(a) General requirements. Each PDP sponsor of a prescription drug plan must meet the following requirements:

(1) Licensure. Except in cases where there is a waiver as specified at §423.410 or §423.415, the sponsor is organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a prescription drug plan. If not otherwise licensed, the sponsor obtains certification from the State that the organization meets a level of financial solvency and other standards as the State may require for it to operate as a PDP sponsor.

(2) Assumption of financial risk for unsubsidized coverage. The PDP sponsor assumes financial risk on a prospective basis for benefits that it offers under a prescription drug plan and that is not covered under section 1860D-15(b) of the Act.

(b) Reinsurance permitted. The PDP sponsor may obtain insurance or make other arrangements for the cost of coverage provided to any enrollee to the extent that the sponsor is at risk for providing the coverage.

(c) Solvency for unlicensed sponsors. In the case of a PDP sponsor that is not described in §423.401(a)(1) and for which a waiver is approved under §423.410 or §423.415, the sponsor must meet the requirements in §423.420.