§ 301.202. Financial requirements—point-of-service products.
(a) Minimum net worth compliance.
(1) HMOs offering point-of-service products will be assuming additional indemnity-type financial risk. To adequately protect HMO members enrolled in point-of-service products and to ensure HMO ability to pay indemnity claims for covered services rendered by out-of-network providers, each HMO desiring to offer a point-of-service product shall first present satisfactory evidence of having a minimum net worth of the highest of $1.5 million of 2% of premiums, or an amount equal to the sum of 3 months uncovered health care expenditures as reported on the most recent financial statement filed with the Insurance Department. The evidence shall be presented to the Insurance Department’s Bureau of Licensing and Financial Analysis, Office of the Regulation of Companies.
(2) Upon satisfactory compliance with this requirement, an HMO may then make an appropriate program filing with the Department’s Office of Rate and Policy Regulation, Division of HMOs/PPOs and to the Bureau of Health Financing and Program Development of the Health Department.
(b) Adequate reserving requirements.
(1) An important component of financial integrity of a point-of-service product is the ability of an HMO to monitor adequately incurred but not reported claims (IBNR) and adequately reserve for the liabilities.
(2) An HMO receiving approval to offer a point-of-service product shall establish and maintain specified reserves for uncovered expenditures—that is, expenditures owed to nonparticipating providers not having contracts with the HMO which includes NAIC/NAHMOR financial hold harmless language—greater than the most recent 3 months of out-of-network (swing out) claims paid.
(3) Each HMO gaining approval to offer a point-of-service product shall submit to the Department’s Bureau of Licensing and Financial Analysis on a quarterly basis evidence that it has met this requirement and established sufficient reserves.
(4) The Department and the Department of Health (the Departments) may suspend the HMO’s authority to enroll additional members in point-of-service products if it fails to maintain the minimum net worth requirements as set forth in subsections (a) and this subsection. Failure of the HMO to correct a reserve deficiency promptly may result in withdrawal of its authority to offer a point-of-service product.
(c) Limits on out-of-network usage/expenses.
(1) It is the Department’s interpretation of the act that, while HMOs may be permitted to offer point-of-service products, the primary business of an HMO should remain the provision and financing of basic health services through the HMO’s organized health services delivery system centered around each member’s voluntarily selected primary care physician (PCP).
(2) Therefore, the Departments are establishing a 10% target limit for out-of-plan usage.
(3) The 10% target limit shall be calculated as follows for each reporting period:
Total point-of-service out of network claims incurred by the HMO for the reporting period. Divided by:
Total of all claims incurred by the HMO for the reporting period. Equals:
The target percentage
(i) The target percentage shall be calculated and reported to the Departments on a quarterly basis.
(ii) If the target percentage exceeds 10%. The HMO shall include with its submission of the target percentage calculation:
(A) An explanation of why and how out-of-plan utilization has exceeded 10%.
(B) What steps will be taken during the following reporting period to bring out-of-plan utilization to within the target percentage.
(iii) The Departments may suspend the HMO from enrolling additional members in the point-of-service product if the target percentage exceeds 10% for more than 3 consecutive quarters.
(iv) The Departments will compare reported estimated expenditures with actual expenditures. Variations between estimated and actual expenditures may result in suspension of the HMO’s authority to offer a point-of-service product.
Source The provisions of this § 301.202 adopted September 27, 1991, effective September 28, 1991, 21 Pa.B. 4424.
Cross References This section cited in 31 Pa. Code § 301.203 (relating to filing requirements).
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