No. 27506 (New Rule): R590-232. Authorization for a Health Maintenance Organization to Provide Services as Third Party Administrator of Health Care Benefits

DAR File No.: 27506
Filed: 10/25/2004, 03:09
Received by: NL

 

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to authorize a health maintenance organization (HMO) to provide services as a third party administrator (TPA) of health care benefits. There has been confusion in the industry about whether or not a TPA business is reasonably incidental to the operation of a HMO.

 

Summary of the rule or change:

The purpose of this rule it to allow an HMO to provide services as a TPA of health care benefits without the need to obtain a separate license to do so.

 

State statutory or constitutional authorization for this rule:

Sections 31A-2-201 and 31A-8-103

 

Anticipated cost or savings to:

the state budget:

Currently the state has seven licensed HMOs. Of these seven, two provide services as a TPA. As a result of this rule, the state budget will lose $87 in new and renewal license fees for the two HMOs, as well as the requirement to obtain a separate license for the TPA business.

 

local governments:

Local governments should not be affected by this rule since it deals with the relationship between HMOs and state government.

 

other persons:

This rule eliminates the need for an HMO to obtain a TPA license through the department. Therefore, the cost savings to the HMO would be the cost to establish a corporation, which would be done through the Department of Corporations, and the $87 to obtain a new or renewal TPA insurance license. Any time an insurer can reduce their costs, costs are also potentially reduced for the consumer.

 

Compliance costs for affected persons:

This rule eliminates the need for an HMO to obtain a TPA license through the department. Therefore, the cost savings to the HMO would be the cost to establish a corporation, which would be done through the Department of Corporations, and the $87 to obtain a new or renewal TPA insurance license. Any time an insurer can reduce their costs, costs are also potentially reduced for the consumer.

 

Comments by the department head on the fiscal impact the rule may have on businesses:

It is anticipated that this rule will eliminate a potential cost to two HMOs for a TPA license.

 

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

 

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

 

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/15/2004

 

Interested persons may attend a public hearing regarding this rule:

11/30/2004 at 9:00 AM, State Office Building, Room 3112 (third floor), Salt Lake City, UT

 

This rule may become effective on:

12/16/2004

 

Authorized by:

Jilene Whitby, Information Specialist

 

 

RULE TEXT

R590. Insurance, Administration.

R590-232. Authorization for a Health Maintenance Organization to Provide Services as Third Party Administrator of Health Care Benefits.

R590-232-1. Authority.

This rule is promulgated and adopted pursuant to Subsection 31A-8-103(2) allowing the commissioner to waive provisions of Title 31A that he considers inapplicable to health maintenance organizations, and Section 31A-2-201 giving the commissioner authority to implement the provisions of Title 31A.

 

R590-232-2. Purpose.

The purpose of this rule is to authorize a health maintenance organization to provide services as a third party administrator of health care benefits.

 

R590-232-3. Definitions.

All definitions in Sections 31A-1-301 and 31A-8-101 are hereby adopted by reference.

 

R590-232-4. Findings.

A. The term "organization" includes a health maintenance organization by definition.

B. Subsection 31A-8-106 provides, "No organization may engage, directly or indirectly, in any business other than that of an organization and business reasonably incidental to that business."

C. For some time, there has been a question as to whether providing services by a health maintenance organization as a "third party administrator" of health care benefits could be deemed to be the "business . . . of an organization" or at least be deemed to be "business reasonably incidental to that business."

D. The Commissioner finds that when a health maintenance organization provides services as a third party administrator of health care benefits, that business is, at the very least, "business reasonably incidental to that business" of a health maintenance organization.

E. In addition, Subsection 31A-8-103(2) provides, "The commissioner may by rule waive other specific provisions of this title that the commissioner considers inapplicable to health maintenance organizations or limited health plans, upon a finding that the waiver will not endanger the interests of: (a) enrollees; (b) investors; or (c) the public."

F. To the extent the definition of "third party administrator" in Section 31A-1-301 can be read as prohibiting a health maintenance organization from providing services as a third party administrator of health care benefits, and to the extent Chapter 25 of Title 31A can be read as requiring that a health maintenance organization apply for a separate license to provide services as a third party administrator of health care benefits, the commissioner finds that waiving those provisions with respect to health maintenance organizations will not endanger the interests of (a) enrollees, (b) investors, or (c) the public, and therefore the commissioner hereby waives those provisions with respect to a health maintenance organization providing third party administrator services of health care benefits.

 

R590-232-5. Rule.

A health maintenance organization may provide services as a third party administrator of health care benefits, and may do so without acquiring a third party administrator license under Chapter 25 of Title 31A.

 

R590-232-6. Severability.

If any provision of this rule or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

 

KEY: health maintenance organizations

2004

31A-2-201

31A-2-202

31A-21-312

31A-26-301

31A-26-303