Common use of EXPERIENCE REBATE TO STATE Clause in Contracts

EXPERIENCE REBATE TO STATE. 13.2.1 HMO must pay to HHSC an experience rebate for each Experience Rebate Period. Experience Rebate Period 1 will begin on June 1, 2004 and end on August 31, 2004, unless extended by contract amendment. The Parties may also amend the contract to include additional Experience Rebate Periods. HMO will calculate the experience rebate in accordance with the tiered rebate formula listed below based on Net Income Before Taxes (excess of allowable revenues over allowable expenses) as set forth in Appendix I. The HMO's calculations are subject to HHSC approval, and HHSC reserves the right to have an independent audit performed to verify the information provided by HMO. GRADUATED REBATE FORMULA ------------------------------------------------------------------ NET INCOME BEFORE TAXES AS A PERCENTAGE OF REVENUES HMO SHARE HHSC SHARE ------------------------------------------------------------------ 0% - 3% 100% 0% ------------------------------------------------------------------ Over 3% - 7% 75% 25% ------------------------------------------------------------------ Over 7% - 10% 50% 50% ------------------------------------------------------------------ Over 10% - 15% 25% 75% ------------------------------------------------------------------ Over 15% 0% 100% ------------------------------------------------------------------ 13.2.2 Carry Forward of Prior Experience Rebate Period Losses: Losses incurred for one Experience Rebate Period can only be carried forward as an offset to Net Income before Taxes in the next Experience Rebate Period. 13.2.2.1 HMO shall calculate the experience rebate by applying the experience rebate formula in Section 13.2. 1. For SFY 2004 the experience rebate formula will be applied to the sum of the Net Income Before Taxes for all CHIP, STAR Medicaid, and STAR+PLUS Medicaid services areas contracted between HHSC or TDHS and HMO. 13.2.3 Experience rebate will be based on a pre-tax basis. Expenses for value-added services are excluded from the determination of Net Income Before Taxes reported in the Final MCFS Report; however, HMO may subtract from Net Income Before Taxes, expenses incurred for value added services for the experience rebate calculations. 13.2.4 [THIS SUBSECTION IS INTENTIONALLY LEFT BLANK] 13.2.5 There will be two settlements for payment of the experience rebate. The first settlement shall equal 100 percent of the experience rebate as derived from Net Income Before Taxes reduced by any value-added services expenses in the first Final MCFS Report and shall be paid on the same day that the first Final MCFS Report is submitted to HHSC. The second settlement shall be an adjustment to the first settlement and shall be paid on the same day that the second Final MCFS Report is submitted to HHSC if the adjustment is a payment from HMO to HHSC. If the adjustment is a payment from HHSC to HMO, HHSC shall pay such adjustment to HMO within thirty (30) days of receipt of the second Final MCFS Report. HHSC or its agent may audit the MCFS Reports. If HHSC determines that corrections to the MCFS Reports are required, based on an audit of other documentation acceptable to HHSC, to determine an adjustment to the amount of the second settlement, then final adjustment shall be made within three (3) years from the date that HMO submits the second Final MCFS Report. HMO must pay the first and second settlements on the due dates for the first and second Final MCFS Reports, respectively, as identified in Section 12.1.4. HHSC may adjust the experience rebate if HHSC determines HMO has paid (an) affiliate(s) amounts for goods or services that are higher than the fair market value of the goods and services in the service area. Fair market value may be based on the amount HMO pays (a) non-affiliate(s) or the amount another HMO pays for the same or similar goods and services in the service area. HHSC has final authority in auditing and determining the amount of the experience rebate. 13.2.6 Interest on any experience rebate owed to HHSC shall be charged beginning on the date that the first and/or second settlements are overdue to the date of the respective payment. In addition, if any adjusted amount is owed to HHSC at the final settlement date, then interest is charged on the adjusted amount owed beginning on the second settlement date to the date of the final settlement payment. Interest charged shall be calculated on an annual and simple basis using the current Prime Rate(s) established by the federal government.

