1. (a) Definitions.

   1. (1) Purchased commercial liability insurance--Either general or professional liability insurance from a commercial carrier or a non-profit service corporation in an arm's-length transaction that provides for the shifting of risk to the unrelated party. The commercial carrier or non-profit service corporation must meet the requirements as set by the Texas Department of Insurance (TDI) for authorized insurance.
   2. (2) Self-insurance--Self-insurance is a means whereby a contracted provider undertakes the risk to protect itself against anticipated liabilities by providing funds equivalent to liquidate those liabilities. If a provider enters into an arrangement with an unrelated party that does not provide for the shifting of risk to the unrelated party, such an agreement shall be considered self-insurance. Self-insurance is not purchased liability insurance.
   3. (3) Independently procured insurance--an insurance transaction involving an insurance contract independently procured from an insurance company not licensed in Texas through negotiations occurring entirely outside the state of Texas that is reported and on which premium tax is paid.
   4. (4) Purchased captive insurance--A company providing either general or professional liability insurance purchased from a nonadmitted captive insurance company that insures solely directors and officer's liability insurance for the directors and officers of the company's parent and affiliated companies and/or the risks of the company's parent and affiliated companies.

2. (b) Payment rates for purchased general and professional liability insurance will be determined as follows:

   1. (1) Determine the portion of the general/administration rate component from 1 TAC §355.307 (relating to Reimbursement Setting Methodology) attributable to allowable liability insurance costs.
   2. (2) Determine the amount of total dollars that would be expended if the liability rate component from paragraph (1) of this subsection were paid uniformly to all providers during the rate effective period.
   3. (3) Estimate the number of days of service that will be covered by purchased liability insurance during the rate period.
   4. (4) Divide the total dollars available for liability insurance from paragraph (2) of this subsection by the estimated number of days of service that will be covered by purchased liability insurance during the rate period from paragraph (3) of this subsection. Estimate the proportion of this per diem amount accruing from general liability insurance and the proportion accruing from professional liability insurance to determine the payment rate for each day of purchased general liability insurance and the payment rate for each day of purchased professional liability insurance.
   5. (5) Payment rates for purchased general and professional liability insurance may be adjusted as often as HHSC determines is necessary to ensure that the total dollars expended during the rate period do not exceed the amount appropriated for this purpose.
   6. (6) Since these payment rates are determined through an allocation of available appropriations among estimated units of service covered by purchased liability insurance, a public rate hearing is not required when adjustments are made to the payment rates.
   7. (7) Providers will be notified, in a manner determined by HHSC, of adjustments to the payment rates for purchased general and professional liability insurance.
   8. (8) Providers who purchase general liability insurance without professional liability insurance are only eligible to receive payment of the rate for purchased general liability insurance. Providers who purchase professional liability insurance without general liability insurance are only eligible to receive payment of the rate for purchased professional liability insurance. Providers who purchase both general and professional liability insurance are eligible to receive payment of both rates.

3. (c) Purchased liability insurance issued through entities meeting any one of the following criteria will be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance as appropriate. These entities have been determined by the TDI to be authorized to issue liability insurance policies in the State of Texas.

