Exhibit 10.3

 

ADDENDUM TO MEDICARE MANAGED CARE CONTRACT PURSUANT TO

SECTIONS 1860D-1 THROUGH 1860D-42 OF THE SOCIAL SECURITY ACT

FOR THE OPERATION OF A VOLUNTARY MEDICARE PRESCRIPTION

DRUG PLAN

 

The Centers for Medicare & Medicaid Services (hereinafter referred to as “CMS”)
and (See Chart), a Medicare managed care organization (hereinafter referred to
as the MA-PD Sponsor) agree to amend the contract (INSERT “H” OR “R” NUMBER)
governing the MA-PD Sponsor’s operation of a Part C plan described in
Section 1851(a)(2)(A) of the Social Security Act (hereinafter referred to as
“the Act”) or a Medicare cost plan to include this addendum under which the
MA-PD Sponsor shall operate a Voluntary Medicare Prescription Drug Plan pursuant
to sections 1860D-1 through 1860D-42 (with the exception of section 1860D-22 and
1860D-31) of the Act.

 

This addendum is made pursuant to Subpart L of 42 CFR Part 417 (in the case of
cost plan sponsors offering a Part D benefit) and Subpart K of 42 CFR Part 422
(in the case of an MA-PD Sponsor offering a Part C plan).

 

NOTE: For purposes of this addendum, unless otherwise noted, reference to an
“MA-PD Sponsor” or “MA-PD Plan” is deemed to include a cost plan sponsor or a MA
private fee-for-service contractor offering a Part D benefit.

--------------------------------------------------------------------------------

Article I

Medicare Voluntary Prescription Drug Benefit

 

A. The MA-PD Sponsor agrees to operate one or more Medicare Voluntary
Prescription Drug Plans as described in its application and related materials,
including but not limited to all the attestations contained therein and all
supplemental guidance, for Medicare approval and in compliance with the
provisions of this addendum, which incorporates in its entirety the Solicitation
For Applications from Prescription Drug Plans released on January 21, 2005 (as
revised on March 9, 2005) [applicable to Medicare Part C contractors] or the
Solicitation for Applications from Cost Plan Sponsors released on January 21,
2005 (as revised on March 9, 2005) [applicable to Medicare cost plan
contractors] (hereinafter collectively referred to as “the addendum”). The MA-PD
Sponsor also agrees to operate in accordance with the regulations at 42 CFR
§423.1 through 42 CFR §423.910 (with the exception of Subparts Q, R, and S),
sections 1860D-1 through 1860D-42 (with the exception of sections 1860D-22(a)
and 1860D-31) of the Social Security Act, and the applicable solicitation
identified above, as well as all other applicable Federal statutes, regulations,
and policies. This addendum is deemed to incorporate any changes that are
required by statute to be implemented during the term of this addendum and any
regulations or policies implementing or interpreting such statutory provisions.

 

B. CMS agrees to perform its obligations to the MA-PD Sponsor consistent with
the regulations at 42 CFR §423.1 through 42 CFR §423.910 (with the exception of
Subparts Q, R, and S), sections 1860D-1 through 1860D-42 (with the exception of
sections 1860D-22(a) and 1860D-31) of the Social Security Act, and the
applicable solicitation, as well as all other applicable Federal statutes,
regulations, and policies.

 

C. CMS agrees that it will not implement, other than at the beginning of a
calendar year, regulations under 42 CFR Part 423 that impose new, significant
regulatory requirements on the MA-PD Sponsor. This provision does not apply to
new requirements mandated by statute.

 

D. This addendum is in no way intended to supersede or modify 42 CFR, Parts 417,
422 or 423. Failure to reference a regulatory requirement in this addendum does
not affect the applicability of such requirements to the MA-PD Sponsor and CMS.

 

Article II

Functions to be Performed by the MA-PD Sponsor

 

A. ENROLLMENT

 

  1. MA-PD Sponsor agrees to enroll in its MA-PD plan only Part D-eligible
beneficiaries as they are defined in 42 CFR §423.30(a) and who have elected to
enroll in MA-PD Sponsor’s Part C or Section 1876 benefit.

