EXHIBIT 10.51 TO CURRENT REPORT ON FORM 8-K DATED AS OF JUNE 30, 2003
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ADMINISTRATION AGREEMENT
This Administration Agreement is entered into this 30th day of June, 2003,
by and among Health Net of Arizona, Inc. ("HNT-AZ"), an Arizona corporation,
Health Net Life Insurance Company, a California domiciled life and disability
insurance company ("HNL") and SafeHealth Life Insurance Company, a California
domiciled life and disability insurance company ("SafeHealth").
WHEREAS, HNT-AZ is a duly licensed health care services organization
organized pursuant to Arizona Revised Statutes Sec. 20-1051 et seq. HNT-AZ
issues benefit agreements to individuals, employer groups and other entities.
The benefit agreements include medical health maintenance organization
agreements and vision health maintenance organization agreements.
WHEREAS, HNL is duly licensed in Arizona to provide vision PPO and vision
indemnity insurance benefits to Arizona residents;
WHEREAS, SafeHealth represents and warrants that it is duly licensed and
qualified to provide the administrative services specified in this Agreement.
WHEREAS, pursuant to a Purchase and Sale Agreement by and between Health
Net, Inc. and SafeGuard Health Enterprises, Inc. dated June 30, 2003 ("Purchase
and Sale Agreement"), SafeGuard Health Enterprises, Inc. agreed, among other
things, to provide for the transition of the vision health maintenance
organization business provided by HNT-AZ, and the vision PPO and vision
indemnity insurance business provided in Arizona by HNL through December 31,
2004.
WHEREAS, HNT-AZ, HNL and SafeHealth intend by entering into this Agreement
that SafeHealth shall provide administrative and other services specified in
this Agreement on behalf of HNT-AZ and HNL in connection with the Benefit
Agreements described in Appendix B to this Agreement ("Benefit Agreements").
ARTICLE
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CERTAIN DEFINITIONS
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Capitalized terms used in this Agreement and not otherwise defined shall
have the meanings given such terms in the Purchase and Sale Agreement.
ARTICLE
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RELATIONSHIP OF PARTIES
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Section 2.1 Relationship of Parties. The parties to this Agreement are
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and shall remain independent contractors. Neither party is the employee or
agent of the other party, except as set forth herein, and neither party has an
express or implied right to bind the other party. The parties do not intend to
form a joint venture, partnership, or to be governed by Law relating to any
relationship other than that of independent contractors. HNT-AZ and HNL agents,
officers, and employees shall not be considered or construed to be the employees
of SafeHealth for any
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purpose, and SafeHealth's agents, officers and employees shall not be considered
or construed to be the employees of HNT-AZ or HNL for any purpose.
Section 2.2 Receipt of Premium. Payment to SafeHealth of premiums or
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charges with respect to the Benefit Agreements by or on behalf of the HNT-AZ or
HNL insureds or subscribers shall be considered receipt by HNT-AZ or HNL as
appropriate. The payment of return premiums or claims by HNT-AZ and HNL to
SafeHealth is not considered payment to the insured, or claimant until the
payment is received by the insured or claimant. Nothing in this Section 2.02
shall limit the rights of either HNT-AZ or HNL against SafeHealth resulting from
SafeHealth's failure to make payments to HNT-AZ or HNL or any of their insureds,
Subscribers or claimants.
Section 2.3 Notice of Changes. SafeHealth shall inform HNT-AZ and HNL
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in writing:
(a) within thirty (30) calendar days of any changes in its computer
systems, including hardware or software, that could materially affect
the ability of SafeHealth to perform its obligations under this
Agreement;
(b) within ten (10) calendar days of a change of 25% or more in the direct
or indirect ownership of SafeHealth, and of any changes in the
licensing of SafeHealth material to the services rendered by
SafeHealth under this Agreement; and
(c) within ten (10) calendar days of changes in governmental approvals,
the filing with a Governmental Authority of a complaint against
SafeHealth, or the filing of a lawsuit against SafeHealth if the
governmental approval, complaint or lawsuit is either (i) directly
related to the services rendered by SafeHealth under this Agreement or
to HNT-AZ or HNL Benefit Agreements, or (ii) the amount involved is in
excess of $1,000,000.
Section 2.4 Limitation of Authority. The authority of SafeHealth is
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limited to the performance of the Administrative Services specified in this
Agreement. SafeHealth has no authority to modify, waive, add to or delete any
provision of the Benefit Agreements. SafeHealth shall not represent to a third
party that it has authority that is not provided in this Agreement. HNT-AZ and
HNL shall at all times exercise ultimate control over their respective assets
and operations and the ultimate authority regarding coverage or the
interpretation of any Benefit Agreement shall remain at all times with HNT-AZ
and HNL. Notwithstanding anything to the contrary in this Agreement, HNT-AZ and
HNL shall (a) retain custody of, responsibility for, and control of all
investments; (b) own, have custody of, and keep their general corporate
accounts, books, and records; (c) own all of the accounts, books, and records of
their business; (d) have an ultimate veto right on underwriting; (e) have the
ultimate right to cancel any risk; (f) have ultimate responsibility for and at
least general control of claims adjustments and claim payments; (g) retain the
right to cancel this Agreement and discharge SafeHealth in the event SafeHealth
fails to perform satisfactorily according to the terms of this Agreement.
Section 2.5 Representations Regarding Coverage. SafeHealth shall not
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make any representations to applicants for coverage under the Benefit Agreements
or to insureds,
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Subscribers or claimants, regarding the existence or extent of coverage which
are inconsistent with the terms and conditions of coverages available from
HNT-AZ or HNL under the applicable Benefit Agreement. SafeHealth shall make
known to any applicant, insured or Subscriber the full scope and effect of all
exclusions and limitations under the applicable Benefit Agreement.
