(a) Definitions.   (1) Purchased commercial liability insurance--Either general or professional liability insurance from a commercial carrier or a non-profit service corporation in an arm's-length transaction that provides for the shifting of risk to the unrelated party. The commercial carrier or non-profit service corporation must meet the requirements as set by the Texas Department of Insurance (TDI) for authorized insurance.   (2) Self-insurance--Self-insurance is a means whereby a contracted provider undertakes the risk to protect itself against anticipated liabilities by providing funds equivalent to liquidate those liabilities. If a contracted provider enters into an arrangement with an unrelated party that does not provide for the shifting of risk to the unrelated party, such an agreement shall be considered self-insurance. Self-insurance is not purchased liability insurance.   (3) Independently procured insurance--An insurance transaction involving an insurance contract independently procured from an insurance company not licensed in Texas through negotiations occurring entirely outside the state of Texas that is reported and on which premium tax is paid.   (4) Purchased captive insurance--A company providing either general or professional liability insurance purchased from a nonadmitted captive insurance company that insures solely directors and officer's liability insurance for the directors and officers of the company's parent and affiliated companies and/or the risks of the company's parent and affiliated companies. (b) Payment rates for purchased general and professional liability insurance will be determined as follows:   (1) Determine the portion of the general/administration rate component from 1 TAC §355.307 (relating to Reimbursement Setting Methodology) attributable to allowable liability insurance costs.   (2) Determine the amount of total dollars that would be expended if the liability rate component from paragraph (1) of this subsection were paid uniformly to all providers during the rate effective period.   (3) Estimate the number of days of service that will be covered by purchased liability insurance during the rate period.   (4) Divide the total dollars available for liability insurance from paragraph (2) of this subsection by the estimated number of days of service that will be covered by purchased liability insurance during the rate period from paragraph (3) of this subsection. Estimate the proportion of this per diem amount accruing from general liability insurance and the proportion accruing from professional liability insurance to determine the payment rate for each day of purchased general liability insurance and the payment rate for each day of purchased professional liability insurance.   (5) Payment rates for purchased general and professional liability insurance may be adjusted as often as HHSC determines is necessary to ensure that the total dollars expended during the rate period do not exceed the amount appropriated for this purpose.   (6) Since these payment rates are determined through an allocation of available appropriations among estimated units of service covered by purchased liability insurance, a public rate hearing is not required when adjustments are made to the payment rates.   (7) Contracted providers will be notified, in a manner determined by HHSC, of adjustments to the payment rates for purchased general and professional liability insurance.   (8) Contracted providers who purchase general liability insurance without professional liability insurance are only eligible to receive payment of the rate for purchased general liability insurance. Contracted providers who purchase professional liability insurance without general liability insurance are only eligible to receive payment of the rate for purchased professional liability insurance. Contracted providers who purchase both general and professional liability insurance are eligible to receive payment of both rates. (c) Purchased liability insurance issued through entities meeting any one of the following criteria will be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance as appropriate. These entities have been determined by the TDI to be authorized to issue liability insurance policies in the State of Texas.   (1) An insurance company identified as an admitted, licensed, insurer authorized to write liability insurance in Texas. This type of insurance company is designated as "active" on the TDI website. This includes risk retention groups chartered inside the state of Texas.   (2) An insurance company that is an eligible surplus lines insurer which requires that there be a Texas licensed surplus lines agent placing the coverage with the insurance company. This type of insurance company is designated as "eligible" on the TDI website.   (3) The Texas Medical Liability Insurance Underwriting Association (JUA). This insurance arrangement is designated as "active" on the TDI website.   (4) A risk retention group chartered outside the state of Texas that is registered with the TDI and which is designated as "registered" on the TDI website. (d) Independently procured insurance will not be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance. To qualify for the purchased general and/or professional liability insurance payment rates, the coverage must have been purchased through an independently procured insurance arrangement. The liability insurance payment rates will not be paid to any nursing facility contracted provider until HHSC Rate Analysis has received from the contracted provider a signed and notarized affidavit in the form provided by HHSC regarding the circumstances of the solicitation and procurement of coverage. An authorized signatory for the contracted provider as per the Department of Aging and Disability Services (DADS) Form 2031 must sign the affidavit. HHSC may request additional information to support the contents of the affidavit. The affidavit and supporting information will be reviewed by HHSC to determine if the information supplied is correct and complete to authorize payment of rates for purchased general and/or professional liability insurance. Upon receipt and review of the affidavit and supporting information and a determination that the information is correct and complete to authorize payments, payments will be made as identified in subsection (h) of this section. HHSC may refer any questionable case to the TDI to determine if a violation of the Texas Insurance Code has occurred. The liability insurance payment rates will continue to be paid if evidence that taxes on the premiums of independently procured insurance were paid to and received by the Texas Comptroller for the calendar year in which the policy is procured, continued or renewed. Evidence of the annual taxes paid to and received by the Texas Comptroller for the independently procured insurance in which the policy has been procured, continued or renewed must be received by HHSC Rate Analysis no later than the end of the business day on June 15 following the applicable calendar year. Failure to provide HHSC by June 15 with evidence that premium taxes have been paid will result in the discontinuation of the liability insurance rate add-on. If June 15 falls on a weekend, a national holiday, or a state holiday, then the first