EXHIBIT 10.6
ADMINISTRATIVE SERVICES AGREEMENT
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This ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made and
entered into as of this 6th day of May, 1999 (the "Effective Date"), by and
between the Blue Cross Blue Shield Association ("THE ASSOCIATION"), an Illinois
not-for-profit organization, and Network Management Services, Inc. ("NMS"), a
Minnesota corporation.
RECITALS:
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A. THE ASSOCIATION provides certain centralized enrollment, financial and
other administrative services in connection with certain programs (currently
designated under the names HMO Blue USA; Medicare Blue USA and BluesCONNECT)
through which Blue Cross and/or Blue Shield Plans provide and/or administer
health benefits coverage for employees of accounts;
B. THE ASSOCIATION and NMS are parties to an Administrative Services
Agreement dated August 29, 1997 (the "BluesCONNECT Agreement"), pursuant to
which THE ASSOCIATION has outsourced to NMS certain enrollment, financial and
other administrative services that are provided through THE ASSOCIATION in
connection with the BluesCONNECT program; and
C. NMS is in the business of providing administrative services to health
plans, insurance carriers and to purchasers of health care coverage, and
possesses the expertise necessary to assist THE ASSOCIATION in administering the
HMO Blue USA, Medicare Blue USA and other centralized programs; and to continue
to assist in the administration of the BluesCONNECT program.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the parties agree as follows:
SECTION 1
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 Account. "Account" means an employer or other entity which has
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employees for whom the Account provides any type of health coverage products,
including indemnity, health maintenance organization, point of service, or
preferred provider organization products.
1.2 Administrative Services. "Administrative Services" means certain
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centralized enrollment, eligibility, billing and disbursement, financial and
reporting, client issue resolution and related administrative services and
products which have been delegated by the Participating Plans to THE ASSOCIATION
in connection with the Program(s) and are provided to Participating Accounts
through THE ASSOCIATION.
1.3 Bank. "Bank" means the First National Bank of Chicago and/or any
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other financial institution selected from time to time by THE ASSOCIATION in
which the Bank Account will be maintained.
1.4 Bank Account. "Bank Account" means a fiduciary bank deposit account
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established by THE ASSOCIATION and used for the receipt and disbursement of
monies in connection with the Program(s) in accordance with Section 4 below.
1.5 BEN-NET(TM). "BEN-NET(TM)" means NMS's proprietary eligibility
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management tools, software and services which provides the capability for group
set-ups, vendor set-ups, enrollment and eligibility management, enrollment and
eligibility data edits, eligibility distribution to vendors, retroactive
enrollment adjustments, consolidated billing, customer services and payment to
Health Plans.
1.6 Blue Plan. "Blue Plan" means any Blue Cross and/or Blue Shield
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Health Plan or its licensed affiliates.
1.7 BluesCONNECT. "BluesCONNECT" refers to the national account program
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through which Blue Plans provide health maintenance organization ("HMO") and
HMO-based insurance products to Accounts, supported by certain enhanced
centralized Administrative Services provided by THE ASSOCIATION through NMS
pursuant to the BluesCONNECT Agreement.
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1.8 BluesNET. "BluesNET" means the private wide-area computer network
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through which THE ASSOCIATION maintains communications with selected Health
Plans and other entities.
1.9 Business Day. "Business Day" means any day other than Saturday,
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Sunday or a United States National holiday.
1.10 Consolidated Xxxx. "Consolidated Xxxx" means a detailed monthly
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billing invoice based upon the Participating Plan's premium and rate data in
BEN-NET(TM) and the entry of Subscriber information received from Participating
Plans or Participating Accounts.
1.11 Core Services. "Core Services" means all of the services NMS agrees
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to perform under this Agreement, including but not limited to the services
referenced under Section 2 of this Agreement; except those services identified
as non-Core Services on Schedule I hereto.
1.12 Coverage Month. "Coverage Month" means a month during the term of
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this Agreement in which a Member receives health care coverage from a
Participating Plan.
1.13 Eligible Employee. "Eligible Employee" means a bona-fide employee
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of a Participating Account.
1.14 Enrollment Form. "Enrollment Form" means a form completed by an
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Eligible Employee or other Member to enroll in benefits coverage offered by a
Participating Plan or to terminate from or make changes to his/her enrollment in
benefits coverage offered by a Participating Plan.
1.15 Environmental Analysis. "Environmental Analysis" means an interview
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and analysis conducted by NMS with representatives of a Participating Account to
determine current enrollment, financial, and customer service processes for
applicable coverage benefits sponsored by such Participating Account, as
described in Section 2.1 below.
1.16 Health Plan. "Health Plan" means a health care service plan or
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affiliated entity, insurance carrier, health maintenance organization or other
provider of health care benefits or benefits administration.
1.17 HMO Blue USA. "HMO Blue USA" refers to the national account program
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through which Blue Plans provide HMO and HMO-based insurance products to
Accounts, supported by centralized Administrative Services.
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1.18 Lock Box. "Lock Box" means a lock box to be established at the
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Bank for the receipt and distribution of monies in connection with the
Program(s) in accordance with Section 4 below.
1.19 Medicare Blue USA. "Medicare Blue USA" refers to the national
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account program through which Blue Plans provide HMO and HMO-based insurance to
Medicare enrollees of Participating Accounts supported by centralized
Administrative Services in a manner substantially similar to that for HMO Blue
USA.
1.20 Member. "Member" means a person enrolled for benefits coverage
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as a result of such Member's relationship with a Subscriber maintained in BEN-
NET(TM) including but not limited to Eligible Employees and dependents of
Eligible Employees, retirees, dependents of retirees, COBRA continuees,
dependents of COBRA continuees, persons on leaves of absence and other
continuations of coverage.
1.21 Participants. "Participants" means collectively, THE ASSOCIATION,
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NMS, the Participating Accounts, the Participating Plans and all Members.
1.22 Participating Account. "Participating Account" means an Account
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which participates in the Program(s) (current list on Schedule II hereto) and
for which NMS receives fees as described in Schedule I for providing Core
Services to the Account hereunder.
1.23 Participating Plan. "Participating Plan" means a Blue Plan which
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participates in the Program(s), or any Blue Plan affiliate which has been
permitted to participate in the Program(s).
1.24 Program(s). "Program(s)" means the HMO Blue USA, Medicare Blue USA,
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BluesCONNECT (as such names may change from time to time) and other programs
which may be identified and/or developed from time to time through which Blue
Plans provide any type of health insurance products, including indemnity, health
maintenance organization, point of service or preferred provider organization
products to Accounts, and in connection with which THE ASSOCIATION provides
centralized Administrative Services.
1.25 Program Rules. "Program Rules" means the administrative rules for
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Program participation by Accounts and Health Plans, as promulgated from time to
time and implemented by THE ASSOCIATION in its sole discretion as set forth in
Section 10.3 below.
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1.26 Self-Xxxx. "Self-Xxxx" means the billing method by which a
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Participating Account or third party administrator maintains its own membership
files and calculates monthly premiums owed under the Program(s).
1.27 Subscriber. "Subscriber" means an individual who is enrolled in
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benefits coverage through the Program(s) and is the certificate holder,
including Eligible Employees, retirees, COBRA continuees, persons on leaves of
absence and other continuations of coverage. "Subscriber" does not include any
dependents of such individual.
SECTION 2
DUTIES OF NMS
During the term of this Agreement, NMS shall provide the following Core
Services in accordance with the standards set forth below:
2.1 Participating Account and Participating Plan Setup.
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a. (i) NMS will perform an Environmental Analysis with each
Participating Account that has an enrollment of *** or more Subscribers. Each
such Environmental Analysis will include an on-site interview conducted by NMS
with representatives of the Participating Account to determine current
enrollment, financial and customer service processes for applicable benefits
sponsored by such Participating Account to determine group reporting, rate and
benefit structure requirements, and Participating Plan contract setup.
(ii) At THE ASSOCIATION's request, NMS will also perform an
Environmental Analysis for a Participating Account that has an enrollment of
less than *** subscribers for the fees described in Schedule I.
(iii) At THE ASSOCIATION's request, NMS will also perform an
expanded Environmental Analysis that will involve additional site visits and
further analysis for any Participating Accounts that do not have the capacity to
provide a single electronic enrollment file (e.g., as a result of maintaining
multiple payroll systems). The terms and conditions for that expanded
Environmental Analysis shall be mutually agreed upon by THE ASSOCIATION and NMS.
b. NMS staff shall actively participate in the implementation
process of new Participating Accounts into the Program(s) in accordance with the
requirements of this
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***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Agreement. NMS staff shall be responsible for ensuring that a new Participating
Account is set-up correctly in BEN-NET(TM), based on information provided by THE
ASSOCIATION, and that the implementation is well-defined and documented. NMS
staff shall develop and manage an implementation project plan for each new
Participating Account's implementation. Provided that NMS shall not be required
to convert any Participating Account which, prior to October 31, 1999, has given
notice to the Participating Plans of its termination of participation in the
Program(s) to be effective prior to December 31, 1999, and THE ASSOCIATION has
notified NMS of such termination.
c. For each Participating Plan, NMS shall complete implementation of
the electronic connectivity for such Participating Plan by a date mutually
agreed to by THE ASSOCIATION, NMS and the Participating Plan.
2.2 Collection and Distribution of Enrollment and Eligibility Data.
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a. (i) For all Participating Accounts which have the
capability to send enrollment and eligibility data electronically, NMS shall
have the capability and shall receive and process enrollment information
regarding additions, changes and terminations of enrollment of Members from
those Participating Accounts in the manner described in Schedule III hereto as
modified from time to time by THE ASSOCIATION (except for new Participating
Accounts with less than *** subscribers, in which case NMS shall only be
obligated to accept electronic data if the Participating Account uses a standard
industry import);
(ii) For all Participating Accounts which do not have the
capability to send electronic enrollment and eligibility data or for those
accounts with less than *** subscribers that do not use a standard industry
import, NMS shall receive and process Enrollment Forms and materials regarding
additions, changes and terminations of enrollment from those Participating
Accounts.
b. NMS shall follow the eligibility rules established for each
Participating Account in processing enrollment and eligibility information.
c. NMS shall establish and maintain ongoing electronic
connectivity for enrollment information between NMS and each Participating
Plans' membership systems, in accordance with THE ASSOCIATION's specifications
described in Schedule III, and as modified by THE ASSOCIATION from time to time.
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***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
d. NMS shall distribute enrollment information electronically
to Participating Plans for all Participating Accounts where the enrollment data
is submitted directly to NMS, either electronically or on paper Enrollment
Forms, within time frames to be determined by mutual agreement.
e. NMS shall at all times maintain the capability to
disseminate enrollment data to Participating Plans via paper where the
Participating Plan does not have the capability to receive electronic enrollment
data from NMS.
f. NMS will forward paper copies of Enrollment Forms to
Participating Plans for all Participating Accounts relying upon centralized
"paper form flow" to communicate enrollment information to the Participating
Plans. THE ASSOCIATION will make reasonable efforts to improve the efficiency of
this process.
g. NMS shall maintain and make available to THE ASSOCIATION a
log of electronic connectivity, which identifies the current status of
electronic connectivity for each Participating Plan. The log will identify in
detail any issues or problems with establishing and maintaining such
connectivity for any Participating Plan and the action plan devised by the
Participating Plan for resolving such issues or problems and the timetable for
that resolution.
h. NMS shall process and distribute enrollment and eligibility
information in the manner and within the time frames described in this Agreement
and Schedule IV hereto.
2.3 Billing and Reconciliation.
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(a) Except as provided in Section 2.3(b) below with respect to Self-
Xxxx Accounts, NMS shall accurately calculate the correct amount of premiums and
other payments due from each Participating Account, including but not limited to
all premiums, broker's and administrative fees, late payments and other charges
based on the applicable rates, administrative fees and other charges to each
Participating Account and Participating Plan provided by THE ASSOCIATION (which
have been obtained from the Participating Plans, as applicable). The amounts due
from the Participating Account and any changes to the rates or other charges
applicable to such amounts shall be included by NMS in a Consolidated Xxxx. The
Consolidated Xxxx for each month shall be transmitted to the applicable
Participating Account no later than the
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twenty-first day of the month prior to the Coverage Month represented by that
invoice or by such other date as established from time to time by THE
ASSOCIATION.
(b) NMS shall receive, review for accuracy and process invoices from
Participating Accounts which Self-Xxxx. Self-Xxxx invoices shall be transmitted
to NMS either electronically or by paper.
(c) NMS shall direct each Participating Account to remit all amounts
due under its Consolidated Xxxx or Self-Xxxx invoice directly to the Lock Box at
the Bank Account by electronic funds transfer or other means acceptable to THE
ASSOCIATION. Upon request by THE ASSOCIATION, NMS shall provide copies of any or
all Consolidated Bills and Self-Xxxx invoices to THE ASSOCIATION. In the event
that THE ASSOCATION's request requires substantial time and effort on NMS's
behalf, THE ASSOCATION shall reimburse NMS for its reasonable expenses related
to the request.
