Chapter Ins 57

Ins 57.10(1) (1) Filing requirements.

Ins 57.10(1)(a) (a) No person other than the care management organization may enter into an agreement to merge with or otherwise to acquire or attempt to acquire control of a care management organization or any person having control of a care management organization unless all of the following are complied with:

Ins 57.10(1)(a)1. 1. The person first files the information required under sub. (2) with the commissioner and sends a copy of the information to the care management organization; and

Ins 57.10(1)(a)2. 2. The offer, request, invitation, agreement or acquisition has been approved by the commissioner.

Ins 57.10(1)(b) (b) For purposes of this section “care management organization” includes any person having control of a care management organization.

Ins 57.10(2) (2) Content of statement. A person required to file under sub. (1) shall file the following information not less than 30 days after the care management organization signs a letter of intent, using information substantially similar to that contained in form A in Appendix 1 to this chapter, in a sworn statement by an official of the care management organization:

Ins 57.10(2)(a) (a) For each acquiring person:

Ins 57.10(2)(a)1. 1. The acquiring person’s name and address;

Ins 57.10(2)(a)2. 2. If the acquiring person is an individual, his or her principal occupation and all offices and positions held during the past 5 years, any conviction of crimes other than traffic violations not involving death or injury during the past 10 years and all relevant information regarding any occupational license or registration; and

Ins 57.10(2)(a)3. 3. If the acquiring person is not an individual, a report of the nature of its business operations during the past 5 years or for the lesser period that the acquiring person and any predecessors of the acquiring person have been in existence, if shorter; an informative description of the business intended to be done by the acquiring person and the acquiring person’s subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the acquiring person, or who perform or will perform functions similar to those positions. The list shall include for each individual the information required by subds. 1. and 2.

Ins 57.10(2)(b) (b) The source, nature and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction from which funds were or are to be obtained for that purpose, including any pledge of the care management organization’s assets or the assets of any of its subsidiaries or affiliates which control the care management organization, the criteria used in determining the nature and amount of consideration and the identity of persons furnishing the consideration.

Ins 57.10(2)(c) (c) Fully audited financial information as to the earnings and financial condition of each acquiring person for the preceding 5 fiscal years of each acquiring person or for the period the acquiring person and any predecessors of the acquiring person have been in existence, if shorter, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.

Ins 57.10(2)(d) (d) Any plans or proposals under which any acquiring person is considering to liquidate, to sell assets of, or to merge or consolidate the care management organization or to make any other material change in the care management organization’s business or corporate structure or management.

Ins 57.10(2)(e) (e) A full description of any contracts, arrangements or understandings with respect to any security in which any acquiring person is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, guarantees of loans, guarantees against loss or guarantees of profits, or division of losses or profits. The description shall identify the persons with whom the contracts, arrangements or understandings have been entered into.

Ins 57.10(3) (3) Material changes. A person required to file under sub. (1) shall file an amendment to the filing if any material change occurs in the facts set forth in a statement previously filed with the commissioner. The person shall include in the amendment a description of the change and copies of all documents and other material relevant to the change. The amendment shall be filed with the commissioner and sent to the care management organization within 2 business days after the person learns of the change.

Ins 57.10 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.12 Ins 57.12 Standards for transactions within a holding company system.

Ins 57.12(1) (1) Transactions within a holding company system. A care management organization or affiliate of a care management organization may not enter directly or indirectly into a transaction between the care management organization and the affiliate unless the care management organization and affiliate comply with all of the following:

Ins 57.12(1)(a) (a) Comply with s. 648.45 (5) and (6), Stats.

Ins 57.12(1)(b) (b) Allocate to the care management organization for expenses incurred and payment received for the transaction in conformity with customary accounting practices consistently applied.

Ins 57.12(1)(c) (c) Disclose clearly and accurately in books, accounts and records of each party the nature and details of the transaction including the accounting information which is necessary to support the reasonableness of the charges or fees to the respective parties.

