Current through Register 1531, September 27, 2024
(1)
Financial
Concerns. Each HMO shall inform the Commissioner of any
extraordinary loss or claim which has the potential to render it unable to meet
its obligations as they become due, within five business days of its
occurrence.
(2)
Quarterly Filings. Within 45 days of the close of each
fiscal quarter, the Division will collect information according to the format
specified by the NAIC or otherwise as specified by the Commissioner.
(3)
Unaudited Annual
Reports. Each year, every HMO shall file with the Commissioner, on
or before March 1st, a report about the HMO's
preceding fiscal year that is verified by at least two principal executive
officers, in the format specified by the NAIC or otherwise specified by the
Commissioner in accordance with the provisions of M.G.L. c. 176G, § 10;
provided, that if the Commissioner determines that a threat of insolvency
exists to the HMO, he or she may require that such report be made available
prior to March 1st; in the alternative, as
authorized by the Commissioner, the Commissioner may obtain certain annual
reporting information from an alternate source.
(a) Such annual report shall be made on the
latest applicable form of annual statement approved by the NAIC, with any
additional information the Commissioner may require for filing with the NAIC
for the purpose of eliciting a complete and accurate exhibit of the condition
and transactions of the HMO. All financial information reflected in the annual
statement shall be maintained and prepared in accordance with accounting
practices and procedures prescribed or permitted by the Commissioner. The
Commissioner shall require that the annual statement be maintained and prepared
in accordance with the Annual Statement Instructions and Accounting Practices
and Procedures Manual adopted by the NAIC unless further modified by the
Commissioner as he or she considers appropriate. The annual statement shall be
subscribed and sworn to by its president and secretary or, in their absence, by
two of its principal executive officers. The Commissioner may at other times
require any such statements as he or she may deem necessary.
(b) A copy of such annual report shall be
sent to the NAIC in an electronic filing form as provided by the
NAIC.
(c) Each domestic and foreign
HMO authorized to transact insurance in Massachusetts shall annually on or
before March 1st, file with the NAIC a copy of its
annual statement blank, along with such additional filings as prescribed by the
Commissioner for the preceding year. The information filed with the NAIC shall
be in the same format and scope as that required by the Commissioner and shall
include the signed jurat page and the actuarial certification. Any amendment or
addendum to the annual statement filing subsequently filed with the
Commissioner shall also be filed with the NAIC. Foreign HMOs that are domiciled
in a state that has a law substantially similar to 211 CMR 43.04 shall be
deemed to be in compliance with 211 CMR 43.04.
(d) The reporting provisions of 211 CMR
43.04(3) shall apply to all domestic, foreign and alien HMOs that are
authorized to transact business in Massachusetts.
(4)
Audited Annual
Reports. Consistent with M.G.L. c. 176G, § 10 and c. 175,
§ 4, all HMOs shall have an annual audit by an independent certified
public accountant and shall file an audited financial report with the
Commissioner, prepared in accordance with statutory accounting practices and
procedures prescribed or permitted by the Commissioner, on or before June
1st for the preceding fiscal year. Extensions of the
filing date may be granted by the Commissioner for 30-day periods upon showing
by the HMO or its independent certified public accountant valid justification
for such extension. The request for any extension must be received prior to the
due date of the audited financial report in sufficient detail to permit the
Commissioner to make an informed decision with respect to the requested
extension.
(a)
Designation of
Independent Certified Public Accountant. All HMOs shall notify the
Commissioner of the engagement of a certified public accountant within 30 days
of such appointment if such accountant was not the accountant for purposes of
211 CMR 43.00 for the
immediately preceding year. Such notification shall include a statement by the
president, treasurer and chairman of the audit committee (if any) as to whether
in the 24 months preceding the most recent year end, there were any
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosures, or auditing procedures which
disagreements if not resolved to the satisfaction of the former accountant
would have caused him or her to make reference to the subject matter of the
disagreement in connection with his or her opinion. The HMO shall also in
writing request such former accountant to furnish it with a letter addressed to
the Commissioner stating whether he or she agrees with the statements contained
in its letter and, if not, stating the reasons why he or she does not agree.
The HMO shall furnish the responsive letters from the former accountant to the
Commissioner together with its own.