(d) For self funded Participating Accounts, NMS shall receive and
consolidate claims expenses from vendors on a weekly basis, analyze expense
reporting, perform high-level audits, collect funds from the Participating
Accounts and direct the distribution of those funds to the applicable Health
Plan.
(e) NMS's BEN-NET(TM) system shall be able to support a variety of
billing rates, including composite and coverage-tier driven rates.
2.4 Delinquency Process. NMS shall promptly notify all Participating
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Accounts of any past due amounts owed and shall make reasonable efforts to
collect such amounts in accordance with the delinquency process described in
Schedule V. NMS shall not commence legal action to collect past due amounts.
The Participating Plans shall have the sole authority to terminate the
participation of any Participating Account in the Program(s) and may do so
without NMS's consent. If one or more Participating Plans elect to waive or
postpone compliance with payment requirements, THE ASSOCIATION shall so advise
NMS and shall be responsible for facilitating any necessary arrangements among
Participating Plans. The delinquency process described in this Section 2.4
shall be carried out in accordance with procedures that have been approved in
advance by THE ASSOCIATION and such procedures must comply with all applicable
state and federal laws.
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2.5 No Liability for Unpaid Amounts. Neither THE ASSOCIATION nor NMS
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shall have any obligation to remit or guaranty collection of any unpaid amounts
owed by a Participating Account for any services provided hereunder.
2.6 Reconciliation Services.
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2.6.1 Reconciliation of Premiums and Membership. Commencing from the
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effective date of the transfer of a Participating Account to NMS hereunder, NMS
shall be responsible for resolving all discrepancies in premiums and enrollment
and eligibility for the Participating Account arising on or after the effective
date of transfer of a Participating Account to NMS hereunder, including
discrepancies resulting from differences in the timing for processing of
enrollment and eligibility data, data entry inaccuracies and retroactive
enrollment and eligibility changes. THE ASSOCIATION shall cooperate with NMS in
performing these reconciliations. Notwithstanding the above, THE ASSOCIATION
shall, within 60 days commencing from the effective date of the transfer of a
Participating Account to NMS hereunder, be responsible for resolving all
discrepancies in premiums and enrollment for that Participating Account which
occurred prior to the date of the transfer, including discrepancies resulting
from differences in the timing for processing of enrollment and eligibility
data, data entry inaccuracies and retroactive enrollment and eligibility
changes. NMS shall cooperate with THE ASSOCIATION in performing these
reconciliations.
2.6.2 5500 and 1099 Reporting. Each calendar year and only one time
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each calendar year, NMS will provide to each Participating Account and/or broker
or representative for each Participating Account the information related to the
Program(s) to be used for preparation of a premium summary report reflecting
annual premiums paid by each Participating Account for Schedule A production of
IRS Forms 5500 and 1099. NMS will be responsible for providing premium summary
data for the period during which NMS performed Administrative Services for the
Participating Account.
2.7 Customer Service.
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2.7.1 Toll-Free Number. NMS shall make telephone support available
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to THE ASSOCIATION, Participating Accounts and Participating Plans, via a
dedicated toll-free (800) telephone number available from 7:00 a.m. to 7:00 p.m.
(Central Time) each Business Day. The toll-free number shall be staffed with
NMS personnel trained to answer eligibility, enrollment,
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premium, billing and payment status and other questions related to the
Program(s) and NMS's performance hereunder.
2.7.2 NMS Response. NMS shall promptly respond to all inquiries from
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Participating Plans and Participating Accounts regarding the eligibility,
enrollment, premium, billing and payment status and other issues related to the
Program(s) and NMS's performance hereunder. NMS shall promptly notify THE
ASSOCIATION of any unresolved concerns or problems identified by a Participating
Plan or Participating Account. THE ASSOCIATION shall direct to NMS all inquiries
and concerns regarding the foregoing issues that THE ASSOCIATION receives. THE
ASSOCIATION shall support, and shall use its reasonable efforts to enforce, the
agreed upon resolution of customer service issues.
2.7.3 Issue Tracking System. NMS shall maintain an automated record
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of each issue or problem communicated to NMS's customer service department by a
Participating Account or Participating Plan relating to the Program(s) or to
NMS's services hereunder, including but not limited to telephone calls, e-mail
messages, facsimile or paper communications. The record shall also reflect the
disposition of each such contact. All records created pursuant to this Section
2.7.3 shall be available to THE ASSOCIATION on a confidential basis.
2.8 Implementation Plan.
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2.8.1 Implementation Plan. Attached hereto as Schedule VI is a
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summary of the critical tasks, dates and project resources set forth in the
Implementation Plan mutually developed by the NMS and THE ASSOCIATION which is
intended to produce a prompt and efficient transition to NMS of Program
operations and Administration Services delegated to NMS hereunder. NMS shall be
primarily responsible for implementing the Implementation Plan in a prompt
manner and in accordance with the time schedule set forth in the Implementation
Plan with minimal disruption to the provision of Core and Non-Core Services to
the Participating Accounts and the Participating Plans. NMS shall provide the
project management and issue resolution staff identified in the Implementation
Plan and such other support and resources as are required to fulfill its
responsibilities under the Implementation Plan. For each Participating Account
being transferred hereunder, NMS shall incorporate into BEN-NET(TM) limited
historical Member level and Participating Account enrollment and eligibility
information in THE
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ASSOCIATION's billing system from the initial import from (i) the most recent
anniversary date of that Account's participation in the Program(s) or (ii) 90
days from the Effective Date of this Agreement, whichever historical period is
greater. The process of incorporating the foregoing information into BEN-NET(TM)
shall be completed by the date such Participating Account is transferred
hereunder.
2.8.2 Reimbursement of Association Costs. In the event that all
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Participating Accounts are not fully transitioned to NMS in accordance with the
Implementation Plan by October 31, 1999 and that delay is not attributable to
THE ASSOCIATION's failure to meet its obligations under this Agreement or the
Implementation Plan, NMS shall pay to THE ASSOCIATION all costs incurred by THE
ASSOCIATION to continue to provide Core Services to those untransitioned
Participating Accounts after October 31, 1999, including the salary, benefits,
assigns and overhead for THE ASSOCIATION employees and any compensation for
ASSOCIATION contractors providing those Core Services. THE ASSOCIATION shall
provide to NMS a written accounting of such reimbursable costs, which NMS will
have the opportunity to review. At THE ASSOCIATION's election, such costs shall
be withheld from amounts otherwise payable to NMS hereunder or shall be paid
directly by NMS to THE ASSOCIATION. At no time will these costs include any
consequential costs resulting from NMS not meeting its obligations.
2.9 Rollover of BluesCONNECT Program.
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2.9.1 Termination of BluesCONNECT Agreement. The parties hereby
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agree that the BluesCONNECT Agreement shall terminate as of the close of
business on December 31, 1999. Except as expressly provided in this Agreement,
termination of the BluesCONNECT Agreement shall not relieve the parties of their
respective obligations that are intended to survive termination of the Blues
CONNECT Agreement, including under Section 6.7 thereof, nor shall such
termination constitute a waiver or release of any breach of the BluesCONNECT
Agreement by either party.
2.9.2 Rollover of BluesCONNECT Accounts. Effective as of January 1,
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2000, (i) all BluesCONNECT Accounts under the BluesCONNECT Agreement shall
become Participating Accounts under this Agreement and (ii) NMS shall provide
Core and non-Core Services to those former BluesCONNECT Accounts in accordance
with all of the terms and
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conditions of this Agreement, including the compensation terms set forth in
Schedule I hereto. The foregoing shall not apply to the IKON Account and other
Participating Accounts which receive a limited number of Core and/or Non-Core
Services. Those limited service Accounts shall continue to be handled under the
pricing in place as of the Effective Date of this Agreement.
2.10 Reports and Records.
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2.10.1 Provision of Reports. NMS shall provide the following
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accurate and complete reports to THE ASSOCIATION in the manner set forth herein:
(i) The Standard Reports referenced on Schedule VII hereto
shall be provided in accordance with the requirements set forth therein.
(ii) Upon request by THE ASSOCIATION, a record of all
significant transactions and communications with each Participating Account and
such Account's Members;
(iii) Such additional reports relating to the Program(s)
and/or the services provided by NMS hereunder as are specified from time to time
by THE ASSOCIATION, provided that the parties mutually agree on additional
compensation payable to NMS to generate such reports.
Except as provided in Section 2.10.1(iii) above, NMS shall bear all costs
incurred to create and provide the foregoing reports. All such reports shall be
provided to THE ASSOCIATION electronically and/or by hard copy as directed by
THE ASSOCIATION.
2.10.2 Maintenance of Records and Files. NMS shall create and
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maintain complete records of each Participating Account, including copies of all
payment distributions, Consolidated Xxxx and Self Xxxx invoices, paper
enrollment reports and/or forms, significant correspondence with Participating
Accounts, Participating Plans and/or brokers, and records of all other
significant transactions relating to the Program(s). Such records shall be
maintained for at least seven years from the date of the termination of this
Agreement. Such records may be maintained in an electronic format and/or paper
and shall be preserved in NMS's custody. Such records shall be available for
examination and copying upon request by THE ASSOCIATION. In the event that THE
ASSOCATION'S copying request requires substantial time and effort on NMS's
behalf, THE ASSOCATION shall reimburse NMS for its reasonable expenses related
to the request.
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2.11 Data Information Systems.
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2.11.1 Maintenance of Systems, Personnel. NMS shall maintain
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adequate hardware, software, operating systems and personnel to deliver the Core
Services and Non-Core Services required hereunder, including electronic
connectivity with Participating Plans in the manner and to the extent set forth
in this Agreement. NMS shall ensure that NMS personnel are fully trained in the
hardware, software and operating systems necessary to provide the Core Services
and Non-Core Services in the manner and to the extent set forth in this
Agreement.
2.11.2 Enhancement to BEN-NET(TM). From time to time, THE
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ASSOCIATION may request NMS to make enhancements or modifications to BEN-NET(TM)
to accommodate the unique requirements of THE ASSOCIATION and the Program(s).
The parties shall agree in advance on the terms and conditions of such changes
to BEN-NET(TM), including the price to be charged to THE ASSOCIATION for such
changes and the parties' respective rights and licenses to such changes.
2.11.3 BEN-NET(TM) Training for ASSOCIATION Staff. At THE
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ASSOCIATION's request, NMS shall train designated staff from THE ASSOCIATION
and/or the Participating Plan(s) on the capabilities of BEN-NET(TM) and on other
aspects of the Program(s). The travel and out-of-pocket expenses incurred by NMS
in providing that training following the completion of the implementation of the
Implementation Plan shall be paid by THE ASSOCIATION in accordance with the
procedures set forth in Schedule I hereto.
2.11.4 Backup and Disaster Recovery. NMS shall maintain a business
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resumption plan (the "Business Resumption Plan") attached hereto as Schedule
VIII. NMS represents and warrants that the Business Resumption Plan shall ensure
that computer and telephone systems essential to the performance by NMS of its
duties under this Agreement shall not be inoperational for more than 24 hours,
other than as a result of natural disasters or other causes not within the
reasonable control of NMS. NMS will give written notice in advance of any
substantial changes NMS intends to make to the Business Resumption Plan.
2.11.5 Y2K Compliance. NMS shall assist THE ASSOCIATION and Accounts
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to enable electronic data files from Participating Accounts that transmit
electronically to be Year 2000 Compliant (as defined in Section 9.2 below).
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2.12 Performance Standards.
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2.12.1 Performance Standards. Commencing on the Effective Date, NMS
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shall use reasonable efforts to meet or exceed the Target Performance Threshold
percentages set forth in Schedule IV hereto. Commencing November 1, 1999, the
Penalty Percentage for failure to meet such Target Performance Thresholds
described in Schedule IV shall go into effect and be applied to NMS's
performance of its duties hereunder commencing on that date. If NMI fails to
achieve the Schedule IV Target Performance Threshold for a standard during a
given quarter, NMI will pay a percentage penalty as indicated in the Schedule IV
Penalty Percentage column. The penalty percentage represents that percentage by
which the corresponding quarter's billed fees will be penalized. Upon receipt of
such xxxx, NMS shall immediately remit the amount of such penalties to THE
ASSOCIATION.
2.12.2 Minimum Performance Threshold. Commencing on the Effective
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Date, NMS shall satisfy the Minimum Performance Threshold referenced in Schedule
IV hereto which reflects the minimum level of acceptable performance by NMS of
its duties hereunder. Commencing November 1, 1999, the penalty points for
failure to achieve the Minimum Performance Threshold described in Schedule IV
shall go into effect and be applied to NMS's performance of its duties hereunder
commencing on that date. If NMI fails to achieve the Minimum Performance
Threshold for a standard during a given quarter, NMI will be assessed penalty
points equal to the number set forth in the Schedule IV Penalty Points column.
