By: Harris, Jack H.B. No. 593
73R901 DLF-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to basic group health insurance coverage for certain small
1-3 employers.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter E, Chapter 3, Insurance Code, is
1-6 amended by adding Article 3.51-6E to read as follows:
1-7 Art. 3.51-6E. GROUP HEALTH INSURANCE PLANS FOR CERTAIN SMALL
1-8 EMPLOYERS
1-9 Sec. 1. PURPOSE. The legislature finds that an increasing
1-10 number of small employers and their employees are unable to afford
1-11 the cost of group health insurance, in part because of the cost of
1-12 mandated benefits. This article authorizes group health insurance
1-13 policies providing basic health care benefits to increase access to
1-14 necessary health care, assist in the reduction of the amount of
1-15 uncompensated care, and reduce the number of uninsured persons in
1-16 this state.
1-17 Sec. 2. DEFINITIONS. In this article:
1-18 (1) "Basic health benefits plan" means a health
1-19 benefits plan for small employers that meets the requirements of
1-20 Section 6 of this article.
1-21 (2) "Carrier" means a person who provides health
1-22 benefits in this state, including an insurance company, a health
1-23 maintenance organization, a group hospital service corporation, a
1-24 multiple employer welfare arrangement, or any other person
2-1 providing a plan of health benefits subject to state insurance
2-2 regulation.
2-3 (3) "Dependent" means the spouse or child of an
2-4 eligible employee, subject to applicable terms of the health
2-5 benefits plan covering the employee.
2-6 (4) "Directors" means the members of the Board of
2-7 Directors of the Texas Small Employer Health Reinsurance Program.
2-8 (5) "Eligible employee" means:
2-9 (A) an officer, partner, or sole proprietor of a
2-10 business entity that is an eligible employer; or
2-11 (B) a full-time or part-time employee of an
2-12 eligible employer.
2-13 (6) "Enrollee" means an eligible employee or the
2-14 dependent of an eligible employee who is enrolled in a health
2-15 benefits plan.
2-16 (7) "Health benefits plan" means a hospital and
2-17 medical insurance policy, a health, hospital, or medical service
2-18 corporation plan contract, a health maintenance organization
2-19 subscriber contract, a plan provided by a multiple employer welfare
2-20 arrangement, or, to the extent permitted by the Employee Retirement
2-21 Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.), an
2-22 arrangement providing health benefits that is offered by a small
2-23 employer and that is self-insured in whole or in part. The term
2-24 does not include:
2-25 (A) accident-only insurance coverage;
2-26 (B) credit insurance coverage;
2-27 (C) disability insurance coverage;
3-1 (D) coverage of Medicare services under a
3-2 federal contract;
3-3 (E) long-term care insurance coverage;
3-4 (F) insurance coverage for dental care only;
3-5 (G) insurance coverage for care of vision only;
3-6 (H) insurance coverage issued as a supplement to
3-7 liability insurance;
3-8 (I) insurance coverage arising out of a workers'
3-9 compensation system or similar statutory system;
3-10 (J) automobile medical payment insurance
3-11 coverage; or
3-12 (K) insurance coverage under which benefits are
3-13 payable without regard to fault and that is required by statute to
3-14 be included in a liability insurance policy or an analogous
3-15 self-insurance plan.
3-16 (8) "Member" means a small employer carrier
3-17 participating in the program.
3-18 (9) "Multiple employer welfare arrangement" has the
3-19 meaning assigned by 29 U.S.C. Section 1002, but does not include an
3-20 arrangement that is fully insured.
3-21 (10) "Plan of operation" means the plan of operation
3-22 of the program including articles, bylaws, and operating rules,
3-23 adopted by the board under Sections 17 and 18 of this article.
3-24 (11) "Preexisting condition provision" means a policy
3-25 provision that excludes coverage for expenses incurred during a
3-26 specified period following the enrollee's effective date of
3-27 coverage as to a condition that had manifested itself during a
4-1 specified period immediately preceding the effective date of
4-2 coverage.
4-3 (12) "Program" means the Texas Small Employer Health
4-4 Reinsurance Program created by Section 17 of this article.
4-5 (13) "Reinsurer" means a person or entity reinsuring
4-6 all or part of the risk of a health benefits plan provided by
4-7 another person, carrier, insurer, or entity.
4-8 (14) "Small employer" means a person, firm,
4-9 corporation, partnership, or association actively engaged in
4-10 business that, on at least 50 percent of its working days during
4-11 the year preceding the date on which coverage under a basic health
4-12 benefits plan begins, employed at least three and not more than 25
4-13 eligible employees. For purposes of determining the number of
4-14 eligible employees, affiliated companies and companies that are
4-15 eligible to file a combined tax return for purposes of state
4-16 taxation are one employer.
4-17 (15) "Small employer carrier" means a carrier that
4-18 elects to comply with Section 17 of this article.
4-19 Sec. 3. APPLICABILITY. A health benefits plan is subject to
4-20 this article only if it covers at least one enrollee of a small
4-21 employer and if:
4-22 (1) a portion of the premium or benefits is paid by
4-23 the employer;
4-24 (2) any enrollee is reimbursed, through wage
4-25 adjustments or otherwise, by the employer for any portion of the
4-26 premium; or
4-27 (3) the plan is treated by the employer or any of the
5-1 enrollees as part of a health plan or insurance constituting
5-2 medical care for the purposes of Section 106 or 162 of the Internal
5-3 Revenue Code.