 

2

--------------------------------------------------------------------------------

  2. If the MA-PD Sponsor is a cost plan sponsor, the MA-PD Sponsor acknowledges
that its Section 1876 plan enrollees are not required to elect enrollment in its
Part D plan.

 

B. PRESCRIPTION DRUG BENEFIT

 

  1. MA-PD Sponsor agrees to provide the required prescription drug coverage as
defined under 42 CFR §423.100 and, to the extent applicable, supplemental
benefits as defined in 42 CFR §423.100 and in accordance with Subpart C of 42
CFR Part 423. MA-PD Sponsor also agrees to provide Part D benefits as described
in the MA-PD Sponsor’s Part D bid(s) approved each year by CMS (and in the
Attestation of Benefit Plan and Price, attached hereto).

 

  2. MA-PD Sponsor agrees to calculate and collect beneficiary Part D premiums
in accordance with 42 CFR §§423.286 and 423.293.

 

  3. If the MA-PD Sponsors is a cost plans sponsor, it acknowledge that its Part
D benefit is offered as an optional supplemental service in accordance with 42
CFR §417.440(b)(2)(ii).

 

C. DISSEMINATION OF PLAN INFORMATION

 

  1. MA-PD Sponsor agrees to provide the information required in 42 CFR §423.48.

 

  2. MA-PD Sponsor agrees to disclose information related to Part D benefits to
beneficiaries in the manner and the form specified by CMS under 42 CFR §§423.128
and 423.50 and in the “Marketing Materials Guidelines for Medicare
Advantage-Prescription Drug Plans (MA-PDs) and Prescription Drug Plans (PDPs).”

 

  3. MA-PD Sponsor certifies that all materials it submits to CMS under the File
and Use Certification authority described in the Marketing Materials Guidelines
are accurate, truthful, not misleading, and consistent with CMS marketing
guidelines.

 

D. QUALITY ASSURANCE/UTILIZATION MANAGEMENT

 

MA-PD Sponsor agrees to operate quality assurance, cost, and utilization
management, medication therapy management programs, and support electronic
prescribing in accordance with Subpart D of 42 CFR Part 423.

 

E. APPEALS AND GRIEVANCES

 

MA-PD Sponsor agrees to comply with all requirements in Subpart M of 42 CFR Part
423 governing coverage determinations, grievances and appeals, and formulary
exceptions. MA-PD Sponsor acknowledges that these requirements are separate and
distinct from the appeals and grievances requirements applicable to the MA-PD
Sponsor through the operation of its Part C or cost plan benefits.

 

3

--------------------------------------------------------------------------------

F. PAYMENT TO MA-PD SPONSOR

 

  1. MA-PD Sponsor and CMS agree that payment paid for Part D services under the
addendum will be governed by the rules in Subpart G of 42 CFR Part 423.

 

  2. If the MA-PD Sponsor is participating in the Part D Reinsurance Payment
Demonstration, described in 70 FR 9360 (Feb. 25, 2005), it affirms that it will
not seek payment under the demonstration for services provided to employer group
enrollees.

 

G. BID SUBMISSION AND REVIEW

 

If the MA-PD Sponsor intends to participate in the Part D program for the future
year, MA-PD Sponsor agrees to submit a future year’s Part D bid, including all
required information on premiums, benefits, and cost-sharing, by the applicable
due date, as provided in Subpart F of 42 CFR Part 423 so that CMS and the MA-PD
Sponsor may conduct negotiations regarding the terms and conditions of the
proposed bid and benefit plan renewal. MA-PD Sponsor acknowledges that failure
to submit a timely bid under this section may affect the sponsor’s ability to
offer a Part C plan, pursuant to the provisions of 42 CFR §422.4(c).

