Sec. 101.4. Requirements for risk transfer, insurer reporting, and superintendent's approval

(a) An insurer may not enter into a financial risk transfer agreement with a health care provider unless all agreements between such health care provider and any participating provider contain the following provisions:

(1) a participating provider will not, in the event of default by the health care provider, demand payment from the insurer for any covered services rendered to the insurer's subscribers for which the in-network capitation payment was made by the insurer to the health care provider pursuant to the financial risk transfer agreement;

(2) a “hold harmless” provision that prohibits a participating provider from collecting or attempting to collect from a subscriber any amounts owed to such participating provider for covered services, but excluding any amounts owed by the subscriber to the provider pursuant to the subscriber's contract, it being understood that such a "hold harmless" is in addition to the protections afforded to subscribers under Insurance Law section 4307(d); and

(3) in the event the health care provider's financial risk transfer agreement is terminated by the superintendent, pursuant to the provisions of section 101.9(a)(7) of this Part, the health care provider's agreement with the participating provider must be assignable on a prospective basis (without any obligation to pay any amounts owed to the participating provider by the health care provider) to each insurer that entered into the financial risk transfer agreement with such health care provider for a period of time which is determined by the Commissioner of Health, as respects entities certified pursuant to article 44 of the Public Health Law, or by the superintendent as respects all other insurers, to be necessary in order to provide the services that the insurer is legally obligated to deliver to its subscribers. However, no such assignment shall exceed 12 months from the date the financial risk transfer agreement is terminated by the superintendent.

(b) Notwithstanding any agreement to the contrary, the insurer retains full financial risk on a prospective basis for the provision of health care services pursuant to any applicable policy or contract. At all times, the insurer must be able to demonstrate to the satisfaction of the superintendent that the insurer can fulfill its nontransferable obligation to provide coverage for health care services to subscribers in any event, including the failure, for any reason, of a financial risk transfer agreement with a provider. In considering whether an insurer has satisfied its obligation to retain full financial risk, on a prospective basis, the superintendent shall consider the financial condition of the insurer and the health care provider, including a review of income and expenses, quality and liquidity of assets, establishment of adequate claim and other reserves, net worth, and any financial security deposit, as defined in section 101.5(b) of this Part, established by the health care provider.

(c) An insurer who uses a capitation arrangement to transfer all or part of its financial risk to a health care provider must do so by means of a contract approved by the superintendent. Before granting such approval the insurer shall have demonstrated to the satisfaction of the superintendent the financial responsibility of the health care provider to render the services covered by the in-network capitation and compliance with the provisions of this Part. If so demonstrated, the insurer is relieved of the reporting requirements for carrying a liability on its own balance sheet for underlying unpaid claims and expenses related to in-network capitated payments made pursuant to the financial risk transfer agreement. However, where a capitated arrangement contains a provision whereby retroactive payments may be made by the insurer for adverse in- network experience of the health care provider, or where the insurer is financially responsible for the payment of claims which exceed amounts set forth in the financial risk transfer agreement, then in both cases the insurer must report an unpaid claim liability on its balance sheet that is adequate to meet its contractual exposure. Amounts deposited into the out-of-network health care provider account may be used by the insurer to offset the liability on its balance sheet for underlying claims and expenses related to nonparticipating provider out-of-network claims. Any such offsetting shall be done on a basis which compares the liability established on the insurer's balance sheet for each health care provider's out-of-network claims and expenses with the amount in such health care provider's out-of-network account. Amounts deposited in such account shall be reconciled at least annually with such health care provider's out-of-network incurred claims and expenses for the period covered by the reconciliation and any excess in the account shall be remitted to or otherwise settled with such provider within six months of the ending date of the reconciliation period. In the event the reconciliation reports a deficit, then the insurer shall bill such deficit or otherwise settle such deficit with the health care provider within six months of the ending date of the reconciliation period.

(d) Any amount due to an insurer from a health care provider, pursuant to a financial risk transfer agreement or any risk sharing arrangement which is not otherwise subject to the provisions of this Part, that is not paid or otherwise satisfied within 90 days from the date the receivable is entered on the insurer's books of account shall not be admitted nor used as an offset on financial statements filed by the insurer with this department.

(e) Financial risk sharing effected under a contract between an insurer and a health care provider shall not be subject to the provisions of this Part when payments, subject to a withhold by the insurer, occur subsequent to the date that the health care provider rendered the service which is covered by the contract.

(f) Where the financial risk transfer agreement includes payment by the insurer of administrative expenses incurred by the health care provider, and such expenses include expense items which the insurer is required to report as a claim adjustment or general administrative expense on its financial statements filed with the superintendent, then such expense shall be included by the insurer as a claim adjustment or general administrative expense in such financial statements and for determining compliance with any applicable loss ratio standards.

(g) Financial risk transfer arrangements which are in effect on the effective date of this Part and which receive all necessary Department of Health approvals, may continue in effect without having to meet the requirements of this Part except that the health care provider must comply with the provisions of section 101.9(a)(3) of this Part as respects the filing of audited financial statements for fiscal years which close on or after the effective date of this Part, until the contract renewal date; however, for agreements which are either automatically renewed or whose renewal date is more than 36 months after the effective date of this Part, the exemption from meeting all of the other requirements of this Part, including obtaining the superintendent's approval, shall not extend beyond 36 months.

(h) The superintendent shall act upon any request for approval, within 30 days of receipt provided such submission includes: a certified financial statement of the health care provider prepared in accordance with section 101.9(a)(3) of this Part which evidences financial solvency including a demonstration of any necessary safeguards which may be required to be in place pursuant to the definition of financially solvent; a copy of any guarantee issued by the guaranteeing parent corporation; 12-month financial projections of the health care provider which reflect the inclusion of the proposed transfer; a demonstration of the health care provider's financial responsibility; and a certification executed by all parties to the financial risk transfer agreement that such agreement complies with the provisions of this Part, that any agreement between the health care provider and its participating providers meets the standards set forth in subdivision (a) of this section, and, if such agreement is to be entered into by an entity certified under article 44 of the Public Health Law, a statement that such agreement has been filed with the Department of Health.