Section 2.6 Branding. None of the parties shall make use of any other
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party's trade marks, service marks, trade names or logos, including domain
names, electronic or written content or other materials, descriptions or
representations of any kind that mentions another party or its Affiliates, or
refers to any products or services of the other party (collectively referred to
as "Branding") without obtaining the prior written consent of such other party.
The parties shall use commercially reasonable efforts to provide the other
parties with such consent to utilize their respective Branding where reasonably
necessary for the other parties to perform their duties and exercise their
rights under this Agreement and any such consent granted to utilize a party's
Branding shall constitute a non-exclusive, revocable license that is limited to
use of the Branding of the party in Arizona consistent with this Agreement.
ARTICLE
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ADMINISTRATIVE SERVICES
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Section 3.1 Services of SafeHealth. SafeHealth shall provide HNT-AZ
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and HNL the administrative services described in Appendix A (the "Administrative
Services") and such other services and responsibilities as may be expressly
agreed upon in writing by the parties.
Section 3.2 Facilities, Equipment and Personnel. SafeHealth shall
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maintain all facilities, equipment and trained personnel necessary to perform
the Administrative Services under this Agreement.
Section 3.3 Performance Standard. The Administrative Services provided
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to HNT-AZ and HNL by SafeHealth pursuant to this Agreement shall at all times be
consistent with the performance standards set forth in Schedule 3.03 and all
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applicable laws, regulations, and regulatory actions and pronouncements. In the
event SafeHealth fails to perform the Administrative Services in a manner
consistent with the performance standards set forth in Schedule 3.03, the
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Service Fee payable to SafeHealth shall be reduced by the amounts and in the
manner set forth in Schedule 3.03.
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Section 3.4 Performance by Affiliates. The parties hereto recognize
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and acknowledge that the Administrative Services to be performed by SafeHealth
may, by their nature, require specific legal authority to perform or will be
more effectively provided by Affiliates of SafeHealth. In connection with the
provisions of such Administrative Services, SafeHealth's Affiliates shall be
subject to the terms and conditions of this Agreement as if such Affiliates were
themselves parties hereto.
Section 3.5 Notice Regarding Relationship. To the extent required by
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applicable law, SafeHealth shall provide written notice to persons named as
insureds or Subscribers under the Benefit Agreements, advising them of the
identity of and relationships among SafeHealth, the insured or Subscriber, and
HNT-AZ or HNL. If SafeHealth collects funds from the insured or Subscriber,
SafeHealth shall provide the insured or Subscriber with written notice of the
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premium charged by HNT-AZ or HNL for the Benefit Agreement. SafeHealth shall
provide the notice in accordance with the provisions of the Benefit Agreement,
but no less than thirty (30) calendar days before the premium charges become
effective.
Section 3.6 Enrollment Reports. HNT-AZ and HNL shall prepare periodic
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and timely reports showing all Benefit Agreements sold, renewed or terminated,
identifying individuals who are enrolled in each Benefit Agreement, and such
other enrollment information required by SafeHealth to perform its duties under
this Agreement. Such reports shall be made by HNT-AZ and HNL on a periodic and
timely basis within five (5) Business Days following the end of the month in
which the transactions or other matters occurred, and shall be transmitted by
electronic transmission in a form reasonably acceptable to SafeHealth. HNT-AZ
and HNL shall each prepare periodic reconciliations of the enrollment
information in their possession. HNT-AZ and HNL shall take all reasonable steps
to ensure that the electronic documentation will be accurate and that SafeHealth
may rely on such information in determining eligibility.
ARTICLE
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RECORDS, MAINTENANCE AND AVAILABILITY, INSPECTION AND AUDIT
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Section 4.1 Maintenance of Records. SafeHealth shall maintain adequate
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records (including copies of all correspondence) of all activities and
transactions relating to the Administrative Services performed under this
Agreement, and records clearly recording the deposits in and withdrawals from
the disbursement accounts on behalf of HNT-AZ and HNL during the period this
Agreement remains in force and for a period of five years thereafter. Such
records shall be the property of HNT-AZ or HNL as appropriate. At the end of
five years, the records shall at HNT-AZ's and HNL's option and at HNT-AZ's and
HNL's written direction, either be transmitted to HNT-AZ or HNL or destroyed.
If no written instructions are received within sixty (60) calendar days after
notice to HNT-AZ and HNL of the end of the five-year period, SafeHealth may
transmit the records to HNT-AZ and HNL at HNT-AZ's and HNL's expense.
SafeHealth may retain a copy of any records of activities and transactions on
behalf of HNT-AZ and HNL pursuant to this Agreement.
Section 4.2 Information Maintenance Procedures. The records shall be
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maintained in accordance with prudent information and data maintenance
procedures approved by HNT-AZ and HNL. Prudent information and data maintenance
procedures require, at a minimum, that backup data and records (including
software and operating systems) be maintained off-site in a secure manner.
Section 4.3 Inspection of Records. All records maintained by
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SafeHealth under this Agreement shall be made available upon reasonable written
notice during normal business hours for inspection by HNT-AZ or HNL or their
authorized representatives or by a legally authorized and properly identified
governmental authority. The records, or copies of the records, shall be
delivered to HNT-AZ or HNL upon request at HNT-AZ's or HNL's expense.