Ins 57.12(2) (2) Transactions required to be reported and subject to disapproval. A care management organization, and a person attempting to acquire control of a care management organization, or an affiliate of a care management organization, which directly or indirectly is involved in or benefits from, a transaction, shall report, under s. 648.45 (6), Stats., each of the following transactions to the commissioner in writing at least 30 days before the care management organization enters into the transaction, unless the commissioner in writing approves a shorter period:

Ins 57.12(2)(a) (a) Sales, purchases, exchanges, loans, extensions of credit, guarantees, or investments involving the care management organization and an affiliate or a person attempting to acquire control of the care management organization if the transactions are equal to or exceed the lesser of 2% of the care management organization’s assets or 10% of net assets as of December 31 of the immediately preceding calendar year.

Ins 57.12(2)(b) (b) Loans, extensions of credit, or guarantees to any person who is not an affiliate, where the care management organization makes loans, extensions of credit or guarantees with the agreement or understanding that the proceeds of the transactions or benefit of the guarantees, in whole or in significant part, directly or indirectly, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the care management organization making the loans, extensions of credit, or guarantee, or any person attempting to acquire control of the care management organization, if the transactions are equal to or exceed the lesser of 2% of the care management organization’s assets or 10% of net assets as of December 31 of the immediately preceding calendar year.

Ins 57.12(2)(c) (c) All management agreements, exclusive agency agreements, service contracts or cost-sharing arrangements which involve a care management organization and either an affiliate or a person attempting to acquire control of the care management organization.

Ins 57.12(2)(d) (d) A transaction not in the ordinary course of business which involves a care management organization and either an affiliate of, or a person attempting to acquire control of, a care management organization and which involves or exposes to risk an amount equal to or exceeding the lesser of 2% of the care management organization’s assets or 10% of net assets as of the 31st day of December of the immediately preceding calendar year.

Ins 57.12(2)(e) (e) Any material transactions which the commissioner requires to be reported by order.

Ins 57.12(3) (3) Illegal transactions not authorized. This section does not authorize or permit any transaction which would be otherwise contrary to law.

Ins 57.12(4) (4) Group or series of related transactions. For the purpose of applying sub. (2), a group or series of related transactions shall be treated as if they are a single transaction.

Ins 57.12(5) (5) Subterfuge prohibited. A care management organization, person attempting to acquire control of a care management organization, person having control of a care management organization or affiliate of a care management organization may not enter into transactions which are part of a group or series of transactions if the purpose of those separate transactions is to attempt to avoid a threshold amount under this chapter.

Ins 57.12(6) (6) Disapproval. Transactions subject to reporting under sub. (2) may be disapproved by the commissioner, after consulting with the department, under s. 648.45 (6) (b), Stats. No person may enter into or assent to a transaction that is disapproved by the commissioner or which is subject to reporting under sub. (2) but not reported.

Ins 57.12(7) (7) Care management organization may report on behalf of affiliate or person attempting to acquire control. A care management organization may file a report under sub. (2) on behalf of its affiliate or of the person attempting to acquire control of the care management organization. Lack of knowledge that a care management organization has not reported on behalf of the affiliate or person or that the report is incomplete or inaccurate is not a defense for the affiliate or person attempting to acquire control of the care management organization.

Ins 57.12 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.13 Ins 57.13 Privileged information. The information required to be filed with the commissioner under s. Ins 57.10 is required under s. 601.42, Stats., and the commissioner may keep it confidential as provided under s. 601.465, Stats.

Ins 57.13 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.20 Ins 57.20 Forms and Instructions.

Ins 57.20(1) (1) General. Forms A and B contained in Appendix 1 to this chapter are intended to be guides in the preparation of the statements required by this chapter. They are not intended to be blank forms which are to be filled in. The statements filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer is in the negative, an appropriate statement to that effect shall be made.