If for any given quarter, the total penalty points assessed is equal to or
greater than 20, NMI will pay a penalty equal in amount to that corresponding
quarter's total billed fees. The Penalty Percentage shall be assessed and billed
to NMS on a quarterly basis, in arrears. Upon receipt of such xxxx, NMS shall
immediately remit the amount of such penalties to THE ASSOCIATION.
2.12.3 Modification. The terms and conditions set forth in Schedule
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IV may be modified from time to time by THE ASSOCIATION'S board or any
ASSOCIATION committee to which the board delegates such functions. Requested
modifications will be mutually agreed upon by THE ASSOCIATION and NMS.
2.13 Capabilities Support. At the request and direction of THE
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ASSOCIATION, NMS will assist THE ASSOCIATION to provide information to Accounts
and Participating Plans about NMS's capabilities to perform Core Services and
non-Core Services. NMS's assistance
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may include, but shall not be limited to, site visits, system demonstrations and
participation in proposal responses and presentations, as THE ASSOCIATION may
reasonably request.
2.14 Non-Blue Health Plans. Both parties agree that certain Participating
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Accounts may desire NMS to provide services similar to those listed herein to
non-Blue Cross, Blue Shield or Blue Cross Blue Shield Health Plans. In such
situations, NMS may, upon THE ASSOCIATION's request, develop and implement the
necessary interfaces to accommodate such requests. Fees charged in conjunction
with such services provided by NMS shall be outlined in a separate agreement
acceptable to NMS and THE ASSOCIATION.
2.15 Modification to Services. The parties recognize and agree that from
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time to time it may be appropriate to modify the scope and manner that NMS
provides Core and non-Core Services hereunder to better and more efficiently
serve the needs of the Participating Accounts and Participating Plans, including
modifications made to take advantage of technology enhancements available to
NMS, to address the changing needs and expectations of Accounts and Health Plans
and to adopt improvements to the delivery of services resulting from the
experience of the parties hereunder. A party who wishes to request a
Modification to this Agreement shall advise the other party in writing of the
requested Modification and the rationale for making that Modification. The
parties agree to thereafter negotiate in good faith to attempt to reach
agreement on the terms and conditions for incorporating that Modification as a
written amendment to this Agreement.
SECTION 3
DUTIES OF THE ASSOCIATION
During the term of this Agreement, THE ASSOCIATION shall provide the
following services hereunder:
3.1 Information. THE ASSOCIATION and/or the Participating Plans shall
-----------
retain responsibility for informing potential new Accounts and Health Plans
about the Program(s). All costs incurred associated with providing such
information, including the cost of issuing proposals, will be borne by the party
providing the information. The level, manner, effort and scope of efforts under
this Section 3.1, including the choice of Accounts and Health Plans to which
such information is provided, shall be determined by THE ASSOCIATION and/or the
Participating Plans in their sole discretion.
15
3.2 Relationships with Health Plans. THE ASSOCIATION shall retain
-------------------------------
responsibility for managing relationships with Participating Plans. THE
ASSOCIATION shall use its reasonable efforts to resolve any Participating Plan
issues, and to enforce the Participating Plans' compliance with the Program
Rules. All agreements with Participating Plans relating to the Program(s) shall
be entered into directly with THE ASSOCIATION, on terms and conditions
acceptable to THE ASSOCIATION.
3.3 Account Relationships. THE ASSOCIATION and/or Participating Plans
---------------------
shall retain responsibility for managing business relationships with the
Participating Accounts and shall act as national account manager for all
Participating Accounts. THE ASSOCIATION shall make reasonable efforts to request
all Self-Xxxx Accounts to convert to a Consolidated Xxxx methodology on or
before the Participating Account's initial and subsequent renewal dates.
3.4 Program Rules. THE ASSOCIATION shall be responsible for development
-------------
and maintenance of Program Rules.
3.5 Electronic Connectivity. THE ASSOCIATION will provide the
-----------------------
specifications for NMS to establish electronic interfaces between BEN-NET and
the eligibility systems of the Participating Plans, as set forth in Section 2.1
above. This connectivity will support data flows between BEN-NET and the
Participating Plans, in accordance with THE ASSOCIATION'S specifications
described in Schedule III, and as modified by THE ASSOCIATION from time to time.
Modifications to existing file formats or file transmission methods will be
mutually agreed upon by THE ASSOCIATION and NMS.
3.6 Account Set-up. THE ASSOCIATION shall provide to NMS accurately,
--------------
completely, in writing and in a timely manner the necessary Participating
Account, Participating Plan and other information in order for NMS to provide
the Administrative Services hereunder. This includes, but is not limited to,
group structure, premium amounts, other administrator fees, Participating
Plan(s) contact information, and Participating Account contact information.
3.7 Unsupported Functions. THE ASSOCIATION will continue to provide
---------------------
Administrative Services related to the Program(s) that are not designated as NMS
responsibilities under this Agreement.
16
3.8 Payment to NMS. THE ASSOCIATION shall reimburse NMS according to
---------------
Section 5 and Schedule I and any other fees pursuant to this Agreement. Any fees
payable to NMS shall ultimately be the responsibility of THE ASSOCIATION.
SECTION 4
MAINTENANCE OF BANK ACCOUNT AND DISTRIBUTION OF FUNDS
4.1 Bank Account. THE ASSOCIATION shall maintain one or more Bank
------------
Accounts at a Bank of THE ASSOCIATION's choice dedicated to the receipt of
moneys from Participating Accounts in connection with Core Services and Non-Core
Services provided under the Program(s). All monies in the Bank Account shall be
held in a fiduciary capacity by THE ASSOCIATION on behalf of the Participating
Plans, and NMS shall be entitled to direct the application of such moneys only
in strict accordance with the provisions of this Agreement. NMS shall not have
the power to assign, transfer, securitize or pledge the monies in the Bank
Account in any fashion, or to use the funds in the Accounts for any purpose
other than as expressly authorized hereunder.
4.2 Records of Bank Account. THE ASSOCIATION shall maintain complete and
-----------------------
accurate records of all deposits to and disbursements from the Bank Account.
4.3 NMS Payment Reconciliation. NMS shall verify that each Participating
--------------------------
Account's payment matches the corresponding invoice, noting any payment
adjustments. When a Participating Account's payment does not match the relevant
invoice, NMS shall contact the Participating Account to attempt to resolve the
discrepancy. If possible, NMS shall apply the Participating Account's payment to
the amount then due. NMS shall also maintain clear and accurate accounting
records of amounts due to Participating Plans, THE ASSOCIATION, NMS and other
administrators.
4.4 Disbursement of Funds.
---------------------
4.4.1 Reporting. On each Business Day, NMS shall notify THE
---------
ASSOCIATION of the amounts to be disbursed from the Bank Account to the
following parties: (i) Participating Plans for premium and other moneys due;
(ii) THE ASSOCIATION for authorized administrative fees; (iii) NMS for
authorized fees due; (iv) other administrative, brokers and service providers
for applicable fees, if any, and (v) any other disbursements authorized by this
Agreement. The notice given to THE ASSOCIATION by NMS shall be
17
accurate and complete and shall include all data required for the generation of
a check or wire transfer of such disbursements and shall provide such
information in a format in accordance with Schedule IX to enable THE ASSOCIATION
to make a single consolidated disbursement to each Participating Plan and will
also be compatible with THE ASSOCIATION's accounting system.
4.4.2 Approval of Disbursements. THE ASSOCIATION shall authorize the
-------------------------
Bank to make the disbursements referenced in Section 4.4.1 in accordance with
the requirements of this Agreement. THE ASSOCIATION shall be entitled to rely on
the information provided by NMS under Section 4.4.1 above in making those
disbursements.
SECTION 5
COMPENSATION
5.1 Payment of Compensation.
-----------------------
5.1.1 Fixed Fees. For all Core Services required to be provided by
----------
NMS for the period from the Effective Date through December 31, 1999, NMS shall
be entitled to the compensation set forth in part 1 of Schedule I hereto and on
the terms and conditions and subject to the limitations set forth therein.
5.1.2 Per Subscriber Per Month Charges. Effective January 1, 2000,
--------------------------------
NMS shall be compensated for Core Services provided on and after that date on a
per subscriber per month basis in accordance with Schedule I hereto and on the
terms and conditions and subject to the limitations set forth therein. The per
subscriber per month fees shall be disbursed to NMS when distributions are made
of premiums for that month to the Participating Plans.
5.1.3 Payment for Non-Core Services. Except for the daily export and
-----------------------------
student status generation services which shall be paid in accordance with
Section 5.1.2 hereto, for all non-Core Services provided by NMS, NMS shall
receive such compensation as is agreed upon in writing by the parties.
5.1.4 Cost and Expenses. Except as specifically provided in Schedule
-----------------
I NMS shall be responsible for all out-of-pocket costs and expenses it incurs in
performing its duties hereunder.
5.1.5 Comparable Services to Blue Plans. In the event that NMS
---------------------------------
agrees to provide Core Services or other services substantially equivalent in
substance to the Core Services provided hereunder to any Blue Plan or subsidiary
or affiliate of such Blue Plan at a per
18
subscriber per month rate or other price or rate that is less than the then
current per subscriber per month rate then in effect under this Agreement, the
per subscriber per month rate then in effect under this Agreement and any
subsequent rates hereunder shall retroactively be reduced to that lower rate as
of the date that lower rate was in effect at the other Blue Plan. For purposes
of enforcing the obligations of this Section 5.1.5, NMS shall promptly inform
THE ASSOCIATION of the basic terms of any agreements it enters into with any
Blue Plans. In the event the parties disagree as to whether the foregoing
adjustments are required to be made in a particular case, they will engage a
mutually agreeable third party expert to determine what, if any, such adjustment
in the rates hereunder shall be required. The final determination of such expert
shall be binding upon the parties. The parties shall bear the expenses of such
expert equally.
5.1.6 Comparable Services to Non-Blue Plans. The parties agree to
-------------------------------------
engage in good faith negotiations with the intent and goal of reaching agreement
on reductions in the rates charged by NMS hereunder and/or expansion in the
scope of Core Services provided by NMS hereunder to reasonably assure that the
rates charged to THE ASSOCIATION for the scope of Core Services under this
Agreement are competitive with those NMS charges to any Non-Blue Plans.
SECTION 6
TERM AND TERMINATION
6.1 Initial Term and Renewal. The initial term of this Agreement (the
------------------------
"Initial Term") shall commence on the Effective Date and will expire at 11:59
p.m. on December 31, 2002. This Agreement may be extended or renewed with the
written consent of both parties.
6.2 Termination for Breach. This Agreement may be terminated by either
----------------------
party at any time in the event of a material breach of this Agreement by the
other party and the failure of the breaching party to fully cure or correct such
breach, within 60 days after its receipt of written notice of such breach. Upon
receipt of such written notice, the breaching party shall promptly advise the
other party in writing of its specific plan to cure such breach.
6.3 Plan, Participating Account and Member Noncompliance Not a Breach.
-----------------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, THE ASSOCIATION
shall not be deemed to be in breach of this Agreement as a result of the failure
by any Participating Plan, Participating Account or Member's failure to comply
with the Program Rules or its obligation or
19
failure to pay the fees it owes under the Program(s). Under the Program(s), if a
Participating Plan, Participating Account or Member fails materially to comply
with the Program Rules, or commits any other material breach of its obligations
with respect to the Program(s), then NMS's remedy for such material failure or
breach shall be to request THE ASSOCIATION to disqualify and remove such
Participating Plan, Participating Account or Member from the Program(s) and/or
to request additional compensation if such noncompliance following that request
results in extra costs to NMS.
6.4 Performance Below Termination Standards. THE ASSOCIATION may
---------------------------------------
terminate the Agreement immediately upon written notice to NMS if NMS fails to
meet the Minimum Performance Threshold for any two consecutive calendar months
or for any three months of any calendar year.
6.5 Insolvency. This Agreement may be terminated by either party if the
----------
other party (i) applies for or consents to the appointment of a receiver,
trustee, or liquidator of all or a substantial portion of its assets; (ii) files
a voluntary petition in bankruptcy or admits in writing its inability to pay its
debts as they become due; (iii) makes a general assignment for the benefit of
creditors; or (iv) files a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law; or if an
order, judgment, or decree will be entered by a court of competent jurisdiction,
on the application of the creditor, adjudicating the party bankrupt or insolvent
or approving a petition seeking reorganization of the party or appointment of a
receiver, trustee, or liquidator of all or a substantial portion of the party's
assets.
6.6 Termination Due to Changes in Law. The contract may be terminated in
----------------------------------
accordance with paragraph 10.20.
NMS 6.7 Post Notice of-Termination Duties. Upon termination of this
---------------------------------
Agreement, the responsibilities of the parties shall be as follows:
(a) Group Application Review. Review of group applications and group
------------------------
set-ups in the BEN-NET(TM) system by NMS shall cease on a date to be determined
by THE ASSOCIATION not later than the effective date of the termination of the
Agreement. Any group applications received by NMS subsequent to such date shall
be sent to THE ASSOCIATION via facsimile and first-class mail within two (2)
Business Days of receipt.
