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not) who wishes to enroll in the HMO signs an application form, dated at the time the HMO receives the application from the beneficiary.

(2) Applications from beneficiaries are accepted in chronological order by date of application (except as provided in § 417.220(d)), subject to restrictions permitted by § 417.220(c). The date of application is the date on which the HMO receives the application from the beneficiary.

(3) The beneficiary is notified by the HMO of its acceptance or denial of his application:

(i) Not later than 30 days following the application date; or (ii) more than 30 days, and less than 61 days, following the application date if such HMO demonstrates to the satisfaction of the Secretary that more than 30 days is required for such purpose and is given approval by the Secretary to notify such beneficiary later than 30 days.

(4) Such notice is made as follows: (i) If the application is accepted, the beneficiary is notified of the date upon which the HMO will request that his enrollment be effective, or

(ii) If the application is accepted, but the HMO is enrolled to capacity, the beneficiary is notified of procedures to be followed as vacancies occur, or

(iii) If the application is denied, an explanation of the reason for denial is given to the beneficiary.

(5) The HMO transmits to the Social Security Administration the information necessary to add the beneficiary to the HMO on the Social Security Administration's records:

(i) Within 30 days of the date of application; or

(ii) in the case of applications which are accepted when the HMO is enrolled to capacity, within 30 days after a vacancy for the applicant has occurred; or

(iii) where the HMO demonstrates to the satisfaction of the Secretary that it requires more than 30 days to process and transmit the necessary information to the Social Security Administration, within such additional period of time which the Secretary grants for such purpose.

(6) The beneficiary is promptly informed in writing by the HMO of the

effective month of his membership as an enrollee and a health insurance program beneficiary following notice to the HMO by the Health Care Financing Administration pursuant to § 417.221(c)(2).

(7) If the HMO accepts applications when it is filled to capacity, its procedures for processing and controlling such applications from health insurance program beneficiaries assure that vacancies that occur for such applicants who are still eligible to enroll are filled in chronological order by date of application, except where to do so would result in the HMO's failure to comply with the qualifying conditions set forth in §§ 417.202 to 417.207.

(f) Application form. (1) The application form must be in such format and contain such information as the Health Care Financing Administration may specify, including the beneficiary's authorization for disclosure and exchange of necessary information between the HMO and the Health Care Financing Administration.

(2) Application forms shall be filed and retained as long as the Secretary may prescribe.

[41 FR 9311, Mar. 4, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. Redesignated at 50 FR 1345, Jan. 10, 1985]

§ 417.224 Membership rules.

(a) The HMO shall maintain written rules regarding membership which are reasonable and which do not conflict with the requirements and limitations imposed by this subpart. Such rules and regulations shall deal with, but need not be limited to, procedures for paying premiums and other charges for which enrollees who are health insurance program beneficiaries may be liable, grievance and appeal procedures, disenrollment rights, how and where to obtain services from or through the HMO, and such other matters as the Secretary may prescribe.

(b) A copy of such written membership rules shall be furnished each enrollee who is a health insurance program beneficiary (see § 417.223(c)(1)).

(c) Any change in the membership rules affecting enrollees who are health insurance program benefici

aries must first be approved by the Health Care Financing Administration and must be communicated in writing to all such enrollees of the HMO no later than 30 days prior to the effective date of the change. The HMO shall be notified, within 30 days of the receipt of such proposed change(s) by the Health Care Financing Administration, as to whether the change(s) has been approved or disapproved by the Health Care Financing Administration.

