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.