To:           All Insurance Companies Writing Health Insurance

From:      Jay Angoff, Director

Re:          Types of Compensation and Reimbursement Arrangements

Date:       January 12, 1996

This bulletin sets out the position of the Director of Insurance regarding certain types of compensation and reimbursement arrangements between health care providers (e.g., doctors, hospitals, networks, and others) and individuals, employers, and other groups. It is the Director's goal to see that consumers have the solvency and consumer protections afforded by the insurance laws.

If a health care provider enters into an arrangement with an individual, employer, or other group that results in the provider assuming all or part of the risk for health care expenses or service delivery, the provider is engaged in the business of a health maintenance organization (HMO). The only arrangement where a provider need not obtain a license from the Department of Insurance is when the provider agrees to assume all or part of the risk for health care expenses or service delivery under a contract with a duly licensed health insurer or HMO, for that insurer's policyholders, certificateholders, or enrollees. An example of this is when a group of doctors or a hospital enters into an arrangement with an HMO to provide services to the HMO's enrollees in exchange for a fixed prepayment. Providers wishing to engage in the business of an HMO or insurer must obtain the appropriate certificate of authority (e.g., health insurer or HMO, etc.) from the Department of Insurance.{ See generally sections 354.400 to 354.550, RSMo, 1994.} Enclosed is an application for an HMO certificate of authority.

For example, if a group of doctors or a hospital enters into an arrangement with an employer to provide future health care services to the employer's employees for a fixed prepayment (i.e., full or partial capitation) the doctors or hospital are engaged in the business of insurance: "Health insurance is an indemnity to persons for expense and loss of time occasioned by illness."{ Corpus Juris Secundum, Vol. 44, 1993, West Publishing Co., St. Paul, MN, pg 76.} Examples of other arrangements that may be the business of insurance include risk corridors, with-hold, or pooling arrangements.

The Department will be pleased to work with providers to bring any arrangements into compliance with state insurance law applicable to health carriers. If there are questions please contact the following persons at the Department:

Administration 573-526-4775

Certificate of Authority 573-751-4362

Financial Regulation 573-526-2944

Provider & Coverage 573-751-3365