[41 FR 9311, Mar. 4, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977. Redesignated at 50 FR 1345, Jan. 10, 1985]

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(a) HMO disenrollment of health insurance program beneficiaries. An HMO may not request or encourage, by written or oral communication or by any action or inaction, a health insurance program beneficiary to disenroll, other than under the following circumstances:

(1) Enrollee fails to pay premiums. (i) An enrollee who is a health insurance program beneficiary and who fails to pay, pursuant to the HMO's written membership rules, the premiums or other charges imposed by the HMO for deductible and coinsurance amounts for which the enrollee is liable pursuant to § 417.222(b) may be disenrolled by the HMO provided that the HMO can demonstrate to the Secretary that it made reasonable efforts to collect the unpaid amount and gives written notice of termination of enrollment. Such notice shall be mailed to the enrollee prior to the submission of the disenrollment notice to the Social Security Administration. Such notice shall include an explanation of the enrollee's right to have any such disenrollment matter heard under the grievance procedures established pursuant to section 1301(c)(7) of the Public Health Service Act.

(ii) The liability of the Health Care Financing Administration to make monthly capitation payments to the HMO on behalf of such a beneficiary shall terminate as of the first day of the month in which the termination of his membership in the HMO as a health insurance program beneficiary is made effective, as shown on the

records of the Social Security Administration. In no event will such month be earlier than the month immediately following, or later than the third month following, the month in which the disenrollment notice is received in acceptable form by the Social Security Administration.

(iii) Where the health insurance program beneficiary fails to pay the premium, or portion thereof, attributable to a supplemental benefit plan (but continues to pay other premiums), the beneficiary has contracted for, the HMO may cease to provide such supplemental coverage to such a beneficiary, as provided for in its membership rules, but may not disenroll the beneficiary for nonpayment of premiums applicable to a supplemental benefit plan.

(2) Enrollee moves out of the HMO's service area or area in which enrollment of health insurance program beneficiaries is required. A health insurance program beneficiary enrolled by the HMO as provided in § 417.220(b) may be disenrolled by the HMO if he moves permanently out of the HMO's service area or area in which enrollment of health insurance program beneficiaries is required (see § 417.220(b)(2)) and does not voluntarily disenroll pursuant to paragraph (b) of this section. Where the HMO does not disenroll such a beneficiary, the HMO's enrollment area is not automatically expanded to include the geographic area of the beneficiary's new permanent residence, notwithstanding the provisions of § 417.205(a)(1). Where the HMO elects to disenroll a beneficiary who moves permanently outside the HMO's service area or area in which enrollment of health insurance program beneficiaries is required (see § 417.220(b)(2)) and such a beneficiary does not voluntarily disenroll, the HMO may do so provided that the HMO, on the basis of a written statement from the beneficiary or other evidence acceptable to the Social Security Administration, establishes that the beneficiary has permanently moved out of such an area and gives written notice of termination of enrollment to the beneficiary pursuant to the requirements of paragraph (a)(1)(i) of this section. In that event,

the Health Care Financing Administration's liability to make monthly capitation payments to the HMO on behalf of the beneficiary shall terminate as of the first day of the month in which the termination of his membership in the HMO as a health insurance program beneficiary is made effective, as shown on the records of the Health Care Financing Administration. In no event will such month be earlier than the month immediately following, or later than the third month following, the month in which the disenrollment notice is received from the HMO in acceptable form by the Social Security Administration.

(3) Enrollee dies. The liability of the Health Care Financing Administration to make monthly per capita payment shall terminate effective with month immediately following month of death.

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(4) Enrollee's entitlement to benefits under the supplementary medical insurance program ends. (i) The liability of the Health Care Financing Administration to make monthly capitation payments to the HMO on behalf of the beneficiary shall terminate effective with the month immediately following the last month of entitlement to benefits under the supplementary medical insurance program. The beneficiary may be continued as an enrollee other than a health insurance program beneficiary by the HMO under its regular plan if the HMO and the enrollee so choose.

(ii) Where an enrollee loses entitlement to benefits under the hospital insurance program, but remains entitled to benefits under the supplementary medical insurance program, he shall automatically continue as an enrollee of the HMO as a health insurance program beneficiary. He shall be entitled to receive and have payment made for services, as provided for in § 417.221 beginning with the month immediately following the last month of his entitlement to hospital insurance program benefits.