20
(b) Enrollment Processing. New enrollment of Participating Accounts
---------------------
and Eligible Employees by NMS shall cease on a date to be determined by THE
ASSOCIATION but in no event later than the effective date of the termination.
Any Enrollment Forms received by NMS subsequent to such date shall be sent to
THE ASSOCIATION via facsimile and first-class mail within two (2) Business Days
of receipt.
(c) Payments. THE ASSOCIATION shall pay for any services performed by
--------
NMS after the effective date of termination of the Agreement, at rates mutually
agreed to by the parties, subject to any rights of offset or credit authorized
under the Agreement.
(d) Transition. NMS shall provide commercially reasonable cooperation
----------
to THE ASSOCIATION or any third party retained by THE ASSOCIATION to assume the
performance of the Core Services. Such cooperation shall include providing THE
ASSOCIATION and such third party access electronically and/or by paper to all
records and data in NMS's possession pertaining to this Agreement. Any such
third party will be required to abide by any confidentiality provisions as
agreed to hereunder.
6.8 Effect of Termination. Termination of this Agreement shall have no
---------------------
effect upon the rights and obligations of the parties arising out of any
transactions or events (including the processing of all pre-termination claims)
occurring prior to the effective date of final termination, including but not
limited to, the obligations under "Post Notice of Termination Duties" (Section
6.7), "Indemnification" (Section 7.2), "Compliance with Government Mandate"
(Section 8.2), "Representations and Warranties of NMS" (Section 9),
"Confidentiality" (Section 10.7), "Dispute Resolution" (Section 10.9), and
"Quality and Financial Audits" (Section 10.11).
SECTION 7
INSURANCE, INDEMNIFICATION AND FIDUCIARY STATUS
7.1 Insurance. NMS shall procure and maintain, at its own sole expense,
---------
errors and omission and general liability insurance and other insurance and
surety or fidelity bonds as may be necessary to protect itself and its
employees, agents, or representatives against any claims, liabilities, damages
or judgments and costs of defense that arise out of services provided by or to
be provided by NMS or its employees, agents or representatives in the discharge
of NMS's responsibilities under this Agreement. NMS shall provide proof of such
insurance to THE
21
ASSOCIATION upon request and shall notify THE ASSOCIATION if such insurance
coverage is terminated or materially altered.
7.2 Indemnification.
---------------
7.2.1 By NMS. NMS shall defend, hold harmless and indemnify THE
------
ASSOCIATION and the Participating Plans from any claims, liabilities, damages or
judgments asserted against, imposed upon or incurred by THE ASSOCIATION and/or
the Participating Plans or that arise out of NMS's negligence, intentional
wrongdoing, breach of its responsibilities under this Agreement or in failure to
obtain or maintain "Applicable Licenses" as set forth in Section 8.1.2 below.
The indemnification granted under this Section 7.2.1 expressly includes
indemnification with respect to expense costs, legal fees, defense costs, fines,
penalties, court costs, or amounts paid in settlement or in satisfaction of any
judgment or award.
7.2.2 By The Association. THE ASSOCIATION agrees to defend, hold
------------------
harmless, and indemnify NMS from any claims, liabilities, damages or judgments
asserted against, imposed upon or incurred by NMS that arise out of THE
ASSOCIATION's negligence, intentional wrongdoing, or breach of its
responsibilities under this Agreement. The indemnification granted under this
Section 7.2.2 expressly includes indemnification with respect to expense costs,
legal fees, defense costs, fines, penalties, court costs, or amounts paid in
settlement or in satisfaction of any judgment or award.
7.2.3 Procedure for Asserting Indemnification Claims. If any claim
----------------------------------------------
or liability is asserted in writing against a party entitled to indemnification
under this Section 7 (the "Indemnified Party") which would give rise to a claim
under this Section 7, the Indemnified Party shall notify the agent of the person
providing the indemnity ("Indemnifying Party") in writing of the same within
fifteen (15) days of receipt of such written assertion of a claim or liability.
The Indemnifying Party shall have the right to defend a claim and control the
defense, settlement and prosecution of any litigation. If the Indemnifying
Party, within thirty (30) days after notice of such claim, fails to defend such
claim, the Indemnified Party will (upon further notice to the Indemnifying
Party) have the right to undertake the defense, compromise or settlement of such
claim on behalf of and for the account and risk of the Indemnifying Party,
subject to the right of the Indemnifying Party, through its agent, to assume the
defense of such claim at any time prior to settlement, compromise or final
determination thereof. Anything in
22
this Section 7.2.3 notwithstanding, (i) if there is a reasonable probability
that a claim may materially and adversely affect the Indemnified Party other
than as a result of money damages or other money payments, the Indemnified Party
shall have the right, at its own cost and expense, to defend, compromise and
settle such claim, and (ii) the Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant to the Indemnified Party a release from
all liability in respect to such claim. All parties agree to cooperate as
necessary in the defense of such matters.
7.3 Fiduciary Status. THE ASSOCIATION and NMS acknowledge and agree that
-----------------
NMS shall not be a fiduciary within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, or any state or federal law with
respect to any Plan. NMS shall not have any discretion with respect to the
management or administration of any Health Plan or with respect to determining
or changing the rules or policies pertaining to eligibility or entitlement of
any Member or Subscriber in any Health Plan to benefits under such Health Plan.
NMS also shall not have any control or authority with respect to any assets of
any Health Plan, including the investment or disposition thereof. All discretion
and control with respect to the terms, administration or assets of any Health
Plan shall remain with the named fiduciaries under such Health Plan.
23
SECTION 8
REGULATORY AND CONTRACTING COMPLIANCE
8.1 Regulatory Compliance.
---------------------
8.1.1 Applicable License. NMS shall be solely responsible for
------------------
ensuring that it complies with all applicable federal, state or local laws and
regulations, including all applicable requirements under state insurance laws,
federal and state privacy laws, government procurement and contracting laws, the
Health Insurance Portability and Accountability Act of 1996 and for obtaining
and maintaining all federal, state and local licenses, permits, registrations,
certifications and approvals required for it to perform all of its duties
hereunder, and as may be required under applicable state insurance laws and
regulations governing the subject matter of this Agreement (the "Applicable
Licenses").
8.1.2 Necessity Determination. In the event the parties disagree as
-----------------------
to the necessity for and/or type of state license(s) required to be obtained by
NMS under state insurance laws or regulations, the parties may agree to jointly
contact the relevant state insurance department(s) to obtain a written opinion
from such state insurance department(s) as to whether NMS is required to obtain
such licenses in order to fulfill its obligations hereunder. The parties agree
to abide by the terms and conditions of any such written opinion. In the event
the parties disagree as to the necessity for and/or type of state insurance
license(s) required to be obtained by NMS under state insurance laws or
regulations, and the parties choose not to contact the relevant state insurance
department(s) for a written opinion as to the necessity for licensure or any
state department of insurance refuses to provide such opinion, NMS shall
indemnify THE ASSOCIATION and/or any of the Participating Plans, in accordance
with the indemnification provisions set forth in Section 7.2 above herein, for
any fines, penalties or other monetary damages or judgments levied against THE
ASSOCIATION and/or any of the Plans by any state insurance department arising
out of and as a result of NMS's failure to have obtained such Applicable
License. In such an event NMS shall immediately commence the appropriate license
process under state insurance laws and regulations.
8.1.3 Information Regarding Pending License Applications. In the
--------------------------------------------------
event NMS has commenced the license process under state insurance laws prior to
or after the Effective Date of this Agreement, NMS shall ensure that THE
ASSOCIATION is kept apprised of the status and process of all such license
activities.
24
8.2 Compliance with Government Mandate. NMS acknowledges and agrees that,
----------------------------------
as a contractor with the U.S. Federal Government, THE ASSOCIATION and its
subcontractors are required to comply fully with the terms and conditions of the
Federal Government's "Addendum to Subcontract Under the Health Insurance for the
Aged and Disabled Act (42 U.S.C., chapter 7, Supp., as Amended)" the terms of
which are attached hereto and incorporated herein as Schedule X, and NMS agrees
that it shall so comply.
8.3 Compliance with Code of Business Conduct. THE ASSOCIATION has adopted
----------------------------------------
a Code of Business Conduct ("Code") which governs the conduct of every
ASSOCIATION employee and establishes specific ethical standards for its
employees. Certain significant provisions of the Code include conflict of
interest, gifts or gratuities, kickbacks, entertainment, improper payments, and
protecting information. A copy of the Code has previously been made available
to NMS. NMS agrees that neither it nor any of its employees, representatives or
agents will engage in any conduct that will cause any ASSOCIATION employee to
act contrary to or in contravention of the Code.
8.4 Excluded Vendors. NMS warrants that it is not, as of the Effective
----------------
Date of this Agreement, (i) excluded in any fashion for any reason from
participation in the Medicare, Medicaid or any other federally-funded health
programs, nor (ii) controlled by a person or entity that is so excluded. NMS
shall notify THE ASSOCIATION within twenty-four (24) hours if it receives
written notice from a federal agency with proper authority, or otherwise becomes
aware, that it or a controlling person or entity is so excluded regardless
whether such a determination is appealable by NMS or controlling person or
entity. Such exclusion shall be grounds for termination of this Agreement by THE
ASSOCIATION in a manner and in a timeframe deemed appropriate by THE ASSOCIATION
in its sole discretion, notwithstanding any other provisions of this Agreement.
25
SECTION 9
REPRESENTATIONS AND WARRANTIES OF NMS
9.1 General Representations and Warranties. NMS hereby represents and
--------------------------------------
warrants to THE ASSOCIATION that the following statements are true, complete and
correct.
(a) NMS is a duly formed corporation, and is validly existing and is
duly qualified to carry on its business as a foreign corporation in each
jurisdiction where such qualification is legally required.
(b) The execution and performance of this Agreement by NMS has been
duly authorized by NMS and has been validly executed by an appropriate officer
of NMS.
(c) As referenced in Section 8.1 above, NMS has all Applicable
Licenses required to perform all of the duties required under this Agreement and
all such Applicable Licenses are in good standing and are not subject to nor
threatened with any suspension, termination or non-renewal or other adverse
action.
(d) NMS is not in violation of and has complied with all applicable
laws and there are no suits, investigations, or legal, administrative or other
proceedings pending or threatened against NMS that would have a material effect
on NMS's ability to perform under this Agreement. NMS shall notify THE
ASSOCIATION promptly on becoming aware of any such threatened or ongoing
proceedings.
(e) The BEN-NET system and the use of and participation in the
Program(s) by THE ASSOCIATION, the Participating Plans, the Participating
Accounts and the Members do not and will not infringe or misappropriate any
patent, copyright, trademark, trade secret or other proprietary right of any
third party.
9.2 Year 2000 Representation and Warranty. NMS represents and warrants
-------------------------------------
that the products and services provided by NMS to THE ASSOCIATION and the
Participating Accounts and Participating Plans will accurately process date/time
data (including, but not limited to, calculating, comparing, and sequencing)
from, into and between the twentieth and twenty-first centuries, and will
correctly handle leap year calculations (the foregoing hereafter "Year 2000
Compliant"). NMS shall provide reasonable assistance as requested by THE
ASSOCIATION to demonstrate that such products and services are Year 2000
Compliant. Such cooperation may include testing with simulated data configured
to represent dates from, into and between the twentieth and twenty-first
centuries.
26
9.3 Survival of Representations and Warranty; No Limitation of Remedy.
-----------------------------------------------------------------
Notwithstanding any provision of the Agreement to the contrary, the
representations and warranties set forth in this Section 9 shall not be limited
by any limitation of remedy, limitation of damages or waiver set forth in the
Agreement.
SECTION 10
GENERAL PROVISIONS
10.1 Location of Operations. Except for the site visits referenced in
----------------------
Section 2.1, NMS will provide Core and Non-Core Services from its office(s) in
Minnesota. At the request of THE ASSOCIATION and upon reasonable notice, NMS
shall make available a representative in Chicago or at any other location
specified by THE ASSOCIATION, to address issues arising under this Agreement or
the general administration of the Program(s).
10.2 Time of Performance. Time is of the essence for any provision in this
-------------------
Agreement in which time is a factor. For purposes of this Agreement. if an
obligation is required to be performed on or by a specific date or a specific
day of the month, and such date or day of the month falls on a day other than a
Business Day, then such obligation shall be performed on or by the next
succeeding Business Day.
10.3 Program Rules. THE ASSOCIATION, in consultation with NMS, has adopted
-------------
and implemented Program Rules to govern the administration of the Program(s).