business day following June 15 of that year is the due date for the evidence of taxes paid. If acceptable evidence that taxes have been paid has not been received by HHSC within 60 days after the June 15 deadline, HHSC will recoup any add-on payments made to the contracted provider for the period in which taxes are unpaid. Once HHSC Rate Analysis receives evidence of taxes paid to the Texas Comptroller, HHSC will restore any add-on payments for that period previously withheld or recouped. Any vendor hold placed under 40 TAC §19.2308 (relating to Change of Ownership) will remain in place until evidence that all taxes on the premiums are paid to and received by the Texas Comptroller for all time periods for which the liability insurance add-on rate was paid to the contracted provider. (e) Insurance purchased through a captive insurance company will not be determined automatically to qualify for the payment rates for purchased general and/or professional liability insurance. The liability insurance payment rates will not be paid to any nursing facility contracted provider until HHSC Rate Analysis has received from the contracted provider a signed and notarized affidavit in the form provided by HHSC and any requested supporting information regarding the financial arrangements and affiliation between the contracted provider and the captive insurance company. An authorized signatory for the contracted provider as per DADS Form 2031 must sign the affidavit. HHSC may request additional information to support the contents of the affidavit. The affidavit and supporting information will be reviewed by HHSC to determine if the information supplied is correct and complete to authorize payment of rates for purchased general and/or professional liability insurance. Payments will be made as identified in subsection (h) of this section. Insurance purchased through an "active" or "eligible" insurance company will automatically qualify for the payment rate for purchased general and/or professional liability insurance, regardless of whether such risk has been reinsured by a captive insurance company. It is the responsibility of the nursing facility to obtain any requested information from the captive insurance company or affiliates. HHSC may refer any questionable cases to TDI to determine if a violation of the Texas Insurance Code has occurred. The liability insurance payment rates will continue to be paid if evidence that taxes on the premiums of captive insurance were paid to and received by the Texas Comptroller for the calendar year in which the policy is procured, continued or renewed. Evidence of the annual taxes paid to and received by the Texas Comptroller for the captive insurance in which the policy has been procured, continued or renewed must be received by HHSC Rate Analysis no later than the end of the business day on April 1 following the applicable calendar year. Failure to provide HHSC by April 1 with evidence that premium taxes paid have been will result in the discontinuation of the liability insurance rate add-on. If April 1 falls on a weekend, a national holiday, or a state holiday, then the first business day following April 1 of that year is the due date for the evidence of taxes paid. If acceptable evidence that taxes have been paid has not been received by HHSC within 60 days after the April 1 deadline, HHSC will recoup any add-on payments made to the contracted provider for the period in which taxes are unpaid. Once HHSC Rate Analysis receives evidence of taxes paid to the Texas Comptroller, HHSC will restore any add-on payments for that period previously withheld or recouped. Any vendor hold placed under 40 TAC §19.2308 (relating to Change of Ownership) will remain in place until evidence that all taxes on the premiums are paid to and received by the Texas Comptroller for all time periods for which the liability insurance add-on rate was paid to the contracted provider. (f) Liability insurance payments will not be made to facilities that obtain insurance from an insurer or person engaged in unauthorized insurance as set forth in Chapter 101 of the Texas Insurance Code, Unauthorized Insurance. Providers will be notified by certified mail that the liability insurance payments are being stopped and of the provider's right to appeal the stoppage of payment with HHSC under 1 TAC §§357.481 - 357.490. It is the responsibility of the nursing facility contracted provider to ensure that liability insurance submitted for payment is authorized. Liability insurance payments made on insurance that is later determined by the Texas Department of Insurance to be unauthorized insurance under Chapter 101, Texas Insurance Code will be recouped. If the determination by TDI that the insurance is unauthorized is successfully appealed with TDI and the insurance is determined to be authorized, the liability insurance payments that were stopped will be paid to the provider. (g) To qualify for the purchased liability insurance payment rates each contracted entity must submit the following to HHSC Rate Analysis:   (1) A completed liability insurance coverage certification form provided by HHSC Rate Analysis, signed by an authorized signatory for the contracted provider as per DADS Form 2031.   (2) A copy of evidence of coverage to include a certificate of insurance, the ACORD 25-S or similar document provided by the insurance company or agent that includes the type of coverage, effective and expiration dates of coverage, insurer, policy, and form number of policy contract, agent/producer, and claims made/occurrences. For catastrophic or excess liability coverage, the evidence of coverage must also include the sum that the catastrophic or excess coverage must exceed to become payable. A binder is not acceptable as evidence of insurance.   (3) For independently procured liability insurance, the information identified in subsection (d) of this section.   (4) For insurance purchased through a captive insurance company, the information identified in subsection (e) of this section. (h) If an insurance policy effective date is not the first day of the month, then the liability insurance payment rates will become effective the first day of the following month. If an insurance policy expiration date is not the last day of the month, then the liability insurance payment rates will be paid for the full month that includes the expiration date. (i) It is the contracted provider's responsibility to notify HHSC Rate Analysis of any changes to liability insurance coverage including cancellation of coverage, change of insurance and renewal of coverage within 15 calendar days of the effective date of the change. Failure to notify HHSC Rate Analysis of cancellation of coverage or change of insurance could constitute Medicaid fraud. Renewals of coverage not received within 15 calendar days of the effective date of the renewal could result in the liability insurance payment rates being stopped until documentation of the renewal per subsection (f) of this section is received by HHSC Rate Analysis.

Source Note: The provisions of this §355.312 adopted to be effective December 1, 2001, 26 TexReg 9565; amended to be effective November 1, 2003, 28 TexReg 8310; amended to be effective May 1, 2005, 30 TexReg 2383; amended to be effective October 28, 2007, 32 TexReg 7469