5-4 Sec. 4. BASIC HEALTH BENEFITS PLAN AVAILABILITY. (a)
5-5 Except as otherwise provided by this article, a small employer
5-6 carrier participating in the program shall provide the basic health
5-7 benefits plans to a small employer without underwriting
5-8 restrictions as to health status. This subsection does not apply
5-9 on or after January 1, 1995, except that this subsection does apply
5-10 to an employer that becomes a small employer on or after July 1,
5-11 1994, for a period of one year after the date on which the employer
5-12 becomes a small employer.
5-13 (b) Coverage offered to a small employer who elects not to
5-14 obtain coverage under a basic health benefits plan may be
5-15 underwritten. This coverage may only be provided by a small
5-16 employer carrier.
5-17 (c) A small employer shall provide a small employer carrier
5-18 an application card for each eligible employee and dependent. An
5-19 eligible employee or dependent declining coverage because the
5-20 employee or dependent is already covered under another group health
5-21 plan shall certify the coverage on a form provided by the small
5-22 employer carrier.
5-23 (d) A small employer shall provide on request to a small
5-24 employer carrier reports and documentation regarding the number of
5-25 eligible employees and their hours and wages to determine initial
5-26 eligibility and to ensure continued eligibility. A small employer
5-27 carrier may not request this information more than four times
6-1 annually.
6-2 (e) Coverage under a basic health benefits plan is not
6-3 available unless the small employer applies for and maintains
6-4 coverage for at least 75 percent of its eligible employees. An
6-5 eligible employee who certifies coverage under another group health
6-6 plan does not count toward the participation requirement. Coverage
6-7 is not available under a basic health benefits plan unless at least
6-8 three eligible employees or dependents are actually covered by the
6-9 plan.
6-10 Sec. 5. BASIC HEALTH BENEFITS POLICY EXEMPT FROM MANDATED
6-11 BENEFITS. Except as provided in this article, a basic health
6-12 benefits policy offered under this article is not required to
6-13 include any benefit or coverage otherwise required under this code
6-14 or other insurance laws of this state.
6-15 Sec. 6. BASIC HEALTH BENEFITS POLICY. (a) A basic health
6-16 benefits policy offered under this article must include the
6-17 coverage under either Plan A or Plan B as described by Subsections
6-18 (b), (c), and (d) of this section.
6-19 (b) A basic health benefits policy under Plan A must offer
6-20 minimum benefits as follows:
6-21 (1) physician visits medically appropriate by age for
6-22 wellness, routine illness and surgical follow-up, mental illness,
6-23 and chemical dependency;
6-24 (2) inpatient and outpatient hospital care, including
6-25 treatment for all physical and mental illness and for chemical
6-26 dependency, provided that inpatient hospital care is limited to 20
6-27 days each policy year;
7-1 (3) laboratory, diagnostic, and X-ray services not to
7-2 exceed $200 each policy year, including mammography screening
7-3 according to guidelines established by the American Cancer Society;
7-4 (4) comprehensive maternity and neonatal benefits
7-5 consistent with guidelines established by the American College of
7-6 Obstetrics and Gynecology and the American Academy of Pediatrics
7-7 for neonatal care for up to 28 days after birth;
7-8 (5) health risk screening and risk reduction,
7-9 including immunization and well-child care;
7-10 (6) prescription drugs with a minimal copayment,
7-11 provided that the use of equivalent generic drugs under a managed
7-12 care system is encouraged;
7-13 (7) dental extraction and dental care that affects
7-14 systemic health treatment as prescribed by a physician; and
7-15 (8) 10 home health care visits each policy year if
7-16 case management determines that the visits are appropriate and
7-17 cost-effective.
7-18 (c) The basic health benefits policy under Plan B must offer
7-19 minimum benefits as follows:
7-20 (1) physician visits medically appropriate by age for
7-21 wellness, routine illness and surgical follow-up, mental illness,
7-22 and chemical dependency;
7-23 (2) inpatient and outpatient hospital care, including
7-24 treatment for all physical and mental illness and for chemical
7-25 dependency, provided that inpatient hospital care is limited to 45
7-26 days for each policy year;
7-27 (3) laboratory, diagnostic, and X-ray services not to
8-1 exceed $400 each policy year;
8-2 (4) one mammography screening each policy year for
8-3 women who are at least 40 years of age;
8-4 (5) comprehensive maternity and neonatal benefits
8-5 consistent with guidelines established by the American College of
8-6 Obstetrics and Gynecology and the American Academy of Pediatrics
8-7 for neonatal care for up to 45 days after birth;
8-8 (6) health risk screening and risk reduction,
8-9 including immunization and well-child care;
8-10 (7) prescription drugs with a minimal copayment,
8-11 provided that the use of equivalent generic drugs under a managed
8-12 care system is encouraged;
8-13 (8) dental extraction and dental care that affects
8-14 systemic health treatment as prescribed by a physician;
8-15 (9) 10 home health care visits each policy year if
8-16 case management determines that the visits are appropriate and
8-17 cost-effective; and
8-18 (10) services and supplies for heart, kidney, cornea,
8-19 and liver transplants not to exceed $100,000 each policy year.