THE ASSOCIATION may, in consultation with NMS, add to or modify current Program
Rules from time to time, and shall notify NMS promptly of any changes in the
Program Rules. Notwithstanding any consultation with NMS, the development,
implementation and modification of the Program Rules shall be in the sole
discretion of THE ASSOCIATION. If there are changes in the Program Rules that
substantially affect the cost to NMS of performing its duties hereunder, the
terms and payments for any resulting changes in cost shall be mutually agreed
upon by THE ASSOCIATION and NMS.
10.4 Designated Representatives. In order to avoid unreasonable delay in
--------------------------
the provision of the services to be rendered pursuant to this Agreement, NMS and
THE ASSOCIATION shall each designate a specific representative to perform the
day-to-day administration of the Program(s) and to serve as the primary contact
for communications between the parties. Each party shall provide reasonable and
prompt assistance to the other party to address any concerns or
27
problems relating to the Program(s) and/or this Agreement identified by NMS, THE
ASSOCIATION, a Participating Plan or Participating Account. THE ASSOCIATION
shall provide reasonable effort and support in assisting NMS to cause the
Participating Plans and/or Participating Accounts to promptly respond to all
inquiries from NMS.
10.5 Waiver. Failure to insist upon strict compliance with any terms,
-------
covenants or conditions of this Agreement at any one time shall not be deemed a
waiver of such term, covenant or condition at any time nor shall any waiver or
relinquishment of any right or power herein at any time be deemed a waiver or
relinquishment of the same or any other right or power at any other time.
10.6 Non-Solicitation.
----------------
10.6.1 Employees. Each party agrees that unless mutually agreed to
---------
otherwise, it shall not solicit for employment or employ any person who is then
employed by the other party in any capacity, including without limitation, as an
employee or consultant, during the term of this Agreement and for two years
thereafter.
10.6.2 Accounts.
---------
a. During the period that a Participating Account is in the
Program(s) and for 6 months thereafter (the "Restricted Period"), NMS and its
subsidiaries and affiliates shall not, directly or through any agent or
representative, knowingly target market, solicit or offer to provide or contract
to provide Comparable Services (as defined below) to that Participating Account,
except that NMS and its subsidiaries and affiliates can offer to provide or
contract to provide such Comparable Services to that Participating Account if it
has followed 10.6.2b below. Notwithstanding the foregoing, NMS and its
subsidiaries and affiliates shall be able to solicit, offer to provide and/or
contract to provide Comparable Services to any Participating Account that by
reason of merger, acquisition or other business combination becomes an affiliate
or subsidiary of an Account for which NMS is providing Comparable Services or to
any Account that NMS is already providing Comparable Services at the time that
Account becomes a Participating Account.
b. If NMS or its subsidiary or affiliate directly or
indirectly receives an unsolicited request to provide Comparable Services to an
Account (the "Request") during the Restricted Period for that Participating
Account, NMS shall notify THE ASSOCIATION of that Request and the details
thereof and request a response from THE ASSOCIATION. THE ASSOCIATION shall
promptly respond to NMS by specifying the conditions and terms on which NMS may
respond to that Request, which conditions and terms shall not be commercially
unreasonable. THE ASSOCIATION may withhold its consent for NMS to respond if in
its reasonable judgement the response to the Request would result in the current
participation in the Program(s) by that Participating Account to be adversely
affected.
28
c. Comparable Services shall mean administrative services
that are the same or substantially similar to the Core Services under this
Agreement.
10.7 Confidentiality. The parties have executed the confidentiality
---------------
agreement dated as of March 16, 1999 and the parties agree that the terms of
that confidentiality agreement are incorporated and are a part of this Agreement
as if such terms were restated herein.
10.8 Intellectual Property. Nothing contained in this Agreement shall
---------------------
confer to THE ASSOCIATION any property rights, proprietary interest or licenses
in the software, written materials, techniques or know-how used by NMS and its
BEN-NET/TM/ system.
10.9 Dispute Resolution.
------------------
a. Negotiation. Except as provided in Section 10.8(d) below, any
-----------
dispute, controversy or claim between THE ASSOCIATION and NMS arising out of or
related to the existence, interpretation, performance or breach of this
Agreement, whether in tort, contract or otherwise (a "Dispute"), will be
referred to the parties' designated representatives, who will attempt to resolve
the Dispute by good faith negotiation. If the designated representatives are
unable to resolve the Dispute within fifteen (15) business days, either party
may submit the Dispute for binding arbitration in accordance with Section
10.9(b).
b. Arbitration Procedure. If any Dispute cannot be resolved by
---------------------
negotiation as set forth in Section 10.9(a), either party may submit the Dispute
to be resolved by binding arbitration. The arbitration shall be in accordance
with the rules of the American Arbitration Association or such alternative
dispute resolution service as agreed by the parties. The arbitration shall be
conducted in Chicago, Illinois. Arbitration shall be conducted by three (3)
arbitrators reasonably acceptable to the parties, each of NMS and THE
ASSOCIATION designating one (1) arbitrator and such arbitrators selecting the
third arbitrator. The arbitrators shall be bound by applicable state and federal
law and shall issue a written opinion setting forth findings of fact and
conclusions of law. The arbitrators shall have the power to grant all legal and
equitable remedies provided by law except that the arbitrators shall not award
punitive damages. The parties expressly agree and covenant to be bound by the
decision of the arbitrators
29
as a final determination of the matter in dispute. Judgment upon the
arbitrators' decision may be entered and enforced in any court of competent
jurisdiction.
c. Arbitration Fee. The parties agree to share equally the
---------------
administrative fee as well as the arbitrators' fees, if any, unless otherwise
assessed by the arbitrator. The administrative fee shall be advanced by the
party who submits the Dispute to arbitration, subject to final apportionment by
the Arbitrators in the award.
d. Equitable Remedies. Nothing in this Agreement shall prevent
------------------
either party from seeking emergency equitable relief, such as temporary
injunctive relief, from a court of proper jurisdiction, including for breach of
Section 10.6.
10.10 Binding Effect. This Agreement and the rights, covenants,
--------------
conditions and obligations of the respective parties and any instrument or
agreement executed pursuant to this Agreement shall be binding upon the parties
and upon the successors, assignees and legal representatives of the respective
parties.
10.11 Quality and Financial Audits.
----------------------------
a. Financial Audits. NMS shall maintain adequate books, accounts
----------------
and records, and prepare all financial statements in compliance with the rules
of any governmental or regulatory authority having jurisdiction over NMS, and
permit employees or agents of THE ASSOCIATION at such reasonable times to
inspect NMS's facilities, and to examine, audit and make copies and memoranda of
NMS's books, accounts and records which are related to this Agreement.
b. Quality Audits. THE ASSOCIATION may audit and examine records
--------------
and accounts which pertain, directly or indirectly, to any services provided by
NMS hereunder. NMS shall cooperate with THE ASSOCIATION or its auditors;
however, such audit shall not unduly interfere with the NMS conduct of its
business. NMS shall be reimbursed for its out-of-pocket expenses incurred in
support of the audit.
c. Audit Participants. Any audit review may be undertaken directly
------------------
by THE ASSOCIATION or by third parties engaged by THE ASSOCIATION, including
accountants and consultants. NMS shall cooperate fully with THE ASSOCIATION or
any such third party in connection with the audit review. Any third party
auditor shall not be involved in or be subsidiary to a business engaged in
activities competitive to NMS.
30
d. NMS Review of Audits. NMS shall have the opportunity, prior to
--------------------
the release of any audit report, to review a draft of such report and to include
in the report its responses to issues raised by the report.
10.12 Right to Contract. Nothing in this Agreement shall preclude THE
------------------
ASSOCIATION from contracting with third parties to provide Administrative
Services that are the same or substantially similar to the Core Services in
connection with Program(s) other than the "HMO stitcher Program(s)" as that term
is defined below. THE ASSOCIATION will not contract with other third parties to
provide Administrative Services that are the same or substantially similar to
the Core Services in connection with "HMO stitcher Program(s)," except in the
event THE ASSOCIATION (1) gives notice of termination for failure to perform in
accordance with Section 6.4, then this restriction shall no longer apply as of
the date such notice of termination is given or, (2) THE ASSOCIATION gives
notice of termination for breach in accordance with Section 6.2, then this
restriction shall no longer apply as of 30 days after such notice of breach is
given. For purposes of this paragraph, "HMO stitcher Program(s)" shall mean
Program(s) through which Blue Plans separately underwrite any HMO or HMO-based
type of health insurance products which they provide to Accounts and in
connection with THE ASSOCIATION provides centralized Administrative Services
(i.e. the current HMO Blue USA, BluesCONNECT and Medicare Blue USA Programs).
10.13 Headings. All headings are for convenience of reference only.
--------
10.14 Assignment. Neither party may assign, subcontract or delegate any
----------
of its rights, duties or obligations hereunder without the prior written consent
of the other party, which consent may be withheld in its sole discretion,
however, upon written notice to the other party, either party may assign this
Agreement to a successor in title to substantially all of its business or
assets.
10.15 Entire Agreement; Amendments and Modifications. This Agreement and
----------------------------------------------
any documents expressly included by reference and the BluesCONNECT Agreement are
the full and complete expression of the understandings between NMS and THE
ASSOCIATION and supersede and replace any prior agreements between the parties.
No amendment or modification to this Agreement shall be binding upon the parties
unless it is in writing and signed by both parties.
31
10.16 Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Illinois, without regard to principles
of conflict of law.
10.17 Notices. Any notice required under this Agreement shall be sent to
-------
the parties at the following addresses, or at such other address as such party
may specify in writing from time to time via US Mail Certified Mail return
receipt requested or via Federal Express:
To THE ASSOCIATION:
Blue Cross Blue Shield Association
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: President and Chief Executive Officer, Xxxxxxx X. Xxxxx
With copies to: Executive Director, National Managed Care
Services, Xxxxx Xxxxx; and General Counsel, Xxxxx
X. Xxxxxx, Esq.
To NMS:
Network Management Services, Inc.
0000 Xxxxxxx Xxxx.
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
With copies to: Chief Financial Officer, Xxxxx X. Xxxxxxxx
Any notice under this Agreement shall be deemed received when the receiving
party actually receives the notice.
10.18 Relationship of Parties. NMS is an independent, licensed contractor
-----------------------
to THE ASSOCIATION and neither party is a partner, agent or joint venturer of
the other party. Each party is solely responsible for the acts and omissions,
control and direction of its own employees.
10.19 Counterparts. This Agreement may be executed in counterparts.
------------
10.20 Changes in Law. In the event that any provision of this Agreement
---------------
is not deemed to be in compliance with any state or federal law, regulation,
bulletin, regulatory agency policy, or the like, governing the subject matter
hereof, this Agreement shall be automatically amended to so conform with such
law, regulation, bulletin or regulatory agency policy. To the extent that the
automatic amendment described in this Section 10.20 is the result of a change in
any state or federal law, regulation, bulletin, regulatory agency policy, or the
like, that occurred after the
32
Effective Date of this Agreement and creates a material adverse change of either
party's duty hereunder, the parties agree to negotiate in good faith to attempt
to reach agreement on the terms and conditions for incorporating such change in
law as a written amendment to this Agreement. In the event the parties cannot
reach agreement on changes to the Agreement to fairly address the change in law
prior to the effective date of the change in law, either party may terminate
this Agreement upon 60 days prior written notice or the effective date of the
change in law, whichever occurs first.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the Effective Date.
BLUE CROSS AND BLUE NETWORK MANAGEMENT
SHIELD ASSOCIATION SERVICES, INC.
/s/ Xxxxxxx X. Xxxxx /s/ Xxxx Xxxxxxx
------------------------------- --------------------------
Xxxxxxx X. Xxxxx Xxxx Xxxxxxx
President and Chief Executive Chairman
Officer
33
Schedule I
Part 1 - Core Services
-----------------------
Fixed Fee for Calendar year 1999
In 1999, THE ASSOCIATION shall pay to NMS a fixed fee not to exceed *** for Core
Services provided in connection with Participating Accounts existing as of the
effective date of the Administrative Services Agreement (the "Fixed Fee").
This Fixed Fee will be paid to NMS according to the following schedule:
On or Before Amount Due
-------------------------------
6/1/99 ***
9/1/99 ***
12/1/99 ***
The Fixed Fee shall be reduced as follows. If at the end of calendar 1999, 100%
of the Participating Accounts existing as of the effective date of the
Administrative Services Agreement have not been transferred to NMS (the "Non-
Transferred Members"), for each Non-Transferred Member, the Fixed Fee shall be
reduced by an amount equal to the 1999 Per Subscriber Per Month ("PSPM") rate
(listed below) applicable to the Participating Account for that Non-Transferred
Member multiplied by the number of full and partial calendar months that the
transition of that Participating Account has been delayed beyond the date for
that transition set forth in the implementation plan referenced in Section 2.8
of the Administrative Services Agreement providing NMS causes the delay. The
foregoing adjustment shall be made no later than January 31, 2000 and shall be
paid by credit or offset against other amounts due to NMS under the
Administrative Services Agreement.