Section 4.4 Access to Records. SafeHealth shall permit HNT-AZ and HNL
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reasonable access during normal business hours to its premises, records and
personnel for periodic inspection or audit upon reasonable written notice by
HNT-AZ or HNL and at HNT-AZ's or HNL's expense. Inspection or audit may include
all aspects of this Agreement,
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including relevant financial information. Any corrective action required by
HNT-AZ or HNL as a result of an inspection or audit shall be communicated in
writing to SafeHealth. SafeHealth shall, within a reasonable period of time
specified by HNT-AZ or HNL, but not more than sixty (60) calendar days, take the
corrective action.
ARTICLE
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COMPENSATION
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Section 5.1 Service Fee. Except as provided in Section 9.02, HNT-AZ
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and HNL shall pay SafeHealth a fee equal to fifteen (15%) percent of the claims
paid by SafeHealth under the Benefit Agreements for all Administration Services
relating to the Benefit Agreements (the "Service Fee").
Section 5.2 Payment of Fee. The Service Fee shall be due and payable
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by HNT-AZ and HNL to SafeHealth ten (10) calendar days after receipt of an
invoice for such Service Fee from SafeHealth.
Section 5.3 Adjustments. If it is determined that there has been
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either an overpayment or an underpayment of the Service Fee, the parties shall
either reimburse or remit the amount of the over or under payment to the party
entitled thereto within fifteen (15) calendar days of notification of such
overpayment or underpayment.
ARTICLE
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DISPUTE RESOLUTION
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Section 6.1 Meet and Confer. The parties shall meet and confer in good
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faith on all matters of common interest or disputes between the parties hereto
relating to, arising out of, or in connection with any provision of this
Agreement (hereinafter a "Dispute") which materially affect this Agreement,
including but not limited to, any amendments or appendices to this Agreement.
Section 6.2 Arbitration. In the event any Dispute cannot be resolved
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pursuant to Section 6.01, the parties to this Agreement and their
representatives, designees, successors and assigns agree that any such Dispute
shall be settled by binding arbitration to take place in Orange County,
California; provided, however, that nothing herein shall preclude the parties
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from seeking equitable judicial relief pending arbitration, including but not
limited to injunctive or other provisional relief.
Section 6.3 Selection of Arbitrator. Any arbitration hereunder shall
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be conducted by a single arbitrator chosen from the panel of arbitrators of the
Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise
in the vision HMO or vision indemnity insurance business. If a JAMS arbitrator
with specific experience in the vision HMO or vision indemnity insurance
business is not available, the arbitrator must have general experience in the
health insurance industry. Within ten (10) calendar days of notice of a
Dispute, the parties to the Dispute shall use their best efforts to choose a
mutually agreeable arbitrator. If the parties to the Dispute cannot agree on an
arbitrator, the arbitrator shall promptly be selected by JAMS.
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Section 6.4 Procedures. The party submitting a Dispute to arbitration
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hereunder shall present its case to the arbitrator and the other parties to the
Dispute in written form within twenty (20) calendar days after the appointment
of the arbitrator. The other parties to the Dispute shall then have twenty (20)
calendar days to submit a written response to the arbitrator and the original
party who submitted the Dispute to arbitration. After timely receipt of each
party's case, the arbitrator shall have twenty (20) calendar days to render his
or her decision.
Section 6.5 Applicable Law. The arbitrator is relieved from judicial
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formalities and, in addition to considering the rules of law, the limitations
contained in this Agreement and the customs and practices of the health care
industry, shall make his or her award with a view to effectuating the intent of
this Agreement. The decision of the arbitrator shall be final and binding upon
the parties, and judgment may be entered thereon in a court of competent
jurisdiction.
Section 6.6 Expenses. Each party to an arbitration shall bear its own
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cost of arbitration, and the costs of the arbitrator shall be shared equally
among each party to a Dispute.
Section 6.7 Survival of Article. This Article VI shall survive
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termination of this Agreement.
ARTICLE
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CONFIDENTIALITY AND TRADE SECRETS
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Section 7.1 Confidentiality.
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(a) None of the parties shall disclose any proprietary or confidential
information of any other party to a third party without the express
written consent of the owner of such information to this Agreement.
For purposes of this Agreement, "proprietary and confidential"
information will include, without limitation, all internal business
practices and business records, information concerning products and
pricing, contracts, computer hardware and software or business methods
in any form whatsoever, peer review, quality assurance and grievance
procedures, any aspect of utilization review programs, provider fee
schedules, reimbursement schedules or discounts, and advertising or
marketing information, but not including information otherwise
available to the public. None of the parties shall use any proprietary
and confidential information of any other party for its own benefit.
Upon termination of this Agreement, each party will immediately return
to the owner any confidential information, except confidential
information necessary for the continued administration of any Benefit
Agreement.
(b) The parties shall maintain the confidentiality of any personal
information, including health information, pertaining to Subscribers
including, without limitation, files, records, reports, and other
information prepared and maintained in connection with this Agreement,
in accordance with all applicable Law.
(c) Each party shall obtain any necessary consent or authorization from
Subscribers with respect to the release to any other party of any
non-public personal information, including health information,
relating to such Subscribers, by means
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of general or specific releases, as appropriate. Each party shall
notify the other parties if it becomes aware that proper releases have
not been obtained.
(d) To the extent that either of the parties performs functions,
activities, or services for, or on behalf of, the other party to this
Agreement involving the use or disclosure of Protected Health
Information, as that term is defined in 45 CFR 164.501, the parties
shall comply with the Business Associate Addendum set forth in
Schedule 7.01 hereto.
