Texas Medicaid Surety Bonds

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Understanding Texas Surety Bonds for Medicaid Providers

The purpose of a Texas Medicaid surety bond is to guarantee the state that a health care provider will not overcharge Medicaid or the Children�s Health Insurance Program and will promptly return to the state any overpayments received.

Who Needs It?

Every health care provider in the state of Texas that wants to become a Medicaid provider is required to purchase a Medicaid Surety bond and renew it annually. Failure to maintain a continuous coverage can result in revocation of the license to practice as a Medicaid provider.

How Does It Work?

There are three parties to a Texas Medicaid surety bond contract:

• Obligee. The state of Texas, specifically the Texas Health and Human Services Commission, is the obligee—the party that requires the bond and is protected by it against financial loss.
• Principal.�The Medicaid provider is the principal—the party guaranteeing not to overcharge Medicaid and to return to the Health and Human Services Commission any inadvertent overpayments.
• Surety.�The surety is the company that underwrites and issues the bond and assumes liability for any overpayments not returned to the state as required.

Bond Term

The surety�s liability for unreturned overpayments incurred while the bond is in effect extends for two full years after the bond has expired or been canceled.

The Claims Process

When a claim is filed against a Texas Medicaid surety bond, the surety will investigate to ascertain its validity before taking any other action. If the claim is found to be valid, the surety will pay it, up to the full penal amount of the bond.

However, the responsibility for returning overpayments ultimately rests with the principal. The surety�s payment of a claim is merely an advance payment made on behalf of the principal. The purpose of the advance is to give the principal time to come up with the necessary funds without delaying payment of the claim.

The principal is legally obligated to reimburse the surety for any payments made to claimants. An indemnification clause included in every surety bond contract ensures the principal�s reimbursement of the surety.

How Much Does It Cost?

All surety bond premiums are calculated as a small percentage of the total penal amount established by the obligee. The surety sets the premium rate based primarily on the principal�s personal credit score. The surety�s main concern is to ensure that if any claims are paid on behalf of the principal, the principal will be able to reimburse the surety.

The higher an applicant�s credit score, the lower the premium rate. Most Medicaid providers with decent credit will pay an annual premium of between 1% and 3% of the total penal amount of the bond.

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Our experienced surety bond professionals will work with you to get you the best possible premium on the Texas Medicaid bond you need.

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