(b)
Qualification of Independent
Certified Public Accountant. The Commissioner shall not recognize
any person or firm as an independent certified public accountant who is not
duly licensed to practice and in good standing under the laws of Massachusetts
(or in a state with licensing requirements similar to Massachusetts) and a
member in good standing of the American Institute of Certified Public
Accountants. Except as otherwise provided in 211 CMR 43.04(4)(b), a certified
public accountant shall be recognized as independent as long as he or she
conforms to the standards of the profession, as contained in the Code
of Professional Ethics of the American Institute of Certified Public
Accountants, and Rules and Regulations and Code of Ethics and
Rules of Professional Conduct of the Massachusetts Board of Public
Accountancy (or similar code). The Commissioner may hold a hearing to
determine whether a certified public accountant is qualified under
211 CMR 43.00, whether he or
she is independent, whether an audit performed by him or her conforms to
generally accepted auditing standards, or whether the annual audited financial
report on which he or she has given his or her opinion presents fairly the
financial position and results of operations of the HMO. After a negative
ruling on any of the above issues, the Commissioner may require the HMO to
replace the accountant.
(c)
Availability and Maintenance of Working Papers of the Independent
Certified Public Accountant. The HMOs shall require the
independent certified public accountant to make available for review by the
Commissioner or his or her appointed agent, the work papers prepared in the
conduct of the audit which shall include its parent and affiliates as they
relate to the examination of the HMO. The HMO shall require that the accountant
retain the audit work papers for a period of not less than five years after the
period reported upon. The records of any such audit, examination, or other
inspection and the information contained in the records, reports, or books of
an HMO shall be confidential and open only to the inspection of the
Commissioner and his or her examiners and assistants, except to the extent that
production of such records is required by law in a civil or criminal proceeding
affecting the HMO. The final report of any such audit, criminal proceeding, or
other inspection by or on behalf of the Commissioner shall be a public record.
1. The aforementioned reviews by the
Commissioner shall be considered investigations and all working papers obtained
during the course of such investigations shall be confidential. If the
Commissioner considers them to be relevant, the HMO must require that the
independent certified public accountant provide photocopies of any of his or
her working papers and these papers may be retained by the
Commissioner.
2. "Working Papers",
as referred to in 211 CMR 43.04(4)(c), include, but are not necessarily limited
to, schedules, analyses, reconciliations, abstracts, memoranda, narratives,
flow charts, copies of company records or other documents prepared or obtained
by the accountant and his employees in the conduct of their examinations of the
HMO.
(d)
Annual Audited Financial Report. The report shall
include:
1.
Opinion of the
Independent Certified Public Accountant.
2.
Audited Financial Statements,
including:
a. balance
sheet;
b. statement of revenues and
expenses;
c. statement of cash
flows;
d. statement of changes in
capital and surplus; and
e. notes
to financial statements.
f. In
general, and except as otherwise provided herein, the financial statements
filed pursuant to 211 CMR 43.04(4) should be prepared as follows:
i. The financial statements shall be
comparative, presenting the amounts as of the last date of the current year and
the amounts as of the year end immediately preceding.
ii. If the HMO is included in consolidated or
combined financial statements prepared on the basis of statutory accounting
practices and procedures prescribed or permitted by the Commissioner, such
financial statements must also be included in the filing of the audited
financial report. An HMO may make written application to the Commissioner for
approval, at his or her discretion, to file an annual audited consolidated or
combined financial report in lieu of a separate annual audited financial report
for the HMO. In such cases, and in cases of HMOs that have subsidiaries that
are required to be consolidated under statutory accounting practices and
procedures prescribed or permitted by the Commissioner, the annual audited
financial report shall include a columnar consolidating or combining worksheet,
as follows:
- amounts shown on the consolidated or combined audited
financial report shall be shown on the worksheet;
- amounts for the HMO shall be stated separately;
- non-HMO operations may be shown on the worksheet on a
combined or individual basis; and
- explanations of consolidating and eliminating entries shall
be included. iii. A reconciliation shall compare the amounts shown in the HMO
columns of the worksheet with comparable amounts in the HMO's annual statement
of financial condition.
3.
Report of Significant
Deficiencies in Internal Controls. In addition to the annual
audited financial statements, each HMO shall furnish the Commissioner with a
written report prepared by the accountant describing significant deficiencies
in the HMO's internal control structure noted by the accountant during the
audit. SAS No. 60, Communication of Internal Control Structure Matters Noted in
an Audit (AU Section 325 of the Professional Standards of the American
Institute of Certified Public Accountants) requires an accountant to
communicate significant deficiencies (known as "reportable conditions") noted
during a financial statement audit to the appropriate parties within an entity.