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ARTICLE
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INDEMNIFICATION
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Section 8.1 Indemnification by SafeHealth. SafeHealth shall indemnify
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and hold HNT-AZ and HNL (including their directors, officers and employees)
harmless from all liability, losses, damages, costs or expenses (including
reasonable attorneys' fees) arising out of a claim, demand, lawsuit, or cause of
action asserted against HNT-AZ or HNL by a third party resulting from or arising
out of SafeHealth's wrongful act or omission, including intentional, negligent,
fraudulent or criminal conduct of a director, officer, shareholder, employee or
independent contractor of SafeHealth, except as otherwise provided in this
Article VIII.
Section 8.2 Indemnification by HNT-AZ and HNL. HNT-AZ and HNL shall
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indemnify and hold SafeHealth (including its directors, officers and employees)
harmless from all liability, losses, damages, costs or expenses (including
reasonable attorneys' fees) arising out of a claim, demand, lawsuit or cause of
action asserted against SafeHealth by a third party resulting from or arising
out of HNT-AZ's or HNL's wrongful act or omission, including intentional,
negligent, fraudulent or criminal conduct of a director, officer, shareholder,
employee or independent contractor of HNT-AZ or HNL, except as otherwise
provided in this Article VIII.
Section 8.3 Comparative Fault. In the event that HNT-AZ, HNL and
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SafeHealth claim indemnity under Sections 8.01 and 8.02 of this Agreement, and
in the event it is determined that each is entitled to indemnity from the other,
then the amount of indemnity due from each to the other shall be determined
according to comparative fault principles.
ARTICLE
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TERM AND TERMINATION
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Section 9.1 Effective Date. This Agreement shall be effective on the
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Closing Date of the Purchase and Sale Agreement (the "Effective Date").
Section 9.2 Term. This Agreement shall commence on the Effective Date
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and shall terminate on December 31, 2004 (the "Term"), provided, however, that
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HNT AZ and HNL shall have the option to extend the Term of this Agreement for an
additional one year period on the same terms and subject to the same conditions
except that HNT-AZ and HNL shall pay SafeHealth a fee equal to twenty (20%) of
the claims paid by SafeHealth under the Benefit Agreements for the
Administrative Services provided during the additional one year period.
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Section 9.3 Termination. This Agreement may be terminated as follows:
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(a) At any time by mutual agreement of the parties hereto in writing.
(b) By any party thirty (30) calendar days after written notice has been
given to any other party of the other party's material breach of this
Agreement or material default in the performance of any of its duties
and obligations under this Agreement, if the breach or default has not
been cured within the thirty (30) day period.
(c) By any party at any time after written notice, in the event of the
insolvency, liquidation, rehabilitation, assignment for the benefit of
creditors, or voluntary or involuntary declaration or adjudication of
bankruptcy of the any other party.
(d) By HNT-AZ or HNL upon written notice to SafeHealth at any time if a
license that SafeHealth is legally required to maintain in performing
the Administrative Services is revoked, suspended, or has expired.
(e) By HNT-AZ or HNL upon thirty (30) calendar days' written notice to
SafeHealth, following SafeHealth's notice to HNT-AZ or HNL under
Section 2.04, above, if a material change is not satisfactory to
HNT-AZ or HNL, or under Sections 4.04, above, if corrective action
requested is not performed to HNT-AZ's or HNL's satisfaction.
(f) By HNT-AZ or HNL upon thirty (30) calendar days' written notice to
SafeHealth in the event SafeHealth fails to perform satisfactorily
according to the terms of this Agreement and SafeHealth fails to
remedy the unsatisfactory performance to the reasonable satisfaction
of HNT-AZ or HNL within such thirty (30) day period.
Section 9.4 Transition Following Termination. In the event this
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Agreement is terminated and the Benefit Agreements that are the subject matter
of this Agreement continue to be underwritten by HNT-AZ or HNL, SafeHealth
agrees to cooperate fully and promptly, at SafeHealth's expense, in the transfer
of administrative functions as directed by HNT-AZ and HNL including, but not
limited to, transfer of HNT-AZ's and HNL's proprietary information or records.
Section 9.5 Liability Prior to Termination. Termination of this
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Agreement shall not terminate any rights or liabilities of either party arising
out of the period during which this Agreement was in effect.
ARTICLE
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GENERAL TERMS
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Section 10.1 Compliance with Law. Each party shall, in the performance
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of their obligations set forth in this Agreement, comply with all applicable Law
and the rules and regulations of all Governmental Authorities with jurisdiction
over the parties and each party shall maintain all licenses or certificates
necessary or appropriate for the performance of the functions set forth in this
Agreement. Each party shall conform its actions under this Agreement to any
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orders concerning the activities covered by this Agreement by Governmental
Authorities having jurisdiction over the parties' business affairs and
operations. Each party shall take all actions and make all filing, applications
and provide all notices required by applicable Law. Each party shall promptly
notify the other party of any complaint, inquiry or lawsuit by any Governmental
Authority relating to this Agreement.
Section 10.2 Notices. Any notice or other communication required or
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permitted hereunder shall be in writing and shall be delivered by certified
process server, certified or registered mail (postage prepaid and return receipt
requested), by a nationally recognized overnight courier service (appropriately
marked for overnight delivery) or by facsimile (with request for immediate
confirmation of receipt in a manner customary for communications of such
respective type). Notices shall be effective upon receipt and shall be
addressed as follows:
if to SafeHealth to:
SafeGuard Health Enterprises, Inc.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx
Senior Vice President and General Counsel
SafeGuard Health Enterprises, Inc.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
if to HNT-AZ or HNL to:
Health Net, Inc.
Att: General Counsel
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxxxx X. Xxxxxxx
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Section 10.3 Headings. The headings of the sections of this Agreement
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are included for the purposes of convenience only and shall not affect the
interpretation of any provision hereof.
Section 10.4 Governing Law. This Agreement shall be governed by and
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construed in accordance with the Law of the state of California, without giving
effect to the principles of conflicts of laws thereof.
