By Martin                                             H.B. No. 2055
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to health insurance and health costs and the availability
    1-3  of health insurance coverage for certain individuals and small
    1-4  employers.
    1-5        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-6        SECTION 1.  The Insurance Code is amended by adding Chapter
    1-7  26 to read as follows:
    1-8              CHAPTER 26.  HEALTH INSURANCE AVAILABILITY
    1-9                   SUBCHAPTER A.  GENERAL PROVISIONS
   1-10        Art. 26.01.  SHORT TITLE.  This chapter may be cited as the
   1-11  Small Employer Health Insurance Availability Act.
   1-12        Art. 26.02.  DEFINITIONS.  In this chapter:
   1-13              (1)  "Affiliated employer" means a person or entity
   1-14  connected by commonality of ownership with a small employer.  The
   1-15  term includes, without limitation, an entity that owns a small
   1-16  employer, shares directors with a small employer, or is eligible to
   1-17  file a consolidated tax return with a small employer.
   1-18              (2)  "Agent" means a person who may act as an agent for
   1-19  the sale of a health benefit plan under a license issued under
   1-20  Article 20A.15 or Article 20A.15A, or under Subchapter A, Chapter
   1-21  21, of this code.
   1-22              (3)  "Base premium rate" means, for each class of
   1-23  business as to a rating period, the lowest premium rate charged or
    2-1  that could have been charged under a rating system for that class
    2-2  of business by the health carrier to small employers with similar
    2-3  case characteristics for small employer health benefit plans with
    2-4  the same or similar coverage.
    2-5              (4)  "Board" means the State Board of Insurance.
    2-6              (5)  "Board of directors" means the board of directors
    2-7  of the Texas Health Reinsurance System.
    2-8              (6)  "Case characteristics" means, with respect to a
    2-9  small employer, the geographic area in which the employees reside;
   2-10  the age and gender of the individual employees and their
   2-11  dependents; the appropriate industry classification as determined
   2-12  by the health carrier; and the number of employees and dependents
   2-13  and such other objective criteria as may be established by the
   2-14  health carrier.  The term does not include claims experience,
   2-15  health status, duration of coverage since the date of issuance, or
   2-16  whether a covered person is or may become pregnant.
   2-17              (7)  "Class of business" means all or a separate
   2-18  grouping of small employers established pursuant to this Act.
   2-19              (8)  "Commissioner" means the Commissioner of the Texas
   2-20  Department of Insurance.
   2-21              (9)  "Dependent" means:
   2-22                    (A)  a covered individual's spouse;
   2-23                    (B)  a covered individual's newborn child;
   2-24                    (C)  a covered individual's child under the age
   2-25  of 19 years;
    3-1                    (D)  a covered individual's child who is a
    3-2  full-time student under the age of 22 years and who is financially
    3-3  dependent upon the parent;
    3-4                    (E)  a covered individual' child of any age who
    3-5  is medically certified as disabled and dependent upon the parent;
    3-6  and
    3-7                    (F)  any person who must be covered under Section
    3-8  3D or 3E, Article 3.51-6, or under Article 3.70-2(L), of this code.
    3-9              (10)  "Eligible employee" means an employee who works
   3-10  on a full-time basis and has a normal work week of 30 hours or
   3-11  more.  The term includes a sole proprietor, a partner, and an
   3-12  independent contractor, if the sole proprietor, partner, or
   3-13  independent contractor is included as an employee under a health
   3-14  benefit plan of a small employer.  The term does not include an
   3-15  employee who works on a part-time, temporary, or substitute basis.
   3-16              (11)  "Health benefit plan" means a group, blanket, or
   3-17  franchise insurance policy, a certificate issued under a group
   3-18  policy, a group hospital service contract, a group subscriber
   3-19  contract, or evidence of coverage issued by a health maintenance
   3-20  organization that provides benefits for health care services.  The
   3-21  term does not include:
   3-22                    (A)  accident-only insurance coverage;
   3-23                    (B)  credit insurance coverage;
   3-24                    (C)  disability insurance coverage;
   3-25                    (D)  specified disease coverage;
    4-1                    (E)  coverage of Medicare services under a
    4-2  federal contract;
    4-3                    (F)  Medicare supplement and Medicare Select
    4-4  policies which are regulated in accordance with federal law;
    4-5                    (G)  long-term care insurance coverage;
    4-6                    (H)  coverage limited to dental care;
    4-7                    (I)  coverage limited to care of vision;
    4-8                    (J)  insurance coverage issued as a supplement to
    4-9  liability insurance;
   4-10                    (K)  insurance coverage arising out of a workers'
   4-11  compensation system or similar statutory system;
   4-12                    (L)  automobile medical payment insurance
   4-13  coverage; or
   4-14                    (M)  Taft-Hartley Trusts, which are jointly
   4-15  managed trusts, as allowed by 29 U.S.C. Section 141 et. seq.,
   4-16  containing a plan of benefits for employees which is negotiated in
   4-17  a collective bargaining agreement governing wages, hours, and
   4-18  working conditions of the employees, as allowed by 29 U.S.C.