8-20 (d) Plan A coverage for treatment for mental illness and
8-21 substance abuse or chemical dependency for each policy year is
8-22 limited to 20 days of inpatient or outpatient hospital care and 30
8-23 medication-management outpatient visits. Plan B coverage for
8-24 treatment for mental illness and substance abuse or chemical
8-25 dependency for each policy year is limited to 30 days of inpatient
8-26 or outpatient hospital care and 50 medication-management outpatient
8-27 visits. For the purpose of determining the number of days of
9-1 hospital care under this subsection, one day of outpatient hospital
9-2 care is equivalent to one-half day of inpatient hospital care.
9-3 (e) Reasonable copayments and deductibles may be used in
9-4 Plans A and B. Benefits for maternity and well-child care and
9-5 immunizations may not be subject to a copayment or deductible.
9-6 (f) Each participating small employer shall choose initially
9-7 and on renewal a basic health benefits plan. All enrollees of the
9-8 employer must be under the same plan.
9-9 (g) Both basic health benefits plans may use
9-10 cost-containment provisions, including:
9-11 (1) precertification of covered services;
9-12 (2) preauthorization for specified services;
9-13 (3) second opinion before surgery;
9-14 (4) concurrent utilization review and management;
9-15 (5) discharge planning;
9-16 (6) large case management;
9-17 (7) coordination of benefits, provided that the
9-18 provisions are in compliance with guidelines established by the
9-19 National Association of Insurance Commissioners; and
9-20 (8) managed care or point-of-service arrangements.
9-21 (h) A small employer carrier may offer a small employer a
9-22 health benefits plan with greater benefits than those contained in
9-23 either basic health benefits plan.
9-24 (i) The small employer is the policyholder of a basic health
9-25 benefits plan.
9-26 (j) A small employer carrier may:
9-27 (1) contract with providers or groups of providers
10-1 with respect to health care services or benefits; and
10-2 (2) negotiate with providers regarding the level or
10-3 method of reimbursing care or services provided under health
10-4 benefits plans.
10-5 Sec. 7. PREEXISTING CONDITION PROVISIONS. (a) A
10-6 preexisting condition provision in a basic health benefits policy
10-7 under this article may not apply to an enrollee who is covered by a
10-8 basic health care policy issued before January 1, 1993.
10-9 (b) A preexisting condition provision may not exclude
10-10 coverage after 12 months following the enrollee's effective date of
10-11 coverage and may relate only to:
10-12 (1) a condition that manifested itself in such a
10-13 manner as would cause an ordinarily prudent person to seek medical
10-14 advice, diagnosis, care, or treatment;
10-15 (2) a condition for which medical advice, diagnosis,
10-16 care, or treatment was recommended or received during the six
10-17 months immediately preceding the effective date of coverage; or
10-18 (3) a pregnancy or related condition that existed on
10-19 the effective date of coverage.
10-20 (c) A preexisting condition provision in a basic health
10-21 benefits policy under this article may not apply to an enrollee
10-22 who:
10-23 (1) was covered under another employer's health
10-24 benefits plan at the time the individual was eligible to enroll,
10-25 has lost coverage under another employer's health benefits plan as
10-26 a result of the termination of employment, the termination of the
10-27 other plan's coverage, the death of a spouse, or divorce, and
11-1 requests enrollment within 30 days after termination of coverage
11-2 provided under another employer's health benefits plan or the
11-3 continuation of that plan;
11-4 (2) is employed by an employer that offers multiple
11-5 health benefits plans and the enrollee elects a different plan
11-6 during an open enrollment period; or
11-7 (3) is a dependent covered under an eligible
11-8 employee's basic health benefits plan in accordance with a court
11-9 order and with respect to whom a request for enrollment is made not
11-10 later than the 30th day after issuance of the court order.
11-11 Sec. 8. RENEWAL. (a) Except as provided by Subsection (b)
11-12 of this section, a small employer carrier shall renew a health
11-13 benefits plan under this article for all eligible enrollees at the
11-14 option of the small employer, unless:
11-15 (1) the required premiums are not paid;
11-16 (2) the small employer commits fraud or
11-17 misrepresentation relating to the plan or, with respect to coverage
11-18 of an enrollee, the enrollee or the enrollee's representative
11-19 commits fraud or misrepresentation relating to the plan;
11-20 (3) the small employer does not comply with plan
11-21 provisions;
11-22 (4) the number of enrollees is less than the number
11-23 required under Section 4 of this article or under the plan; or
11-24 (5) the small employer is not actively engaged in the
11-25 business in which it was engaged on the effective date of the plan.
11-26 (b) A small employer carrier may cease to renew all plans
11-27 under a class of business. The carrier must provide notice to all
12-1 affected small employers and to the commissioner of insurance or
12-2 similar official of each state in which an affected insured
12-3 individual is known to reside not later than the 90th day before
12-4 termination of coverage. A carrier that exercises its right to
12-5 cease to renew all plans in a class of business may not:
12-6 (1) establish a new class of business for six years
12-7 after the nonrenewal of the plans without prior approval of the
12-8 commissioner; or
12-9 (2) transfer or otherwise provide coverage to any of
12-10 the employers from the nonrenewed class of business unless the
12-11 carrier offers to transfer or provide coverage to all affected
12-12 employers and eligible employees and dependents without regard to
12-13 case characteristics, claim experience, health status, or duration
12-14 of coverage.