Section 10.5 Severability. In the event any section or provision of
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this Agreement or related documents is found to be void and unenforceable by a
court of competent jurisdiction, the remaining sections and provisions of this
Agreement or related documents shall nevertheless be binding upon the parties
with the same force and effect as though the void or unenforceable part had not
been severed or deleted.
Section 10.6 Assignability. Except as otherwise expressly provided in this
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Agreement, none of the parties may assign any of its rights or obligations under
this Agreement without the prior written consent of the other parties. Except
as specifically provided in this Agreement, any attempted assignment or
delegation of a party's rights, claims, privileges, duties or obligations
hereunder shall be null and void.
Section 10.7 Successors and Assigns. This Agreement and the rights,
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privileges, duties and obligations of the parties hereunder, to the extent
assignable or delegable, shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assignees.
Section 10.8 Waiver. No waiver of or failure by any party to enforce
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any of the provisions, terms, conditions, or obligations herein shall be
construed as a waiver of any subsequent breach of such provision, term,
condition, or obligation, or of any other provision, term, condition, or
obligation hereunder, whether the same or different in nature. No extension of
time for performance of any obligations or acts shall be deemed an extension of
the time for performance of any other obligations or acts.
Section 10.9 Expenses. Except as may be specifically provided for in
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this Agreement, all parties shall bear their own expenses incurred in connection
with this Agreement and the transactions contemplated herein, including but not
limited to, legal and accounting fees.
Section 10.10 Further Assurances. Each party agrees, at its own cost,
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to do such further acts and things and to execute and deliver such additional
agreements and instruments as the
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other may reasonably require to consummate, evidence or confirm the agreements
contained herein in the manner contemplated hereby.
Section 10.11 No Third Party Rights. This Agreement has been made for
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the benefit of the parties hereto and respective successors and permitted
assigns and nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any other person other than the
parties to it and their respective successors and permitted assigns. Nothing in
this Agreement is intended to relieve or discharge the obligations or liability
of any third person to any party to this Agreement.
Section 10.12 Exhibits and Schedules. All exhibits and Schedules
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referred to in this Agreement are incorporated herein by this reference.
Section 10.13 Force Majeure. None of the parties hereto shall be
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liable for any delay or failure in the performance of any obligation under this
Agreement or for any loss or damage (including indirect or consequential damage)
to the extent that such nonperformance, delay, loss or damage results from any
contingency which is beyond the control of such party, provided such contingency
is not caused by the fault or negligence of such party. A contingency for the
purposes of this Agreement shall be acts of God, fires, floods, earthquakes,
explosions, storms, wars, hostilities, blockades, public disorders, quarantine
restrictions, embargoes, strikes or other labor disturbances, and compliance
with any law, order or control of, or insistence by any governmental or military
authority.
Section 10.14 Plurals/Pronouns/Gender. All pronouns and any variations
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thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as appropriate.
Section 10.15 Locative Adverbs. Whenever in this Agreement the
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locative adverbs "herein," "hereof," or "hereunder" are used, the same shall be
understood to refer to this Agreement in its entirety and not to any specific
article, section, subsection, subpart, paragraph or subparagraph.
Section 10.16 Integration. This Agreement and all Exhibits and
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Schedules attached hereto constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof. This Agreement supersedes
all previous agreements between or among the parties. There are no agreements,
representations, or warranties between or among the parties with respect to the
subject matter hereof other than those set forth in this Agreement or the
documents and agreements referred to in this Agreement.
Section 10.17 Amendments. No amendment, modification, or supplement to
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this Agreement shall be binding on any of the parties unless it is reduced to
writing and signed by each of the parties.
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Section 10.18 Counterparts. This Agreement may be executed
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simultaneously in any number of counterparts, each of which will be deemed an
original, but all of which will constitute one and the same agreement.
HEALTH NET OF ARIZONA, INC. SAFEHEALTH LIFE INSURANCE COMPANY
By: /s/ Xxxx El-Xxxxx By: /s/ Xxxxx X. Xxxxxxx
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Title: President Title: President and CEO
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Date: June 30, 2003 Date: June 30, 2003
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HEALTH NET LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx Xxxx
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Title: President
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Date: June 30, 2003
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APPENDIX A
ADMINISTRATIVE SERVICES
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A. CLAIMS ADMINISTRATION SERVICES
1. SafeHealth shall process claims for benefits made under Benefit
Agreements issued by HNT-AZ and HNL in accordance with the terms of the
applicable Benefit Agreement, applicable law and HNT-AZ's written instructions.
2. SafeHealth's claim processing duties for HNT-AZ and HNL include
the following:
a. Receive bills, invoices, statements and electronically submitted
demands for payment (collectively referred to as "claims") from eligible
providers, insured individuals and others.
b. Determine the eligibility of an insured individual and the
reasonableness of the claim, and apply HNT-AZ or HNL vision claim review
guidelines, referring claims to HNT-AZ or HNL as directed.
c. Implement appropriate procedures to pay, reject or modify the
amount of the claim in accordance with the terms of the appropriate Benefit
Agreement and applicable law.
d. At SafeHealth's expense, provide HNT-AZ and HNL with on-line access
to claims data.
e. Provide HNT-AZ with a report by the twentieth (20th) of each month
identifying all claims paid during the previous month. The report is to include
a complete check register report and reconciliation of that register against
paid claims, and a reconciliation report on the account including prior month
open items.
f. Prepare and file, in the manner prescribed by law, all IRS 1099
Forms required with respect to providers.
g. Install and maintain internal control systems satisfactory to
HNT-AZ and HNL on claims processing, fraudulent claims, claims quality, HNT-AZ
and HNL funds, and check stock and signature plates.
h. Make all reasonable efforts to collect all overpayments or other
incorrect payments as determined by the provisions of the applicable Benefit
Agreement, and provide HNT-AZ and HNL with information necessary to permit it to
file Third Party Workers' Compensation liens.
i. Prepare and implement a quality control plan, whereby SafeHealth
will assure itself, HNT-AZ and HNL that its processing of claims conforms to all
contractual benefit provisions, does not violate administrative procedure or
policies established by HNT-AZ and HNL and communicated to SafeHealth, does not
intentionally violate any applicable state or federal laws, and is reasonably
free of error or bias.
