Current through Register Vol. 43, No. 02, November 27, 2024
(1) Subject to
Section 22-6-159(c),
Code of Ala. 1975, each organization with probationary
regional care organization certification ("probationary RCO") shall, not later
than October 1, 2015, have demonstrated to the Medicaid Agency's approval that
it has met or will meet the solvency and financial requirements for a regional
care organization ("RCO") as outlined in section (2) of this rule.
(a) A probationary RCO shall be deemed to
have met such requirements if the Medicaid Agency has in its discretion
approved one or more of the following:
(i)
irrevocable letters of commitment to provide the required capital or surplus
and restricted reserves from one or more risk bearing participants with a
demonstrated ability (as determined by the Agency in its sole discretion) to
provide the required funds,
(ii) a
commitment letter from a qualified insurer to issue a performance bond
complying with section (3) of this rule,
(iii) evidence satisfactory to the Medicaid
Agency demonstrating that the probationary RCO has adequately funded a
restricted reserve account in accordance with section (4) of this rule and has
satisfied the capital or surplus requirement,
(iv) the probationary RCO's most recent
audited financial statements reflecting the required capital or surplus and
restricted reserves, or
(v) some
combination of (i) through (iv) satisfactory to the Medicaid Agency.
(b) No organization shall be
granted full RCO certification until it has either (i) provided a balance
sheet, certified by the chief executive officer and chief financial officer of
the RCO, reflecting the capital or surplus required pursuant to section (2) of
this rule (subject to confirmation and validation by the Medicaid Agency) and
evidence satisfactory to the Medicaid Agency demonstrating that the RCO has
adequately funded a restricted reserve account in accordance with section (4)
of this rule, or (ii) provided a performance bond in accordance with section
(3) of this rule.
(2)
Each RCO shall meet at a minimum the solvency and financial requirements
provided in this section or section (3) of this rule. Each RCO, as a condition
of certification or continued certification, and as a condition to the risk
contract between the Medicaid Agency and the RCO, shall maintain minimum
financial reserves at the following levels:
(a) Restricted reserves of two hundred fifty
thousand dollars ($250,000) or an amount equal to 25 percent of the RCO's total
actual or projected average monthly expenditures (as calculated pursuant to
section (5) of this rule), whichever is greater; and
(b) Capital or surplus, or any combination
thereof, of two million five hundred thousand dollars ($2,500,000).
(3) Instead of maintaining the
financial reserves required by section (2) of this rule, an RCO may submit to
the Medicaid Agency a written guaranty in the form of a bond issued by an
insurer, in an amount equal to the aggregate financial reserves that would
otherwise be required of the RCO under section (2), to guarantee the
performance of the provisions of the risk contract, satisfying the following
requirements:
(a) The performance bond shall
be issued by an insurer authorized to do business in the State of Alabama and
approved by the Medicaid Agency.
(b) No assets of the RCO shall be pledged or
otherwise encumbered in connection with the performance bond.
(c) The performance bond shall be approved by
the Medicaid Agency as to form and content and shall be payable to the Medicaid
Agency on demand in the event of the Medicaid Agency's determination in its
sole discretion that the RCO is in default under the risk contract, with no
proof of breach or default required.
(d) In addition to the foregoing and such
other terms and conditions as shall be required by the Medicaid Agency, the
performance bond shall require that the insurer notify the Medicaid Agency in
writing within ten business days after the occurrence of any delinquency in
payment of any premium by the RCO or giving of notice of default to the RCO by
the insurer. The performance bond shall also require that the insurer give the
Medicaid Agency 30 calendar days' advance written notice prior to termination
of the performance bond or any other material adverse action to be taken by the
insurer with respect to the performance bond.
(4) Each RCO other than RCOs satisfying their
financial reserves requirements with a performance bond shall, using a model
depository agreement provided by the Medicaid Agency, establish a restricted
reserve account with a third party financial institution that is authorized to
do business in the State of Alabama and is satisfactory to the Medicaid Agency
for the purpose of holding the RCO's restricted reserve funds required pursuant
to subsection (2)(a) of this rule.
(a)
Restricted reserves shall be held for the exclusive purpose of making payments
to providers in the event of a determination by the Medicaid Agency pursuant to
Rule No. 560-X-62-.18 that the RCO is
insolvent, is in a hazardous financial condition, or is otherwise in default
under the risk contract.
(b) Each
RCO shall provide a copy of its executed model depository agreement to the
Medicaid Agency in accordance with the timeline for implementation set forth in
Section 22-6-159,
Code of Ala.
1975, and such model depository agreement shall remain in effect
throughout the term of the risk contract, including any renewals thereof,
unless and until the RCO provides a performance bond in compliance with section
(3) of this rule.
(c) The following
are considered eligible deposits for the purposes of the restricted reserve
requirements:
2. Certificates of deposit satisfying
standards approved by the Medicaid Agency; and
3. Bonds, notes, warrants, debentures, and
other evidences of indebtedness which are direct obligations of the United
States of America for which the full faith and credit of the United States of
America is pledged for the payment of principal and interest.
(5) For purposes of
calculating an RCO's required restricted reserves pursuant to subsection (2)(a)
of this rule, an RCO's average monthly expenditures shall be equal to the
average monthly total capitated payment pursuant to the RCO's risk contract.