Ins 57.20(2) (2) Filing format and procedure.

Ins 57.20(2)(a) (a) One complete copy of each statement, including exhibits and all other papers and documents filed as a part of the statement, shall be filed with the commissioner. At least one of the copies shall be manually signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of the power of attorney or other authority shall also be filed with the statement.

Ins 57.20(2)(b) (b) Statements shall be prepared on paper 8 ½ x 11 inches in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of any statement, financial statements or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency shall be converted into United States currency.

Ins 57.20 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.22 Ins 57.22 Forms — incorporation by reference, summaries and omissions.

Ins 57.22(1) (1) Incorporation by reference. Information required by any item of forms A, B or C contained at Appendix 1, may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of form A, B or C provided the document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the commissioner which were filed within the preceding 3 years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that the material is to be incorporated by reference in answer to the item. Information may not be incorporated by reference in any case where the incorporation would render the statement incomplete, unclear or confusing.

Ins 57.22(2) (2) Summary. Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to the statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the commissioner which was filed within 3 years and may be incorporated in its entirety by the reference. In any case where 2 or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties to the documents, the dates of execution, or other details, a copy of only one of the documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents that were filed.

Ins 57.22 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.23 Ins 57.23 Transactions subject to prior notice — notice filing. A person required to give notice of a proposed transaction under this chapter shall furnish the required information in substantially similar in format and in response to questions presented on form B in Appendix 1.

Ins 57.23 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.24 Ins 57.24 Dividends and other distributions. Requests for approval of dividends or any other distributions to shareholders or corporate members shall include the following:

Ins 57.24(1) (1) The amount of the proposed dividend or distribution;

Ins 57.24(2) (2) The date established for payment of the dividend or distribution;

Ins 57.24(3) (3) A statement as to whether the dividend or distribution is to be in cash or other property and, if in property, a description of the property, its cost, and its fair market value together with an explanation of the basis for valuation;

Ins 57.24(4) (4) A balance sheet and statement of income for the period between the date on which of the last annual statement was filed with the commissioner and the end of the month preceding the month in which the request for dividend approval is submitted.

Ins 57.24(5) (5) A brief statement as to the effect of the proposed dividend upon the care management organization’s net assets, the reasonableness of net assets in relation to the care management organization’s outstanding liabilities, and the adequacy of net assets relative to the care management organization’s financial needs.

Ins 57.24 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.25 Ins 57.25 Consent to jurisdiction. Any person required to file consent to jurisdiction under s. 648.45 (3), Stats., shall do so in a format substantially similar to the format and questions contained in form C of Appendix 1 to this chapter.

Ins 57.25 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.26 Ins 57.26 General requirements related to filing and extensions for filing of annual audited financial reports.

Ins 57.26(1) (1) A care management organization shall:

Ins 57.26(1)(a) (a) Annually obtain or cause an audit of the care management organization by an independent certified public accountant; and

Ins 57.26(1)(b) (b) File an audited financial report that complies with s. Ins 57.30 with the commissioner on or before June 1 for the immediately preceding calendar year. If the care management organization is part of a county financial audit, the deadline for the Family Care care management organization audit is the deadline for the county financial audit, which is nine months from the end of the fiscal period.

Ins 57.26(2) (2) The commissioner may require a care management organization to file the audited financial report earlier than the date specified under sub. (1) if the commissioner gives 90 days advance notice to the care management organization.

Ins 57.26(3) (3) The commissioner may grant extensions of the filing date under sub. (1) for 31-day periods if the care management organization and independent certified public accountant establish there is good cause for an extension. A request for an extension shall be submitted in writing not less than 10 days prior to the date specified under sub. (1) in sufficient detail to permit the commissioner to make an informed decision with respect to the requested extension.