A-1
j. Conduct all aspects of appeals and grievances arising from claim
decisions in accordance with the procedures approved by HNT-AZ and HNL.
SafeHealth will notify HNT-AZ and HNL of each appeal or grievance arising from a
claims decision within ten calendar days of receipt of the appeal or grievance.
The ultimate determination on an appeal or grievance rests solely with HNT-AZ or
HNL.
k. Prepare the reports mutually acceptable to the parties.
l. SafeHealth shall provide reports requested by reinsurers of HNT-AZ
and HNL at SafeHealth's expense.
3. SafeHealth will adjudicate, pay or deny all claims strictly in
accordance with provisions of the Benefit Agreements and, with respect to claims
for services of participating vision providers, claims handling will satisfy the
requirements of the provider agreements between providers and HNT-AZ or HNL.
Whenever denying a claim, in whole or in part, SafeHealth will notify the
covered person, in writing in a form approved by HNT-AZ and HNL, that a dispute
with HNT-AZ or HNL must be resolved by binding arbitration if the applicable
Benefit Agreement contains an arbitration provision.
4. In connection with the payment of claims for the services of
participating vision providers, SafeHealth shall:
a. Determine benefit payment on the basis of the reimbursement rate set
out on the participating provider contracts and instructions from HNT-AZ or HNL
on services included or excluded in those rates; and
b. Receive claims from participating providers and pay or deny claims
within thirty (30) calendar days of receiving a "clean claim." For purposes of
this Agreement, "clean claim" means a claim that has no defect or impropriety,
including any lack of any required substantiating documentation, or particular
circumstances requiring special treatment that prevents timely payments from
being made on the claim.
c. Accept HNT-AZ or HNL interpretations of provider contracts and
accept HNT-AZ's or HNL's resolution of questions or disputes with providers.
HNT-AZ and HNL have final authority to interpret their contracts and resolve
disputes with providers.
5. In assisting HNT-AZ and HNL with utilization review, SafeHealth
will:
a. Forward all provider claims without a required Utilization Review
Certification Form either to the provider or to HNT-AZ or HNL, as directed;
b. Submit claims to HNT-AZ and HNL for retrospective utilization
review in accordance with HNT-AZ's or HNL's guidelines and procedures.
6. SafeHealth will pay claims as follows:
a. Issue claim checks in the name of HNT-AZ or HNL from a disbursement
account established at an Arizona Bank acceptable to HNT-AZ and HNL. HNT-AZ or
HNL shall fund the disbursement accounts each Monday. HNT-AZ and HNL shall
provide SafeHealth with an adequate supply of HNT-AZ and HNL checkstock.
A-2
b. Provide to HNT-AZ and HNL by telecopy each Thursday a listing of
all claim checks to be released by the close of business on the following Monday
if a Business Day, or in the event a Monday is not a Business Day, then by the
first Business Day of the following week. HNT-AZ and HNL shall have the right to
stop payment on and request more information about a specific claim by notifying
SafeHealth by the close of business on the Friday following receipt of the
listing of claim checks.
c. Provide HNT-AZ and HNL with copies of the claim documentation for
all proposed claim payments over $500. No claims over $1,000 may be paid without
the countersignature of an authorized representative of HNT-AZ or HNL.
7. SafeHealth will satisfy the following performance criteria in the
processing of claims and report the results monthly:
a. Pay or reject 85% of claims submitted within fourteen (14) calendar
days of receipt.
b. Pay or reject 100% of uncontested claims submitted within thirty
(30) calendar days of receipt.
c. Respond to 98% of all claims-related written inquiries from, from a
provider or from a group within fourteen (14) calendar days.
d. Answer on first contact 80% of claims-related telephone inquiries
from an individual insured by HNT-AZ or HNL, from a provider or from a group.
8. Should any Benefit Agreement subject to this Agreement terminate,
SafeHealth will continue to process claims incurred under the Benefit Agreement
with a date of service prior to termination, and to process other claims which
may be payable under the Benefit Agreement but have not been adjudicated prior
to termination, unless SafeHealth is otherwise instructed in writing by HNT-AZ
or HNL.
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B. COMMUNICATIONS
1. SafeHealth will provide courteous, timely and accurate assistance
and response to all verbal or written inquiries received from HNT-AZ and HNL
insureds, Subscribers, and claimants with respect to all relevant topics,
including but not limited to procedural aspects of claim submission, status of
claim payments, calculation of benefits, and notice of conversion rights, and
generally to act as a liaison between HNT-AZ, HNL, members and groups.
2. SafeHealth will promptly forward to HNT-AZ and HNL all inquiries
which constitute a grievance or a request for review under ERISA. Complaints,
grievances or other communications shall be forwarded by SafeHealth to HNT-AZ
and HNL. Inquiries or complaints which SafeHealth receives from Governmental
Authorities shall be reported immediately by telephone to the appropriate person
at HNT-AZ or HNL, with written notice following immediately thereafter.