(5) Enrollee commits fraud or permits abuse of HMO card. A health insurar.ce program beneficiary may be disenrolled by the HMO if such beneficiary knowingly provides, on the application form, fraudulent information

upon which an HMO relies and which materially affects his or her eligibility to enroll in the HMO, or if the beneficiary intentionally permits others to use his or her membership card to receive services from the HMO. In either case, the HMO must give the beneficiary a written notice of termination of enrollment. Such notice must be mailed to the enrollee prior to the submission of the disenrollment notice to the Social Security Administration. Such notice shall include an explanation of the enrollee's right to have any such disenrollment heard under the grievance procedures established pursuant to § 417.257. The liability of the Health Care Financing Administration to make monthly capitation payments to the HMO on behalf of such a beneficiary shall terminate as of the first day of the month in which the termination of his membership in the HMO is made effective, as shown on the records of the Social Security Administration. In no event shall such month be earlier than the month immediately following, or later than the third month following, the month in which the disenrollment notice is received in acceptable form by the Social Security Administration.

(b) Beneficiary disenrollment. A health insurance program beneficiary may disenroll from an HMO at any time by giving the HMO a signed, dated, written request on such form and in such manner as the HMO may require at least 30 days prior to the month in which he wishes the termination to be effective. In such cases, the HMO shall submit a disenrollment notice to the Social Security Administration within 30 days following the beneficiary's request. The liability of the Health Care Financing Administration to make monthly payments to the HMO on his behalf shall terminate with the close of the month of termination requested by the beneficiary, except that in no event shall the last month of payment be earlier than the month in which the beneficiary requested termination.

(c) Disenrollment in cases of termination or default of contract. (1) The termination of a contract between an HMO and the Secretary, whether by mutual consent or unilateral action by

to

either party, shall result in the termination of the liability of the Health Care Financing Administration make monthly capitation payments and the last month of liability shall be the last month for which the contract is effective.

(2) Where an HMO, for bankruptcy or other reasons, defaults in its contract with the Secretary prior to the close of the contract year, the Secretary shall establish the month in which the liability of the Health Care Financing Administration to make monthly capitation payments for all health insurance program beneficiaries enrolled in the HMO shall cease, and shall notify the HMO and such enrollees of his determination in writing as soon as practicable.

[41 FR 9311, Mar. 4, 1976. Redesignated at 42 FR 52826, Sept. 30, 1977, and amended at 43 FR 5827, Feb. 10, 1978. Redesignated at 50 FR 1345, Jan. 10, 1985]

CONTRACT REQUIREMENTS

SOURCE: Sections 417.228 through 417.239, 44 FR 29061, May 18, 1979, unless otherwise noted. Redesignated at 50 FR 1345, Jan. 10, 1985.

§ 417.228 Basis, purpose, and scope.

Sections 417.229 through 417.239 implement those parts of section 1876 (a), (i), and (j) of the Social Security Act pertaining to the contract between the Secretary and an HMO under the Medicare program, and specify:

(a) Eligibility requirements and procedures for approval of a contract application;

(b) Basic contract requirements; (c) Procedures for refunds; and

(d) Procedures for contract termination, renewals, and changes in ownership.

§ 417.229 Eligibility requirements and procedures for approval of a contract application.

An organization that wishes to contract as an HMO under the Medicare program on either a cost-basis or a risk-basis must submit an application and supporting information to HCFA in the form and detail required by HCFA. Whenever feasible, HCFA will not require an organization to resubmit information which it has already

submitted to the Assistant Secretary for Health in connection with the determination required by paragraph (a)(1) of this section.