 

H. COORDINATION WITH OTHER PRESCRIPTION DRUG COVERAGE

 

  1. MA-PD Sponsor agrees to comply with the coordination requirements with
State Pharmacy Assistance Programs (SPAPs) and plans that provide other
prescription drug coverage as described in Subpart J of 42 CFR Part 423.

 

  2. MA-PD Sponsor agrees to comply with Medicare Secondary Payer procedures as
stated in 42 CFR §423.462.

 

I. SERVICE AREA AND PHARMACY ACCESS

 

  1. The MA-PD Sponsor agrees to provide Part D benefits in the service area for
which it has been approved by CMS to offer Part C or cost plan benefits
utilizing a pharmacy network and formulary approved by CMS that meet the
requirements of 42 CFR §423.120.

 

  2. The MA-PD Sponsor agrees to ensure adequate access to Part D-covered drugs
at out-of-network pharmacies according to 42 CFR §423.124.

 

  3. MA-PD Sponsor agrees to provide benefits by means of point-of-service
systems to adjudicate prescription drug claims in a timely and efficient manner
in compliance with CMS standards, except when necessary to provide access in
underserved areas, I/T/U pharmacies (as defined in 42 CFR §423.100), and
long-term care pharmacies (as defined in 42 CFR §423.100).

 

4

--------------------------------------------------------------------------------

  4. MA-PD Sponsor agrees to contract with any pharmacy that meets the MA-PD
Sponsor’s reasonable and relevant standard terms and conditions. If MA-PD
Sponsor has demonstrated that it historically fills 98% or more of its
enrollees’ prescriptions at pharmacies owned and operated by the MA-PD Sponsor
(or presents compelling circumstances that prevent the sponsor from meeting the
98% standard or demonstrates that its Part D plan design will enable the sponsor
to meet the 98% standard during the contract year), this provision does not
apply to MA-PD Sponsor’s plan.

 

  5. The provisions of 42 CFR §423.120(a) concerning the TRICARE retail pharmacy
access standard do not apply to MA-PD Sponsor if the Sponsor has demonstrated to
CMS that it historically fills more than 50% of its enrollees’ prescriptions at
pharmacies owned and operated by the MA-PD Sponsor. MA-PD Sponsors excused from
meeting the TRICARE standard are required to demonstrate retail pharmacy access
that meets the requirements of 42 CFR §422.112 for a Part C contractor and 42
CFR §417.416(e) for a cost plan contractor.

 

J. COMPLIANCE PLAN/PROGRAM INTEGRITY

 

MA-PD Sponsor agrees that it will develop and implement a compliance plan that
applies to its Part D-related operations, consistent with 42 CFR
§423.504(b)(4)(vi).

 

K. LOW-INCOME SUBSIDY

 

MA-PD Sponsor agrees that it will participate in the administration of subsidies
for low-income individuals according to Subpart P of 42 CFR Part 423.

 

L. BENEFICIARY FINANCIAL PROTECTIONS

 

The MA-PD Sponsor agrees to afford its enrollees protection from liability for
payment of fees that are the obligation of the MA-PD Sponsor in accordance with
42 CFR §423.505(g).

 

M. RELATIONSHIP WITH RELATED ENTITIES, CONTRACTORS, AND SUBCONTRACTORS

 

  1. The MA-PD Sponsor agrees that it maintains ultimate responsibility for
adhering to and otherwise fully complying with all terms and conditions of this
addendum.

 

  2. The MA-PD Sponsor shall ensure that any contracts or agreements with
subcontractors or agents performing functions on the MA-PD Sponsor’s behalf
related to the operation of the Part D benefit are in compliance with 42 CFR
§423.505(i).

 

N. CERTIFICATION OF DATA THAT DETERMINE PAYMENT

 

MA-PD Sponsor must provide certifications in accordance 42 CFR §423.50(k).

 

5

--------------------------------------------------------------------------------

Article III

Record Retention and Reporting Requirements

 

A. MAINTENANCE OF RECORDS

 

MA-PD Sponsor agrees to maintain records and provide access in accordance with
42 CFR §§423.504(d) and 505(d) and (e).