   1. (1) An insurance company identified as an admitted, licensed, insurer authorized to write liability insurance in Texas. This type of insurance company is designated as "active" on the TDI website.
   2. (2) An insurance company that is an eligible surplus lines insurer which requires that there be a Texas licensed surplus lines agent placing the coverage with the insurance company. This type of insurance company is designated as "eligible" on the TDI website.
   3. (3) The Texas Medical Liability Insurance Underwriting Association (JUA). This insurance arrangement is designated as "active" on the TDI website.
   4. (4) A risk retention group that is registered with the TDI and which is designated as "registered" on the TDI website.
4. (d) Independently procured insurance will not be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance. To qualify for the purchased general and/or professional liability insurance payment rates, the coverage must have been purchased through an independently procured insurance. The liability insurance payment rates will not be paid to any nursing facility until HHSC Rate Analysis has received from the provider a signed and certified affidavit in the form provided by HHSC regarding the circumstances of the solicitation and procurement of coverage and evidence that independently procured taxes were paid to the Texas Comptroller. HHSC may request additional information to support the contents of the affidavit. The affidavit and supporting information will be reviewed by HHSC to determine if the information supplied is correct and complete to authorize payment of rates for purchased general and/or professional liability insurance. If, by October 1, 2003, HHSC has not received the affidavit and evidence that independently procured taxes were paid to the Texas Comptroller, HHSC will stop payment of the liability insurance payment rates until HHSC Rate Analysis receives and reviews the required information. Upon receipt and review of the affidavit and supporting information and a determination that the information is correct and complete to authorize payments, payments will be made retroactively to the effective date of the insurance policy or the date the liability insurance rates were stopped, whichever is later. HHSC may refer any questionable case to the TDI to determine if a violation of the Texas Insurance Code has occurred.
5. (e) Insurance purchased through a captive insurance company will not be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance. The liability insurance payment rates will not be paid to any nursing facility until HHSC Rate Analysis has received from the provider a signed and certified affidavit in the form provided by HHSC and any requested supporting information regarding the financial arrangements and affiliation between the provider and the captive insurance company. The affidavit and supporting information will be reviewed by HHSC to determine if the information supplied is correct and complete to authorize payment of rates for purchased general and/or professional liability insurance. Insurance purchased through an "active" or "eligible" insurance company will automatically qualify for the payment rate for purchased general an/or professional liability insurance, regardless of whether such risk has been reinsured by a captive insurance company. It is the responsibility of the nursing facility to obtain any requested information from the captive insurance company or affiliates. HHSC may refer any questionable cases to TDI to determine if a violation of the Texas Insurance Code has occurred.
6. (f) Liability insurance payments will not be made to facilities that obtain unauthorized insurance. It is the responsibility of the nursing facility provider to ensure that liability insurance submitted for payment is authorized. Liability insurance payments made on insurance that is later determined to be unauthorized insurance will be recouped.

7. (g) To qualify for the purchased liability insurance payment rates each contracted entity must submit the following to HHSC Rate Analysis:

   1. (1) A completed liability insurance coverage certification form provided by HHSC Rate Analysis, signed by an authorized signatory for the provider as per Texas Department of Human Services Form 2031.
   2. (2) A copy of evidence of coverage to include a certificate of insurance, the ACORD 25-S or similar document provided by the insurance company or agent that includes the type of coverage, effective and expiration dates of coverage, insurer, policy, and form number of policy contract, agent/producer, and claims made/occurrences. For catastrophic or excess liability coverage, the evidence of coverage must also include the sum that the catastrophic or excess coverage must exceed to become payable. A binder is not acceptable as evidence of insurance.
   3. (3) For independently procured liability insurance, the information identified in subsection (d) of this section.
   4. (4) For insurance purchased through a captive insurance company, the information identified in subsection (e) of this section.
8. (h) If an insurance policy effective date is not the first day of the month, then the liability insurance payment rates will become effective the first day of the following month. If an insurance policy expiration date is not the last day of the month, then the liability insurance payment rates will be paid for the full month that includes the expiration date.
9. (i) It is the contracted provider's responsibility to notify HHSC Rate Analysis of any changes to liability insurance coverage including cancellation of coverage, change of insurance and renewal of coverage within 15 calendar days of the effective date of the change. Failure to notify HHSC Rate Analysis of cancellation of coverage or change of insurance could constitute Medicaid fraud. Renewals of coverage not received within 15 calendar days of the effective date of the renewal could result in the liability insurance payment rates being stopped until documentation of the renewal per subsection (f) of this section is received by HHSC Rate Analysis.

Source Note:The provisions of this §355.312 adopted to be effective December 1, 2001, 26 TexReg 9565; amended to be effective November 1, 2003, 28 TexReg 8310.