Ins 57.26(4) (4) A care management organization may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 57.31 unless the accountant or accounting firm is an independent certified public accountant, regardless of whether the commissioner has issued a ruling under s. Ins 57.32 (1). A care management organization may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 57.31 if the commissioner under s. Ins 57.32 (1) rules that the accountant or accounting firm is not qualified or if the accountant or accounting firm does not comply with s. Ins 57.32 (2).

Ins 57.26 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10.

Ins 57.30 Ins 57.30 Contents of annual audited financial report. The annual audited financial report required under s. Ins 57.26 shall comply with all of the following:

Ins 57.30(1) (1) Report the financial position of the care management organization as of the end of the most recent calendar year and the results of its operations, cash flows and changes in net assets for that year in conformity with generally accepted accounting principles.

Ins 57.30(2) (2) Include all of the following:

Ins 57.30(2)(a) (a) The report of the independent certified public accountant.

Ins 57.30(2)(b) (b) A balance sheet reporting assets, liabilities, and net assets.

Ins 57.30(2)(c) (c) A statement of operations.

Ins 57.30(2)(d) (d) A statement of cash flows.

Ins 57.30(2)(e) (e) A statement of changes in net assets.

Ins 57.30(2)(f) (f) A report on the internal control environment of the CMO.

Ins 57.30(2)(g) (g) A report describing the system of cost allocation for shared overhead and direct services between programs or lines of business.

Ins 57.30(2)(h) (h) A supplemental financial report that demonstrates the financial position and segregated reserves of the CMO business for each state program contract where the organization serves members under multiple Medicaid managed care contracts or other lines of business. The report shall be in columnar format for the various programs as required.

Ins 57.30(2)(i) (i) Management letter as issued or written assurance that a management letter was not issued with the audit report.

Ins 57.30(2)(j) (j) Management responses and corrective action plan for each audit issue identified in the audit report or in the management letter.

Ins 57.30(2)(k) (k) Notes to financial statements. These notes shall be those required by generally accepted accounting principles. The notes shall include a reconciliation of differences, if any, between the audited financial statements and the annual statement filed pursuant to s. Ins 57.40 with a written description of the nature of these differences.

Ins 57.30(3) (3) The financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31, except in the first year in which a care management organization is required to file an audited financial report, the comparative data may be omitted.

Ins 57.30 History History: EmR0927: emerg. cr. eff. 10-10-09; CR 09-093: cr. Register May 2010 No. 653, eff. 6-1-10; correction in (2) (k) made under s. 13.92 (4) (b) 7., Stats., Register May 2010 No. 653.

Ins 57.31 Ins 57.31 Designation of independent certified public accountant.

Ins 57.31(1) (1) A care management organization shall, within 60 days after the care management organization becomes subject to this subchapter:

Ins 57.31(1)(a) (a) Provide the commissioner in writing the name and address of the independent certified public accountant retained to conduct the annual audit required by this subchapter.

Ins 57.31(1)(b) (b) File with the commissioner a copy of the letter required to be obtained under sub. (3).

Ins 57.31(2) (2) Care management organizations not retaining an independent certified public accountant on June 1, 2010, shall register the name and address of their retained independent certified public accountant not less than 6 months before the date when the first audited financial report is to be filed.

Ins 57.31(3) (3) A care management organization shall obtain a letter from the independent certified public accountant it retains to conduct the annual audit required by this subchapter. The letter shall state that the independent certified public accountant:

Ins 57.31(3)(a) (a) Is aware of the provisions of the administrative code and the rules and regulations of the insurance department or equivalent agency of the state of domicile of the care management organization that relate to accounting and financial matters of care management organizations; and

Ins 57.31(3)(b) (b) Will express an opinion on whether the financial statements conform to the generally accepted accounting practices prescribed or otherwise permitted by that department or equivalent agency and will specify exceptions as appropriate.

Ins 57.31(4) (4) If an independent certified public accountant for the immediately preceding filed audited financial report of a care management organization is dismissed or resigns, the care management organization shall comply with all of the following: