Section 57.04. Financial requirements.

  All of the following are the minimum financial requirements for compliance with this section unless a different amount is ordered by the commissioner, after consultation with the department:

(1)   Working capital. Unless otherwise ordered by the commissioner the care management organization shall maintain working capital of not less than 3% of the projected annual capitation made over the effective contract period.

(2)   Restricted reserve. Unless otherwise ordered by the commissioner the care management organization shall maintain a restricted reserve of not less than the sum of the following:

(a) 8% of the first $5 million of annual budgeted capitation revenue.

(b) 4% of the next $5 million annual budgeted capitation revenue.

(c) 3% of the next $10 million annual budgeted capitation revenue.

(d) 2% of the next $30 million annual budgeted capitation revenue.

(e) 1% of annual budgeted capitation revenue in excess of $50 million.

(3)   Accessing restricted reserve funds. A care management organization may not access the restricted reserve unless:

(a) A plan for accessing the funds is filed with the commissioner at least 30 days prior to the proposed effective date; and

(b) The commissioner, after consulting with the department, does not disapprove the plan in the 30 day timeframe.

(4)   Risks. Risks and factors the commissioner may consider in determining whether to require greater restricted reserves by order include all of the following:

(a) Types of contingencies. The commissioner shall consider the risks of:

1. Increases in the frequency or severity of losses beyond the levels contemplated by the capitation payments received;

2. Increases in expenses beyond those contemplated by the capitation payments received; and

3. Any other contingencies the commissioner can identify which may affect the care management organization's operations.

(b) Controlling factors. In making the determination under this subsection, the commissioner shall take into account the following factors:

1. The most reliable information available as to the magnitude of the various risks under par. (a) ;

2. The extent to which the risks in par. (a) are independent of each other or are related, and whether any dependency is direct or inverse;

3. The care management organization's recent history of profits or losses;

4. The extent to which the care management organization has provided protection against the contingencies in ways other than the establishment of restricted reserves, including the use of conservative actuarial assumptions to provide a margin of security; and

5. Any other relevant factors.

(5)   Corrective action plan. A care management organization that does not meet the requirements in sub. (1) or (2) shall file a corrective action plan with the commissioner. The corrective action plan shall include all of the following:

(a) Identification of the conditions which contribute to the deficiency.

(b) Proposals of corrective actions which the care management organization intends to take and would be expected to result in compliance with subs. (1) and (2) .

(c) Projections of the care management organization's financial results in the current year and at least the first succeeding year.

(d) Identification of the key assumptions impacting the care management organization's projections and the sensitivity of the projections to the assumptions.

(e) Such other information as is requested by the commissioner, after consultation with the department.

History: EmR0927 : emerg. cr. eff. 10-10-09; CR 09-093 : cr. Register May 2010 No. 653 , eff. 6-1-10.