§ 301.42. Content of application for certificate of authority.
An application for a certificate of authority under the act shall be made in writing in triplicate to the Commissioner. The application shall contain the following information:
(1) A copy of the basic organizational documents of the applicant organization, such as the articles of incorporation and amendments thereto.
(2) A copy of the bylaws, rules and regulations or similar documents governing the conduct of the internal affairs of the applicant corporation.
(3) A list of the names, addresses and official positions of the members of the Board of Directors of the applicant corporation and of persons who are to be responsible for the conduct of the affairs of the applicant. The list shall include the Executive Director or President, Medical Director, Director of Marketing and Director of Finance, and notarized biographical forms for each.
(4) A description of the service area of the proposed HMO, including geographic boundaries, demographic data and identification of population groups which would be sources of prepayment.
(5) Copies of the applicant corporation’s proposed contracts with subscribers and groups of subscribers, including evidence of coverage forms, setting forth the corporation’s contractual obligations to provide basic health services.
(6) Copies of the applicant corporation’s proposed contracts with physicians, groups of physicians organized on a group-practice or individual-practice basis, hospitals, skilled nursing facilities and other providers of health care services enabling it to provide health services to a voluntarily enrolled population.
(7) Copies of a proposed contract with an individual, partnership, association or corporation for the performance on its behalf of necessary functions, including marketing, enrollment and administration of a contract with an insurance company, hospital plan corporation or professional health service corporation for the provision of insurance, indemnity or reimbursement against the cost of health care services provided by the HMO.
(8) A detailed description of the applicant corporation’s proposed grievance resolution system whereby the complaints of its members may be acted upon promptly and fairly.
(9) A copy of the applicant corporation’s proposed premium rates and a detailed description of the underlying assumptions utilized in deriving rates, which shall be submitted separate from the remainder of the application for certificate of authority. The actuarial methodology used in deriving premium rates may not be considered public information. The detailed description of the underlying assumptions used in deriving rates shall include:
(i) Projected hospital and skilled nursing facility inpatient utilization in days per 1,000 members per year, subdivided by age or sex.
(ii) Projected hospital costs attributable to hospitals to be specifically utilized by the HMO through contract or otherwise.
(iii) Projected outpatient and same day hospital utilization in services per 1,000 members per year, subdivided by age or sex, as applicable.
(iv) Projected outpatient and same day hospital costs attributable to hospitals to be utilized by the HMO by contract or otherwise.
(v) Projected utilization of various physician services, such as primary office, inpatient and surgical, expressed in terms of number of visits per 1,000 members per year, subdivided by age or sex.
(vi) Projected cost of physicians’ services, expressed in terms of cost per visit or per service.
(vii) Identification of physician services that are included in primary care capitation, if applicable. If there is a specialist capitation, services shall be identified.
(viii) Projected cost of emergency and out-of-area services of non-HMO providers, differentiated as to hospital and medical service components.
(ix) Projected cost and utilization of other services, such as prescription drug, home health, eye or ear exams, mental health, substance abuse and medical equipment.
(x) Identification of copays, if any, and their effect on rates.
(xi) Identification of incentive arrangements and risk pool arrangements in provider agreements, and their effect on rates. The categories of provider services covered by the arrangements shall be identified.
(xii) Identification, justification and derivation of a separate trend factor. For each separate trend factor, the specific benefits to which the trend factor applies shall be identified.
(xiii) Identification and justification of reserve or surplus contribution factors.
(xiv) Identification and justification of profit factor.
(xv) Projected cost of reinsurance.
(xvi) Projected amount of investment income.
(xvii) A detailed breakdown of administration expenses into component parts including management fees.
(xviii) Identification of demographic information used to convert the total cost per member per month to the proposed premium rates.
(xix) Identification and derivation of large group rate adjustment formulas.
(xx) A rate table listing proposed premium rates by effective period, class of membership and applicable contract form number which is separate from the rate justification materials.
(xxi) Projected financial statements, including schedules of cash flow, for a number of years that go at least past the breakeven point. Assumptions underlying the financial statements, including the projected number of members, shall be included.
(10) A map of the service area showing the locations of the providers used by the HMO.
(11) A detailed description of incentives for cost control within the structure and function of the proposed HMO.
(12) A detailed description of reinsurance contracts and a description of insolvency reinsurance obtained by the HMO.
(13) A statement that no funds may be transferred out of this Commonwealth by the HMO without the prior approval and written consent of the Department.
(14) A copy of the applicant corporation’s most recent financial statement.
(15) A description of the applicant corporation’s capability to collect and analyze necessary data relating to the utilization of health care services by enrolled members.
(16) A copy of the proposed general subscriber literature.
(17) A procedure for referral of members to nonparticipating specialists.
(18) Written procedures for payment of emergency services provided by other than a participating provider.
(19) A description of the manner in which members will be selected to meet the statutory requirement that 1/3 of the board members be members.
(20) A description of the system established to ensure that the records of the corporation pertaining to its operation of an HMO are identifiable and distinct from other activities in which the corporation may engage.
(21) Other information that the applicant corporation may wish to submit which reasonably relates to its ability to operate and maintain an HMO.
(22) Other information which the Commissioner finds necessary to review an HMO’s application.
Authority The provisions of this § 301.42 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. § § 66, 186, 411 and 412); and the Health Maintenance Organization Act (40 P. S. § § 1551—1567).
Source The provisions of this § 301.42 adopted February 20, 1987, effective February 21, 1987, 17 Pa.B. 807; amended September 8, 1989, effective September 9, 1989, 19 Pa.B. 3820; amended March 13, 1992, effective March 14, 1992, 22 Pa.B. 1178. Immediately preceding text appears at serial pages (143038) to (143041).
Cross References This section is cited in 31 Pa. Code § 301.43 (relating to review by the Department); 31 Pa. Code § 301.301 (relating to definitions); and 31 Pa. Code § 301.303 (relating to certificate of authority).
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