3. SafeHealth will cooperate fully with HNT-AZ, HNL and Governmental
Authorities in maintaining the Benefit Agreements in compliance with existing
and future Law.
4. HNT-AZ and HNL shall provide SafeHealth with an adequate supply of
the most current directories of participating vision providers and SafeHealth
shall promptly supply copies of the directories to Subscribers on request.
5. SafeHealth will design prepare Explanation of Benefits (EOB) forms
for the purpose of informing covered persons of actions taken on claims for
benefits. EOB forms may not be used without HNT-AZ's and HNL's prior review and
approval.
6. SafeHealth will design and prepare a remittance advice form to be
used to identify claims with respect to which a payment is being made.
Remittance advice forms may not be used without HNT-AZ's and HNL's prior review
and approval.
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XXXXXXXX X
BENEFIT AGREEMENTS
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B-1
SCHEDULE 3.03
PERFORMANCE STANDARDS
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% OF
SERVICE FEE
AT RISK
------------
MEMBER SERVICE
--------------
70% of calls answered within 60 seconds excluding January due to open enrollments. 0.5%
Call abandonment rate less than 5% excluding January due to open enrollments. 0.5%
CLAIMS
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Process all claims within 30 calendar days on receipt of complete, accurate data. 1%
Financial accuracy of 98%. 1%
NEW CASE INSTALLATION - ELECTRONIC DATA INTERFACE
-------------------------------------------------
2 business day turnaround on files received in approved format and media. 1%
15 business day turnaround on initial set up of group upon receipt of all required data. 1%
PROVIDER NETWORK MANAGEMENT
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90% of network retained annually. Measurement will be based on global basis and reported 1%
annually.
PENALTY EXPRESSED AS A PERCENTAGE OF THE TOTAL NET SERVICE FEE 6%
6% OF TOTAL SERVICE FEE AT RISK
PENALTY IS PAID ONLY FOR THE TIME PERIOD STANDARD IS NOT ACHIEVED.
SCHEDULE 7.01
BUSINESS ASSOCIATE ADDENDUM
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This Business Associate Addendum (the "Addendum") supplements and is made a part
of the Administration Agreement by and between Health Net of Arizona, Inc.,
Health Net Life Insurance Company and SafeHealth Life Insurance Company (the
"Agreement"), and is effective as of the Effective Date of the Agreement.
RECITALS
A. The parties may disclose certain information to each other pursuant to the
terms of the Agreement, some of which may constitute Protected Health
Information, as defined below.
B. The parties intend to protect the privacy and provide for the security of
Protected Health Information in compliance with the Health Insurance
Portability and Accountability Act of 1996, Public law No. 104-191
("HIPAA") and the regulations promulgated thereunder by the U.S. Department
of Health and Human Services (the "HIPAA Regulations") and other applicable
laws.
C. The purpose of this Addendum is to satisfy certain standards and
requirements of HIPAA and the HIPAA Regulations, including, but not limited
to, 45 CFR 164.502(e) and 45 CFR 164.504(e).
In consideration of the mutual promises below and the exchange of information
pursuant to the Agreement and this Addendum, the parties agree as follows:
1. Definitions
(a) "Business Associate" means the party performing functions, activities,
or services for, or on behalf of, a Covered Entity pursuant to the Agreement
involving the use or disclosure of Protected Health Information.
(b) "Covered Entity" means the party for whom, or on whose behalf,
functions, activities, or services are performed pursuant to the Agreement
involving the use or disclosure of Protected Health Information.
(c) "Privacy Rule" means the Standards for Privacy of Individually
Identifiable Health Information at 45 CFR part 160 and part 164, subparts A and
E.
(d) "Protected Health Information" has the same meaning as the term
"protected health information" in 45 CFR 164.501, limited to the information
created or received by Business Associate from or on behalf of Covered Entity.
(e) Capitalized terms used but not otherwise defined in this Addendum have
the same meaning as those terms in the Privacy Rule.
2. Obligations and Activities of Business Associate
(a) Business Associate shall not use or disclose Protected Health
Information other than as permitted or required by this Addendum or as Required
By Law.
(b) Business Associate shall use appropriate safeguards to prevent use or
disclosure of the Protected Health Information other than as provided for by the
Agreement and this Addendum.
(c) Business Associate agrees to mitigate, to the extent practicable, any
harmful effect that is known to Business Associate of a use or disclosure of
Protected Health Information by Business Associate in violation of the
requirements of this Addendum.
(d) Business Associate shall report to Covered Entity any use or disclosure
of the Protected Health Information not provided for by this Addendum of which
it becomes aware.
(e) Business Associate shall ensure that any agent, including a
subcontractor, to whom it provides Protected Health Information received from,
or created or received by Business Associate on behalf of, Covered Entity agrees
to the same restrictions and conditions that apply through this Addendum to
Business Associate with respect to such information.
(f) Business Associate shall provide access, at the request of Covered
Entity, and in the time and manner designated by Covered Entity, to Protected
Health Information in a Designated Record Set, to Covered Entity or, as directed
by Covered Entity, to an Individual in order to meet the requirements under 45
CFR 164.524
(g) Business Associate agrees to make any amendment(s) to Protected Health
Information in a Designated Record Set that the Covered Entity directs or agrees
to pursuant to 45 CFR 164.526 at the request of Covered Entity or an Individual,
and in the time and manner designated by Covered Entity.
(h) Business Associate agrees to make its internal practices, books, and
records, including policies and procedures, relating to the use and disclosure
of Protected Health Information received from, or created or received by
Business Associate on behalf of, Covered Entity available to the Secretary, in a
time and manner designated by the Secretary, for purposes of the Secretary
determining Covered Entity's compliance with the Privacy Rule.