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
1999 PSPM Fee Schedule for Adjustments
Participating Account Size PSPM Fee
0-499 Members *** PSPM
500-999 Members *** PSPM
1000-1499 Members *** PSPM
1500-1999 Members *** PSPM
2000-2499 Members *** PSPM
2500-4999 Members *** PSPM
greater than 5000 Members *** PSPM
The Participating Account Size for purposes of determining the above referenced
1999 PSPM Fee Schedule Adjustments shall be based on the number of Members
enrolled in the Participating Account as of December 31, 1999.
The Fixed Fee shall be increased as follows:
In the event that NMS is required to transfer more than *** Participating
Accounts who enroll in the Program after the Effective Date of the Agreement and
prior to January 1, 2000, NMS shall receive an additional PSPM fee in accordance
with the 1999 PSPM Fee Schedule Adjustments for each such new Participating
Account in excess of ***. There shall be an additional electronic discount
of *** PSPM applied to the adjustment. This electronic discount applies to
Participating Accounts with *** or more enrolled subscribers and those
Participating Accounts with less than *** enrolled subscribers if such
Participating Accounts use a standard industry import.
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Fees shall be as set forth below for calendar years after 1999:
Year Core Service Pricing
PSPM
2000 Core PSPM - ***
Electronic Discount - ***
Self Xxxx Surcharge- ***
2001 Core PSPM - ***
Electronic Discount - ***
Self Xxxx Surcharge - ***
2002 Core PSPM - ***
Electronic Discount - ***
Self Xxxx Surcharge- ***
Part 2 - Non-Core Services
--------------------------
. Daily Exports - Send enrollment exports to Participating Plans on a daily
basis rather than semi-weekly basis. Price = *** PSPM
. Student status letter generation - Generate a standard letter prior to the
members maximum age and run a report for Participating Accounts indicating
which members have been terminated due to no response. Price = *** PSPM
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Part 3 - Other Costs/Fees
-------------------------
. THE ASSOCIATION shall reimburse travel expenses incurred by NMS in accordance
with THE ASSOCIATION travel policy guidelines and as approved in advance by
THE ASSOCIATION.
. THE ASSOCIATION shall reimburse NMS for the toll-free customer service
telephone line costs including, but not limited to set-up, ongoing
maintenance, and cost of calls.
. THE ASSOCIATION shall reimburse NMS for 5500 and 1099 reporting at *** per
Participating Account and per agent per year for Schedule A production
. THE ASSOCIATION shall pay NMS for (i) initial import programming costs for
Participating Accounts with less than *** enrolled subscribers; (ii)
requested significant modifications to existing imports; and (iii) initial
import programming costs for Participating Accounts with less than ***
enrolled subscribers that convert from paper to electronic submission after
the Effective Date of this Agreement. Such payments shall be made at a rate
of *** per hour. NMS shall be responsible for all costs associated with
initial import programming for Participating Accounts currently sending
electronic imports under the HMO Blue USA program prior to the Effective Date
of this Agreement.
. THE ASSOCIATION assumes all Bank Account fees.
. THE ASSOCIATION shall pay NMS for export programming costs at a rate of ***
per hour for new export formats or significant alterations to the format
standards identified in Schedule III.
. THE ASSOCIATION shall pay NMS training fees at a rate of *** per hour. The
term training does not include that time during which NMS is marketing NMS's
capabilities. Such training must be pre-approved as training by THE
ASSOCIATION.
. THE ASSOCIATION shall pay for the Environmental Analysis described in Section
2.1.a.(ii) and (iii) of the Agreement at a rate of *** per hour.
. THE ASSOCIATION shall reimburse NMS for costs associated with overnight or
expedited packages.
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule II
OSC Accounts
***
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule III(A)
Program
Electronic Connectivity for Enrollment
Purpose
The purpose of this document is to describe the current process for
communicating enrollment and eligibility information, in an electronic format,
between a Participating Account, NMI and the Participating Plans. Once received
from the Participating Account, NMI uses the enrollment data file to load a
central membership database in order to perform centralized premium billing,
collection and disbursement functions on behalf of the network products. Once
the data file is received at the Participating Plans, the enrollment data is
loaded into their membership systems in order to enroll the Participating
Account's subscribers, issue ID cards and provide ongoing health care coverage.
Program Electronic Connectivity For Enrollment Diagram
The overall approach to electronic connectivity for enrollment supporting both
BluesCONNECT and HMO Blue USA is shown in the diagram contained as Attachment
#1. The diagram shows the electronic data imports coming from the Participating
Accounts to NMI and the electronic data exports going from NMI to Participating
Plans. With both imports and exports, the diagram also shows the data format
options, transmission options, file options and frequency supported by the
Programs.
Electronic Enrollment Imports
In the typical Program arrangement involving electronic imports of enrollment
information, the Participating Account is responsible for producing a single
electronic data file and sending the file to NMI. In some cases the electronic
file is created by the Participating Account from their payroll or human
resource/benefits administration system. In other cases, the electronic file is
created by a third party benefit administrator and sent to multiple network
administrators, including NMI.
A key feature of BluesCONNECT/HMO Blue USA approach to electronic connectivity
is that the Participating Account can submit the data in any reasonable client-
defined data format. The data format, however, must provide all of the necessary
data elements required to establish and maintain the enrollment data at NMI and
the Participating Plans.
The data file can be sent to NMI in a variety of ways, either via electronic
transmission or via US Mail. At the Participating Accounts' option, NMI can
receive electronic data via internet FTP, modem to modem or even via internet
BluesCONNECT and HMO Blue USA
Electronic Connectivity for Enrollment
Page 2
e-mail. Electronic files can also be sent through the US Mail on media such as
diskette, reel tape and tape cartridge. And, finally, the enrollment data can be
sent to NMI on paper enrollment application forms.
The Programs will support receiving electronic enrollment data in either a full
file or a change file format. A full file is a file which contains a record for
each member enrolled from the Participating Account, usually with a transaction
code identifying adds, changes and terminations included in the appropriate
records. In those cases where the transaction codes are not present, the
challenge in receiving and processing a full file is determining the
transactions that need to be processed against the membership file. In this
case, the transactions are identified through a "file compare" process which
identifies the changes since the last update. On the other hand, a change file
usually only includes one record for each add, change or termination
transactions transmitted on the file.
The Programs recommend that each Participating Account provide enrollment
updates at least once each week in order to enable NMI to maintain accurate, up-
to-date files. In addition, weekly files enables NMI to send enrollment data
to the Participating Plans and enables the Participating Plans to process the
transactions and issue ID cards on a timely basis. The Programs will, however,
accommodate other frequencies requested by the Participating Account.
Electronic Enrollment Exports
Once enrollment data is received and processed by NMI, NMI is responsible for
sending the enrollment data on to Participating Plans for processing on
Participating Plan membership systems. The Programs currently support four file
format options for sending electronic enrollment data to the Participating
Plans: ASC X12 834 v4010, ASC X12 834 v3040, ASC X12 834 v3051, and the ITS
Membership Exchange Format (MEF). ASC X12 834 v4010 is the insurance industry
standard for transmitting enrollment data between trading partners and is fully
Y2K and HIPAA compliant. This standard will be replacing ASC X12 834 v3040 and
ASC X12 V3051 during 1999. The ITS MEF is a proprietary Blue Cross and Blue
Shield Association data exchange format developed for use with the BlueCard
Point-of-Service (POS) initiative. Each Participating Plan must elect to
receive all of their enrollment data from NMI in one of these two supported
formats.
NMI will send electronic data to Participating Plans via either BluesNet or the
BluesNet Advantis networks with the choice at the Participating Plan's option.
Data transmitted over BluesNet to Participating Plans uses a software product
called Network Data Mover (NDM) (also known as Direct:Connect), sold and
supported by Sterling Software, to transmit the data. The Participating Plans
electing to receive the data via the BluesNet Advantis network usually use the
BluesCONNECT and HMO Blue USA
Electronic Connectivity for Enrollment
Page 3
EDI-Kit, a software product developed by TSI International, to receive and
download the data.
The Participating Plans that receive data via BluesNet NDM usually "map" the
data directly into legacy application systems that automatically process the
enrollment transactions against the Participating Plan membership system. Once
the enrollment data is received, the Participating Plan is responsible for
sending ASC X12 997 functional acknowledgements back to NMI.
The Participating Plans that receive enrollment data via BluesNet Advantis
usually use the EDI-Kit to download and process the file. The EDI-Kit enables
the Participating Plan to print "smart" paper (electronically printed)
enrollment forms that are then data entered and processed against the membership
system. The EDI-Kit automatically creates and transmits the ASC X12 997
functional acknowledgements to NMI to confirm receipt of the enrollment file.
In some cases, the Participating Plan processes the EDI-Kit transaction files
directly into legacy application systems that apply the transactions to the
membership system.
The Program enrollment data files sent to Participating Plans on a routine,
ongoing basis are change files, which contain one record for each add, change or
termination transactions transmitted on the file. Periodically, but not more
than on a quarterly basis, NMI may elect to send a full file to Participating
Plans to enable the Participating Plans to conduct a full-file audit of their
membership system.
NMI is expected to transmit or send enrollment data to Participating Plans
within 2 business days of the receipt of the data from the Participating
Account.
Participating Plans Without Electronic Connectivity
The process described above is used for Participating Accounts which send
electronic enrollment data to NMI and for NMI to send to Participating Plans
which are currently capable of receiving electronic enrollment data. There are
currently *** BluesCONNECT products capable of receiving electronic data.
For those Participating Plans that have not yet established and tested
electronic connectivity, NMI will send "smart" paper enrollment reports to the
Participating Plan within 2 business days of receiving the electronic enrollment
file.
Over the next 2 years, it is expected that the vast majority of HMO Blue USA
products, numbering approximately ***, will establish electronic connectivity
for enrollment with NMI in one of the two primary methods described above.
[CHART]
*** Pursant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and files seperately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule IV
Performance Standards for NMS
05/06/99
Penalty Assessment Methodology
As provided in Section 2.12.1 of the Agreement, if NMS fails to achieve the
Target Performance Threshold for a standard during a given quarter, NMS will pay
a penalty equal in amount to a percentage of the corresponding quarter's billed
fees, as indicated in the Penalty Percentage column.
As provided in Section 2.12.2 of the Agreement, if NMS fails to achieve the
Minimum Performance Threshold for a standard during a given month, NMS will be
assessed penalty points equal to the number set forth in the Penalty Points
column. If for any given month, the total penalty points assessed is equal to or
greater than 20, NMS will pay a penalty equal in amount to that corresponding
month's billed fees. In addition, in accordance with Section 6.4 of the
Agreement, THE ASSOCIATION may terminate the Agreement immediately upon written
notice to NMS if NMS fails to meet the Minimum Performance Threshold for any two
consecutive calendar months or for any three months of any calendar year.
--------------------------------------------------------------------------------------------------------------------------------
STANDARD LANGUAGE STANDARD TARGET PENALTY MINIMUM
PERFORMANCE PERCENTAGE PERFORMANCE
THRESHOLD THRESHOLD
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Enrollment (defined as any membership
change)
--------------------------------------------------------------------------------------------------------------------------------
1. Enrollment Distribution Time: The *** *** *** ***
time it takes to send enrollments
received from national accounts, both *** *** ***
paper and electronic, to HMOs.
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
2. Enrollment data entry: Time it takes *** *** *** ***
to load enrollment information into
the enrollment/billing system. *** *** ***
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
STANDARD LANGUAGE PENALTY NETWORK MANAGEMENT COMMENTS/Proposed COMMENTS
POINTS Measurements 4/6/99
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Enrollment (defined as any membership
change)
---------------------------------------------------------------------------------------------------------------------------------
1. Enrollment Distribution Time: The *** ***
time it takes to send enrollments
received from national accounts, both *** ***
paper and electronic, to HMOs.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
2. Enrollment data entry: Time it takes *** ***
to load enrollment information into
the enrollment/billing system. *** ***
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule IV
Performance Standards for NMS
05/06/99
---------------------------------------------------------------------------------------------------------------------------------
3. Paper Enrollment Accuracy: The accuracy of *** *** *** *** ***
paper enrollment information entered into the
billing system.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
4. Electronic Enrollment Accuracy: Accuracy of *** *** *** *** ***
electronic enrollment information transmitted to
Plans.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time *** *** *** *** ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Billing
---------------------------------------------------------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes *** *** *** ***
to disburse premiums received from national
accounts to HMOs. *** *** *** ***
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
3. Paper Enrollment Accuracy: The accuracy of ***
paper enrollment information entered into the
billing system.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
4. Electronic Enrollment Accuracy: Accuracy of ***
electronic enrollment information transmitted to
Plans.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Billing
---------------------------------------------------------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes ***
to disburse premiums received from national
accounts to HMOs.
---------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------
4. Electronic Enrollment Accuracy: Accuracy of ***
electronic enrollment information transmitted to
Plans.
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
5. Enrollment and Eligibility Reporting: The time ***
it takes to send the enrollment and eligibility
tracking reports to national accounts and Control
Plans.