12-15 (c) For purposes of this section, "class of business" means
12-16 all small employers as shown on the records of the carrier or a
12-17 distinct grouping of small employers established by the carrier in
12-18 accordance with Subsections (d), (e), and (f) of this section.
12-19 (d) A distinct grouping may only be established by the small
12-20 employer carrier on the basis that the applicable health benefits
12-21 plans:
12-22 (1) are marketed and sold through individuals and
12-23 organizations that are not participating in the marketing or sale
12-24 of other distinct groupings of small employers for the small
12-25 employer carrier;
12-26 (2) have been acquired from another small employer
12-27 carrier as a distinct grouping of plans;
13-1 (3) are provided through an association with
13-2 membership of not fewer than 15 small employers formed for purposes
13-3 other than obtaining health benefits; or
13-4 (4) are provided to a class of business for which the
13-5 carrier does not reject, and never has rejected, any small employer
13-6 in the class of business based on claim experience or health status
13-7 and for which the carrier does not reject, and never has rejected,
13-8 an eligible employee or dependent of a covered small employer based
13-9 on claim experience or health status if the employee or dependent
13-10 enrolls on a timely basis.
13-11 (e) A small employer carrier may divide a distinct grouping
13-12 established under any of the subdivisions in Subsection (d) of this
13-13 section into not more than two subgroupings on the basis of
13-14 underwriting criteria that are expected to produce substantial
13-15 variation in the health care costs.
13-16 (f) The commissioner may approve the establishment of
13-17 additional distinct groupings on application to the commissioner
13-18 and finding by the commissioner that establishing additional
13-19 distinct groupings would enhance the efficiency and fairness of the
13-20 small employer health benefits marketplace.
13-21 Sec. 9. PARTICIPATION. Not later than the 30th day after
13-22 the commissioner approves policy forms for the basic health
13-23 benefits plans under Section 20 of this article, each small
13-24 employer carrier approved by the commissioner to participate in the
13-25 program shall offer to small employers both basic health care
13-26 plans. Each small employer carrier shall issue the elected plan to
13-27 each small employer that elects to be covered under either one of
14-1 the plans and agrees to make the required premium payments and to
14-2 satisfy the other provisions of that plan.
14-3 Sec. 10. PREMIUMS MAY REFLECT CREDIT RISK. The premium
14-4 payment requirements for the basic health benefits plans may
14-5 reflect the potential credit risk of small employers that elect
14-6 coverage in accordance with Section 9 of this article through
14-7 payment security provisions that are reasonably related to the risk
14-8 and are uniformly applied. The requirements must be approved by
14-9 the commissioner.
14-10 Sec. 11. COVERAGE FOR ELIGIBLE EMPLOYEES. (a) A small
14-11 employer carrier may not deny an eligible employee eligibility in a
14-12 basic health benefits plan.
14-13 (b) A small employer participating in the program must pay
14-14 at least 25 percent of an eligible employee's premium. A small
14-15 employer who pays 100 percent of the eligible employee's premium
14-16 may require a waiting period for coverage, provided that the
14-17 waiting period may not exceed 30 days from the first day of the
14-18 next month following the date of employment. The effective date of
14-19 coverage of an eligible employee of a small employer who pays less
14-20 than 100 percent of the eligible employee's premium may not be
14-21 later than the first day of the month following the date of
14-22 employment.
14-23 Sec. 12. COVERAGE FOR ELIGIBLE DEPENDENTS. (a) A small
14-24 employer may provide coverage for eligible dependents of the
14-25 eligible employee. The small employer is not obligated to pay for
14-26 dependent coverage.
14-27 (b) If a small employer allows coverage of a child, the
15-1 coverage may not exclude or limit coverage for the child solely
15-2 because the child is adopted.
15-3 (c) Coverage for a child may be provided when:
15-4 (1) the eligible employee is a party to a suit in
15-5 which adoption of the child by the employee is sought; or
15-6 (2) the employee or a dependent of the employee has
15-7 custody of the child under an order by a court of competent
15-8 jurisdiction that granted the employee or dependent managing
15-9 conservatorship of the child.
15-10 (d) A dependent may not be covered before the effective date
15-11 of the enrollee's coverage.
15-12 (e) A basic health benefits plan may not limit or exclude
15-13 initial coverage of a newborn, natural child of the employee,
15-14 except that a small employer may require that the eligible employee
15-15 cover the employee's spouse, children, or both as a condition to
15-16 coverage of a newborn child. Coverage of a newborn, natural child
15-17 of an enrollee under this subsection terminates after the 31st day
15-18 after birth unless:
15-19 (1) dependent children are eligible for coverage; and
15-20 (2) an application and any additional premium is
15-21 received by the carrier not later than the 31st day after birth.