(i) Business Associate agrees to document such disclosures of Protected
Health Information and information related to such disclosures as would be
required for Covered Entity to respond to a request by an Individual for an
accounting of disclosures of Protected Health Information in accordance with 45
CFR 164.528.
(j) Business Associate agrees to provide to Covered Entity, in the time and
manner designated by Covered Entity, information collected in accordance with
Section (2)(i) of this Addendum, to permit Covered Entity to respond to a
request by an Individual for an accounting of disclosures of Protected Health
Information in accordance with 45 CFR 164.528.
3. Permitted Uses and Disclosures by Business Associate General Use and
Disclosure Provisions
Except as otherwise limited in this Addendum, Business Associate may use or
disclose Protected Health Information to perform functions, activities, or
services for, or on behalf of, Covered Entity as specified in the Agreement,
provided that such use or disclosure would not violate the Privacy Rule if done
by Covered Entity.
4. Specific Use and Disclosure Provisions
(a) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information for the proper management and administration of
Business Associate or to carry out the legal responsibilities of Business
Associate.
(b) Except as otherwise limited in this Addendum, Business Associate may
disclose Protected Health Information for the proper management and
administration of Business Associate, provided that disclosures are Required By
Law, or Business Associate obtains reasonable assurances from the person to whom
the information is disclosed that it will remain confidential and used or
further disclosed only as Required By Law or for the purpose for which it was
disclosed to the person (which purpose shall be consistent with the limitations
imposed by this Addendum) and the person notifies the Business Associate of any
instances of which it is aware in which the confidentiality of the information
has been breached.
(c) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information to provide Data Aggregation services to Covered
Entity as permitted by 42 CFR 164.504(e)(2)(i)(B).
(d) Business Associate may use Protected Health Information to report
violations of law to appropriate Federal and State authorities, consistent with
45 CFR 164.502(j)(1).
5. Obligations of Covered Entity Provisions for Covered Entity To Inform
Business Associate of Privacy Practices and Restrictions
(a) Covered Entity shall notify Business Associate of any limitation in its
notice of privacy practices in accordance with 45 CFR 164.520, to the extent
that such limitation may affect Business Associate's use or disclosure of
Protected Health Information.
(b) Covered Entity shall notify Business Associate of any changes in, or
revocation of, permission by an Individual to use or disclose Protected Health
Information, to the extent that such changes may affect Business Associate's use
or disclosure of Protected Health Information.
(c) Covered Entity shall notify Business Associate of any restriction on the
use or disclosure of Protected Health Information that Covered Entity has agreed
to in accordance with 45 CFR 164.522, to the extent that such restriction may
affect Business Associate's use or disclosure of Protected Health Information.
(d) Covered Entity shall not request Business Associate to use or disclose
Protected Health Information in any manner that would not be permissible under
the Privacy Rule if done by Covered Entity, except as permitted by Sections 4(b)
and 4(c) of this Addendum.
6. Term and Termination
(a) This Addendum shall be effective as of the Effective Date of the
Agreement, and shall terminate when all of the Protected Health Information
provided by Covered Entity to Business Associate, or created or received by
Business Associate on behalf of Covered Entity, is destroyed or returned to
Covered Entity, or, if it is infeasible to return or destroy Protected Health
Information, protections are extended to such information, in accordance with
the termination provisions in this Section.
(b) Upon Covered Entity's knowledge of a material breach of this Addendum by
Business Associate, Covered Entity shall either: (i) provide an opportunity for
Business Associate to cure the breach or end the violation and terminate this
Addendum, and the provision for performance of functions, activities, or
services for, or on behalf of Covered Entity under the Agreement, if Business
Associate does not cure the breach or end the violation within the time
specified by Covered Entity; (ii) immediately terminate this Addendum, and the
provision for performance of functions, activities, or services for, or on
behalf of Covered Entity under the Agreement, if Business Associate has breached
a material term of this Addendum and cure is not possible; or (iii) if neither
termination nor cure is feasible, report the violation to the Secretary.
(c) Effect of Termination.
(i) Except as provided in paragraph (ii) of this section, upon termination
of this Addendum, for any reason, Business Associate shall return or
destroy all Protected Health Information received from Covered Entity, or
created or received by Business Associate on behalf of Covered Entity, and
shall retain no copies of the Protected Health Information. This provision
shall apply to Protected Health Information that is in the possession of
subcontractors or agents of Business Associate.
(ii) In the event that Business Associate determines that returning or
destroying the Protected Health Information is infeasible, Business
Associate shall provide to Covered Entity notification of the conditions
that make return or destruction infeasible. Upon mutual agreement that
return or destruction of Protected Health Information is infeasible,
Business Associate shall extend the protections of this Addendum to such
Protected Health Information and limit further uses and disclosures of such
Protected Health Information to those purposes that make the return or
destruction infeasible, for so long as Business Associate maintains such
Protected Health Information.
7. Miscellaneous
(a) Regulatory References. A reference in this Addendum to a section in the
----------------------
Privacy Rule means the section as in effect or as amended.
(b) Amendment. The Parties agree to take such action as is necessary to
---------
amend this Addendum from time to time as is necessary for Covered Entity to
comply with the requirements of the Privacy Rule and the HIPAA.
(c) Survival. The respective rights and obligations of Business Associate
--------
under Section 6(c) of this Addendum shall survive the termination of this
Addendum.
(d) Interpretation. The provisions of this Addendum shall prevail over any
--------------
provisions in the Agreement that may conflict with or appear inconsistent with
any provision of this Addendum. Any ambiguity in this Addendum shall be
resolved to permit Covered Entity to comply with the Privacy Rule.