Texas Medicaid/Chip Program Performance Bond: A Comprehensive Guide

February 18, 2022

Texas MedicaidChip Program Performance Bond

This guide provides information for insurance agents to help their customers obtain a Texas Medicaid/Chip Program Performance bond

At a Glance:

  • Average Cost: Between 0.75% to 7% of the bond amount per year based on the applicant’s credit
  • Bond Amount: $100,000 per program within each service area where the managed care organization has a contract with the Texas Health and Human Services Commission (HHSC) to provide services
  • Who Needs it: All Texas managed care organizations (MCOs) that contract with the HHSC to arrange for the delivery of health care services through the states Medicaid and/or CHIP program
  • Purpose: To ensure the HHSC will receive compensation for financial harm if the MCO  does not fulfill their contractual obligations
  • Who Regulates Managed Care Organizations in Texas: The Texas Health and Human Services Commission (HHSC)

Background

Texas requires all MCOs to purchase a performance surety bond prior to contracting with the HHSC to arrange for the delivery of health care services through the state’s Medicaid and/or CHIP program. Texas has a managed care Medicaid system, meaning that it provides the delivery of Medicaid health benefits via contractual agreements between the HHSC and MCOs. To put it simply, the HHSC pays MCOs to help Texas residents navigate the state’s Medicaid program and receive coverage. The performance bond ensures that the MCO will fulfill their duties as outlined in their contract with the HHSC. However, before becoming an MCO, businesses must first obtain a license with the Texas Department of Insurance (TDI) as either a health maintenance organization (HMO), approved nonprofit health organization (ANHO), or an exclusive provider organization (EPO).

What is the Purpose of the Texas Medicaid/CHIP Program Performance Bond?

Texas requires MCOs to purchase a surety bond prior to contracting with the HHSC to provide health care services. The bond ensures that the HHSC will receive compensation for financial harm if the MCO fails to fulfill its contractual obligations. Specifically, the bond protects HHSC if the MCO fails to adequately provide health care services to the state’s Medicaid and CHIP program participants. In short, the bond is a type of insurance that protects the HHSC if the MCO doesn’t fulfill its contractual obligations.

Texas Medicaid/CHIP Program Performance Bond Form

Texas Medicaid/CHIP Program Performance Bond Form

How Can an Insurance Agent Obtain a Texas Medicaid/CHIP Program Performance Surety Bond?

BondExchange makes obtaining a Texas Medicaid/CHIP Program Performance 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.

Is a Credit Check Required for the Texas Medicaid/CHIP Program Performance Bond?

Surety companies will run a credit check on the owners of the MCO to determine eligibility and pricing for the Texas Medicaid/CHIP Program Performance 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 Texas Medicaid/CHIP Program Performance Bond Cost?

The Texas Medicaid/CHIP Program Performance bond can cost anywhere between 0.75% to 7% 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 $100,000 bond requirement.

$100,000 Medicaid/CHIP Program Performance Bond Cost

Credit Score Bond Cost (1 year)
720+ $750
625 – 719 $1,000
600 – 624 $2,500
575 – 599 $3,000
550 – 574 $5,000
500 – 549 $7,000

Who is Required to Purchase the Bond?

Texas requires managed care organizations to purchase a performance bond prior to contracting with the HHSC to arrange the delivery of health care services. An organization becomes a “managed care organization” through its contractual agreement with the HHSC. All MCOs must be licensed with the TDI as either a(n):

  • Health Maintenance Organization: Type of health plan that provides care to members through a network of doctors, hospitals, and providers resulting in lower out-of-pocket costs.
  • Approved Nonprofit Health Corporation: A nonprofit health organization that has been approved and certified by the Texas Medical Board
  • Exclusive Provider Organization: A managed care plan that, except for emergencies, only covers services provided by doctors, specialists, or hospitals in the plan’s network

How do MCOs Obtain a Contract with the Texas HHSC?

MCOs in Texas must navigate several steps to obtain a contract with the HHSC. Below are the general guidelines, but applicants should refer to the Uniformed Managed Care Terms and Conditions for details on the process.

Contract Term – The maximum term of an MCO contract is 8 years. The MCO and HHSC will set the contract’s term for a mutually agreed upon period.

Step 1 – Obtain a License or Approval from the Texas Department of Insurance

MCOs must be licensed or approved by the TDI to operate in the state. The MCO will have to complete a specific licensure/approval process based on its organizational type.

