Chapter Ins 57

Ins 57.32   Qualifications of independent certified public accountants.

Ins 57.33   Scope of audit and report of independent certified public accountant.

Ins 57.35   Notification of adverse financial condition.

Ins 57.37   Accountant’s letter of qualifications.

Ins 57.38   Availability and maintenance of CPA work papers.

Ins 57.39   Conduct of care management organization in connection with the preparation of required reports and documents.

Ins 57.40   Care management organizations to file financial statements.

Ins 57.41   Exemptions and effective dates.

Ins 57.01 Ins 57.01 Definitions. In addition to the definitions in s. 648.01, Stats., in this chapter:

Ins 57.01(1) (1) “Affiliate” of, or person “affiliated” with, a specific person means a person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

Ins 57.01(2) (2) “Care management organization” or “CMO” means an entity defined at s. 648.01 (1), Stats.

Ins 57.01(3) (3) “Commissioner” means the commissioner of insurance of this state or the commissioner’s designee.

Ins 57.01(4) (4) “Department” means the department of health services of this state.

Ins 57.01(5) (5) “Independent certified public accountant” means an independent certified public accountant, or independent accounting firm, in good standing with the American Institute of Certified Public Accountants in this state, and in the states in which the accountant or firm is licensed, or required to be licensed, to practice.

Ins 57.01(6) (6) “Net assets” means assets minus liabilities.

Ins 57.01(7) (7) “Restricted reserve” means liquid assets maintained in a segregated account by a care management organization.

Ins 57.01(8) (8) “Subsidiary” of a person means a person which is controlled, directly or indirectly through one or more intermediaries, by the first person.

Ins 57.01(9) (9) “Ultimate controlling person” means a person who is not controlled by any other person.

Ins 57.01(10) (10) “Work papers” means records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the independent certified public accountant’s examination of the financial statements of a care management organization. “Work papers” includes audit planning documentation, audit guides, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of examination of the financial statements of a care management organization or which support the opinion of the independent certified public accountant regarding the financial statements.

Ins 57.01(11) (11) “Working capital” means a measure calculated as current assets minus current liabilities.

Ins 57.01 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.04 Ins 57.04 Financial requirements. All of the following are the minimum financial requirements for compliance with this section unless a different amount is ordered by the commissioner, after consultation with the department:

Ins 57.04(1) (1) Working capital. Unless otherwise ordered by the commissioner the care management organization shall maintain working capital of not less than 3% of the projected annual capitation made over the effective contract period.

Ins 57.04(2) (2) Restricted reserve. Unless otherwise ordered by the commissioner the care management organization shall maintain a restricted reserve of not less than the sum of the following:

Ins 57.04(2)(a) (a) 8% of the first $5 million of annual budgeted capitation revenue.

Ins 57.04(2)(b) (b) 4% of the next $5 million annual budgeted capitation revenue.

Ins 57.04(2)(c) (c) 3% of the next $10 million annual budgeted capitation revenue.

Ins 57.04(2)(d) (d) 2% of the next $30 million annual budgeted capitation revenue.

Ins 57.04(2)(e) (e) 1% of annual budgeted capitation revenue in excess of $50 million.

Ins 57.04(3) (3) Accessing restricted reserve funds. A care management organization may not access the restricted reserve unless:

Ins 57.04(3)(a) (a) A plan for accessing the funds is filed with the commissioner at least 30 days prior to the proposed effective date; and

Ins 57.04(3)(b) (b) The commissioner, after consulting with the department, does not disapprove the plan in the 30 day timeframe.

Ins 57.04(4) (4) Risks. Risks and factors the commissioner may consider in determining whether to require greater restricted reserves by order include all of the following:

Ins 57.04(4)(a) (a) Types of contingencies. The commissioner shall consider the risks of:

Ins 57.04(4)(a)1. 1. Increases in the frequency or severity of losses beyond the levels contemplated by the capitation payments received;

Ins 57.04(4)(a)2. 2. Increases in expenses beyond those contemplated by the capitation payments received; and

Ins 57.04(4)(a)3. 3. Any other contingencies the commissioner can identify which may affect the care management organization’s operations.