Thus, the restricted reserves required to be maintained by an RCO shall be the
greater of $250,000 or 25% of such average monthly total capitated payment.
"Average monthly total capitated payment" means the mathematical average of the
total capitated payment pursuant to the risk contract for each of the three
months during the preceding calendar quarter. Within 30 calendar days after the
end of each calendar quarter, each RCO's required restricted reserves shall be
adjusted based on the average monthly total capitated payment for such
preceding quarter. Until an RCO has completed a full calendar quarter of its
risk contract, the RCO's projected average monthly total capitated payment
shall be determined by the Medicaid Agency, based on a projection of the
capitated payment to be paid to the RCO if the Medicaid Agency enters into a
risk contract with the RCO. Such projected average monthly expenditures may be
adjusted by the Medicaid Agency from time-to-time through the completion of the
first full calendar quarter of the RCO's risk contract, based upon changes in
the projected or the actual capitated payment under the risk
contract.
(6) For purposes of
subsection (2)(b) of this rule and Section
22-6-151(e),
Code of Ala. 1975, an RCO's capital and surplus is the
difference between the admitted assets of the RCO and the liabilities of the
RCO, determined as follows:
(a) The
classification and value of the RCO's assets and liabilities shall be
determined in accordance with Generally Accepted Accounting Principles (GAAP),
as modified by the provisions of this section (6).
(b) For purposes of this rule, "admitted
assets" means only assets owned exclusively by the RCO consisting of:
1. Cash, including the true balance of
deposits in solvent banks and trust companies;
2. Bonds, notes, warrants, debentures, and
other evidences of indebtedness which are direct obligations of the United
States of America for which the full faith and credit of the United States of
America is pledged for the payment of principal and interest ("U.S. Treasury
Securities");
3. Investment grade
bonds or other evidences of indebtedness other than U.S. Treasury Securities,
satisfying standards approved by the Medicaid Agency;
4. Marketable equity securities, satisfying
standards approved by the Medicaid Agency;
5. Due or deferred capitated payments
pursuant to the risk contract between the RCO and the Medicaid Agency or, in
the case of an RCO granted probationary RCO certification, due or deferred
payments for case management services;
6. The amount recoverable under any stop loss
insurance or reinsurance provided or approved by the Medicaid Agency, and the
amount recoverable from a third party reinsurer if and to the extent credit for
stop loss insurance or reinsurance is allowed by the Medicaid Agency;
7. The acquisition cost of land and
depreciated cost of improvements thereon owned by the RCO and used in
connection with the performance of the risk contract, in excess of any
liabilities secured by encumbrances on such assets, in an aggregate amount not
greater than 50 percent of the required minimum capital and surplus of the RCO;
and
8. Such other assets as may be
approved by the Medicaid Agency.
(c) In addition to assets not described in
subsection (6)(b) of this rule, an RCO's admitted assets shall not include:
1. Any single investment or asset, or any
combination of investments in or secured by the securities, obligations, and/or
property of one person, entity, or governmental unit, to the extent any such
investment or combination of investments would exceed 20 percent of the RCO's
admitted assets, provided that the foregoing restriction shall not apply to
U.S. Treasury Securities or cash; or
2. Goodwill and other intangible
assets.
(d) In any
determination of the capital and surplus of an RCO, liabilities to be charged
against the RCO's admitted assets shall include, in addition to other
liabilities chargeable in accordance with GAAP:
1. The amount necessary to pay all of the
RCO's unpaid losses and claims incurred on or prior to the date of the
statement, together with the expenses of adjustment or settlement
thereof;
2. Federal, state, and
local taxes, expenses and other obligations due or accrued at the date of the
statement;
3. The restricted
reserves required by subsection (2)(a) of this rule, if applicable;
and
4. Any additional reserves for
asset valuation contingencies or loss contingencies required by the Medicaid
Agency pursuant to Rule No.
560-X-62-.18 or otherwise
required by applicable law.
(7) No RCO shall reduce its combined capital
and surplus, by distribution of its assets to the members, owners, or
risk-bearing participants of the RCO or otherwise, below the RCO's required
capital and surplus under the rules of the Medicaid Agency.
(8) The Medicaid Agency may offer or mandate
that each RCO participate in one or more stop-loss insurance or reinsurance
programs, including but not limited to one or more stop-loss pools. The
Medicaid Agency may administer any such programs and may require that they be
funded by the RCOs at such levels as may be determined by the Medicaid Agency.
If the Medicaid Agency offers or mandates a stop-loss insurance or reinsurance
program, no RCO shall purchase duplicative stop loss insurance or reinsurance
for enrollees that provides the same coverage as that offered or mandated in
such stop-loss insurance or reinsurance program.
(9) Each RCO shall at its expense procure and
maintain, throughout the term of the risk contract between the Medicaid Agency
and the RCO, professional and general liability insurance, directors' and
officers' liability insurance, errors and omissions liability insurance, and,
if the RCO provides Medicaid services to enrollees directly, medical
malpractice insurance, in such amounts and including such coverage as set forth
in the risk contract.
Author: Sharon Weaver, Administrator,
Administrative Procedures Office
Statutory Authority:
Code of Ala.
1975, §§
22-6-150.