No report need be issued if the accountant does not identify significant
deficiencies. If significant deficiencies are noted, the written report shall
be filed annually by the HMO with the Division. The HMO is required to provide
a description of remedial actions taken or proposed to correct significant
deficiencies, if such actions are not described in the accountant's report.
(e)
Notification of Adverse Financial Condition. An HMO
subject to
211 CMR 43.00 shall require
the independent certified public accountant to immediately notify in writing an
officer and all members of its Board of Directors of any determination by the
independent certified public accountant that the HMO has materially misstated
its financial condition as reported to the Commissioner for the fiscal year
ended immediately preceding. The HMO shall furnish such notification to the
Commissioner within five days of receipt thereof. If the accountant, subsequent
to the date of the audited financial report pursuant to 211 CMR 43.04(4)(d) 2.,
becomes aware of facts which would have affected his or her report, the
Commissioner notes the obligation of the accountant to take such action as
prescribed by Section 561 of the Statement of Auditing Standards Number One of
the American Institute of Certified Public Accountants.
(5)
Examination by the
Commissioner. The Commissioner shall determine the nature, scope
and frequency of examinations conducted pursuant to M.G.L. c. 176G, § 10.
Such examinations may cover all aspects of the HMO's assets, condition, affairs
and operations and may include and be supplemented by audit procedures
performed by independent certified public accountants as herein provided.
(a) The type of examinations performed by the
Commissioner's examiners may include, but shall not be limited to, the
following:
1. Financial surveillance will
consist of a review of the audited financial report and annual statement and
may include a review of the independent certified public accountant's working
papers if expressly required and a general review of the HMO's corporate
affairs and operations to determine compliance with Massachusetts General Laws
and the Rules and Regulations of the Commissioner. The examiners may perform
alternative or additional examination procedures to supplement those performed
by the independent certified public accountants when the examiners determine
that such procedures are necessary to verify the financial condition of the
HMO;
2. Targeted examinations will
cover specific areas of an HMO's operations as the Commissioner may deem
appropriate; and
3. Comprehensive
examinations will be performed when the report of the accountant as provided
for in 211 CMR 43.04(4)(d) or the notification required by 211 CMR 43.04(4)(e)
or the results of financial surveillance or targeted examinations or other
circumstances indicate in the judgment of the Commissioner that a complete
examination of the condition and affairs of the HMO is necessary. Such
examinations may be conducted by the Commissioner or his or her appointed
agent.
(b) At the
completion of each examination described above, the examiner appointed by the
Commissioner shall make a full and true report on the results of the
examination. Each report shall include a general description of the scope of
the examination performed and the extent to which the examiners utilized the
work of the HMO's accountants or other certified public accountants to
supplement their examination. The cost of all work performed by independent
certified public accountants shall be borne by the HMO.
(6)
Exemptions. Upon
written application of any HMO, the Commissioner may grant an exemption from
compliance with 211 CMR 43.04 or portions thereof if the Commissioner finds,
upon review of the application, that compliance with
211 CMR 43.00 would
constitute a financial or organizational hardship upon it or its independent
certified public accountant. An exemption may be granted at any time for any
specified period. Within ten days of receipt of a denial of a written request
for an exemption from
211 CMR 43.00, the HMO may
request in writing a hearing on its application for exemption. Such hearing
shall be held in accordance with M.G.L. c. 30A and the practices of the
Commissioner pertaining to administrative hearings.
(7)
Material
Changes. All material changes to reporting information contained
in the HMO's application, including but not limited, to the HMO's articles of
incorporation and by-laws, Board of Directors, management structure or key
management personnel, investment guidelines, letters of financial support,
service area, amendments to the evidence of coverage, significant changes to
provider networks, the name under which the HMO does business, and all changes
in controlling interest of the HMO, shall be submitted to the Commissioner on
or before their effective dates.
(8)
Independent Certified
Accountant. Pursuant to M.G.L. c. 176G, § 10 and c. 175,
§ 4, the Commissioner may require HMOs to comply with the provisions of
211 CMR 43.00.
(9)
Additional
Reports. The Commissioner, if he or she so determines the need
exists, may require the HMO to submit additional reports other than those
specifically required by
211 CMR 43.00.