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Billing
----------------------------------------------------------------------------------
6. Premium disbursement time: The time it takes ***
to disburse premiums received from national
accounts to HMOs.
----------------------------------------------------------------------------------
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
SCHEDULE IV
Performance Standards for NMS
05/06/99
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
7. Xxxx Production Time: The time it takes to *** *** *** *** ***
produce and send consolidated bills.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
8. Billing Information Accuracy: The *** *** *** ***
accuracy of rates, fee structure and
contractual eligibility requirements.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
9. Outstanding premium: The amount of *** *** *** *** ***
time total monthly premium is outstanding.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10. Reconciliation Report Processing Time: The *** *** *** *** ***
time it takes to process reconciliation
reports received from HMOs.
------------------------------------------------------------------------------------------------------
***
------------------------------------------------------------------------------------------------------
***
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
*** ***
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
*** ***
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
*** ***
------------------------------------------------------------------------------------------------------
***Pursuant to Rule 406 of the Securities Xxx 0000, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule IV
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
-------------------------------------------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and *** *** *** ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and *** *** *** ***
enrollment: Results from NMCS annual Account
Satisfaction Surveys.
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Client Services
-------------------------------------------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it *** *** *** ***
takes to resolve client issues. *** *** *** ***
------- *** *** *** ***
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
14. Call Response Time: Time it takes to *** *** *** ***
respond to incoming calls.
-------------------------------------------------------------------------------------------------------------------------------
15. Call Abandon Rate: Percentage of total *** *** *** ***
calls abandoned.
-------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
***
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
----------------------------------------------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and *** ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and *** ***
enrollment: Results from NMCS annual
Account Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Client Services
----------------------------------------------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it *** ***
takes to resolve client issues. *** ***
*** ***
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
14. Call Response Time: Time it takes to *** ***
respond to incoming calls.
-----------------------------------------------------------------------------------------------------------------------------------
15. Call Abandon Rate: Percentage of total *** ***
-----------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Overall Performance - Billing and Enrollment
------------------------------------------------------------------------------------------
11. Plan Satisfaction with billing and ***
enrollment services: Results from NMCS
annual Plan Satisfaction Surveys.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
12. Account Satisfaction with billing and ***
enrollment: Results from NMCS annual Account
Satisfaction Surveys.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Client Services
------------------------------------------------------------------------------------------
13. Client Issue Turnaround Time: The time it ***
takes to resolve client issues.
------------------------------------------------------------------------------------------
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-----------------------------------------------------------------------------------------------------------------------------------
***
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule IV
Performance Standards for NMS
05/06/99
----------------------------------------------------------------------------------------------------------------------------------
16. Call blockage rate: Percentage of *** *** *** ***
total calls that are blocked.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Customer Service
----------------------------------------------------------------------------------------------------------------------------------
17. Plan Satisfaction with Customer *** *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
18. Account Satisfaction with Customer *** *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
16. Call blockage rate: Percentage of *** ***
total calls that are blocked.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Overall Performance - Customer Service
----------------------------------------------------------------------------------------------------------------------------------
17. Plan Satisfaction with Customer *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
18. Account Satisfaction with Customer *** *** ***
Service: Results from NMCS annual
Plan Satisfaction Surveys.
----------------------------------------------------------------------------------------------------------------------------------
/1/
__________________________
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
SCHEDULE V
HMO Blue USA
Premium Delinquency Procedure
* * *
*** Pursuant to Rule 406 of the securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
1
Schedule VI - A: HBU Conversion Staffing Plan
* * *
*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibti 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule VII BluesCONNECT and HMO Blue USA - Standard Reports and Other
Information Requirements
Page 1
Financial Reports
------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
-----------------------------------------------------------------------------------------------------------------------------------
1) Summary of Premium *** *** *** ***
Disbursements By Month
------------------------------------------------------------------------------------------------------------------------------------
2) Monthly Premium *** *** *** ***
Disbursement Summary
------------------------------------------------------------------------------------------------------------------------------------
Premium Collection/Disbursement Reports
------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
------------------------------------------------------------------------------------------------------------------------------------
1) Outstanding Accounts *** *** *** ***
Receivable Via Internet
------------------------------------------------------------------------------------------------------------------------------------
2) Premium Receipts and *** *** *** ***
Disbursements Summary
------------------------------------------------------------------------------------------------------------------------------------
Enrollment/Eligibility Disbursement Reports
------------------------------------------------------------------------------------------------------------------------------------
Title Description Purpose Frequency Priority
------------------------------------------------------------------------------------------------------------------------------------
1) Electronic Enrollment *** *** *** ***
Log Via Internet
------------------------------------------------------------------------------------------------------------------------------------
2) Electronic Connectivity *** *** *** ***
Log Via Internet
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*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule VII BluesCONNECT and HMO Blue USA - Standard Reports and Other
Information Requirements
Page 2
Other
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Title Description Purpose Frequency Priority
------------------------------------------------------------------------------------------------------------------------------------
1) OSC Monthly Volume Report *** *** *** ***
------------------------------------------------------------------------------------------------------------------------------------
2) OSC Monthly APS Performance *** *** *** ***
Report
------------------------------------------------------------------------------------------------------------------------------------
3) BluesCONNECT Monthly Volume *** *** *** ***
Report
------------------------------------------------------------------------------------------------------------------------------------
4) BluesCONNECT Monthly APS *** *** *** ***
Performance Report
------------------------------------------------------------------------------------------------------------------------------------
5) BluesCONNECT Enrollment Report *** *** *** ***
------------------------------------------------------------------------------------------------------------------------------------
6) HMO Blue USA Enrollment Report *** *** *** ***
------------------------------------------------------------------------------------------------------------------------------------
7) BluesCONNECT Enrollment Report *** *** *** ***
by Tier
------------------------------------------------------------------------------------------------------------------------------------
8) HMO Blue USA Enrollment Report *** *** *** ***
By Tier
------------------------------------------------------------------------------------------------------------------------------------
9) BluesCONNECT Enrollment Report; *** *** *** ***
Showing Revised Enrollment Counts
------------------------------------------------------------------------------------------------------------------------------------
10) HMO Blue USA Enrollment Report; *** *** *** ***
Showing Revised Enrollment Counts
------------------------------------------------------------------------------------------------------------------------------------
* All monthly reports by the tenth business day of each month.
** Any references to specific software applications may be changed upon mutual
agreement of the parties.
*** Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Schedule IX
This file contains the record layout for the data file to upload to the
PeopleSoft Disbursement system to generate payments to HMO Blue USA Operation
Service Center participating HMO's.
Record Layout for PeopleSoft Upload
***
***Pursuant to Rule 406 of the Securities Act of 1933, as amended, confidential
portions of Exhibit 10.6 have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
SCHEDULE X
Addendum to Subcontract Under the
Health Insurance for the Aged and Disabled Act
(42 U.S.C., Chapter 7, Supp., as Amended)
The clauses of this Addendum are a part of and are applicable, as indicated, to
the subcontract by and between ______________________________________
________________________, hereinafter referred to as the "Contractor" and
____________________________________________________________________________,
hereinafter referred to as the "Subcontractor." The term "Secretary" as used
herein, means the Secretary of Health and Human Services or his delegate unless
specified otherwise.
TABLE OF CONTENTS
Clause Title Page
No. No.
------ ----
Section I
I Facilities Nondiscrimination Clause 03
II Disclosure of Information 04
III Automatic Termination of Subcontract Clause 04
IV Liquidated Damages in Subcontracts 04
V Privacy Act 05
VI Cost or Pricing Data 05
Section II
VII Subcontracting of Responsibilities 06
VIII Inspection 06
IX Rights in Data 06
X Subcontractor as Common Xxxxxxxxxxxxx 00
XX Xxxxxxxxxxxx of Subcontract 08
XII Regulations and General Instructions 09
XIII Prohibition Against Billing Services 09
Section III
Federal Acquisition Regulation Clauses (FAR)
52.203-7 Anti-Kickback Procedures 10
52.203-10 Price or Fee Adjustment for Illegal or Improper Activity 10
52.203-11 Certification and Disclosure Regarding Payments 10
to Influence Certain Federal Transactions
52.203-12 Limitation on Payments to Influence Certain 10
Federal Transactions
52.215-2 Audit and Records - Negotiation 10
October 1996
Page 2 of 11
52.219-8 Utilization of Small, Small Disadvantaged and Women-
Owned Business Concerns 10
52.219-9 Small, Small Disadvantaged and Women-Owned 10
Business
Subcontracting Plan 10
52.219-16 Liquidated Damages - Subcontracting Plan 11
52.222-21 Certification of Nonsegregated Facilities 11
52.222-26 Equal Opportunity 11
52.222-35 Affirmative Action for Special Disabled and 11
Vietnam Era Veterans
52.222-36 Affirmative Action for Handicapped Workers 11
52.222-37 Employment Reports on Special Disabled Veterans 11
and Veterans of the Vietnam Era
52.223-6 Drug-Free Workplace 11
(Note - If there are any questions by the Subcontractor as to the applicability
of the above clauses to this subcontract or whether the Subcontractor will be
performing under this subcontract one of the Medicare "functions" or other
responsibilities requiring prior approval of the Secretary as provided in the
Medicare agreement between the Contractor and the Secretary, clarification
should be requested from the Contractor in writing prior to execution hereof.)
Page 3 of 11
Section I
The clauses in Section I are applicable to this subcontract (and to lower tier
subcontracts hereunder) unless excluded by the virtue of the lead-in language or
other provisions contained in the body of the individual clauses.
Clause I
FACILITIES NONDISCRIMINATION CLAUSE
The following provisions are applicable if this subcontract is for the lease of
real estate:
"As used in this clause, the term `Facility' means stores, shops, restaurants,
cafeterias, restrooms, and any other facility of a public nature in the building
in which the space covered by this lease is located.
"The lessor agrees that he will not discriminate by segregation or otherwise
against any person or persons because of race, color, religion, sex, or national
origin in furnishing or by refusing to furnish, to such person or persons, the
use of any facility, including any or all services, privileges, accommodations,
and activities provided thereby. Nothing herein shall require the furnishing to
the general public of the use of any facility customarily furnished by the
lessor solely to tenants, their employees, customers, patients, clients, guests
and invitees.
"It is agreed that the lessor's noncompliance with the provisions of this clause
shall constitute a material breach of this lease. In the event of such
noncompliance, the lessee may take appropriate action to enforce compliance, may
terminate this lease, or may pursue such other remedies as may be provided by
law. In the event of termination, the lessor shall be liable for all excess
costs of the lessee in acquiring substitute space. Substitute space shall be
obtained in as close proximity to the lessor's building as is feasible and
moving costs will be limited to the actual expenses thereof as incurred.
"The lessor agrees to include, or to require the inclusion of the foregoing
provisions of this clause (with the terms "lessor" and "lessee" appropriately
modified) in every agreement or concession pursuant to which any person other
than the lessor operates or has the right to operate any facility. Nothing
herein contained, however, shall be deemed to require the lessor to include or
require the inclusion of the foregoing provisions of this clause in any existing
agreement or concession arrangement or one in which the contracting party other
than the lessor has the unilateral right to renew or extend the agreement or
arrangement, until the expiration of the existing agreement or arrangement and
the unilateral right to renew or extend. The lessor also agrees that it will
take any and all lawful actions as expeditiously as possible with respect to any
such agreement as the contracting agency may direct to enforce this clause,
including but not limited to termination of the agreement or concessions and
institution of court action.
Page 4 of 11
Clause II
DISCLOSURE OF INFORMATION
This clause is applicable to this subcontract and to any lower tier subcontract
hereunder if it provides for the performance of any of the functions required
for the administration of the Medicare agreement between the Contractor and the
Secretary, and to any other subcontract where the Subcontractor, its agents,
officers, or employees might reasonably be expected to have access to
information within the purview of section 1106 of the Social Security Act, as
amended, and regulations prescribed pursuant thereto.
"The Subcontractor agrees to establish and maintain procedures and controls so
that no information contained in its records or obtained from the Contractor
and/or the Secretary or from others in carrying out terms of its subcontract
shall be used by or disclosed by it, its agents, officers, or employees except
as provided in section 1106 of the Social Security Act, as amended, and
Regulations prescribed thereunder."
Clause III
AUTOMATIC TERMINATION OF SUBCONTRACT CLAUSE
This clause is applicable to this subcontract if its term exceeds the term of
the agreement between the Secretary and the Subcontractor, except where the
Secretary agrees to its omission or if this subcontract is solely for the
purchase of supplies and equipment.
Notwithstanding the following, if the Contractor wishes to continue the
subcontract relative to its own business after the contract between the
Secretary and the contractor has been terminated or nonrenewed, it may do so
provided it assures the Secretary in writing that the Secretary's obligations
will terminate at the time the Medicare contract terminates or is nonrenewed
subject to the termination cost provisions provided for in the contract.