Ins 57.04(4)(b) (b) Controlling factors. In making the determination under this subsection, the commissioner shall take into account the following factors:

Ins 57.04(4)(b)1. 1. The most reliable information available as to the magnitude of the various risks under par. (a);

Ins 57.04(4)(b)2. 2. The extent to which the risks in par. (a) are independent of each other or are related, and whether any dependency is direct or inverse;

Ins 57.04(4)(b)3. 3. The care management organization’s recent history of profits or losses;

Ins 57.04(4)(b)4. 4. The extent to which the care management organization has provided protection against the contingencies in ways other than the establishment of restricted reserves, including the use of conservative actuarial assumptions to provide a margin of security; and

Ins 57.04(4)(b)5. 5. Any other relevant factors.

Ins 57.04(5) (5) Corrective action plan. A care management organization that does not meet the requirements in sub. (1) or (2) shall file a corrective action plan with the commissioner. The corrective action plan shall include all of the following:

Ins 57.04(5)(a) (a) Identification of the conditions which contribute to the deficiency.

Ins 57.04(5)(b) (b) Proposals of corrective actions which the care management organization intends to take and would be expected to result in compliance with subs. (1) and (2).

Ins 57.04(5)(c) (c) Projections of the care management organization’s financial results in the current year and at least the first succeeding year.

Ins 57.04(5)(d) (d) Identification of the key assumptions impacting the care management organization’s projections and the sensitivity of the projections to the assumptions.

Ins 57.04(5)(e) (e) Such other information as is requested by the commissioner, after consultation with the department.

Ins 57.04 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.05 Ins 57.05 Business plan. All applications for permits of a care management organization shall include a proposed business plan. In addition to the items listed in s. 648.05 (2), Stats., the following information shall be contained in the business plan:

Ins 57.05(1) (1) Organizational information. All care management organization business plans shall include:

Ins 57.05(1)(a) (a) A narrative that discusses the business environment, the strategies and tactics that will be employed to manage the business including a plan to utilize mandated care principles and targets associated with that plan, and other areas of focus, stress, change, efficiency or any other information that supports or affects the financial projections.

Ins 57.05(1)(b) (b) A description of the general business model to be employed by the care management organization.

Ins 57.05(1)(c) (c) A brief organizational history, providing and describing major milestones in the development of the care management organization including organizational strengths and deficits, as they relate to the ongoing delivery of the Family Care program.

Ins 57.05(1)(d) (d) A description of the care management organization’s governance structure, including organizing documents (e.g., articles, by-laws, mission statement, etc.), and an organizational chart that clearly demonstrates reporting lines and domains of management authority, with names of current incumbents for management positions.

Ins 57.05(1)(e) (e) Information for all persons or entities who are in direct control of the care management organization, including the names, addresses and occupations of all controlling persons, directors and principal officers of the care management organization currently and for the preceding 10 years. The care management organization information shall also include the position held and target group representation, if applicable, for each member of the board of directors.

Ins 57.05(2) (2) Geographical service area. The geographical service area by county including a chart showing the number of providers with locations and service areas by county. A description and the method of handling out–of–area services shall also be included.

Ins 57.05(3) (3) Enrollment. A description of the target populations being served by the care management organization, in what proportions these target groups are currently being served, what the long range expectations of the care management organization are in serving each target group (i.e., anticipated program growth), and how historical trends or projections are similar to, or different, from program averages.

Ins 57.05(4) (4) Provider agreements. The extent to which any of the following are included in provider agreements and the form of any provisions that do any of the following:

Ins 57.05(4)(a) (a) Permit or require the provider to assume a financial risk in the care management organization, including any provisions for assessing the provider, adjusting capitation or fee–for–service rates, or sharing in the earnings or losses.

Ins 57.05(4)(b) (b) Govern amending or terminating agreements with providers.

