Source: http://regulations.delaware.gov/register/march2015/final/18%20DE%20Reg%20693%2003-01-15.htm
Timestamp: 2017-12-16 07:14:44
Document Index: 683265389

Matched Legal Cases: ['§7931', '§438', '§483', '§483', '§438', '§438', '§3', '§5', '§5', '§5', '§5', '§9', '§5']

Delaware Health and Social Services (“Department”) / Division of Medicaid and Medical Assistance (DMMA) initiated proceedings to amend the Division of Social Services Manual (DSSM) regarding fiscal solvency standards for managed care organizations (MCOs) serving State Medicaid clients, specifically, Certification and Regulation of Medicaid Managed Care Organizations. The Department’s proceedings to amend its regulations were initiated pursuant to 29 Delaware Code Section 10114 and its authority as prescribed by 31 Delaware Code Section 512.
The purpose of this notice is to advise the public that Delaware Health and Social Services/Division of Medicaid and Medical Assistance is proposing to amend the Division of Social Services Manual (DSSM) regarding fiscal solvency standards for managed care organizations (MCOs) serving State Medicaid clients, specifically, Certification and Regulation of Medicaid Managed Care Organizations.
Statutory Authority and Other References
Section 1902(a)(4) of the Social Security Act, State Plan for Medical Assistance, Methods of Administration
Section 1903(m), Medicaid Managed Care Organization
29 Del. C. §7931, Division of Medicaid and Medical Assistance
42 CFR § [483.1] [438.1], Managed Care, Basis and scope
42 CFR § [483.116] [438.116], Solvency standards
State Medicaid Director Letter, December 30, 1997, An array of provisions including beneficiary protections, solvency standards and contract administration
Managed Care is a health care delivery system organized to manage cost, utilization, and quality. Medicaid managed care provides for the delivery of Medicaid health benefits and additional services through contracted arrangements between state Medicaid agencies and managed care organizations (MCOs) that accept a set per member per month (capitation) payment for these services. By contracting with various types of MCOs to deliver Medicaid program health care services to their beneficiaries, states can reduce Medicaid program costs and better manage utilization of health services. Improvement in health plan performance, health care quality, and outcomes are key objectives of Medicaid managed care.
Managed Care in Delaware
Delaware has been operating a mandatory managed care program since 1996 when it implemented Diamond State Health Plan (DSHP), which covers acute, primary, and behavioral health care services for low-income children, families, and adults; children and adults with disabilities; and foster care children. In April 2012, the state expanded managed care to additional populations and added long term supports and services (LTSS) to the benefit package with the implementation of the DSHP-Plus program. This program enrolls dual eligible beneficiaries, individuals enrolled in the Elderly and Disabled and AIDS home and community-based service (HCBS) waivers, and nursing facility residents on a mandatory basis and provides LTSS and acute, primary, and behavioral health care services to eligible individuals. DSHP and DSHP-Plus cover a limited number of outpatient and inpatient behavioral health and substance abuse services and any services in excess of the limits on visits are provided as a fee-for-service wraparound.
With respect to solvency standards imposed on the MCO by the State, federal law indicates that MCOs should meet solvency standards that the State establishes for its private MCOs or should be licensed by the State as risk-bearing entities. In accordance with above-referenced federal and state regulations:
1.	States are authorized to administer Medicaid through Medicaid managed care organizations (each an “MMCO”).
2.	An MMCO shall provide assurances satisfactory to the State showing that its provision against the risk of insolvency is adequate to ensure that its Medicaid enrollees will not be liable for the debts if the MMCO becomes insolvent.
3.	An MMCO, in order to make the required showing under Section 438.116(a), must either meet state solvency requirements for a private health maintenance organization, or be licensed or certified by the State as a risk bearing entity.
The purpose of these regulations is to create standards of fiscal solvency. These regulations establish the standards by which Delaware Health and Social Services/Division of Medicaid and Medical Assistance (DHSS/DMMA) will evaluate and, where appropriate, certify insurers as MMCOs.
This administrative regulation establishes the operational and related requirements and policies of managed care organization serving State Medicaid clients. DHSS/DMMA proposes new DSSM 70000 concerning the solvency standards required by managed care organizations participating in the Delaware Medical Assistance Program (DMAP). This new section is proposed as, Certification and Regulation of Medicaid Managed Care Organizations and is consistent with federal regulations.
In accordance with public notice requirements established at Section 1902(a)(13)(A) of the Social Security Act, and Title 29, Chapter 101 of the Delaware Code, Delaware Health and Social Services (DHSS)/Division of Medicaid and Medical Assistance (DMMA) is seeking public comment on the proposed regulations.
As background, DMMA contracts with MCOs to administer the Diamond State Health Plan and Diamond State Health Plan Plus programs. Federal regulation 42 C.F.R. §438.116 (attached) requires MCOs to either meet state solvency standards for private health maintenance organizations or be licensed or certified by the state as a risk-bearing entity. Delaware DMMA is adopting the second option, i.e., it will certify MCOs which meet certain standards contained in the proposed regulation.
Agency Response Note: This characterization is correct. Thank you for your thoughtful comments on the proposed standards for the regulation of the financial solvency of MCOs.
