17-1735.2

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1735.2-1
HAWAII ADMINISTRATIVE RULES
TITLE 17
DEPARTMENT OF HUMAN SERVICES
SUBTITLE 12
MED-QUEST DIVISION
CHAPTER 1735.2
GENERAL PROVISIONS FOR PARTICIPATING HEALTH PLANS
§17-1735.2-1 	Purpose
§17-1735.2-2 	Health plan participation in the
medical assistance program
§17-1735.2-3 	Service areas
§17-1735.2-4 	Requirements of participating health
plans
§17-1735.2-5 	Capitated payments
§17-1735.2-6 	Enforcement of contracts with
participating health plan
§17-1735.2-7 	Termination of contract with
participating health plan
§§17-1735.2-8 to 17-1735.2-10 	(Reserved)
Historical Note: 	This chapter is based substantially
upon repealed subchapters 5 and 8 of chapter 17-1721.1
and subchapter 9 of chapter 17-1727.
The source notes for subchapters 5 and 8 of chapter
17-1721.1 are: [Eff 	01/31/09; am 06/25/12;
R 09/30/13].
The source notes for subchapter 9 of chapter 17-1727
is: [Eff 	08/01/94; am 01/29/96; am 06/19/00; am
02/16/02; am 09/17/07; am 06/25/12;
R 09/30/13].

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1735.2-2
§17-1735.2-1 	Purpose. 	This chapter describes
the requirements for the participation of health plans
under the medical assistance program.
[Eff 	09/30/13] 	(Auth: HRS §346-14) (Imp: HRS §346-
14; 42 C.F.R. §430.25)
§17-1735.2-2 	Health plan participation in the
medical assistance program. 	(a) 	The department shall
request proposals from managed care health plans for
provision of healthcare services to an eligible
individual to participate in the medical assistance
program.
(b) 	The department shall evaluate the proposals
from managed care plans to ensure that the plans meet
the conditions and requirements described in the
department's request for proposals.
(c) 	Contracts for participation in the medical
assistance program shall be awarded to qualified
health plans upon finalization of financial agreements
with the department.
(d) 	The department shall develop a request for
proposals prior to the lapse of existing contracts
with participating health plans to ensure that
beneficiaries receive continued health care coverage.
[Eff 	09/30/13] 	(Auth: 	HRS §346-14) (Imp: HRS §346-
14; 42 C.F.R. §430.25)
§17-1735.2-3 	Service areas. 	(a) 	The department
shall designate geographic areas as the areas for
which health plans will submit proposals to provide
services.
(b) 	A health plan may submit proposals to
service more than one service area.
(c) 	More than one health plan may be contracted
by the department for each service area.
[Eff 	09/30/13] 	(Auth: HRS §346-14) (Imp: HRS §346-
14; 42 C.F.R. §430.25)

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1735.2-3
§17-1735.2-4 	Requirements of participating
health plans. 	(a) 	Health plans participating in the
medical assistance program shall abide by the
provisions of their respective contracts with the
department as well as federal and state statutes and
regulations.
(b) 	The requirements of each participating
health plan shall include, but are not limited to, the
following:
(1) 	Provision of all services required by the
contract between the respective plan and the
department;
(2) 	Provision of a primary care provider for
each eligible individual who is enrolled in
the health plan;
(3) 	Provision of a case management system to
ensure that health services identified by an
eligible individual’s primary care provider
as medically necessary are received;
(4) 	Development and maintenance of a sufficient
network of health care providers to ensure
the provision of required health services
are provide to an eligible individual in a
timely manner;
(5) 	Maintenance of adequate support staff and
systems to administer and conduct business
functions;
(6) 	Development and maintenance of required
information systems;
(7) 	Development and maintenance of a quality
assurance program;
(8) 	Development and maintenance of a grievance
and appeal system for a dissatisfied
eligible individual;
(9) 	Development and maintenance of a toll-free
telephone hotline in the State to confirm
enrollment, respond to inquiries from an
eligible individual, and provide information
to the general public; and
(10) 	Maintenance of a medical records system to
enable the provision of information