   4-19  Section 157.
   4-20              (12)  "Health carrier" means any entity authorized
   4-21  under this code that provides health insurance or health benefits
   4-22  in this state, including an insurance company, a group hospital
   4-23  service corporation authorized under Chapter 20, a health
   4-24  maintenance organization authorized under Chapter 20A, and a
   4-25  stipulated premium company authorized under Chapter 22 of this
    5-1  code.
    5-2              (13)  "Index rate" means, for each class of business as
    5-3  to a rating period for small employers with similar case
    5-4  characteristics, the arithmetic average of the applicable base
    5-5  premium rate and corresponding highest premium rate.
    5-6              (14)  "Late enrollee" means an eligible employee or
    5-7  dependent who requests enrollment in a small employer's health
    5-8  benefit plan following the initial enrollment period provided under
    5-9  the terms of the first plan for which such employee or dependent
   5-10  was eligible through such small employer, provided an eligible
   5-11  employee or dependent shall not be considered a late enrollee if:
   5-12                    (A)  the individual:
   5-13                          (1)  was covered under another
   5-14  employer-provided health benefit plan at the time the individual
   5-15  was eligible to enroll;
   5-16                          (2)  states, at the time of the initial
   5-17  eligibility, that coverage under another employer health benefit
   5-18  plan was the reason for declining enrollment;
   5-19                          (3)  has lost coverage under another
   5-20  employer health benefit plan as a result of the termination of
   5-21  employment, the termination of the other plan's coverage, death of
   5-22  a spouse, or divorce; and
   5-23                          (4)  requests enrollment within thirty-one
   5-24  days after the termination of coverage under another employer
   5-25  health benefit plan, or
    6-1                    (B)  the individual is employed by an employer
    6-2  who offers multiple health benefit plans and the individual elects
    6-3  a different health benefit plan during an open enrollment period,
    6-4  or
    6-5                    (C)  a court has ordered coverage to be provided
    6-6  for a spouse or minor child under a covered employee's plan and
    6-7  request for enrollment is made within thirty-one days after
    6-8  issuance of such court order.
    6-9              (15)  "New business premium rate" means, for each class
   6-10  of business as to a rating period, the lowest premium rate charged
   6-11  or offered or which could have been charged or offered by the
   6-12  health carrier to small employers with similar case characteristics
   6-13  for newly issued small employer health benefits plans with the same
   6-14  or similar coverage.
   6-15              (16)  "Person" means an individual, corporation,
   6-16  partnership, association, or any other private legal entity.
   6-17              (17)  "Plan of operation" means the plan of operation
   6-18  of the system established under article 26.55 of this code.
   6-19              (18)  "Premium" means all moneys paid by a small
   6-20  employer and eligible employees as a condition of receiving
   6-21  coverage from a health carrier, including any fees or other
   6-22  contributions associated with a health benefit plan.
   6-23              (19)  "Rating period" means the calendar period for
   6-24  which premium rates established by a health carrier are assumed to
   6-25  be in effect.
    7-1              (20)  "Reinsuring carrier" means a health carrier
    7-2  participating in the system.
    7-3              (21)  "Risk-assuming carrier" means a health carrier
    7-4  that elects not to participate in the system.
    7-5              (22)  "Small employer" means a person actively engaged
    7-6  in business and that, on at least 50 percent of its working days
    7-7  during the preceding calendar quarter, employed at least 3 and not
    7-8  more than 50 eligible employees, the majority of whom were employed
    7-9  in this state, including the employees of an affiliated employer,
   7-10  if any.
   7-11              (23)  "Small employer health benefit plans" means the
   7-12  Primary and Preventive Care Benefit Plan, the In-Hospital Benefit
   7-13  Plan, and the Standard Health Benefit Plan described in Subchapter
   7-14  E of this chapter.
   7-15              (24)  "System" means the Texas Health Reinsurance
   7-16  System established under Subchapter F of this chapter.
   7-17        Art. 26.03.  AFFILIATED CARRIERS.  (a)  For purposes of this
   7-18  chapter, health carriers that are affiliates or that are eligible
   7-19  to file a consolidated tax return are considered to be one carrier,
   7-20  and a restriction imposed by this chapter applies as if the health
   7-21  benefit plans delivered or issued for delivery to small employers
   7-22  in this state by the affiliates were issued by one carrier.
