Medicare enrollees only to a PSO that meets each requirement for the issuance of a certificate of authority as a health maintenance organization imposed by the Insurance Code, Chapter 20A, provided, a PSO that received a certificate of authority before November 1, 2002 does not have to comply with [ except for] Article 20A.13, Insurance Code until December 31, 2006 under the provisions of §11.2306 of this title (relating to Solvency Standards).

§11.2306. Solvency Standards.

(a) A PSO or the legal entity of which the PSO is a component that received a certificate of authority under §11.2305 of this title (relating to Issuance of Certificate of Authority) before November 1, 2002 must have a fiscally sound operation that meets the requirements of §11.2307-11.2310 of this title (relating to Provider Sponsored Organizations.)

(b) By June 30, 2003, a PSO described in subsection (a) of this section must:

(1) demonstrate that it complies with §§11.801-11.810 of this title (relating to Financial Requirements); and

(2) file a business plan with the department that contains quarterly projected pro forma financial statements that demonstrates that the PSO will be in compliance with the requirements of §§11.801-11.810 of this title by December 31, 2006.

(c) A PSO or the legal entity of which the PSO is a component that receives a certificate authority after November 1, 2002, must have a fiscally sound operation that meets the requirements of §§11.801-11.810 of this title as a condition of receiving the certificate of authority.

§11.2315. Application of Other Insurance Laws. Subject to the provisions of this subchapter, the [ The] holder of a certificate of authority issued under this subchapter has all the powers granted to and duties imposed on a health maintenance organization under the Texas Health Maintenance Organization Act (Insurance Code, Chapter 20A) and the insurance laws of this state, and is subject to regulation and regulatory enforcement under these laws in the same manner as a health maintenance organization [ , except for the solvency standards in this subchapter].



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