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1735.2-4
pertinent to the care and management of an
eligible individual to the department.
[Eff 	09/30/13] 	(Auth: HRS §346-14) (Imp:
HRS §346-14; 42 C.F.R. §430.25)
§17-1735.2-5 	Capitated payments. 	(a) 	Each
participating health plan shall be paid on a capitated
basis, as negotiated with the department, for an
eligible individual enrolled in that health plan.
(b) 	The department shall provide the capitated
payment, as stipulated in the contract between the
department and each health plan, in return for the health
plan's provision of all contracted coverage for the
health plan's eligible individuals. 	[Eff 	09/30/13]
(Auth: 	HRS §346-14) (Imp: 	HRS §346-14; 42 C.F.R.
§430.25)
§17-1735.2-6 	Enforcement of contracts with
participating health plan. 	(a) 	The department may
monitor a participating health plan’s performance
during any contract period.
(b) 	The department may impose civil or
administrative monetary penalties not to exceed the
maximum amount established by federal and state
statutes and regulations if the health plan:
(1) 	Fails to provide medically necessary items
and services that are required under law or
under contract;
(2) 	Imposes upon beneficiaries excess premiums
and charges;
(3) 	Acts to discriminate among an eligible
individual;
(4) 	Misrepresents or falsifies information;
(5) 	Violates marketing guidelines established by
the department;
(6) 	Violates other contract provisions and
requirements; or
(7) 	Violates federal or state statutes or
regulations.

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1735.2-5
(c) 	If a health plan violates the contract
conditions between the health plan and the department,
federal or State statutes or regulations, the Hawaii
Administrative Rules, or if there is a substantial
risk to the health of an eligible individual, the
department may:
(1) 	Notify the affected individual of the
violations;
(2) 	Allow the affected individual to change
plans without cause;
(3) 	Suspend enrollment; or
(4) 	Suspend payment.
The department may also impose financial sanctions as
described under the provisions of the contract between
the respective plan and the department for inaccurate,
incomplete, and untimely data and reports submitted to
the department.
(d) 	If a health plan continues to violate the
contract conditions between the health plan and the
department, federal or state statutes and regulations,
or the Hawaii Administrative Rules, regardless of any
other penalty that may be imposed, the department
shall:
(1) 	Appoint temporary management to oversee
compliance efforts;
(2) 	Notify the affected eligible individual of
the violations; or
(3) 	Allow the affected eligible individual to
change plans without cause.
(e) 	Temporary management may continue until the
department determines that the health plan can ensure
that the behavior that caused the penalty will not
recur.
(f) 	Before imposing a sanction, with the
exception of appointing temporary management to
oversee compliance efforts, the department shall give
the health plan timely written notice, as specified in
the contract with the participating health plans.
[Eff 	09/30/13] 	(Auth: 	HRS §346-59.5) (Imp: 	HRS
§346-14; 42 C.F.R. §§430.25; 438.700, 438.702;
438.706; 438.710)

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1735.2-6
§17-1735.2-7 	Termination of contract with
participating health plan. 	(a) 	The department shall
have the authority to terminate the participating
health plan’s contract for any or all of the following
reasons:
(1) 	Convenience;
(2) 	Default by the health plan;
(3) 	Expiration of the medical assistance
program;
(4) 	Failure by the health plan to abide by the
contract conditions;
(5) 	Insolvency of or declaration of bankruptcy
by the health plan;
(6) 	Failure to meet federal or state statutes,
or both; or
(7) 	Unavailability of funds.
(b) 	When termination of contract is due to
reasons identified under subsections (a)(2), (4) or
(6), the department shall provide a hearing for the
affected health plan prior to termination of the
contract.
(c) 	After the department notifies the health
plan of its intent to terminate the contract due to
reasons identified under subsections (a)(2), (4) or
(6), the department may do the following:
(1) 	Provide the affected eligible individual
written 	notice of the department’s intent
to terminate the contract; and
(2) 	Allow the affected eligible individual to
change health plans immediately without
cause. 	[Eff 	09/30/13] 	(Auth: 	HRS §346-
14) (Imp: 	HRS §346-14; 42 C.F.R. §§430.25;
438.708)
§§17-1735.2-8 to 17-1735.2-10 	(Reserved).