Risk Bearing Organization (RBO) Frequently Asked Questions

How do I determine if an entity is considered a Risk Bearing Organization?

A risk bearing organization (RBO) is either a professional medical corporation, other form of corporation controlled by physicians and surgeons, a medical partnership, a medical foundation exempt from licensure pursuant to subdivision (l) of Section 1206 of the Health and Safety Code, or another lawfully organized group of physicians that delivers, furnishes, or otherwise arranges for or provides health care services. An RBO does not include an individual or a health care service plan. An RBO does all of the following:

  • Contracts directly with a health care service plan or arranges for health care services for the health care service plan's enrollees.
  • Receives compensation for those services on any capitated or fixed periodic payment basis.
  • Is responsible for the processing and payment of claims made by providers for services rendered by those providers on behalf of a health care service plan when those services are covered under the capitation or fixed periodic payment made by the plan to the risk bearing organization.

How do I obtain an RBO Identification Number?

The organization requests a RBO identification number by completing an RBO Questionnaire. The questionnaire will be reviewed by the DMHC staff to determine whether the entity meets the definition of a risk bearing organization.

An email notification will be sent to the principal officer regarding the DMHC’s determination.

As an RBO, am I required to file quarterly and annual financial reports? When are the reports due to the DMHC?

Yes, the RBO is required to submit quarterly and annual financial reports to the DMHC.

Quarterly financial survey reports or Compliance Statements are due to the DMHC within forty-five (45) days after the close of each quarter of the fiscal year.

Annual financial survey reports are due to the DMHC within one hundred fifty (150) days after the close of the organization's fiscal year. The annual financial survey report is based upon the RBO’s annual audited financial statement prepared by an independent certified public accountant in accordance with generally accepted accounting principles.

Are there different reporting requirements for RBOs that have less than 10,000 covered lives?

Organizations serving less than 10,000 covered lives under all risk arrangements will submit a Compliance Statement that addresses the following:

  • Whether or not the organization has, at all times during the quarter, maintained positive tangible net equity (TNE).
  • Whether or not the organization has, at all times during the quarter, maintained positive working capital.
  • Whether or not the organization has, at all times during the quarter, maintained a cash-to-claims ratio as required.
  • Whether or not the organization has estimated and documented its liability for IBNR claims.
  • The percentage of completed claims the organization has timely reimbursed, contested, or denied during the quarter.

Are the results of the RBOs' financial survey reports available to the public?

Yes, within 120 days following each reporting period due date, the DMHC will make the following information available on its website:

  • A list of all RBOs that have submitted substantially complete financial survey forms, if required, and whether the RBO's submission reflects that the organization has met or not met each of the Grading Criteria.
  • A list of all "non-compliant" organizations that failed to substantially comply with the reporting obligations, including submission of the financial survey reports.
  • Comparative, aggregated data on all RBOs, and information that enables consumers to assess an RBO's relative financial viability.

What is the purpose of a sponsoring organization?

The purpose of a sponsoring organization is to allow the RBO to use a qualified guarantee to reduce its liabilities for purposes of calculating tangible net equity, working capital and the cash to claims ratio.

A sponsoring organization is one that, typically, has a tangible net equity at least twice the amount it has guaranteed to any person or entity.

A qualified guarantee is one that meets all of the following:

  • It is approved by a board resolution of the sponsoring organization.
  • The sponsoring organization agrees to submit audited annual financial statements to the plan and the DMHC within 120 days of the end of the sponsoring organization’s fiscal year.
  • The guarantee is unconditional except for a maximum monetary limit.
  • The guarantee is not limited in duration with respect to liabilities arising during the term of the guarantee.
  • The guarantee provides for six months’ advance notice to the plan prior to its cancellation.

The request for a sponsoring organization must be approved by the DMHC.

What are the minimum requirements for an RBO to maintain compliance with solvency requirements?

The RBO shall comply with the following requirements, at all times:

  • Maintain a minimum cash-to-claims ratio of 0.75.
  • Maintain positive Tangible Net Equity (TNE) at all times during the quarter.
  • Maintain positive Working Capital at all times during the quarter.
  • Reimburse, contest or deny at least 95% of all complete claims on a timely basis during the quarter in accordance with the requirements of Health and Safety Code sections 1371, and 1371.35, section 1300.71 of Title 28 of the California Code of Regulations, and any other applicable state and federal laws and regulations.
  • Estimate and document, on a monthly basis, its liability for Incurred But Not Reported (IBNR) claims, pursuant to a method specified in section 1300.77.2, for which the estimates are the basis for the financial survey reports. 

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