15-22 (f) If the Consolidated Omnibus Budget Reconciliation Act of
15-23 1985, as amended (Pub. L. No. 99-272, 100 Stat. 222), does not
15-24 require a small employer to provide continuation coverage or does
15-25 not impose tax liability on a small employer that fails to provide
15-26 continuation coverage, an enrollee who has been covered by the
15-27 small employer for at least one year or who is an infant under one
16-1 year of age may elect to continue coverage with the small employer
16-2 if the enrollee loses eligibility for coverage because of the
16-3 termination, death, divorce, or retirement of the employee. To
16-4 continue coverage under this subsection, the enrollee must notify
16-5 the small employer of the enrollee's intent to continue coverage
16-6 not later than the 30th day after the termination, death, divorce,
16-7 or retirement of the employee and must timely pay the applicable
16-8 premium to the small employer. The small employer may require the
16-9 enrollee to pay a fee of not more than $5 a month for
16-10 administrative costs. Continuation coverage continues until one of
16-11 the following events occurs:
16-12 (1) the enrollee fails to pay the premium on or before
16-13 the 30th day after the premium is due;
16-14 (2) the enrollee obtains other group health insurance
16-15 or becomes covered by Medicare;
16-16 (3) three years have elapsed since the termination,
16-17 death, divorce, or retirement of the employee; or
16-18 (4) the employer is no longer eligible to participate
16-19 in the program.
16-20 Sec. 13. DISCLOSURE. In connection with the offering for
16-21 sale of a health benefits plan to a small employer, each small
16-22 employer carrier shall make a reasonable disclosure, as part of its
16-23 solicitation and sales materials, of:
16-24 (1) the extent to which premium rates for the small
16-25 employer are established or adjusted in part based on the actual or
16-26 expected variation in claims costs or actual or expected variation
16-27 in health condition of the employees and dependents of the
17-1 employer;
17-2 (2) the small employer carrier's right to change
17-3 premium rates and the factors other than claim experience that
17-4 affect changes in premium rates;
17-5 (3) renewability of policies and contracts; and
17-6 (4) any preexisting condition provision.
17-7 Sec. 14. INFORMATION RELATING TO CARRIERS' RATING AND
17-8 RENEWAL PRACTICES. (a) Each small employer carrier shall maintain
17-9 at its principal place of business a complete and detailed
17-10 description of its rating and renewal practices, including
17-11 information and documentation that demonstrate that its rating
17-12 practices are based on commonly accepted actuarial assumptions and
17-13 are in accordance with sound actuarial principles.
17-14 (b) Each small employer carrier shall file with the
17-15 commissioner on or before March 15 of each year an actuarial
17-16 certification certifying that the carrier is in compliance with
17-17 this article and that the rating methods of the small employer
17-18 carrier are actuarially sound. The small employer carrier shall
17-19 keep a copy of the certification at its principal place of
17-20 business.
17-21 (c) Each small employer carrier shall make the information
17-22 and documentation described by Subsection (a) of this section
17-23 available to the commissioner on request. The commissioner may not
17-24 disclose the information to persons outside of the board except:
17-25 (1) as agreed by the small employer carrier;
17-26 (2) as ordered by the board;
17-27 (3) as ordered by a court of competent jurisdiction;
18-1 or
18-2 (4) in a case in which this article is violated.
18-3 Sec. 15. EXEMPTION: HEALTH MAINTENANCE ORGANIZATION. (a)
18-4 A health maintenance organization is not required to offer coverage
18-5 or accept applications in accordance with this article:
18-6 (1) to a small employer that is not physically located
18-7 in the health maintenance organization's approved service area;
18-8 (2) to an employee who does not work or reside within
18-9 the health maintenance organization's approved service area; or
18-10 (3) within an area where the health maintenance
18-11 organization reasonably anticipates, and demonstrates to the
18-12 satisfaction of the commissioner, that it will not have the
18-13 capacity within that area in its network of providers to deliver
18-14 service adequately to the members of the groups because of its
18-15 obligations to existing group contract holders and enrollees.
18-16 (b) A health maintenance organization that demonstrates that
18-17 it cannot offer coverage under Subsection (a)(3) of this section
18-18 may not offer coverage in the applicable area to new employer
18-19 groups with more than 25 eligible employees or to small employer
18-20 groups until the later of the 180th day after the refusal to offer
18-21 coverage or accept an application or the date on which the carrier
18-22 notifies the commissioner that it has the capacity to deliver
18-23 services to small employer groups in that area.
18-24 Sec. 16. EXEMPTION: CERTAIN SMALL EMPLOYER CARRIERS.
18-25 (a) A small employer carrier is not required to offer coverage or
18-26 accept applications under this article if the commissioner finds
18-27 that the acceptance of an application would place the small
19-1 employer carrier in a financially impaired condition.
19-2 (b) A small employer carrier that has refused to offer
19-3 coverage or accept applications under this section may not offer
19-4 coverage or accept applications for any group health benefits plan
19-5 until the 180th day after a determination by the commissioner that
19-6 the carrier has ceased to be financially impaired.
19-7 Sec. 17. TEXAS SMALL EMPLOYER HEALTH REINSURANCE PROGRAM.
19-8 (a) The Texas Small Employer Health Reinsurance Program is
19-9 created. The program is a nonprofit entity.
19-10 (b) A carrier may not provide a health benefits plan to a
19-11 small employer in this state unless the carrier is approved by the
19-12 commissioner to participate in the program as a small employer
19-13 carrier. A carrier must certify the election to participate to
19-14 the commissioner not later than the 45th day after the date on
19-15 which the carrier begins providing health benefits in this state.
