28 TAC §§11.2301, 11.2305, 11.2306, 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.
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
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
].
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 15, 2003.
TRD-200302467
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: June 1, 2003
For further information, please call: (512) 463-6327