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You are here: Home . rules . 2003 . 0725-059
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SUBCHAPTER X. PROVIDER SPONSORED ORGANIZATIONS

28 TAC §§11.2301, 11.2305, 11.2306 and 11.2315

The Commissioner of Insurance adopts amendments to 28 TAC §§11.2301, 11.2305, 11.2306 and 11.2315 concerning provider sponsored organizations (PSOs). Sections 11.2305, 11.2306 and 11.2315 are adopted with changes to the proposed text as published in the May 2, 2003 issue of the Texas Register . Section 11.2301 is adopted without changes and will not be republished.

These amendments are necessary because federal law now requires 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 until November 1, 2002 . 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. With the expiration of the federal waiver program, it is no longer legally permissible to provide solvency standards for PSOs that are different than the solvency standards for HMOs. PSOs must demonstrate compliance with the provisions of 28 TAC §§11.801-11.810 by June 30, 2003 . Part of the new requirements also include the filing of a business plan with projections by year-end 2006. In addition, the adopted amendments provide that PSOs possessing existing certificates 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 applying to HMOs. The changes that were made to §§11.2305 and 11.2315 were to correct the references to Insurance Code Chapter 843 due to the recodification of Chapter 20A. A change was made to §11.2306 to clarify what is requested to be filed.

The purpose and objective of these amendments are to comply with federal mandates related to the Medicare+Choice program that now require all PSOs to meet the requirements for HMOs as to licensure and operation. These requirements include complying with the financial standards provided in 28 TAC §§11.801-11.810 by June 30, 2003 , and the filing of a business plan with projections by year-end 2006.

Amendments to §11.2301 specify the purpose and scope of the amendments. The amendments to §11.2305 clarify that PSOs with certificate of authorities issued before November 1, 2002 , must come into compliance with Insurance Code Sections 843.405 and 843.408, which are items relating to solvency protection. In addition, the amendments in §11.2306 direct all PSOs to met the financial requirements of §§11.801-11.810, whether licensed before or after November 1, 2002 . For PSOs licensed prior to November 1, 2002 , they have until June 30, 2003 , to comply with §§11.801-11.810 unless they have filed a business plan with the department which contains projections that they will be in compliance with the solvency requirements by December 31, 2006. Finally, the amendment to §11.2315 deletes the exception from solvency standards for PSOs.

No comments were received.

These amendments are adopted under authority of the Texas Insurance Code Sections 843.151 (formerly Article 20A.22 §(c)) and 36.001. Texas Insurance Code Section 843.151 authorizes rules necessary to meet the requirements of federal law, which in this instance is related to the Medicare+Choice program. In addition, Texas Insurance Code Section 36.001 authorizes the Commissioner of Insurance to adopt rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance.

§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 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 more stringent than those required of a PSO under the Medicare+Choice program. This subchapter required 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 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. Provider Sponsored Organizations licensed under this subchapter are only authorized to engage in the delivery of health care services pursuant to a contract with the Health Care Financing 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 843, provided, a PSO that received a certificate of authority before November 1, 2002 does not have to comply with Sections 843.405 and 843.408, 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); or

(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 of 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 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 843) 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.



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