Alabama Medicaid DME and Medical Supply Provider Bond: A Comprehensive Guide

December 15, 2021

Alabama Medicaid DME and Medical Supply Provider Bond

This guide provides information for insurance agents to help their customers obtain Alabama Medicaid DME and Medical Supply Provider Bonds

At a Glance:

  • Average Cost: Between 1% to 7.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: $50,000 per National Provider Identifier (NPI)
  • Who Needs it:  Certain durable medical equipment (DME) providers operating in Alabama (more on this later)
  • Purpose: To ensure the public will receive compensation for any damages should the DME provider violate licensing law
  • Who Regulates DME Providers in Alabama: The Alabama Medicaid Agency

Background

Alabama statute 560-X-13-.02 requires all DME providers operating in the state to obtain a license with the Board of Home Medical Equipment Services. The Alabama legislature enacted the licensing laws and regulations to ensure that DME providers engage in ethical business practices. To provide financial security for the enforcement of the licensing law, certain DME providers must purchase and maintain a $50,000 surety bond, per NPI, to be eligible for licensure.

What is the Purpose of the Alabama Medicaid DME and Medical Supply Provider Surety Bond?

Alabama requires certain DME providers to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the DME provider fails to comply with the regulations set forth in Alabama statute 560-X-13-.02. Specifically, the bond protects the public in the event the DME provider engages in any acts of fraud or fails to issue refunds. In short, the bond is a type of insurance that protects the public if the DME provider breaks licensing laws.

Alabama Medicaid DME and Medical Supply Provide Bond Form

Alabama Medicaid DME and Medical Supply Provide Bond Form

How Can an Insurance Agent Obtain an Alabama DME and Medical Supply Provider Surety Bond?

BondExchange makes obtaining an Alabama Medicaid Agency surety bond easy. Simply log in to your account and use our keyword search to find the “Medicaid” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Who is Required to Purchase the Bond?

As outlined in Alabama statute 560-X-13-.02, all home health agencies, pharmacies, and pay on production suppliers who contract with Medicaid to provide durable medical equipment must obtain a license prior to conducting business. However, not all providers are required to be bonded, as the following providers are exempt from all surety bond requirements:

  • DME providers licensed for 5 years with no record of impropriety
  • Government operated DME, prosthetics, orthotics, and supplies (DEMPOS) providers
  • State licensed orthotic and prosthetic personnel in private practice making custom orthotics and prosthetics
  • Physician and non-physician practitioners
  • Private physical and occupational therapists
  • Providers who received $100,000 or less in Medicaid payments in the last 2 years
  • Pharmacy providers
  • Phototherapy providers who only service infants
  • Federally qualified health centers

Is a Credit Check Required for the Alabama Medicaid DME and Medical Supply Provider Bond?

Surety companies will run a credit check on the owners of the DME provider company to determine eligibility and pricing for the Alabama Medicaid DME and Medical Supply Provider Bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.

How Much Does the Alabama Medicaid DME and Medical Supply Provider Bond Cost?

The Alabama Medicaid DME and Medical Supply Provider Bond can cost anywhere between 1% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on a $50,000 bond requirement.

$50,000 Medicaid DME and Medical Supply Provider Bond Cost

Credit Score Bond Cost (1 year)
680+ $500
625 – 679 $750
575 – 624 $1,875
550 – 574 $2,500
500 – 549 $3,750

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How do DME Providers Apply for a License in Alabama?

DME providers in Alabama must navigate several steps to secure their licenses. Below are the general guidelines, but applicants should refer to the application form for details on the process.

License Period – All Alabama DME Provider Licenses expire on August 31 of each year and must be renewed before the expiration date

Step 1 – Obtain a City/County License

DME providers must obtain a business license with their city/county prior to receiving their DME provider license. Providers should contact their county clerk for assistance in obtaining their license.

Step 2 – Obtain a State License

Alabama requires DME providers to obtain a state business license. Providers can purchase a state license from their local county courthouse.

Step 3 – Purchase Insurance

DME providers must purchase liability insurance with a minimum limit of $300,000. The certificate of insurance must reflect the physical address listed on the provider’s license application.

Step 4 – Obtain Additional Licenses/Permits

DME providers who supply oxygen must obtain a permit from the Alabama Board of Pharmacy. Additionally, providers supplying stair/platform lifts must obtain an Elevator Contractor License.

Step 5 – Complete the Application

All Alabama DME Provider License applications can be completed online here. DME providers must complete the application in its entirety, and pay the following fees:

    • $500 new location fee
    • $250 licensure fee

Step 6 – Pass Inspection

After submitting their license application, DME providers must pass an inspection of their physical address. Provider’s physical locations will be judged based on the following factors.

Step 7 – Purchase a Surety Bond

DME providers must purchase and maintain a $50,000 surety bond, per NPI. While the bond is not required to obtain a license through the Board of Home Medical Equipment Services, DME providers do need to file their bond with the Alabama Medicaid Agency (more on this later).

How Do Alabama DME Providers Renew Their License?

Prior to August 31, the Board of Home Medical Equipment Services will contact the DME provider with instructions on how to renew their license. All Alabama DME Provider Licenses expire on August 31 of each year and must be renewed before the expiration date.

What are the Insurance Requirements for the Alabama DME Provider License?

Alabama requires DME providers to purchase liability insurance with a minimum limit of $300,000. Additionally, DME providers must purchase and maintain a $50,000 surety bond, per NPI, and file it with the Medicaid Agency.

How Do Alabama DME Providers File Their Bond?

DME providers should mail their completed bond form, including the power of attorney, to their district’s Medicaid office. The surety bond requires signatures from both the surety company that issues the bond and from the DME provider company. The surety company should include the following information on the bond form:

  • Legal name of entity/individual(s) buying the bond
  • Surety company’s name
  • Date the bond goes into effect
  • Date the bond is signed

What Can Alabama DME Providers Do to Avoid Claims Against Their Bonds?

To avoid claims on their bond, DME providers in Alabama must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

  • Do not engage in any acts of fraud
  • Payout all refunds as requested

What Other Insurance Products Can Agents Offer DME Providers in Alabama?

Alabama requires DME providers to purchase insurance as a prerequisite to obtaining a business license. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Alabama DME Provider Customers?

Alabama conveniently provides a public database to search for active DME providers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-03-04T13:02:20-05:00