   7-23        (b)  An affiliate that is a health maintenance organization
   7-24  is considered to be a separate health carrier for the purposes of
   7-25  this chapter.
    8-1        (c)  In this article, "affiliate" has the meaning assigned by
    8-2  Article 21.49-1 of this code.
    8-3        Art. 26.04.  RULES.  The board shall adopt rules to implement
    8-4  this chapter.
    8-5        Art. 26.05.  STATUTORY REFERENCES.  A reference in this
    8-6  chapter to a statutory provision applies to all reenactments,
    8-7  revisions, or amendments of that statutory provision.
    8-8        Article 26.06.  APPLICABILITY.  (a)  Any individual or group
    8-9  health benefit plan shall be subject to the provisions of this
   8-10  chapter if it provides health care benefits covering three or more
   8-11  eligible employees of a small employer and if it meets any one of
   8-12  the following conditions:
   8-13              (1)  Any portion of the premium or benefits is paid by
   8-14  a small employer, or
   8-15              (2)  Any covered individual is reimbursed, whether
   8-16  through wage adjustments or otherwise, by a small employer for any
   8-17  portion of the premium, or
   8-18              (3)  The health benefit plan is treated by the employer
   8-19  or any of the covered individuals as part of a plan or program for
   8-20  the purposes of Section 162 or Section 106 of the United States
   8-21  Internal Revenue Code.
   8-22        (b)  This chapter applies to a list-billed individual health
   8-23  insurance policy.  This article does not apply to an individual
   8-24  health insurance policy that is underwritten individually.
   8-25        (c)  Except as expressly provided in this Act, no small
    9-1  employer health benefit plan offered to a small employer shall be
    9-2  subject to:
    9-3              (1)  Any law requiring coverage or the offer of
    9-4  coverage of a health care service or benefit;
    9-5              (2)  Any law that would prevent any health carrier from
    9-6  contracting with providers or groups of providers with respect to
    9-7  health care services or benefits; or
    9-8              (3)  Any law that would prevent negotiations with
    9-9  providers regarding the level or method of reimbursing care of
   9-10  services provided under the health benefit plan.
   9-11                SUBCHAPTER B.  PURCHASING COOPERATIVES
   9-12        Art. 26.11.  DEFINITIONS.  In this subchapter:
   9-13              (1)  "Board of trustees" means the board of trustees of
   9-14  the Texas cooperative.
   9-15              (2)  "Board" means the board of directors elected by a
   9-16  private purchasing cooperative.
   9-17              (3)  "Cooperative" means a purchasing cooperative
   9-18  established under this subchapter.
   9-19              (4)  "Texas cooperative" means the Texas Health
   9-20  Benefits Purchasing Cooperative established under Art. 26.12 of
   9-21  this subchapter.
   9-22        Art. 26.12.  TEXAS HEALTH BENEFITS PURCHASING COOPERATIVE.
   9-23  (a)  The Texas Health Benefits Purchasing Cooperative is a
   9-24  nonprofit organization established to make health care coverage
   9-25  available to small employers, their eligible employees, and their
   10-1  eligible employees' dependents.
   10-2        (b)  The Texas cooperative is administered by a six-member
   10-3  board of trustees appointed by the governor with the advice and
   10-4  consent of the senate.  Two members must represent employers, two
   10-5  members must represent employees and two members must represent the
   10-6  public.  The chair of the State Board of Insurance and the
   10-7  executive director of the Texas Department of Commerce shall serve
   10-8  as ex officio trustees.
   10-9        (c)  The appointed members of the board of trustees serve
  10-10  staggered six-year terms, with the terms of two of the members
  10-11  expiring February 1 or each odd-numbered year.
  10-12        (d)  A member of the board of trustees may not be compensated
  10-13  for serving on the board of trustees but is entitled to
  10-14  reimbursement for actual expenses incurred in performing functions
  10-15  as a member of the board of trustees as provided in the General
  10-16  Appropriations Act.
  10-17        (e)  The board of trustees shall employ an executive
  10-18  director.  The executive director may hire other employees as
  10-19  necessary.
  10-20        (f)  The board of trustees may develop regional subdivisions
  10-21  of the Texas cooperative, and authorize each subdivision to
  10-22  separately exercise the powers and duties of a cooperative.
  10-23        (g)  Employee salaries and related costs may be paid from
  10-24  administrative fees collected from employers and carriers or other
  10-25  sources of funding arranged by the Texas cooperative.
   11-1        (h)  A member of the board of trustees, the executive
   11-2  director, and any employee or agent of the Texas cooperative is not
   11-3  liable for any act performed in good faith in the execution of
   11-4  duties in connection with the Texas cooperative.