EXPERIENCE REBATE TO STATE. 13.2.1 The HMO must pay to HHSC TDHS an experience rebate for each Experience Rebate Period. Experience Rebate Period 1 will begin on June 1, 2004 and end on August 31, 2004, unless extended by contract amendment. The Parties may also amend the contract to include additional Experience Rebate Periods. HMO will calculate the experience rebate calculated in accordance with the tiered rebate formula method listed below based on Net Income Before Taxes (the excess of allowable HMO STAR+PLUS revenues over allowable expensesHMO STAR+PLUS expenses as measured by any positive amount on Line 8 of "Part 1: Financial Summary, All Coverage Groups Combined" of the final (Contract period) Managed Care Financial-Statistical Report as set forth in Appendix I. The HMO's calculations are subject to HHSC approval, reviewed and HHSC reserves confirmed by the right to have an independent audit performed to verify the information provided by HMOState. GRADUATED REBATE FORMULA ------------------------------------------------------------------ NET INCOME BEFORE TAXES AS A PERCENTAGE OF REVENUES ------------------------------------------------------------------------------------------ Graduated Rebate Method ------------------------------------------------------------------------------------------ Experience Rebate HMO SHARE HHSC SHARE ------------------------------------------------------------------ Share State Share as a Percentage of Revenues ------------------------------------------------------------------------------------------ 0% - 3% 100% 0% ------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Over 3% - 7% 75% 25% ------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Over 7% - 10% 50% 50% ------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Over 10% - 15% 25% 75% ------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Over 15% 0% 100% ------------------------------------------------------------------------------------------------------------------------------------------------------------ 13.2.2 Allowable start-up costs (pre-implementation costs) are costs incurred between the contract effective date and the implementation date as defined in the "Cost Principles for Administrative Expenses" (Attachment E). 13.2.3 Carry Forward of Prior Experience Rebate Contract Period Losses: Losses incurred for one Experience Rebate Period contract period can only be carried forward as an offset to Net Income before Taxes in the next Experience Rebate Periodcontract period. 13.2.2.1 HMO shall calculate the experience rebate by applying the experience rebate formula in Section 13.2. 1. For SFY 2004 the experience rebate formula will be applied to the sum of the Net Income Before Taxes for all CHIP, STAR Medicaid, and STAR+PLUS Medicaid services areas contracted between HHSC or TDHS and HMO. 13.2.3 13.2.4 Experience rebate will be based on a pre-tax basis. Expenses for value-added services are excluded from the determination of Net Income Before Taxes reported in the Final MCFS Report; however, HMO may subtract from Net Income Before Taxes, expenses incurred for value added services for the experience rebate calculations. 13.2.4 [THIS SUBSECTION IS INTENTIONALLY LEFT BLANK] 13.2.5 There will be two settlements for payment of the experience rebate. The first settlement shall equal 100 percent of the experience rebate as derived from Line 7 of Part 1 (Net Income Before Taxes reduced by any value-added services expenses in Taxes) of the first Final MCFS contract period Managed Care Financial Statistical (MCFS) Report and shall be paid on the same day that the first Final contract period MCFS Report is submitted to HHSCTDHS. The second settlement shall be an adjustment to the first settlement and shall be paid on the same day that the second Final MCFS Report is submitted to HHSC if the adjustment is a payment from TDHS/HMO to HHSC. If the adjustment is a payment from HHSC to HMOCONTRACT August 11, HHSC shall pay such adjustment to HMO within thirty (30) days of receipt of the second Final MCFS Report. HHSC or its agent may audit the MCFS Reports. If HHSC determines that corrections to the MCFS Reports are required, based on an audit of other documentation acceptable to HHSC, to determine an adjustment to the amount of the second settlement, then final adjustment shall be made within three (3) years from the date that HMO submits the second Final MCFS Report. HMO must pay the first and second settlements on the due dates for the first and second Final MCFS Reports, respectively, as identified in Section 12.1.4. HHSC may adjust the experience rebate if HHSC determines HMO has paid (an) affiliate(s) amounts for goods or services that are higher than the fair market value of the goods and services in the service area. Fair market value may be based on the amount HMO pays (a) non-affiliate(s) or the amount another HMO pays for the same or similar goods and services in the service area. HHSC has final authority in auditing and determining the amount of the experience rebate. 13.2.6 Interest on any experience rebate owed to HHSC shall be charged beginning on the date that the first and/or second settlements are overdue to the date of the respective payment. In addition, if any adjusted amount is owed to HHSC at the final settlement date, then interest is charged on the adjusted amount owed beginning on the second settlement date to the date of the final settlement payment. Interest charged shall be calculated on an annual and simple basis using the current Prime Rate(s) established by the federal government.1999 95 102