19-16 For good cause shown, the commissioner may permit a late
19-17 certification of an election to participate. In determining
19-18 whether to approve an election to participate, the commissioner
19-19 shall consider the carrier's financial condition, including a
19-20 demonstration of sufficient surplus to support the assumption of
19-21 risk of small employer groups, its history of assuming and managing
19-22 risk, its history of financial condition and claim processing in
19-23 this state, and its ability to participate in the reinsurance
19-24 program. A carrier approved by the commissioner is subject to the
19-25 provisions of this article. The commissioner shall maintain and
19-26 publish a list of all members of the program.
19-27 (c) The program is administered by a board of directors
20-1 composed of nine members appointed by the governor and the
20-2 commissioner or the commissioner's designee, who serves as an ex
20-3 officio director. Six directors must be representatives of members
20-4 and reinsurers and three must be small employers or their
20-5 employees. The directors appointed by the governor are appointed
20-6 to two-year terms that expire on December 31 of each odd-numbered
20-7 year. At least one member director must be, to the extent there is
20-8 such a person in the state willing to serve, a representative of:
20-9 (1) a company chartered under Chapter 3 of this code;
20-10 (2) a group hospital service corporation; or
20-11 (3) a health maintenance organization.
20-12 (d) The directors shall submit to the State Board of
20-13 Insurance a plan of operation for administration of the program.
20-14 The board shall, after notice and hearing, approve the plan of
20-15 operation if the board determines the plan is suitable to ensure
20-16 the fair, reasonable, and equitable administration of the program
20-17 and provides for the sharing of program gains or losses on an
20-18 equitable and proportionate basis in accordance with the provisions
20-19 of this section. The plan of operation is effective on approval in
20-20 writing by the board, consistent with the date on which the
20-21 coverage under this section is made available.
20-22 (e) The directors may submit proposed amendments to the plan
20-23 of operation to the board. Amendments to the plan of operation
20-24 submitted to the board by the directors under this subsection shall
20-25 be considered approved by the board if not disapproved in writing
20-26 by the board on or before the 30th day after receipt by the board.
20-27 (f) The plan of operation must:
21-1 (1) establish procedures for the handling of and
21-2 accounting for program assets and money and for an annual fiscal
21-3 report to the commissioner;
21-4 (2) establish procedures for the selection of an
21-5 administering carrier, if one is to be selected, and set forth the
21-6 powers and duties of any administering carrier;
21-7 (3) establish procedures for reinsuring risks in
21-8 accordance with the provisions of this article;
21-9 (4) establish procedures for collecting assessments
21-10 from members to provide for claims reinsured by the program and for
21-11 administrative expenses incurred or estimated to be incurred during
21-12 the period for which the assessment is made;
21-13 (5) provide bylaws for the operation of the program;
21-14 and
21-15 (6) provide for additional matters at the discretion
21-16 of the directors.
21-17 (g) The program has the general powers and authority granted
21-18 under the laws of this state to insurance companies and health
21-19 maintenance organizations licensed to transact business, except
21-20 that the program may not issue health benefits plans or other
21-21 insurance coverage directly to groups or individuals. The program
21-22 may:
21-23 (1) enter into contracts necessary and proper to carry
21-24 out the provisions and purposes of this article and may, with the
21-25 approval of the commissioner, enter into contracts with similar
21-26 programs in other states for the joint performance of common
21-27 functions or with persons or other organizations for the
22-1 performance of administrative functions;
22-2 (2) sue or be sued, including taking any legal actions
22-3 necessary and proper to:
22-4 (A) recover assessments and penalties for or on
22-5 behalf of the program or any director; or
22-6 (B) avoid the payment of improper claims against
22-7 the program;
22-8 (3) establish rules, conditions, and procedures
22-9 relating to the reinsurance of members' risks by the program;
22-10 (4) establish actuarial functions as appropriate for
22-11 the operation of the program;
22-12 (5) assess members and reinsurers under Section 18 of
22-13 this article and make reasonable and necessary advance interim
22-14 assessments for organizational and interim operating expenses,
22-15 provided that any interim assessments shall be credited as offsets
22-16 against any regular assessments due following the close of the
22-17 fiscal year;
22-18 (6) appoint from among members appropriate legal,
22-19 actuarial, and other committees as necessary to provide technical
22-20 assistance in the operation of the program, policy and other
22-21 contract design, and any other function within the authority of the
22-22 program; and
22-23 (7) borrow money to effect the purposes of the
22-24 program, provided that any notes or other evidence of indebtedness
22-25 of the program not in default shall be legal investments for
22-26 members and may be carried as admitted assets.
22-27 (h) A small employer carrier shall reinsure the coverage of
23-1 an enrollee if the health benefits plan covering the enrollee has
23-2 incurred claims with respect to the enrollee greater than the
23-3 threshold stop-loss amount established under Subsection (j) of this
23-4 section during any 12-month period beginning either on the
23-5 effective date of coverage or on any anniversary of the effective
23-6 date of coverage. Claims in each 12-month period up to and
23-7 including the threshold stop-loss amount are the responsibility of
23-8 the health benefits plan and are not subject to reinsurance. The
23-9 directors may adopt other requirements to control the volume of
23-10 claims subject to reinsurance.
23-11 (i) If a small employer reinsures the coverage of an
23-12 enrollee under Subsection (h) of this section, the program shall
23-13 reimburse a member in a manner and in an amount as established
23-14 under Subsection (j) of this section. The program may not
23-15 reimburse a member for claims for benefits other than those
23-16 provided under the basic health benefits plans.