 

B. GENERAL REPORTING REQUIREMENTS

 

The MA-PD Sponsor agrees to submit to information to CMS according to 42 CFR
§§423.505(f), 423.514, and the “Final Medicare Part D Reporting Requirements,” a
document issued by CMS and subject to modification each program year.

 

C. CMS License For Use of Plan Formulary

 

PDP Sponsor agrees to submit to CMS each plan’s formulary information, including
any changes to its formularies, and hereby grants to the Government[, and any
person or entity who might receive the formulary from the Government,] a
non-exclusive license to use all or any portion of the formulary for any purpose
related to the administration of the Part D program, including without
limitation publicly distributing, displaying, publishing or reconfiguration of
the information in any medium, including www.medicare.gov, and by any
electronic, print or other means of distribution.

 

Article IV

HIPAA Transactions/Privacy/Security

 

A. MA-PD Sponsor agrees to comply with the confidentiality and enrollee record
accuracy requirements specified in 42 CFR §423.136.

 

B. MA-PD Sponsor agrees to enter into a business associate agreement with the
entity with which CMS has contracted to track Medicare beneficiaries’ true
out-of-pocket costs.

 

6

--------------------------------------------------------------------------------

Article V

Addendum Term and Renewal

 

A. TERM OF ADDENDUM

 

This addendum is effective from the date of CMS’ authorized representative’s
signature through December 31, 2006. This addendum shall be renewable for
successive one-year periods thereafter according to 42 CFR §423.506. MA-PD
Sponsor shall not conduct Part D-related marketing activities prior to
October 1, 2005 and shall not process enrollment applications prior to
November 15, 2005. MA-PD Sponsor shall begin delivering Part D benefit services
on January 1, 2006.

 

B. QUALIFICATION TO RENEW ADDENDUM

 

  1. In accordance with 42 CFR §423.507, the MA-PD Sponsor will be determined
qualified to renew this addendum annually only if—

 

  (a) CMS informs the MA-PD Sponsor that it is qualified to renew its addendum;
and

 

  (b) The MA-PD Sponsor has not provided CMS with a notice of intention not to
renew in accordance with Article VII of this addendum.

 

  2. Although MA-PD Sponsor may be determined qualified to renew its addendum
under this Article, if the MA-PD Sponsor and CMS cannot reach agreement on the
Part D bid under Subpart F of 42 CFR Part 423, no renewal takes place, and the
failure to reach agreement is not subject to the appeals provisions in Subpart N
of 42 CFR Parts 422 or 423. (Refer to Article XI for consequences of non-renewal
on the Part C contract and the ability to enter into a Part C contract.)

 

Article VI

Nonrenewal of Addendum

 

A. NONRENEWAL BY THE MA-PD SPONSOR

 

  1. MA-PD Sponsor may non-renew this addendum in accordance with 42 CFR
423.507(a).

 

  2. If the MA-PD Sponsor non-renews this addendum under this Article, CMS
cannot enter into a Part D addendum with the organization for 2 years unless
there are special circumstances that warrant special consideration, as
determined by CMS.

 

B. NONRENEWAL BY CMS

 

CMS may non-renew this addendum under the rules of 42 CFR 423.507(b). (Refer to
Article X for consequences of non-renewal on the Part C contract and the ability
to enter into a Part C contract.)

 

7

--------------------------------------------------------------------------------

Article VII

Modification or Termination of Addendum by Mutual Consent

 

This addendum may be modified or terminated at any time by written mutual
consent in accordance with 42 CFR 423.508. (Refer to Article X for consequences
of non-renewal on the Part C contract and the ability to enter into a Part C
contract.)

 

Article VIII

Termination of Addendum by CMS

 

CMS may terminate this addendum in accordance with 42 CFR 423.509. (Refer to
Article X for consequences of non-renewal on the Part C contract and the ability
to enter into a Part C contract.)