GACEC and SCPD have the following observations:
First, on p. 504, the references to 42 C.F.R. §483.1 and 42 C.F.R. §483.116 are incorrect. The correct citations are 42 C.F.R. §438.1 and 42 C.F.R. §438.116 respectively.
Agency Response: This edit has been made.
Second, §3.1.2 requires an MCO to demonstrate “net equity in excess of $[10] million.” At a minimum, the brackets should be deleted. On a substantive level, the Councils questions whether net equity of $10 million is sufficient. Delaware’s Medicaid population has grown to approximately 230,000 individuals. See DHSS Secretary’s FY16 budget presentation to OMB (November 20, 2014), available at http://www.dhss.delaware.gov/dhss/index.shtml. Most of Delaware’s Medicaid population is served by two MCOs (Highmark; United Healthcare). Assuming equal enrollment, each MCO would serve 115,000 individuals and have approximately $86 in equity for each participant. Some of the $10 million in equity could be in fixed or non-liquid assets out-of state or out of the country. We recognize that the managed care system is intended to not tap equity, i.e., monthly State capitation payments (§5.2) should ideally cover MCO outlays. Moreover, DMMA enjoys the protection of a performance bond equal to one month’s capitation payment. In reality, an MCO could suffer huge losses if an epidemic or natural disaster resulted in unanticipated health costs. An MCO with only $10 million in net equity may be unable to absorb such costs.
Agency Response: The recommended deletion of the brackets has been made. DMMA believes that the $10 million in net equity, coupled with the required performance bond and certification of financial stability, is adequate.
Third, §5.0 may merit further review to ensure consistency. On the one hand, an MCO is required to submit a performance bond equal to the projected first month’s capitation payment “up front”. See §§5.1 and 5.2. On the other hand, §5.4 requires MCO supplementation of the bond “if the performance bond falls below 90% of the first month’s capitation in any month”. Literally, this could never occur since the performance bond based on 100% of the first month’s capitation amount was already submitted to DMMA up front. If DMMA intends that the MCO increase the bond based on later increases in monthly capitation amounts, the regulation should be reworded.
Agency Response: DMMA has made changes to the regulation based on this comment. First, it has stricken the words “and submit” since the MCOs will maintain the performance bond, and report that to DMMA. The performance bond is only required to cover startup costs for the first 12 months of the MCO contracts. Thereafter, DMMA gauges and assesses the financial stability of the MCO through record review and mandatory notice requirements contained in the MCO contracts.
Fourth, §9.1 contemplates MCO maintenance of a system for tracking incurred but unreported costs and unpaid claims by category (e.g. hospital; nursing facility). The MCO is expected to review its system annually and DHSS can prompt adjustments. DMMA may wish to consider requiring a 6-month report of data under this section. If a year passes, and the system/methodology has resulted in grossly inadequate reservation of funds, it may be too late to intervene in the face of huge unpaid bills.
Agency Response: DMMA believes that the regulation as written, e.g. annual reviews, not biannual reviews, of the methodology for estimating and tracking IBNR, is appropriate. The MCOs are required to report actual IBNR to DMMA quarterly. DMMA believes that this mechanism addresses the concerns raised by this comment.
Fifth, it’s unclear when the performance bond required by §5.0 lapses. Obviously, an MCO which terminates its participation as an MCO will still have to cover bills incurred during the contract period. It is possible that the DMMA-MCO contract addresses the duration of the performance bond. If it does not, the regulation could be revised to include some standards.
Agency Response: The DMMA-MCO contract does indeed authorize collection of unpaid monies from the performance bond to collect in the event of an MCO default.
Sixth, Council would also recommend that GAAP and STAT be spelled out in sections 3.1.2 and 4.1.1.
THEREFORE, IT IS ORDERED, that the proposed regulation to amend the Division of Social Services Manual (DSSM) regarding fiscal solvency standards for managed care organizations (MCOs) serving State Medicaid clients, specifically, Certification and Regulation of Medicaid Managed Care Organizations, is adopted and shall be final effective March 10, 2015.
DMMA FINAL ORDER REGULATION #15-05
70000	Certification and Regulation of Medicaid Managed Care Organizations
3.1.2	Audited financial statements for the most recent calendar or fiscal year demonstrating, on a consolidated basis, [GAAP generally accepted accounting principles] net equity in excess of [$[10] $10] million.
4.1.1	The person or persons responsible for preparing the MMCO’s financial statements in U.S. [GAAP and/or STAT generally accepted accounting principles] format and for preparing any financial reporting required under the Contract. Such person shall have accounting or finance training and experience, and shall have experience in the preparation of financial statements for health plans.
5.1	Prior to certification, the MMCO shall obtain [and submit to DHSS] a performance bond from a surety licensed to write surety business in Delaware and rated A- (Excellent) or better by A.M. Best and Company. The performance bond shall be restricted to the Contract.
8.1.3	Maintain a uniform accounting system that adheres to generally accepted accounting principles for charging and allocating to all funding resources the MMCO’s costs incurred hereunder including, but not limited to, the American Institute of Certified Public Accountants Statement of Position 89-5 “Financial Accounting and Reporting by Providers of Prepaid Health Care Services.”
18 DE Reg. 693 (03/01/15) (Final)