23-17 (j) Before each fiscal year, the directors shall establish
23-18 the individual threshold stop-loss amounts for reinsurance
23-19 eligibility and the stop-loss charges that will apply during the
23-20 fiscal year in accordance with the following requirements:
23-21 (1) all small employer carriers shall participate in
23-22 the reinsurance pool;
23-23 (2) claims of all small employers whose basic health
23-24 benefits plans become effective on or after the effective date of
23-25 the reinsurance pool are subject to reinsurance;
23-26 (3) the individual stop-loss amount is determined by
23-27 the size of the small employer, provided that the small employers
24-1 with the largest enrollments must have higher dollar maximums to be
24-2 satisfied before transferring risk to the reinsurance pool; and
24-3 (4) members shall retain 10 percent of the claim
24-4 liability in excess of the stop-loss charges.
24-5 Sec. 18. REINSURANCE PROGRAM FUNDING. (a) The reinsurance
24-6 program shall be funded through three sources:
24-7 (1) the pooling charge or charge for transferring
24-8 liability to the reinsurance program;
24-9 (2) an assessment to small employer carriers; and
24-10 (3) an assessment on reinsurers doing business in this
24-11 state.
24-12 (b) The pooling charge must be established by the directors
24-13 and approved by the commissioner.
24-14 (c) After each fiscal year, the directors or, if an
24-15 administering carrier has been selected, the administering carrier
24-16 shall determine the program net loss for the year, the program
24-17 expenses of administration, and the incurred losses for the year,
24-18 taking into account pooling charges, investment income, and other
24-19 appropriate gains and losses. Any net loss for the year shall be
24-20 recouped by assessments divided equally between members and
24-21 reinsurers.
24-22 (d) In determining net loss under Subsection (c) of this
24-23 section, the directors may not consider expenses of administration
24-24 that exceed 12.5 percent of the gross premium receipts for the
24-25 coverages reinsured by the program.
24-26 (e) The directors shall apportion assessments among the
24-27 members in proportion to their respective shares of the total
25-1 health benefits plan premiums earned in this state from health
25-2 benefits plans covering small employers during the calendar year
25-3 coinciding with or ending during the fiscal year of the program, or
25-4 on any other equitable basis reflecting coverage of small employers
25-5 as may be provided in the plan of operation. The directors shall
25-6 apportion assessments among the reinsurers in proportion to their
25-7 respective shares of the reinsurance market premiums earned in this
25-8 state from reinsuring health benefits plans during the calendar
25-9 year coinciding with or ending during the fiscal year of the
25-10 program, or on any other equitable basis reflecting coverage in the
25-11 reinsurance market.
25-12 (f) Health benefits plan premiums and benefits paid by a
25-13 member or reinsurer that are less than an amount determined by the
25-14 directors to justify the cost of collection shall not be considered
25-15 for purposes of determining assessments. For purposes of this
25-16 subsection, "net premiums" means health benefits plan premiums less
25-17 administrative expense allowances. Health benefits plan premiums
25-18 earned by multiple employer welfare arrangements and, to the extent
25-19 permitted by the Employee Retirement Income Security Act of 1974
25-20 (29 U.S.C. Section 1001 et seq.), health benefit arrangements that
25-21 are self-insured in whole or in part by a small employer shall be
25-22 established by adding paid health losses and administrative
25-23 expenses of the multiple employer welfare arrangement or
25-24 self-insured benefit arrangement.
25-25 (g) If assessments exceed actual losses and administrative
25-26 expenses of the program, the excess shall be held and used by the
25-27 directors to offset future losses or to reduce program premiums.
26-1 For purposes of this subsection, "future losses" includes reserves
26-2 for incurred but unreported claims.
26-3 (h) Each member's and reinsurer's portion of the assessment
26-4 shall be determined annually by the directors based on annual
26-5 statements and other reports deemed necessary by the directors and
26-6 filed by the member. Multiple employer welfare arrangements and,
26-7 to the extent permitted by the Employee Retirement Income Security
26-8 Act of 1974 (29 U.S.C. Section 1001 et seq.), health benefit
26-9 arrangements that are self-insured in whole or in part by a small
26-10 employer shall report to the directors claims payments made and
26-11 administrative expenses incurred in this state on an annual basis
26-12 on a form prescribed by the commissioner.
26-13 (i) The plan of operation must provide for the imposition of
26-14 an interest penalty for late payment of assessments.
26-15 (j) A member or reinsurer may petition the commissioner for
26-16 a deferment in whole or in part of an assessment. The commissioner
26-17 may defer the assessment in whole or in part if, in the opinion of
26-18 the commissioner, the payment of the assessment would place the
26-19 member or reinsurer in a financially impaired condition. If an
26-20 assessment against a member or reinsurer is deferred, the amount by
26-21 which the assessment is deferred may be assessed against the other
26-22 members and reinsurers in a manner consistent with the basis for
26-23 assessment set forth in this section. A member or reinsurer
26-24 receiving a deferment may not write or cede any new business under
26-25 the program until certified by the commissioner as no longer in a
26-26 financially impaired condition. A member or reinsurer receiving a
26-27 deferment is liable to the program for the amount deferred and is
27-1 prohibited from reinsuring a group in the program until the
27-2 assessment is paid.
