N.J. Admin. Code § 11:24-11.6 - Financial reporting requirements

(a) Every HMO shall submit, no later than March 1, an annual report for the immediately preceding calendar year, completed as prescribed by the NAIC Annual Statement Instructions for Health Maintenance Organizations, and completed on a SAP basis, in accordance with the NAIC Accounting Practices and Procedures Manual, effective January 1, 2001, incorporated herein by reference, as amended and supplemented (NAIC, 2301 McGee Street, Kansas City, MO 64108).

1. HMOs shall submit the annual report for calendar year 1996 (reported in March 1997) and thereafter using the current format established for any year by the National Association of Insurance Commissioners for HMOs, more commonly referred to as the "NAIC blank" for HMOs, the forms of which are available for purchase through several independent insurance service companies throughout the United States.

2. Every HMO shall submit with the annual report a certification of and an opinion by a member of the American Academy of Actuaries or an active fellow of the Society of Actuaries that the reserves required by N.J.A.C. 11:24-11.3 and included on the HMO's SAP annual report are sufficient.

i. The actuarial certification shall identify the specific methodology used to determine the reserves, and shall specify whether and how the methodology has changed since the last report.

ii. The workpapers prepared by the actuary in support of the certification shall be made available to the Department of Banking and Insurance upon request.

(b) Every HMO shall submit, no later than June 1, audited annual financial reports for the immediately preceding calendar year for the HMO and any company that is a financial guarantor for the HMO, completed on a SAP basis; except that any financial guarantor that is not an insurer or HMO shall submit audited annual financial reports as set forth herein on a GAAP basis.

1. The annual audited financial report shall include:

i. A report of an independent certified public accountant;

ii. A balance sheet reporting admitted assets, liabilities, capital and surplus;

iii. A statement of operations;

iv. A statement of cash flows;

v. A statement of changes in capital and surplus; and

vi. Notes to financial statements in accordance with the NAIC Annual Statement Instructions.

2. The annual report shall be certified by an independent public accountant. The Commissioner shall not recognize any person or firm as a qualified independent public accountant unless they are in good standing with the American Institute of Certified Public Accountants, and in all states in which the accountant is licensed to practice. Except as otherwise provided in this paragraph, an independent certified public accountant shall be recognized as qualified as long as he or she conforms to the standards of his or her profession, as contained in the Code of Professional Ethics of the American Institute of Certified Public Accountants and Rules and Regulations, Code of Ethics and Rules of Professional Conduct of the New Jersey Board of Public Accountancy or similar code.

i. No partner or other person responsible for rendering a report may act in that capacity for more than seven consecutive years. Following any period of service, such person shall be disqualified from acting in that or a similar capacity for the same company for a period of two years. An HMO may make application to the Commissioner for relief from the above rotation requirement on the basis of unusual circumstances. The Commissioner may consider the following factors in determining if the relief should be granted:

(1) The number of partners, expertise of the partners or the number of HMO clients in the currently registered firm; and

(2) The premium volume of the HMO;

ii. The Commissioner shall not recognize as a qualified independent certified public accountant, nor accept any annual audited financial report, prepared in whole or in part by, any natural person who:

(1) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. §§ 1961 through 1968, or any dishonest conduct or practices under Federal or state law, or similar conduct under any foreign law;

(2) Has been found to have violated the insurance laws of this State with respect to any previous reports submitted under this subchapter; or

(3) Has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under the provisions of this subchapter.

iii. Whenever it appears that the certified public accountant or accounting firm retained by the HMO to conduct the annual audit is not a qualified independent certified public accountant as provided under these rules, the Department shall notify the HMO that it does not recognize the certified public accountant or accounting firm as qualified, and the Department shall not accept any audited financial report prepared by that accountant or accounting firm. However, upon receipt of such notice from the Department, the HMO may, within 20 days, request an administrative review on the issue of the qualifications of the independent certified public accountant or accounting firm retained by the HMO.

3. Any internal control letter prepared by the independent public accountant shall also be submitted with the annual report.

4. Each HMO required by this subchapter to file an annual audited financial report shall, within 60 days after becoming subject to such requirement, register with the Commissioner in writing the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit. HMOs not retaining an independent certified public accountant on April 16, 2001 shall register the name and address of their retained certified public accountant not less than six months before the date when the audited financial report is to be filed.

5. The HMO shall also obtain a letter from the accountant, and file a copy with the Commissioner, stating that the accountant is aware of the provisions of the HMO statutes, regulations, and administrative rules of this State that relate to accounting and financial matters. The accountant shall also certify that he or she will express his or her opinion on the financial statements in the terms of their conformity to the statutory accounting practices prescribed or otherwise permitted by the Department and specify such exceptions as he or she may believe appropriate.

