1. (a) Purpose. The purpose of this section is to enumerate conditions which may indicate an HMO is in hazardous condition and which authorize the commissioner of insurance to initiate an action against an HMO under Insurance Code §843.461 or §843.157. In evaluating any of the conditions in this section, the commissioner must evaluate all circumstances concerning the HMO's operation in making an ultimate conclusion that an HMO is in hazardous condition. The evaluation of the information relating to these conditions is a part of the examination process. The conditions enumerated in this section do not conclusively indicate that an HMO is in hazardous condition. One or more of the conditions can exist in an HMO which is in satisfactory condition; however, one or more of these conditions has often been found in an HMO which was unable to perform its obligations to enrollees, creditors or the general public, or has required the commissioner to initiate regulatory action to protect enrollees, creditors and the general public.

2. (b) An HMO may be found to be in hazardous condition, after notice and opportunity for hearing, when the commissioner finds one or more of the following conditions to exist:

   1. (1) an HMO's federal qualification designation and/or National Committee on Quality Assurance accreditation is revoked or discontinued;
   2. (2) an HMO's reported claims in process exceed 12% of annualized medical and hospital expenses (12% is approximately a 45 day backlog);
   3. (3) an HMO's parent or sponsoring organization is operating in a hazardous condition;
   4. (4) an HMO's annual CPA report or actuarial opinion contains a material adverse finding or findings;
   5. (5) an HMO fails to comply with the Texas Health Maintenance Organization Act (Insurance Code Chapters 20A and 843) or Title 28, Texas Administrative Code, Chapter 11;
   6. (6) an HMO has an inadequate provider network;
   7. (7) an HMO contracts with a management or administrative company on a capitated or percentage of premium basis and such administrative or management company refuses to submit financial statements to the HMO;
   8. (8) an HMO does not file a financial statement with the department within the time required by the Insurance Code, or as requested by the department;
   9. (9) a health care provider that is under contract, directly or indirectly, with an HMO, has a pattern of balance billing;
   10. (10) an HMO files financial information with the department which is false or misleading;
   11. (11) an HMO does not amend its financial statement when requested by the department;
   12. (12) an HMO overstates its net worth by 25% or more;
   13. (13) an HMO relies on its parent's forgiveness of debt or frequent surplus contributions to finance its operations or to maintain its minimum net worth or risk based capital;

   14. (14) an HMO does not maintain books and records sufficient to permit examiners to determine the financial condition of the HMO, examples of which include:

       1. (A) a domestic HMO maintains books and records outside the State of Texas in violation of Insurance Code Chapter 803; or
       2. (B) an HMO moves, or maintains, the location of the books and records necessary to conduct an examination without notifying the department of such location;
   15. (15) an HMO's management does not have the experience, competence, or trustworthiness to operate the HMO in a safe and sound manner;
   16. (16) an HMO's management has been found to have engaged in unlawful transactions;
   17. (17) an HMO has a pattern of denial or nonpayment of emergency care;
   18. (18) an HMO does not follow its policy on rating and underwriting standards appropriate to the risk;
   19. (19) an administrative or judicial order, initiated by an insurance regulatory agency of another state, is issued against an HMO, its parent or affiliate, or a regulatory action is initiated by another agency within the state of domicile;
   20. (20) an HMO does not have the minimum net worth required by Insurance Code §843.403 or §843.4031;
   21. (21) an HMO does not meet the requirements of §11.809 of this title (relating to Risk-Based Capital for HMOs and Insurers Filing the NAIC Health Blank); or
   22. (22) an HMO is in any condition that the commissioner finds may present a hazard to enrollees, creditors, or the general public.

Source Note:The provisions of this §11.810 adopted to be effective March 30, 2000, 25 TexReg 2651; amended to be effective February 24, 2005, 30 TexReg 854.