27-3 (k) A member that pays an assessment under the program is
27-4 entitled to exempt the premium income received under the program
27-5 from assessments required under Section 9, Article 21.28-D, of this
27-6 code.
27-7 (l) Participation in the program as members, establishment
27-8 of rates, reinsurance, forms, or procedures, and any other joint or
27-9 collective action required by this article may not be the basis of
27-10 any criminal or civil liability or penalty against the program or
27-11 its members or directors, either jointly or separately.
27-12 (m) The program is exempt from all taxes.
27-13 Sec. 19. RULES. The commissioner shall adopt rules
27-14 requiring:
27-15 (1) registration by each carrier with the commissioner
27-16 of its intention to be a small employer carrier under this article;
27-17 (2) publication by the department of a list of all
27-18 small employer carriers that may include a requirement applicable
27-19 to agents and carriers that a health benefits plan may not be sold
27-20 by a carrier not identified as a small employer carrier;
27-21 (3) maintenance by the department of a broadly
27-22 publicized toll-free telephone number for access by small employers
27-23 to information concerning this article;
27-24 (4) to the extent considered necessary by the
27-25 commissioner to ensure the fair distribution of high-risk
27-26 individuals and groups among carriers, periodic reports by carriers
27-27 and agents concerning health benefits plans issued, provided that
28-1 reporting requirements shall be limited to information concerning
28-2 case characteristics and numbers of health benefits plans in
28-3 various categories marketed or issued to small employers;
28-4 (5) registration by agents of the intention to be
28-5 agents for health benefits plans marketed or issued to small
28-6 employers under this article; and
28-7 (6) periodic demonstration by small employer carriers
28-8 and agents that they are marketing and issuing health benefits
28-9 plans to small employers in fulfillment of the purposes of this
28-10 article.
28-11 Sec. 20. APPROVAL OF POLICY FORMS. (a) Except as provided
28-12 by Subsection (b) of this section, a small employer carrier may not
28-13 use a policy form for a basic health benefits plan unless the
28-14 policy form has been approved by the commissioner.
28-15 (b) After the commissioner has approved policy forms for the
28-16 basic health benefits plans, a small employer carrier may certify
28-17 to the commissioner, in accordance with rules adopted by the board,
28-18 that policy forms for basic health benefits plans to be used by the
28-19 carrier comply with the approved policy forms. On receipt by the
28-20 commissioner of the certification, the carrier may use the
28-21 carrier's forms unless the commissioner disapproves their continued
28-22 use.
28-23 Sec. 21. EVALUATION OF EFFECTIVENESS OF ARTICLE. The
28-24 commissioner shall conduct a study of the effectiveness of the
28-25 provisions of this article, recommend further improvements to
28-26 achieve greater stability, accessibility, and affordability in the
28-27 small employer marketplace, and, not later than September 1, 1996,
29-1 submit the recommendations to the lieutenant governor and the
29-2 speaker of the house of representatives. This section expires
29-3 December 31, 1996.
29-4 SECTION 2. This Act takes effect September 1, 1993.
29-5 SECTION 3. A carrier that is providing health benefits in
29-6 this state on the effective date of this Act and that desires to
29-7 participate in the Texas Small Employer Health Reinsurance Program
29-8 established under Article 3.51-6E, Insurance Code, as added by this
29-9 Act, shall certify its election to participate not later than
29-10 October 15, 1993. For good cause, the commissioner of insurance
29-11 may permit a late certification of an election to participate.
29-12 SECTION 4. (a) Not later than the 90th day after the
29-13 appointment of a majority of the initial members of the board of
29-14 directors of the Texas Small Employer Health Reinsurance Program
29-15 established under Article 3.51-6E, Insurance Code, as added by this
29-16 Act, the commissioner of insurance shall give notice to all small
29-17 employer carriers participating in the program and to all members
29-18 of the board of directors of the time and place for the initial
29-19 organizational meeting.
29-20 (b) The organizational meeting shall take place not later
29-21 than the 30th day after the date notice is given.
29-22 (c) Not later than the 90th day after the organizational
29-23 meeting is held, the board of directors shall submit the initial
29-24 plan of operation to the State Board of Insurance for approval in
29-25 accordance with Section 17, Article 3.51-6E, Insurance Code, as
29-26 added by this Act. If the board of directors fails to submit a
29-27 plan of operation acceptable to the State Board of Insurance before
30-1 the 91st day after the organizational meeting is held, the State
30-2 Board of Insurance shall, after notice and hearing, adopt a
30-3 temporary plan of operation. The State Board of Insurance shall
30-4 amend or rescind a plan adopted under this section at the time the
30-5 State Board of Insurance approves a plan submitted by the board of
30-6 directors.
30-7 SECTION 5. This Act applies only to a basic health benefits
30-8 plan provided under an insurance policy that is delivered, issued
30-9 for delivery, or renewed on or after January 1, 1994. A policy
30-10 that is delivered, issued for delivery, or renewed before January
30-11 1, 1994, is governed by the law as it existed immediately before
30-12 the effective date of this Act, and that law is continued in effect
30-13 for that purpose.
30-14 SECTION 6. The importance of this legislation and the
30-15 crowded condition of the calendars in both houses create an
30-16 emergency and an imperative public necessity that the
30-17 constitutional rule requiring bills to be read on three several
30-18 days in each house be suspended, and this rule is hereby suspended.