1.a Health Maintenance Organization: HMOs must obtain a Certificate of Authority prior to conducting business. To obtain a Certificate of Authority, HMOs should mail their completed application, including a $7,500 fee, to the following address:

Texas Department of Insurance
Financial Regulation Division – Company Licensing and Regulation
PO Box 149104
Austin, Texas 78714-9104

For help navigating the application process, including all net worth and fidelity bond requirements, refer to the application checklist.

1.b Approved Nonprofit Health Corporation: Become certified with the Texas Medical Board by mailing a completed application (162.001(b) or 162.001(c)) to the following address:

Texas Medical Board
MC-232
P.O. Box 2029
Austin, Texas 78768-2029

Refer to the application checklist (162.001(b) or 162.001(c)) for help navigating the process. The TDI will recognize and approve the ANHC after it has obtained its certification.

1.c Exclusive Provider Organization: Mailed a completed application to operate an exclusive provider benefit plan to the following address:

Texas Department of Insurance
Financial Regulation Division – Company Licensing and Regulation
PO Box 149104
Austin, Texas 78714-9104

EOPs must pass a qualifying examination of their benefits plan.

Step 2 – Purchase a Surety Bond

MCOs must purchase and maintain a performance surety bond with a limit of $100,000 per program within each service area where the managed care organization has a contract with the Texas Health and Human Services Commission (HHSC) to provide services

Step 3 – Purchase Insurance

The HHSC requires MCOs to obtain the following types of insurance:

    • Business automobile liability insurance for all owner, non-owned, and hired vehicles
    • Comprehensive general liability insurance with the following mi$1 million per occurrence
      • $5 million aggregate, which includes bodily injury coverage of at least $100,000 per occurrence and property damage coverage of $25,000 per occurrence
    • Professional liability insurance, for each provider network, with minimum limits of:
      • $100,000 per occurrence
      • $300,000 in the aggregate
    • Errors and omissions insurance with a limit of either $3 million or the total number of members enrolled with the MCO in the first month of the state’s fiscal year multiplied by $150 and rounded to the nearest $100,000, whichever is greater. The required amount may not exceed $10 million

Step 4 – Apply for a Contract with the HHSC

MCOs should contact the HHSC directly and request a contract to arrange the delivery of health care services. MCOs can view all of the different contract types here.

How Do MCOs Renew Their Contract with the HHSC

Before a contract’s term is completed, the MCO and HHSC must both authorize an amendment that extends the term of the contract. The contract will expire ff either the MCO or HHSC rejects this amendment. The maximum term of an MCO contract is 8 years. The MCO and HHSC will set the contract’s term for a mutually agreed upon period.

What are the Insurance Requirements for Texas MCOs Contracting with the HHSC?

The HHSC requires MCOs to obtain automobile liability, comprehensive general liability, professional liability, and errors and omissions insurance coverage before being awarded a contract. MCOs must purchase and maintain a performance surety bond with a limit of $100,000 per program within each service area where the managed care organization has a contract with the Texas Health and Human Services Commission (HHSC) to provide services.

How Do Texas MCOs File Their Bond?

MCOs should mail their completed bond form, including the power of attorney, to the following address:

Health and Human Services Commission
Director – MCD Financial Reporting
11501 Burnet Rd, Bldg. 902, 3rd Floor
Mail Code 1519
Austin, TX 78758

The surety bond requires signatures from both the surety company that issues the bond and from a representative of the MCO. The surety company should include the following information on the bond form:

  • Legal name, address, and county of entity/individual(s) buying the bond
  • Surety company’s name, address, and phone number
  • Bond amount
  • Term of the bond
  • Date the bond is signed

What Can Texas MCOs Do to Avoid Claims Against Their Performance Bonds?

To avoid claims made against their performance bonds, MCOs in Texas must ensure that they fulfill all duties and obligations outlined in their contract with the HHSC.

What Other Insurance Products Can Agents Offer MCOs in Texas?

Texas requires MCOs to obtain automobile liability, comprehensive general liability, professional liability, and errors and omissions insurance coverage. Bonds are our only business at BondExchange, so we do not issue any other types of 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 Texas MCO Customers?

Texas conveniently provides a list of managed care organizations in the state, which can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services

2022-03-21T12:28:37-04:00