Ins 57.05(5) (5) Provider availability. A description of the care management organization’s general plan for delivering care management services to its members. Differences in the delivery of this service across target groups or counties shall be described. Changes in the delivery of care management over time, either completed or anticipated shall be described.

Ins 57.05(6) (6) Plan administration. A summary of how administrative services are provided, including the size and qualifications of the administrative staff and the projected cost of administration in relation to capitation income. If administrative services are to be provided by a person outside the organization, the business plan shall include a copy of the contract. The contract shall include all of the following:

Ins 57.05(6)(a) (a) The services to be provided.

Ins 57.05(6)(b) (b) The standards of performance for the manager.

Ins 57.05(6)(c) (c) The method of payment.

Ins 57.05(6)(d) (d) The duration of the contract.

Ins 57.05(6)(e) (e) Any provisions for modifying, terminating or renewing the contract.

Ins 57.05(7) (7) Financial projections. A summary of all of the following:

Ins 57.05(7)(a) (a) Current and projected enrollment.

Ins 57.05(7)(b) (b) Income from capitation payments.

Ins 57.05(7)(c) (c) Other income.

Ins 57.05(7)(d) (d) Expenses associated with providing services to enrollees. A budget narrative that accompanies any projections related to care management utilization shall be provided. The narrative will identify assumed staff-to-member ratios, by type of staff; historical trends and projections regarding care management utilization; explanations regarding any major changes; and unit cost trends for each time period and target group.

Ins 57.05(7)(e) (e) Administrative and other costs.

Ins 57.05(7)(f) (f) The estimated break even point if a loss is being projected.

Ins 57.05(7)(g) (g) A summary of the assumptions made in developing projected operating results.

Ins 57.05(8) (8) Strengths, Weaknesses, Opportunities and Threats analysis. An analysis of the CMO’s strengths, weaknesses, opportunities and threats, a description of the major challenges the CMO faces, both internal and external to the organization, in providing services to each target group, and the strategies it is employing, or plans to employ, to address those challenges.

Ins 57.05(9) (9) Financial guarantees. A summary of all financial guarantees by providers, sponsors, affiliates or parents within a holding company system, or any other guarantees which are intended to ensure the financial success of the care management organization. These include hold harmless agreements by providers, stop loss insurance, or other guarantees.

Ins 57.05(10) (10) Business plan requirements of the department. The business plan filed with the department pursuant to provisions in the family care contract is acceptable for the purposes of this section.

Ins 57.05 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.06 Ins 57.06 Changes in the business plan. A care management organization shall file a written report of any proposed substantial change in its business plan. The care management organization shall file the report at least 30 days prior to the effective date of the change. The office, after consulting with the department, may disapprove the change. The care management organization may not enter into any transaction, contract, amendment to a transaction or contract or take action or make any omission that is a substantial change in the care management organization’s business plan prior to the effective date of the change or if the change is disapproved. Substantial changes include changes in articles and bylaws, organization type, geographical service areas, provider agreements, provider availability, plan administration, financial projections and guarantees and any other change that might affect the financial solvency of the organization. Any transaction or series of transactions that exceed the lesser of 5% of the care management organization’s assets or 10% of net assets as of December 31 of the immediately preceding calendar year shall be deemed material. Any changes in the items listed in s. Ins 9.05 (3) shall be filed under this section.

Ins 57.06 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.07 Ins 57.07 Copies of provider agreements.

Ins 57.07(1) (1) Notwithstanding any claim of trade secret or proprietary information, all care management organizations shall, upon request, from the commissioner, make available to the commissioner all executed copies of any provider agreements between the care management organization and intermediate entities or individual providers. Any party to a provider agreement may assert that a portion of the contracts contain trade secrets, and the commissioner may withhold that portion to the extent it may be withheld under s. Ins 6.13.

Ins 57.07(2) (2) All care management organizations shall file with the commissioner a list of providers executing a standard contract and a copy of the form of the contract may be filed instead of copies of the executed contracts.

Ins 57.07 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.10 Ins 57.10 Acquisition of control of or merger with a care management organization.