 

Article IX

Termination of Addendum by the MA-PD Sponsor

 

A. The MA-PD Sponsor may terminate this addendum only in accordance with 42 CFR
423.510.

 

B. CMS will not enter into a Part D addendum with an organization that has
terminated its addendum within the preceding 2 years unless there are
circumstances that warrant special consideration, as determined by CMS.

 

C. If the addendum is terminated under section A of this Article, the MA-PD
Sponsor must ensure the timely transfer of any data or files. (Refer to Article
X for consequences of non-renewal on the Part C contract and the ability to
enter into a Part C contract.)

 

Article X

Relationship Between Addendum and Part C Contract or 1876 Cost Contract

 

A. MA-PD Sponsor acknowledges that, if it is a Medicare Part C contractor, the
termination or nonrenewal of this addendum by either party may require CMS to
terminate or non-renew the Sponsor’s Part C contract in the event that such
non-renewal or termination prevents the MA-PD Sponsor from meeting the
requirements of 42 CFR §422.4(c), in which case the Sponsor must provide the
notices specified in this contract, as well as the notices specified under
Subpart K of 42 CFR Part 422. MA-PD Sponsor also acknowledges that Article X.B.
of this addendum may prevent the sponsor from entering into a Part C contract
for two years following an addendum termination or non-renewal where such
non-renewal or termination prevents the MA-PD Sponsor from meeting the
requirements of 42 CFR §422.4(c).

 

B. The termination of this addendum by either party shall not, by itself,
relieve the parties from their obligations under the Part C or cost plan
contracts to which this document is an addendum.

 

8

--------------------------------------------------------------------------------

C. In the event that the MA-PD Sponsor’s Part C or cost plan contract (as
applicable) is terminated or nonrenewed by either party, the provisions of this
addendum shall also terminate. In such an event, the MA-PD Sponsor and CMS shall
provide notice to enrollees and the public as described in this contract as well
as 42 CFR Part 422, Subpart K or 42 CFR Part 417, Subpart K, as applicable.

 

Article XI

Intermediate Sanctions

 

The MA-PD Sponsor shall be subject to sanctions and civil monetary penalties,
consistent with Subpart O of 42 CFR Part 423.

 

Article XII

Severability

 

Severability of the addendum shall be in accordance with 42 CFR §423.504(e).

 

Article XIII

Miscellaneous

 

A. DEFINITIONS: Terms not otherwise defined in this addendum shall have the
meaning given such terms at 42 CFR Part 423 or, as applicable, 42 CFR Part 422
or Part 417.

 

B. ALTERATION TO ORIGINAL ADDENDUM TERMS: The MA-PD Sponsor agrees that it has
not altered in any way the terms of the MA-PD addendum presented for signature
by CMS. MA-PD Sponsor agrees that any alterations to the original text the MA-PD
Sponsor may make to this addendum shall not be binding on the parties.

 

C. ADDITIONAL CONTRACT TERMS: The MA-PD Sponsor agree to include in this
addendum other terms and conditions in accordance with 42 CFR §423.505(j).

 

D. CMS APPROVAL TO BEGIN MARKETING AND ENROLLMENT ACTIVITIES: The MA-PD Sponsor
agrees that it must complete CMS operational requirements related to its Part D
benefit prior to receiving CMS approval to begin MA-PD plan marketing activities
relating to its Part D benefit. Such activities include, but are not limited to,
establishing and successfully testing connectivity with CMS systems to process
enrollment applications (or contracting with an entity qualified to perform such
functions on MA-PD Sponsor’s behalf) and successfully demonstrating the
capability to submit accurate and timely price comparison data. To establish and
successfully test connectivity, the PDP Sponsor must, 1) establish and test
physical connectivity to the CMS data center, 2) acquire user identifications
and passwords, 3) receive, store, and maintain data necessary to perform
enrollments and send and receive transactions to and from CMS, and 4) check and
receive transaction status information.

 

9