CMS Pub. 100-16, ch. 11, § 20.1

Contract

(Rev. 83; Issued: 04-25-07; Effective/Implementation Dates: 04-25-07)

Organizations that seek to offer an MA or MA-PD plan must enter into a contract with

CMS. A single MA contract may cover more than one MA plan offered by the

contracting MA organization. An applicant entity, however, must meet certain

requirements before CMS can consider entering into a contract with the organization. In

addition, an applicant entity must have an acceptable bid before it may enter into a

contract to offer an MA or MA-PD plan (see Subpart F at 42 CFR Part 422 for

information on the bidding process). Information on the applications process and the MA

program in general can be found at http://www.cms.hhs.gov/HealthPlansGenInfo.

• The applicant must document that it is authorized under State law in the requested

service area (SA) to operate as a risk bearing entity that may offer health benefits.

If the applicant offers a continuation area in another State, then the applicant must

show that it is authorized by the State to offer health benefits. As such, before an

applicant entity may apply to become a Medicare Advantage organization, it must

first submit a completed MA State Certification Form to CMS. This form, which

is available on our Web site, must be provided by the MA organization to the

State. The State, in turn, will certify that the organization is authorized to bear

risk associated with the plan(s) it is offering in the State. Existing §1876 cost

contractors do not have to complete this form. Please note that the revised

coordinated care plan (CCP), regional preferred provider organization (PPO),

private fee-for-service (PFFS), medical savings account (MSA), and service area

expansion (SAE) applications include this form.

• Except in the case of a provider sponsored organization granted a waiver under

422.370 of Part 422 of the CFR the applicant entity must be licensed (or if the

State does not license such entities, hold a certificate of authority/operation) as a

risk-bearing entity in the State in which it wishes to operate as an MA

organization.

• The applicant must meet certain minimum enrollment requirements. The applicant

entity must have at least 5,000 (or 1,500 if it is a PSO) individuals receiving

health benefits from the organization or at least 1,500 (or 500 if it is a PSO)

individuals receiving benefits in a rural area. CMS has the authority to waive the

minimum enrollment requirements for the first 3 contract years;

• An MA organization must demonstrate certain administrative and managerial

capabilities. They include:

o A policy making body that exercises oversight and control over the MA

organizations policies and personnel to ensure that management actions

are in the best interest of the organization and its enrollees;

o Personnel and systems sufficient for the MA organization to organize,

plan, control, and evaluate financial and marketing activities, the

furnishing of services, the quality improvement program, and the

administrative and management aspects of the organization (to include

systems/capabilities to provide data and/or reports to CMS, in the manner

and formats requested);

o At a minimum, an executive manager whose appointment and removal are

under the control of the policy making body;

o A fidelity bond or bonds procured and maintained by the MA

organization, in an amount fixed by its policy making body, but not less

than $100,000 per individual, covering each officer and employee

entrusted with the handling of its funds. (The bond may have reasonable

deductibles, based upon the financial strength of the MA organization.);

o Insurance policies or other arrangements, secured and maintained by the

MA organization and approved by CMS to insure the MA organization

against losses arising from professional liability claims, fire, theft, fraud,

embezzlement, and other casualty risks; and

o A commitment to compliance, integrity, and ethical values as

demonstrated by the following:

ƒ Written policies, procedures, and standards of conduct that

articulate the organizations commitment to comply with all

applicable Federal and State standards;

ƒ The designation of a compliance officer and compliance committee

that are accountable to senior management;

ƒ Effective training and education between the compliance officer

and organization employees;

ƒ Effective lines of communication between the compliance officer,

the organization's employees, and MA-related contractors that at a

minimum, includes a mechanism for employees or contractors to

ask questions, seek clarification, and report potential or actual

noncompliance without fear of retaliation;

ƒ Enforcement of standards through well-publicized disciplinary

guidelines;

ƒ Provision for internal monitoring and auditing that includes a risk

assessment process to identify and analyze risks associated with

failure to comply with all applicable Medicare Advantage

compliance standards; and

ƒ Procedures for ensuring prompt response to detected offenses and

development of corrective action initiatives relating to the

organization's MA contract.

NOTE: --MA organizations offering a prescription drug benefit

under Part D must also follow the fraud, waste and

abuse requirements at 42 CFR Part 423. Please see

42 CFR 423.504(b)(4)(vi)(H) for a description of

these requirements.

Also please note that MA plans offered to employer/union

members may not be subject to some of the rules discussed

above. Employers/unions may directly contract with CMS to

become an MA-only or MA-PD plan, or may contract with an

existing MA plan for customized coverage for its members.

These plans are referred to as employer/union-only group

waiver plans (EGWPs). Information on the application

process for EGWPs can be found at

http://www.cms.hhs.gov/EmpGrpWaivers/.