Subchapter G. PROTECTION AGAINST INSOLVENCY
301.121. Protections against insolvency.
301.122. Hold harmless.
301.123. Continuation of benefits.
301.124. Notice of provider termination.
301.125. Replacement coverage.
301.126. HMO insolvency group.
The provisions of this Subchapter G adopted March 13, 1992, effective March 14, 1992, 22 Pa.B. 1178, unless otherwise noted.
§ 301.121. Protections against insolvency.
(a) A new certificate of authority filing shall include procedures to be implemented to meet the requirements for protection against insolvency.
(b) Requirements for protection against insolvency include:
(1) For new plans filing for a certificate of authority, a minimum initial net worth of $1.5 million.
(2) For every operational HMO, minimum net worth equal to the greater of $1 million or 3 months uncovered health care expenditures for Pennsylvania enrollees as reported on the most recent financial statement filed with the Commissioner. A dedicated funding commitment, such as an irrevocable letter of credit or other instrument from a parent company, may be considered in assessing net worth, if approved by the Commissioner. This commitment would not be considered a substitute for a capital infusion needed to obtain a positive net worth.
(c) Existing HMOs have 4 years to meet the net worth requirements, in increments of $250,000 as of January 1 of each year. The plan is required to include the uncovered expenses amount, if applicable, in the fifth year.
(d) Interest expenses relating to the repayment of a fully subordinated debt are considered a covered expense.
(e) Fully subordinated debt is not considered a liability.
(f) An HMO shall deposit with the Commissioner cash, securities or a bond, or an acceptable combination, which has a value of at least $100,000. The deposit shall cover administrative costs in the event of liquidation.
(g) The deposit, as required in subsection (f), is an admitted asset of the HMO in the determination of net worth.
(h) Income from deposits is an asset of the organization. An HMO that has made a securities deposit could withdraw that deposit or a part thereof after making a substitute deposit of cash, securities, or a combination of these, or other instruments of equal amount and value.
(i) The Commissioner may reduce or eliminate the deposit requirement if the HMO deposits with the State Treasurer, the Commissioner or other official body of the state of the HMOs domicile for the protection of all subscribers and enrollees of the HMO, wherever located, cash, acceptable securities or surety, and delivers to the Commissioner a certificate to that effect, authenticated by the appropriate state official holding the deposit.
(j) An HMO investment is subject to the investment provisions for a stock life company in sections 404.1 and 404.2 of The Insurance Company Law of 1921 (40 P. S. § § 504.1 and 504.2).
§ 301.122. Hold harmless.
A contract between an HMO and a participating provider of health care services shall include a provision to the following effect:
(Provider) hereby agrees that in no event, including, but not limited to non-payment by the HMO, HMO insolvency or breach of this agreement, shall (Provider) bill, charge, collect a deposit from, seek compensation, remuneration or reimbursement from, or have any recourse against subscriber/enrollee or persons other than HMO acting on their behalf for services listed in this Agreement. This provision shall not prohibit collection of supplemental charges or copayments on the HMOs or providers behalf made in accordance with the terms of the applicable agreement between the HMO and subscriber/enrollee.
(Provider) further agrees that (1) the hold harmless provisions herein shall survive the termination of the (applicable Provider contract) regardless of the cause giving rise to termination and shall be construed to be for the benefit of the HMO subscriber/enrollee and that (2) this hold harmless provision supersedes any oral or written contrary agreement now existing or hereafter entered into between (Provider) and subscriber/enrollee or persons acting on their behalf.
Any modification, addition, or deletion to the provisions of this section shall become effective on a date no earlier than fifteen (15) days after the Secretary of Health has received written notice of such proposed changes.
This section is cited in 31 Pa. Code § 301.314 (relating to Department review).
§ 301.123. Continuation of benefits.
(a) An HMO shall have a plan for handling insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of insolvency in an inpatient facility until either their discharge or expiration of benefitslimited to services directly related to the condition which occasioned the admissionwhichever comes later. This plan may limit the continuation of benefits to the expiration of the members benefits if the member or the contractholder, for example, employer, has an opportunity to obtain replacement coverage under § 301.125 (relating to replacement coverage), and fails to obtain replacement coverage.
(b) The Commissioner may require one or more of the following which provides for continuation of benefits:
(1) Insurance to cover the expenses for continued benefits after an insolvency, including conversion contracts. The HMO shall provide evidence of an agreement by the insurer to notify the Commissioner within 10 days of the insurers intent to terminate for any reason, including failure to pay the premium.
(2) Provisions in provider contracts that obligate the provider to provide services for the duration of the period after the HMOs insolvency for which premium payment has been made and until the enrollees discharge from the inpatient facility. The provisions may limit the continuation of benefits to the expiration of the members benefits if the member or the contractholder, for example, employer, has an opportunity to obtain replacement coverage under § 301.125, and fails to obtain replacement coverage.
(3) Acceptable letters of credit.
(4) Dedicated parental guaranty in a form and amount approved by the Commissioner.
(5) Other arrangements approved by the Commissioner to assure that benefits are continued as specified in this section.
The provisions of this § 301.123 adopted March 13, 1992, effective March 14, 1992, 22 Pa.B. 1178; corrected April 24, 1992, effective March 14, 1992, 22 Pa.B. 2242.
§ 301.124. Notice of provider termination.
An agreement to provide health care services between a provider and an HMO shall require that if the provider terminates the agreement, the provider shall give the HMO at least 60 days advance notice of termination.
Notes of Decisions
Regulatory notice was unnecessary once the contract between the hospital and the insurance company expired, rather than terminated, because the parties already approved the expiration and, thus, providing notice of the contracts expiration would simply inform the party of a contractual term which it has already approved. Childrens Hospital of Philadelphia v. Independence Blue Cross, 89 F. Supp. 2d 630 (E. D. Pa. 2000).
§ 301.125. Replacement coverage.
If an impairment or insolvency of an HMO exists the following requirements shall be met:
(1) Other carriers who participated in the enrollment process with the impaired or insolvent HMO at a groups last regular enrollment period, and which currently provide coverage to one or more employes of that group, shall offer the enrollees of the impaired or insolvent HMO a 15 business day enrollment period commencing upon the date of the mailing of the notification to subscribers of the impairment or insolvency.
(2) A carrier shall offer the enrollees of the impaired or insolvent HMO the same coverage and rates which the carrier currently offers to the enrollees for the group. The carrier shall immediately cover the employes and dependents who were validly covered under the previous HMO contract or policy as of the date of discontinuance and who would otherwise be eligible for coverage under the succeeding carriers contract, regardless of provisions in the contract relating to active employment, hospital confinement or other pre-existing health conditions.
(3) The receiving HMO may not become primary for expenditures which should be covered under the impaired or insolvent HMOs continuation of benefits coverage.
(4) An open enrollment period will be preceded by at least 30 days notice from the Commissioner to each affected plan.
(5) An HMO shall provide the Department with evidence of a contractual arrangement with an insurer or hospital service corporation to provide conversion coverage in the event of the HMOs impairment or insolvency.
This section cited in 31 Pa Code § 301.123 (relating to continuation of benefits).
§ 301.126. HMO insolvency group.
At the time of HMO impairment, the Department may appoint a team of HMO managers to work under the direction of State regulatory personnel and the management of the impaired HMO to develop a viable plan to restore, rehabilitate, reorganize or otherwise deal with the problem and protect the subscribers of the impaired plan. The group will serve in an advisory capacity to the Commissioner. Members of the group will be selected by the Commissioner from plans that did not compete with the impaired plan. Suggested members of the team will include representatives of general management, marketing, finance and health care delivery systems.
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