[Code of Federal Regulations] [Title 42, Volume 2] [Revised as of October 1, 2002] From the U.S. Government Printing Office via GPO Access [CITE: 42CFR417.142] [Page 698-700] TITLE 42--PUBLIC HEALTH HUMAN SERVICES PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS--Table of Contents Subpart D--Application for Federal Qualification Sec. 417.142 Requirements for qualification. (a) General rules. (1) An entity seeking qualification as an HMO must meet the requirements and provide the assurances specified in paragraphs (b) through (f) of this section, as appropriate. (2) CMS determines whether the entity is an HMO on the basis of the entity's application and any additional information and investigation (including site visits) that CMS may require. (3) CMS may determine that an entity is any of the following: (i) An operational qualified HMO. (ii) A preoperational qualified HMO. (iii) A transitional qualified HMO. (b) Operational qualified HMO. CMS determines that an entity is an operational qualified HMO if-- (1) CMS finds that the entity meets the requirements of subparts B and C of this part. (2) The entity, within 30 days of CMS's determination, provides written assurances, satisfactory to CMS, that it-- (i) Provides and will provide basic health services (and any supplemental health services included in any contract) to its enrollees; (ii) Provides and will provide these services in the manner prescribed in sections 1301(b) and 1301(c) of the PHS Act and subpart B of this part; (iii) Is organized and operated and will continue to be organized and operated in the manner prescribed in section 1301(c) of the PHS Act and subpart C of this part; (iv) Under arrangements that safeguard the confidentiality of patient information and records, will provide access to CMS and the Comptroller General or any of their duly authorized representatives for the purpose of audit, examination or evaluation to any books, documents, papers, and records of the entity relating to its operation as an HMO, and to any facilities that it operates; and (v) Will continue to comply with any other assurances that it has given to CMS. (c) Preoperational qualified HMO. (1) CMS may determine that an entity is a preoperational qualified HMO if it provides, within 30 days of CMS's determination, satisfactory assurances that it will become operational within 60 days following that determination and will, when it becomes operational, meet the requirements of subparts B and C of this part. (2) Within 30 days after receiving notice that the entity has begun operation, CMS determines whether it is an operational qualified HMO. In the absence of this determination, the entity is not an operational qualified HMO even though it becomes operational. (d) Transitional qualified HMO: General rules--(1) Basic requirements. CMS may determine that an entity is a transitional qualified HMO if the entity-- (i) Meets the requirements of paragraph (d)(2) through (d)(4) of this section; and (ii) Provides the assurances specified in paragraphs (d)(5) through (d)(7) of this section within 30 days of CMS's determination. [[Page 699]] (2) Organization and operation. The entity is organized and operated in accordance with subpart C of this part, except that it need not-- (i) Assume full financial risk for the provision of basic health services as required by Sec. 417.120(b); or (ii) Comply with the limitations that are imposed on insurance by Sec. 417.120(b)(1). (3) Range of services. The entity is currently providing the following services on a prepaid basis: (i) Physician services. (ii) Outpatient services and inpatient hospital services. (The entity need not provide or pay for hospital inpatient or outpatient services that it can show are being provided directly, through insurance, or under arrangements, by other entities.) (iii) Medically necessary emergency services. (iv) Diagnostic laboratory services and diagnostic and therapeutic radiologic services. These services must meet the requirement of Sec. 417.101, but may be limited in time and cost without regard to the constraints imposed by Sec. 417.101(a). (4) Payment for services--(i) General rule. The entity pays for basic health services in accordance with Sec. 417.104, except that it need not comply with the copayments limitations imposed by Sec. 417.104(a)(4). (ii) Determination of payment rates. In determining payment rates, the entity need not comply with the community rating requirements of Secs. 417.104(b) and 417.105(b). (5) Contracts in effect on the date of CMS's determination. The entity gives assurances that it will meet the following conditions with respect to its group and individual contracts that are in effect on the date of CMS's determination, and which are renewed or renegotiated during the period approved by CMS under paragraph (d)(6) of this section: (i) Continue to provide services in accordance with paragraph (d)(3) of this section. (ii) Continue to be organized and operated and to pay for basic health services in accordance with paragraphs (d)(2) and (d)(4) of this section, respectively. (6) Time-phased plan. The entity gives assurances as follows: (i) It will implement a time-phased plan acceptable to CMS that-- (A) May not extend for more than 3 years from the date of CMS's determination; and (B) Specifies definite steps for meeting, at the time of renewal of each group or individual contract, all the requirements of subparts B and C of this part. (ii) Upon completion of this time-phased plan, it will-- (A) Provide basic and supplemental services to all of its enrollees; and (B) Be organized and operated, and provide services, in accordance with subparts B and C of this part. (7) Contracts entered into after the date of CMS's determination. The entity gives assurances that, with respect to any group or individual contract entered into after the date of CMS's determination, it will-- (i) Be organized and operated in accordance with subpart C of this part; and (ii) Provide basic health services and any supplemental health services included in the contract, in accordance with subpart B of this part. (e) Failure to sign assurances timely. If CMS determines that an entity meets the requirements for qualification and the entity fails to sign its assurances within 30 days following the date of the determination, CMS gives the entity written notice that its application is considered withdrawn and that it is not a qualified HMO. (f) Qualification of regional components. An HMO that has more than one regional component is considered qualified for those regional components for which assurances have been signed in accordance with this section. (g) Special rules: Enrollees entitled to Medicare or Medicaid. For an HMO that accepts enrollees entitled to Medicare or Medicaid, the following rules apply: (1) The requirements of titles XVIII and XIX of the Act, as appropriate, take precedence over conflicting requirements of sections 1301(b) and 1301(c) of the PHS Act. [[Page 700]] (2) The HMO must, with respect to its enrollees entitled to Medicare or Medicaid, comply with the applicable requirement of title XVIII or XIX, including those that pertain to-- (i) Deductibles and coinsurance; (ii) Enrollment mix and enrollment practices; (iii) State plan rules on copayment options; and (iv) Grievance procedures. (3) An HMO that complies with paragraph (g)(2) of this section may obtain and retain Federal qualification if, for its other enrollees, the HMO meets the requirements of sections 1301(b) and 1301(c) of the PHS Act and implementing regulations in this subpart D and in subparts B and C of this part. (h) Special rules: Enrollees under the Federal employee health benefits program (FEHBP). An HMO that accepts enrollees under the FEHBP (Chapter 89 of title 5 of the U.S.C.) may obtain and retain Federal qualification if, for its other enrollees, it complies with the requirements of section 1301(b) and 1301(c) of the PHS Act and implementing regulations in this subpart D and subparts B and C of this part. [59 FR 49836, Sept. 30, 1994]