1. (a) An HMO that delegates to a delegated entity any function required by the Insurance Code Chapters 843 and 1272 and applicable insurance laws and regulations of this state that apply to HMOs shall execute a written agreement with that delegated entity.

2. (b) Written agreements shall include the following:

   1. (1) a provision that the delegated entity and any delegated third parties must agree to comply with all statutes and rules applicable to the functions being delegated by the HMO;

   2. (2) a provision that the HMO shall monitor the acts of the delegated entity through a monitoring plan. The monitoring plan shall be set forth in the delegation agreement, and must contain, at a minimum:

      1. (A) provisions for the review of the delegated entity's solvency status and financial operations. This shall include, at a minimum, review of the delegated entity's financial statements, consisting of at least a balance sheet, income statement, and statement of cash flows for the current and preceding year;
      2. (B) provisions for the review of the delegated entity's compliance with the terms of the delegation agreement as well as with all applicable statutes and rules affecting the functions delegated by the HMO under the delegation agreement;
      3. (C) a description of the delegated entity's financial practices in sufficient detail that will ensure that the delegated entity tracks and timely reports to the HMO liabilities including incurred but not reported obligations;
      4. (D) a method by which the delegated entity shall report monthly a summary of the total amount paid by the delegated entity to physicians and providers under the delegation agreement; and
      5. (E) a monthly log, maintained by the delegated entity, of oral and written complaints from physicians, providers, and enrollees regarding any delay in payment of claims or nonpayment of claims pertaining to the delegated function, including the status of each complaint;

   3. (3) a statement that the HMO shall utilize the monitoring plan on an ongoing basis. Compliance with this requirement shall be documented by the HMO maintaining, at a minimum:

      1. (A) periodic signed statements from the individual identified by the HMO in paragraph (23) of this subsection that the HMO has reviewed the information required in the monitoring plan; and
      2. (B) periodic signed statements from the chief financial officer of the HMO acknowledging that the most recent financial statements of the delegated entity have been reviewed.
   4. (4) a provision establishing the penalties to be paid by the delegated entity for failure to provide information required by this subchapter;
   5. (5) a provision requiring quarterly assessment and payment of penalties under the agreement, if applicable;
   6. (6) a provision that the agreement cannot be terminated without cause by the delegated entity or the HMO without written notice provided to the other party and the department before the 90th day preceding the termination date, provided that the commissioner may order the HMO to terminate the agreement under §11.2608 of this subchapter (relating to Department May Order Corrective Action);
   7. (7) a provision that requires the delegated entity, and any entity or physician or provider with which it has contracted to perform a function of the HMO, to hold harmless an enrollee under any circumstance, including the insolvency of the HMO or delegated entity, for payments for covered services other than copayments and deductibles authorized under the evidence of coverage;
   8. (8) a provision that the delegation agreement may not be construed to limit in any way the HMO's responsibility, including financial responsibility, to comply with all statutory and regulatory requirements;
   9. (9) a provision that any failure by the delegated entity to comply with applicable statutes and rules or monitoring standards shall allow the HMO to terminate delegation of any or all delegated functions;

   10. (10) a provision that the delegated entity must permit the commissioner to examine at any time any information the department reasonably considers is relevant to:

       1. (A) the financial solvency of the delegated entity; or
       2. (B) the ability of the delegated entity to meet the entity's responsibilities in connection with any function delegated to the entity by the HMO;
   11. (11) a provision that the delegated entity, in contracting with a delegated third party directly or through a third party, shall require the delegated third party to comply with the requirements of paragraph (10) of this subsection;
   12. (12) a provision that the delegated entity shall provide the license number of any delegated third party performing any function that requires a license as a third party administrator under the Insurance Code Chapter 4151, or a license as a utilization review agent under the Insurance Code Article 21.58A, or that requires any other license under the Insurance Code or another insurance law of this state;

   13. (13) if utilization review is delegated, a provision stating that:

