[Code of Federal Regulations]
[Title 42, Volume 3]
[Revised as of October 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR423.401]

[Page 393]
 
                         TITLE 42--PUBLIC HEALTH
 
                    CHAPTER IV--CENTERS FOR MEDICARE
                          & MEDICAID SERVICES,
                        DEPARTMENT OF HEALTH AND
                             HUMAN SERVICES
 
PART 423_VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT--Table of Contents
 
   Subpart I_Organization Compliance with State Law and Preemption by 
                               Federal Law
 
Sec.  423.401  General requirements for PDP sponsors.


    (a) General requirements. Each PDP sponsor of a prescription drug 
plan must meet the following requirements:
    (1) Licensure. Except in cases where there is a waiver as specified 
at Sec.  423.410 or Sec.  423.415, the sponsor is organized and licensed 
under State law as a risk bearing entity eligible to offer health 
insurance or health benefits coverage in each State in which it offers a 
prescription drug plan. If not otherwise licensed, the sponsor obtains 
certification from the State that the organization meets a level of 
financial solvency and other standards as the State may require for it 
to operate as a PDP sponsor.
    (2) Assumption of financial risk for unsubsidized coverage. The PDP 
sponsor assumes financial risk on a prospective basis for benefits that 
it offers under a prescription drug plan and that is not covered under 
section 1860D-15(b) of the Act.
    (b) Reinsurance permitted. The PDP sponsor may obtain insurance or 
make other arrangements for the cost of coverage provided to any 
enrollee to the extent that the sponsor is at risk for providing the 
coverage.
    (c) Solvency for unlicensed sponsors. In the case of a PDP sponsor 
that is not described in Sec.  423.401(a)(1) and for which a waiver is 
approved under Sec.  423.410 or Sec.  423.415, the sponsor must meet the 
requirements in Sec.  423.420.