(a) Eligibility requirements to enter into an HMO contract. An organization will be determined eligible to enter into an HMO contract if:

(1) The Assistant Secretary for Health finds that it meets the qualifying conditions specified in §§ 417.201 through 417.207, or those conditions are waived as provided by these sections, and

(2) HCFA finds that:

(i) Entering into, or renewing, an HMO contract with the organization would be consistent with the effective and efficient administration of section 1876 of the Act. HCFA may not approve a contract under this paragraph if it finds that the organization:

(A) Lacks sufficient administrative capability to carry out the requirements of the contract;

(B) Has a conflict of interest that would interfere with the performance of its contract, or the administration of the Medicare program; or

(C) Has any persons with ownership or control interests, or agents or managing employees, who have been convicted of criminal offenses related to their involvement in Medicaid, Medicare or the social services programs under title XX, and

(ii) In the case of an organization that is applying for a risk-basis contract, the organization:

(A) Has not previously voluntarily terminated or failed to renew a riskbasis contract under section 1876 of the Act; and

(B) Has the financial capability to assume the risk of any costs that might be reasonably anticipated during the contract period in excess of the adjusted average per capita cost for its area. Evidence of financial capability may include the purchase of an insurance program, or other financial arrangements that are satisfatory to HCFA.

(b) Approval of application. If HCFA determines that the organization meets the eligibility requirements specified in paragraph (a) of this section, HCFA will notify the organization in writing that:

(1) It is eligible to enter into a contract with the Secretary under 1876 of the Act-

(i) Either as a cost-basis HMO or as a risk-basis HMO or

(ii) Only as a cost-basis HMO; (2) If the organization is dissatisfied with HCFA's determination that it is only eligible to enter into a contract as a cost-basis HMO, it may request a review of the determination by following the applicable procedures for reconsiderations of initial determinations specified in §§ 417.265 through 417.292; and

(3) If the organization wishes to be reimbursed as an HMO under Medicare, it must sign and submit a written contract that meets the requirements specified in §§ 417.230 417.236.

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(c) Denial of application. If the organization does not meet the eligibility requirements specified in paragraph (a) of this section, HCFA will notify the organization in writing:

(1) That it is not eligible to enter into a contract with the Secretary under section 1876 of the Act;

(2) Of the reasons why the organization is ineligible for a contract; and

(3) That if it is dissatisfied with the notice of denial, it may request a review of the determination by following the applicable procedures for reconsiderations of initial determinations specified in §§ 417.265 through 417.292.

§ 417.230 General contract requirements.

(a) Submittal of contract. In order to be reimbursed as an HMO under Medicare, an eligible organization must sign and submit a written contract, in the form required by HCFA, that meets the requirements of this subpart and contains any other provisions required by HCFA.

(b) General provisions of contract. The contract must provide that the HMO agrees to comply with:

(1) Title VI of the Civil rights Act of 1964, as provided in § 417.265(c);

(2) Section 504 of the Rehabilitation Act of 1973, as amended;

(3) The requirements of Part B (Professional Standards Review) of title XI of the Social Security Act with respect

to review of the services furnished its Medicare enrollees; and

(4) All provisions of this subpart. (c) Waived conditions. All qualifying conditions that are waived (see

§ 417.229(a)(1)) must be specified in the contract. The specification must include:

(1) The specific terms of the waiver; (2) The expiration date of the waiver; and

(3) Any other information that HCFA considers relevant.

(d) Exemption from Federal Procurement Regulations. Under the authority provided by section 1876(j) of the Act, the Federal Procurement Regulations and HHS Procurement Regulations contained in Title 41 CFR will not apply to contracts entered into under this subpart.

§ 417.231 Effective date and term of the contract.

(a) Effective date. The contract must specify its effective date, which may not be earlier than the date the contract is signed and executed by both the Secretary and the HMO.

(b) Term. The contract must specify its term.

(c) Initial term. The initial term of the contract may be not less than 12 months or more than 23 months.

(d) Subsequent term. Any subsequent term after the initial term will be for a period of 12 months.

(e) Renewal. A contract will be renewed automatically unless either party gives notice of its intent to terminate or not renew, as specified in § 417.238.

§ 417.232 Required services and organization.

The contract must specify that the HMO agrees to provide services, and is organized and operated, in the manner prescribed by section 1876(b)(1) (B) and (C) of the Social Security Act, and §§ 417.201 through 417.207 of this subpart.

§ 417.233 Charges, refunds, and recoup

ment.

(a) Charges. The contract must provide that the HMO agrees to charge its Medicare enrollees

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