       1. (A) enrollees will receive notification at the time of enrollment identifying the entity that will be performing utilization review;
       2. (B) the delegated entity or delegated third party performing utilization review shall do so in accordance with Texas Insurance Code Art. 21.58A and related rules; and
       3. (C) utilization review decisions made by the delegated entity or a delegated third party shall be forwarded to the HMO on a monthly basis;
   14. (14) a provision that any agreement in which the delegated entity directly or indirectly delegates to a delegated third party any function delegated to the delegated entity by the HMO pursuant to the Insurance Code Chapters 843 and 1272 and applicable insurance laws and regulations of this state that apply to HMOs, including any handling of funds, shall be in writing;
   15. (15) a provision that upon any subsequent delegation of a function by a delegated entity to a delegated third party, the executed updated agreements shall be filed with the department and enrollees shall be notified of the change of any party performing a function for which notification of an enrollee is required by this chapter or the Insurance Code Chapters 843 and 1272 and applicable insurance laws and regulations of this state that apply to HMOs;
   16. (16) an acknowledgment and agreement by the delegated entity that the HMO is not precluded from requiring that the delegated entity provide any and all evidence requested by the HMO or the department relating to the delegated entity's or delegated third party's financial viability;
   17. (17) a provision acknowledging that any delegated third party with which the delegated entity subcontracts will be limited to performing only those functions set forth and delegated in the agreement, using standards approved by the HMO and that are in compliance with applicable statutes and rules;
   18. (18) a provision that any delegated third party is subject to the HMO's oversight and monitoring of the delegated entity's performance and financial condition under the delegation agreement;
   19. (19) a provision that requires the delegated entity to make available to the HMO samples of each type of contract the delegated entity executes or has executed with physicians and providers to ensure compliance with the contractual requirements described by paragraphs (6) and (7) of this subsection, except that the agreement may not require that the delegated entity make available to the HMO contractual provisions relating to financial arrangements with the delegated entity's physicians and providers;

   20. (20) a provision that requires the delegated entity to provide information to the HMO on a quarterly basis and in a format determined by the HMO to permit an audit of the delegated entity and to ensure compliance with the department's reporting requirements with respect to any functions delegated by the HMO to the delegated entity and to ensure that the delegated entity remains solvent to perform the delegated functions, including:

       1. (A) a summary:

          1. (i) describing any payment methods, including capitation or fee-for-services, that the delegated entity uses to pay its physicians and providers and any other third party performing a function delegated by the HMO; and
          2. (ii) of the breakdown of the percentage of physicians and providers and any other third party paid by each payment method listed in clause (i) of this subparagraph;
       2. (B) the period of time that claims and any other obligations for health care filed with the delegated entity, under this and any other delegation agreements to which the delegated entity is a party, have been pending but remain unpaid, divided into categories of 0 - 45 days, 46 - 90 days, and 91 or more days. The summary shall include aggregate information for all delegation agreements entered into by the delegated entity and information for the specific delegation agreement entered into between the parties;
       3. (C) the aggregate dollar amount of claims and other obligations for health care owed by the delegated entity to any physician or provider, including estimates for incurred but not reported obligations;
       4. (D) information that the HMO requires in order to file claims for reinsurance, coordination of benefits, and subrogation; and

       5. (E) documentation, except for information, documents, and deliberations related to peer review that are confidential or privileged under Subchapter A, Chapter 160, Occupations Code, that relates to:

          1. (i) any regulatory agency's inquiry or investigation of the delegated entity or of an individual physician or provider with whom the delegated entity contracts that relates to an enrollee of the HMO; and
          2. (ii) the final resolution of any regulatory agency's inquiry or investigation;
   21. (21) a provision relating to enrollee complaints that requires the delegated entity to ensure that upon receipt of a complaint, as defined in the Insurance Code Chapter 843 and applicable insurance laws and regulations of this state that apply to HMOs, a copy of the complaint shall be sent to the HMO within two business days, except that in a case in which a complaint involves emergency care, as defined in the Insurance Code Chapter 843 and applicable insurance laws and regulations of this state that apply to HMOs, the delegated entity shall forward the complaint immediately to the HMO, and provided that nothing in this paragraph prohibits the delegated entity from attempting to resolve a complaint
   22. (22) a provision that the HMO, the delegated entity and any delegated third party shall comply with the provisions of Chapter 22 of this title;
   23. (23) a provision identifying an officer of the HMO as the representative of the HMO for all matters related to the delegation agreement; and
   24. (24) a provision identifying which party to the agreement shall bear the expense of compliance with each requirement set forth in this subsection, including the cost of any examinations performed pursuant to this subchapter.

Source Note:The provisions of this §11.2604 adopted to be effective October 13, 2002, 27 TexReg 9585; amended to be effective November 15, 2006, 31 TexReg 9298.