The clause is as follows:
"In the event the Medicare contract between the Secretary and the Contractor is
terminated, the subcontract between the Contractor and the Subcontractor will be
terminated unless the Secretary and the Contractor agree to the contrary. Such
termination shall be accomplished by delivery of written notice to the
Subcontractor of the date upon which said termination will become effective."
Page 5 of 11
Clause IV
LIQUIDATED DAMAGES IN SUBCONTRACTS
The following provisions are applicable to this subcontract if it contains
liquidated damages provisions which relate solely to Medicare:
"The Secretary, after consultation with the Contractor, shall have the right to
determine that the specified levels of performance have not been attained by the
Subcontractor. In such event, the Secretary may direct the Contractor to notify
the Subcontractor of the Secretary's determination that liquidated damages apply
and to set-off the liquidated damages against the Subcontractor."
Clause V
PRIVACY ACT
The Privacy Act of 1974, Public Law 93-579, and the Regulations and General
instructions issued by the Secretary pursuant thereto, are applicable to this
subcontract, and to all subcontracts hereunder to the extent that the design,
development, operation, or maintenance of a system of records as defined in the
Privacy Act is involved.
Clause VI
COST OR PRICING DATA
This clause is applicable to this subcontract and to any modification thereof,
(1) where the estimated cost to Medicare exceeds or will exceed ***, and (2) the
estimated cost was not based on adequate price competition, established catalog
or market prices of commercial items sold in substantial quantities to the
general public, or prices set by law or regulation.
"The Subcontractor is required to submit written cost or pricing data and
certify that the data submitted was accurate, complete and current at the time
of entry into this subcontract or modification in accordance with Subpart 15.804
of the Federal Acquisition Regulation and to maintain full and complete
accounting records to support cost or pricing data submitted. The Subcontractor
must provide for full access by the Contractor, the Secretary, and the
Comptroller General of the United States for the purpose of examining the
accuracy of cost or pricing data submitted as aforesaid, and in accordance with
Subpart 15.804 of the Federal Acquisition Regulation, agrees to a reduction in
price if the cost or pricing data submitted is found to be defective."
***Pursuant to Rule 406 of the Securites Act of 1933, as amended, confidential
portions of Exhibit 10(_) have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
Page 6 of 11
Section II
In addition to the clauses n Section I, the clauses contained in Section II are
also applicable to this subcontract regardless of amount if the subcontract (a)
provides for the performance of any of the functions required for the
administration of the Medicare agreement between the Contractor and the
Secretary, or (b) involves subcontracting for automated data processing systems
or facilities management services which required the Secretary's prior approval.
Clause VII
SUBCONTRACTING OF RESPONSIBILITIES
The Subcontractor agrees that it shall not enter into any lower tier subcontract
with any other party to carry out the primary responsibilities of this
subcontract without the prior written approval of the Secretary. In the event
such approval is given, the Subcontractor further agrees that the substance of
these clauses shall be inserted in each lower tier subcontract.
Clause VIII
INSPECTION
The Secretary shall have the right, at all reasonable times and upon reasonable
notice, to inspect or to otherwise evaluate the work performed or being
performed under this subcontract, and the premises in which it is being
performed. If an inspection or evaluation is made, the Subcontractor shall
provide all reasonable facilities and assistance for the safety and convenience
of the Secretary's representatives in the performance of their duties. All
inspections and evaluations by the Secretary's representatives shall be
performed in such a manner as will not unduly delay the work.
Clause IX
RIGHTS IN DATA
A. The Subcontractor agrees that the Secretary shall at such time and in such
manner as he may prescribe, have access to any data acquired or utilized by it
in the development and processing of claims or in carrying out its other
functions under this subcontract, and further, shall have use of such data
obtained solely from private business of the Subcontractor). The Subcontractor
shall also, at such times and in such manner as the Secretary may prescribe,
furnish to other organizations for use in administering health care or health
care financing programs under the Act, data acquired or utilized by it in the
development and processing of claims or other data (other than discrete data
such as trade secrets, commercial or financial data obtained solely from private
business of the Subcontractor) acquired by it in carrying out its functions
under this subcontract. This does not apply to the proprietary data of
subcontractors which is utilized by the Contractor for program purposes.
Page 7 of 11
B. As used in this clause, the term "Subject Data" means writings, sound
recordings, pictorial reproductions, drawings, designs, or other graphic
representations, all systems documentation, program logic, operational manuals,
forms, diagrams, workflow charts, equipment descriptions, data files, data
processing or computer programs, all other operational methods and procedures
involved in the performance of functions under the subcontract and works of any
similar nature (whether copyrighted or copyrightable) which are acquired or
utilized by the Subcontractor in carrying out its functions under this
subcontract, for which more than 50 percent of the cost of development has been
paid out of Government funds. The term does not include financial reports, cost
analyses, and similar information incidental to contract administration.
C. Government rights. Subject only to provisions of (D) below, the Government
may use, duplicate or disclose in any manner, and for any purpose whatsoever,
and have or permit others to do so, all Subject Data.
D. License to copyright data. In addition to the Government rights as provided
in (C) above with respect to any Subject Data which may be copyrighted, the
Subcontractor agrees to and does hereby grant to the Government a royalty-free,
nonexclusive, and irrevocable license throughout the world to use, duplicate or
dispose of such data in any manner and for any purpose whatsoever, and to have
or permit others to do so; provided, however, that such licenses shall be only
to the extent that the Subcontractor now has, or prior to completion or final
settlement of this subcontract may require, the right to grant such license
without becoming liable to pay compensation to others solely because such grant.
E. Relation to patents. Nothing contained in this clause shall imply a license
to the Government under any patent or be construed as affecting the scope of any
license or other right otherwise granted to the Government under any patent.
F. Marking and identification. The Subcontractor shall not affix any restrictive
markings upon any Subject Data, and if such markings are affixed, the Government
shall have the right at any time to modify, remove, obliterate, or ignore such
markings.
G. Deferred ordering and delivery of data. The Government shall have the right
to order, at any time during the performance of this subcontract, or within two
years from either acceptance of all items to be delivered under this subcontract
or termination of this subcontract, whichever is later, any Subject Data, or
data generated in performance of the subcontract developed with Government
funds, and the Subcontractor shall promptly prepare and deliver such Subject
Data or data as may be required. When Subject Data is delivered pursuant to this
paragraph G, payment shall be made for converting the Subject Data or data into
the prescribed form, reproducing it or preparing it for delivery. The
Government's right to use data delivered pursuant to this paragraph G shall be
the same as the rights in Subject Data as provided in (C) above. The
Subcontractor shall be relieved of the obligation to furnish Subject Data or
data upon the expiration of two years from the date it accepts such items.
Page 8 of 11
H. The Subcontractor shall retain such data or Subject Data subject to the time
limit imposed by the Examination of Records clause of this Addendum and the
right to examine such records by the Comptroller General of the United States
and the Secretary (including their duly authorized representatives).
Clause X
SUBCONTRACTOR AS COMMON SUBCONTRACTOR
In the event a systems change, as designated by the Secretary, is required as
the result of an act of Congress, Regulation, or General Instruction, and it
applies to more than one Medicare contractor for which the Subcontractor
("Common Subcontractor") provides similar services, each contractor shall
individually arrange for the Common Subcontractor to implement such change to
its system. If an increase in cost is sought by the Common Subcontractor for the
modification, the Contractor shall pay a reasonable price, based upon certified
cost or pricing data submitted by the Common Subcontractor. As soon as possible
thereafter, the Contractor shall submit the supporting data, along with all
other pertinent documentation, to the Secretary. On a basis to be determined by
the Secretary, a reasonable price shall then be established for the common
systems change as implemented by all affected contractors and such price shall
be divided among those contractors. The cost of any additional modifications
needed to meet the specific requirements of a particular contractor shall be
borne only by that contractor. Should the Secretary determine that the increase
in price for the common change or other modification is not adequately
supported, the Common Subcontractor agrees to refund such amount to the
Contractor. In the event the Common Subcontractor refuses to refund the above
amount, the Secretary may request that the Contractor take action to recover
from the Common Subcontractor that portion of the price which the Secretary
finds to be unsupported. The Secretary shall reimburse the Contractor for all
reasonable costs relating to such action. The Secretary shall from time-to-time
notify the Contractor of the identity of other Medicare contractors with common
subcontracts.
Clause XI
MODIFICATION OF SUBCONTRACT
(A) Neither this subcontract nor any lower tier subcontract under this
subcontract shall be modified or amended, regardless of amount, without
obtaining prior written approval of the Secretary if it provides for the
performance of any of the functions contained in the Medicare agreement between
the Contractor and the Secretary.
(B) If this subcontract does not fall within the purview of paragraph (A) of
this clause, the Secretary's prior approval shall be obtained for any
modification or amendment thereof where the estimated cost of such change or
changes would result in an increase of the costs to Medicare in excess of fifty
percent of the Contractor's threshold amount as provided in its agreement.
(C) Before this subcontract is renewed or any option herein is exercised, the
Secretary's approval shall be obtained, unless the Secretary has previously
stipulated otherwise in writing.
Page 9 of 11
Clause XII
REGULATIONS AND GENERAL INSTRUCTIONS
The Contractor is obliged under its agreement with the Secretary to comply with
all Regulations and General Instructions as the Secretary may from time-to-time
prescribe for the administration of its agreement. To the extend that such
Regulations and General Instructions affects this subcontract, the Subcontractor
shall also comply with such Regulations and General instructions.
Clause XIII
PROHIBITION AGAINST BILLING SERVICES
The provisions of this clause are applicable to this subcontract if it provides
for facilities management services or any electronic data processing which
contemplates performance of an integral part of the Medicare claims process.
However, such provisions do not apply if this subcontract is for the lease or
purchase of equipment or supplies.
The Subcontractor (or a parent, subsidiary, or affiliated organization) shall
not perform services for providers which involve (1) the preparation or
completion of preliminary or initial cost reports, or (2) the allocation of
expenses to provider cost centers and apportionment of such costs between
Medicare beneficiary patients and other patients of the provider where such data
may be used in the preparation of cost reports subsequently submitted to the
Subcontractor for desk review and audit and which serve as the basis for
determination of Medicare program payments by the Subcontractor. The
Subcontractor (or a parent, subsidiary or affiliated organization) shall not
perform, in any jurisdiction in which it is serving as a Subcontractor to a
Medicare Contractor, billing services for a provider where xxxxxxxx by such
providers are to be subsequently processed by the Subcontractor for Medicare
payments. This does not preclude the subcontractor from offering and operating
an automated billing service (software and equipment) for a provider as long as
operating such a billing service does not require the Subcontractor to describe
or code the health-care services being billed.
Page 10 of 11
SECTION III
This subcontract incorporates the following clauses by reference with the same
force and effect as if they were given in full text. Upon request, the Secretary
will make their full text available to the Subcontractor.
The clauses are applicable to this subcontract and to lower tier subcontractors
if the cost of the subcontract or lower tier subcontract to Medicare is equal to
or greater than the amount in brackets located to the right of the listed
clause, unless specifically exempted by applicable rules, regulations, or
Executive Orders. The term "Contractor" as used therein shall mean the
"Subcontractor".
FEDERAL ACQUISITION REGULATION
(48 CFR, CHAPTER 1) CLAUSES
52.203-7 Anti-Kickback Procedures ($100,000)
(July 1995)
52.203-10 Price or Fee Adjustment for Illegal or ($100,000)
Improper Activity
(September 1990)
52.203-11 Certification and Disclosure Regarding ($100,000)
Payments to Influence Certain Federal
Transactions
(April 1991)
52.203-12 Limitation on Payments to Influence ($100,000)
Certain Federal Transactions
(January 1990)
52.215-2 Audit and Records - Negotiation ($100,000)
(October 1995)
52.219-8 Utilization of Small, Small ($100,000)
Disadvantaged and Women-Owned
Business Concerns
(October 1995)
52.219-9 Small, Small Disadvantaged and (Subcontracts that
Women-Owned Subcontracting offer
Plan subcontracting
(October 1995) possibilities and
any subcontract
exceeding $500,000,
$1,000,000
for construction
of any public
facility)
Page 11 of 11
52.219-16 Liquidated Damages - Subcontracting (Subcontracts that
(October 1995) offer
subcontracting
possibilities and
any subcontract
exceeding
$500,000
$1,000,000 for
construction of
any public
facility)
52.222-21 Certification of Nonsegregated ($10,000)
(April 1984)
52.222-26 Equal Opportunity ($10,000)
(April 1984)
52.222-35 Affirmative Action for Special ($10,000)
Disabled and Vietnam Era Veterans
(April 1984)
52.222-36 Affirmative Action for Handicapped ($2,250)
Workers
(April 1984)
52.222-37 Employment Reports on Special Disabled ($10,000)
Veterans and Veterans of the Vietnam
Era
(January 1988)
52.223-6 Drug-Free Workplace (No Minimum)
(July 1990)
