28 Tex. Admin. Code § 13.431 - Reserves and Working Capital Requirements

(a) An HCC must maintain working capital composed of current assets with a ratio of current assets to current liabilities of 1.25:1, based on the greater of the prior year's actual liabilities or the projected liabilities for the subsequent year, subject to the following requirements, as applicable:

(1) an HCC consisting of physicians and one or more facilities must maintain unencumbered net equity of not less than $200,000; and

(2) an HCC must base its ratio of assets to liabilities on the projected liabilities for the subsequent year if the HCC has not been certified for more than one year.

(b) An HCC must have reserves sufficient to operate and maintain the HCC and to arrange for services and expenses it incurs. An HCC must maintain financial reserves computed in accord with Generally Accepted Accounting Principles in an amount not less than 100 percent of incurred but not paid claims of nonparticipating physicians and providers.

(c) Any HMO or insurer certified by the department that forms an HCC pursuant to Insurance Code § 848.001(2)(C)(iii) and (iv) or enters into a contract with an HCC pursuant to Insurance Code § 848.103 must maintain a reserve that is:

(1) equivalent in value to three months of prepaid funding or capitation payments;

(2) phased in over a no-more-than 36-month period;

(3) maintained separately from and in addition to all other reserves and liabilities of the HMO or insurer;

(4) unencumbered and dedicated to assure its availability for its intended purpose; and

(5) reported in the aggregate separately from all other reserves and liabilities of the HMO or insurer.

(d) For the purpose of meeting the minimum working capital requirements of this section, current assets of an HCC are limited to U.S. currency, certificates of deposit with fixed terms of one year or less, money market accounts, accounts receivable from government payors, and other accounts receivable that have remained due 90 days or less. Accounts receivable must be reported net of all allowances. Assets with a maturity period or fixed term that is greater than one year are not current assets for purposes of this section.

(e) For the purpose of meeting the minimum reserve and minimum net equity requirements of this section, investments in capital assets, mortgages, notes, and loan-backed securities must be excluded from the calculation of reserves and net equity in determining satisfaction of minimum requirements.

Notes

28 Tex. Admin. Code § 13.431

The provisions of this §13.431 adopted to be effective March 31, 2013, 38 TexReg 2100