28 CA ADC § 1300.78


      28 CCR s 1300.78

      Cal. Admin. Code tit. 28, s 1300.78


      CALIFORNIA CODE OF REGULATIONS
      TITLE 28. MANAGED HEALTH CARE
      DIVISION 1. THE DEPARTMENT OF MANAGED HEALTH CARE
      CHAPTER 2. HEALTH CARE SERVICE PLANS
      ARTICLE 9. FINANCIAL RESPONSIBILITY
      RISK-BEARING ORGANIZATIONS
      This database is current through 06/09/06, Register 2006, No. 23.

      s 1300.78. Administrative Costs.

      (a) For the purposes of Section 1378 of the Act, "administrative costs" 
      include only those costs which arise out of the operation of the plan as 
      such, excluding direct and overhead costs incurred in the furnishing of 
      health care services which would be ordinarily incurred in the provision 
      of such services whether or not through a plan. Administrative costs 
      include the following:

      (1) Salaries, bonuses and benefits paid or incurred with respect to the 
      officers, directors, partners, trustees or other principal management of 
      the Plan, less to the extent that such persons also are providers of 
      health care services, the minimum reasonable cost of obtaining such 
      services from others.

      (2) The cost of soliciting and enrolling subscribers and enrollees, 
      including the solicitation of group contracts, and including any indirect 
      costs of enrollment borne on behalf of the plan by the holder of a group 
      contract.

      (3) The cost of receiving, processing and paying claims of providers of 
      health care services and of claims for reimbursement by subscribers and 
      enrollees, excluding the actual amount paid on such claims.

      (4) Legal and accounting fees and expenses.

      (5) The premium on the fidelity and surety bonds, and any insurance 
      maintained pursuant to Section 1377, and any insurance or other expense 
      incurred for the purposes of complying with Section 1375 of the Act. 
      Malpractice insurance is not included within this subsection.

      (6) All costs associated with the establishment and maintenance of 
      agreements with providers of health care services, excluding the cost of 
      reviewing quality and utilization of such services, and the cost of 
      reviewing utilization of health care services on a referral basis.

      (7) The direct or pro rata portion of all expenses incurred in the 
      operation of the plan which are not essential to the actual provision of 
      health care services to subscribers and enrollees, including but not 
      limited to office supplies and equipment, clerical services, interest 
      expense, insurance, dues and subscriptions, licenses (other than licenses 
      for medical facilities, equipment or personnel), utilities, telephone, 
      travel, rent, repairs and maintenance, depreciation of facilities and 
      equipment, and charitable or other contributions.

      (b) The administrative cost incurred by a plan, directly, as herein 
      defined, shall be reasonable and necessary, taking into consideration such 
      factors as the plan's stage of development and other considerations. If 
      the administrative costs of an established plan exceed 15 percent, or if 
      the administrative costs of a plan in the development phase exceed 25 
      percent, during any period of the revenue obtained by the plan from 
      subscribers and enrollees, or paid to the plan on their behalf, the plan 
      shall demonstrate to the Director, if called upon to do so, that its 
      administrative costs are not excessive administrative costs within the 
      meaning of Section 1378 and are justified under the circumstances and/or 
      that it has instituted procedures to reduce administrative costs which are 
      proving effective. An established plan is a plan which has been in 
      operation for a period of five years or more. For the purposes of Section 
      1378 of the Act, money borrowed will be deemed to be money derived from 
      revenue obtained from subscribers and enrollees to the extent that such 
      revenue is exposed to liability for repayment of such borrowings or that 
      repayment is anticipated from such revenues and "money not derived from" 
      such revenues includes only net assets arising independently of the 
      operation of the plan and not traceable on a historical basis to such 
      revenues, whether as net profit or otherwise.


      


      Note: Authority cited: Section 1344, Health and Safety Code. Reference: 
      Section 1378, Health and Safety Code. 


       HISTORY 
         
      1. Editorial correction adding NOTE filed 12-8-82 (Register 82, No. 50).

      2. Change without regulatory effect amending subsection (b) filed 
7-18-2000
      pursuant to section 100, title 1, California Code of Regulations (Register
      2000, No. 29).
      28 CA ADC s 1300.78

      END OF DOCUMENT

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