6. In addition to the requirements in (b)4 and 5 above, if the accountant for the immediately preceding filed audited financial report is dismissed or resigns, the HMO shall, within five business days, notify the Department of this event. The HMO shall also furnish the Commissioner with a separate letter within 10 business days of the above notification stating whether in the 24 months preceding such event there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; which disagreements, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. The disagreements required to be reported in response to this paragraph include both those resolved to the former accountant's satisfaction and those not resolved to the former accountant's satisfaction. Disagreements contemplated by this paragraph are those that occur at the decision-making level (that is, between personnel of the HMO responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report). The HMO shall also request in writing that such former accountant furnish a letter addressed to the HMO stating whether the accountant agrees with the statements contained in the HMO's letter and, if not, stating the reasons for which he or she does not agree; and the HMO shall furnish such responsive letter from the former accountant to the Commissioner together with its own.

(c) Every HMO shall submit, no later than March 1 annually, the New Jersey-Specific Annual Supplement, available from the Department, for the preceding calendar year.

(d) Every HMO shall submit quarterly reports no later than 45 days following the close of each of the first three calendar quarters (that is, May 15, August 15, and November 15, respectively), completed as prescribed by the NAIC Annual Statement Instructions for Health Maintenance Organizations, and completed on a SAP basis, in accordance with the NAIC Accounting Practices and Procedures Manual.

1. HMOs shall submit the quarterly report using the NAIC blank for HMOs in effect at the time of the quarter reported.

2. The quarterly reports shall also include "Membership by County," and "Analysis of Minimum Net Worth Requirements" of the New Jersey-Specific Annual Supplement, and any other data requested of a particular HMO by the Commissioner, attached to the last page of the quarterly report.

3. Every HMO shall submit with the quarterly financial report a certification of, and an opinion by, a member of the American Academy of Actuaries or an active fellow of the Society of Actuaries that the reserves required by N.J.A.C. 11:24-11.3 and included on the HMO's annual report are sufficient.

i. The actuarial certification shall identify the specific methodology used to determine the reserves, and shall specify whether and how the methodology has changed since the last report.

ii. The workpapers prepared by the actuary in support of the certification shall be made available to the Department upon request.

4. The quarterly reports shall include a certification identifying all of the HMO's current reinsurance, insolvency and stop loss insurance arrangements, which shall include the identity of all reinsurers and insurers, policy periods, appropriate deductibles and coverage limits, the face page of all inforce policies, and a statement as to whether any of these risks are self-funded.

(e) Both the NAIC blank and the New Jersey--Specific Annual Supplement, including those sections required to be completed on a quarterly basis, shall be completed in their entirety; if a specific schedule is not applicable to the HMO, that should be so indicated using "N/A" or "None".

(f) With respect to completion of the New Jersey-Specific Annual Supplement, if an HMO's actual net worth calculated in "Analysis of Minimum Net Worth Requirements" of the New Jersey-Specific Annual Supplement for the reporting period is less than 125 percent of the required minimum net worth for the HMO as required pursuant to N.J.A.C. 11:24-11.1, the HMO shall include with its then-current report a detailed plan of action demonstrating how the minimum net worth shall be maintained, specifying marketing and financial projections.

1. The plan of action shall include documentation of supporting assumptions made by the HMO.

2. The plan of action shall include discussions of alternate funding sources and shall specifically discuss parental or affiliate guarantees.

3. The plan of action shall be subject to review and approval of the Commissioner.

(g) With respect to completing the annual and quarterly SAP reports, periodic interim payments (PIP) from Medicaid managed care organizations to financially distressed hospitals as approved by the Division of Medical Assistance of the Department of Human Services shall be considered admitted assets, provided the amounts advanced are settled within 90 days.

(h) The annual and quarterly Revenue and Expense Statements (Report # 2-NAIC) shall include separate supplemental pages for "Commercial only," "Medicare," "Medicaid" and any other publicly funded program.

(i) Annual and quarterly reports shall not be accepted unless completed in accordance with this subchapter and additional instructions that may be obtained from the Department at the address specified at (j) below.

(j) Every HMO shall submit three copies each of its reports to:

Chief Insurance Examiner

Office of Financial Examinations

N.J. Department of Banking and Insurance

20 West State Street

PO Box 325

Trenton, NJ 08625-0325.

(k) Every HMO that has a contract with the Department of Human Services to provide coverage to the Medicaid population, or some segment thereof, also shall submit one copy of its reports to:

Executive Director

Office of Managed Health Care

Division of Medical Assistance and Health Services

N.J. Department of Human Services

Quakerbridge Plaza, Building 5

PO Box 712

Trenton, NJ 08625-0712

Notes

N.J. Admin. Code § 11:24-11.6

Amended by R.1999 d.201, effective 6/21/1999.
See: 31 N.J.R. 610(a), 31 N.J.R. 1631(a).
Rewrote (a)2; in (b), substituted a reference to June 1 for a reference to May 1 in the introductory paragraph, and added 4; in (d), rewrote 3, and added 4 and 5; inserted a new (h); recodified former (h) through (j) as (i) through (k); in the new (i), changed an internal reference; and in the new (j), substituted a reference to the Director for a reference to the Chief and made an address change for the Department of Health and Senior Services.
Amended by R.2001 d.126, effective 4/16/2001.
See: 33 N.J.R. 159(a), 33 N.J.R. 1196(a).
Rewrote the section.