   11-5        Art. 26.13.  PRIVATE PURCHASING COOPERATIVE.  (a)  One or
   11-6  more small employers may form a cooperative for the group purchase
   11-7  of small employer health benefit plans.  A cooperative shall be
   11-8  organized as a non-profit corporation and has the rights and duties
   11-9  provided by the Texas Non-Profit Corporation Act.
  11-10        (b)  The board shall annually file with the commissioner a
  11-11  statement of all moneys collected and expenses incurred for each of
  11-12  the past three years.
  11-13        Art. 26.14.  POWERS AND DUTIES OF COOPERATIVES.  (a)  A
  11-14  cooperative may:
  11-15              (1)  arrange for small employer health benefit plans
  11-16  coverage for small employer groups who participate in the
  11-17  cooperative by contracting with one or more health carriers;
  11-18              (2)  collect moneys to cover the cost of:
  11-19                    (A)  premiums for small employer health benefit
  11-20  plans coverage purchased through the cooperative, and
  11-21                    (B)  the cooperative's administrative expenses;
  11-22              (3)  contract with agents to market coverage issued
  11-23  through the cooperative;
  11-24              (4)  establish administrative and accounting procedures
  11-25  for the operation of the cooperative;
   12-1              (5)  establish criteria governing the eligibility of
   12-2  carriers or health care providers to participate in the program;
   12-3              (6)  establish procedures under which an applicant for
   12-4  or participant in coverage issued through the cooperative may have
   12-5  a grievance reviewed by an impartial person;
   12-6              (7)  contract with a carrier or third-party
   12-7  administrator to provide administrative services to the
   12-8  cooperative;
   12-9              (8)  contract with a health carrier or health care
  12-10  provider for the provision of services to small employers covered
  12-11  through the cooperative;
  12-12              (9)  develop and implement a plan to maintain public
  12-13  awareness of the cooperative and publicize the eligibility
  12-14  requirements for, and the procedures for enrollment in coverage
  12-15  through, the cooperative; and
  12-16              (10)  negotiate premiums paid by its members.
  12-17        (b)  A cooperative may not self insure or self fund any
  12-18  health benefit plan or portion thereof.
  12-19        Art. 26.15.  COOPERATIVE NOT AN INSURER.  (a)  A cooperative
  12-20  is not an insurer and the employees of the cooperative are not
  12-21  required to be licensed under Subchapter A, Chapter 21, of this
  12-22  code.
  12-23        (b)  An agent or third-party administrator used and
  12-24  compensated by the cooperative must be licensed as required by
  12-25  Subchapter A, Chapter 21, of this code.
   13-1           SUBCHAPTER C.  GUARANTEED ISSUE AND RENEWABILITY
   13-2        Art. 26.21.  SMALL EMPLOYER HEALTH BENEFIT PLANS; EMPLOYER
   13-3  ELECTION.  (a)  Until December 31, 1996, each health carrier
   13-4  marketing to small employers shall provide the small employer
   13-5  health benefit plans without regard to claims experience, health
   13-6  status, or medical history.  Each health carrier shall issue the
   13-7  plan chosen by the small employer to each small employer that
   13-8  elects to be covered under that plan, agrees to make the required
   13-9  premium payments, and agrees to satisfy the other requirements of
  13-10  the plan.  After December 31, 1996, a small employer that desires
  13-11  coverage for its employees through the purchase of a small employer
  13-12  health benefit plan is subject to normal underwriting requirements.
  13-13        (b)  An employer that becomes a small employer after December
  13-14  31, 1996, has one year in which to purchase coverage for its
  13-15  employees through the small employer health benefit plans without
  13-16  regard to claims experience, health status, or medical history.
  13-17  After that time, the small employer is subject to normal
  13-18  underwriting requirements.
  13-19        (c)  Coverage under a small employer health benefit plan is
  13-20  not available unless a small employer pays 100 percent of the
  13-21  insurance premium for all of its eligible employees for, at the
  13-22  small employer's election, one of the small employer health benefit
  13-23  plans.  The small employer may also elect to pay the premium cost
  13-24  for additional coverage.
  13-25        (d)  An eligible employee may obtain additional coverage
   14-1  beyond that purchased by the employer if at least 20 percent of the
   14-2  eligible employees elect to obtain the same additional coverage.
   14-3  Such additional coverage may be paid for by the employer, the
   14-4  employee, or both.
   14-5        (e)  The initial enrollment period for the employees and
   14-6  their dependents shall be at least 30 days.
   14-7        (f)  A new employee of a covered small employer and the
   14-8  dependents of that employee shall not be denied coverage if the
   14-9  application is received by the health carrier not later than the
  14-10  31st day after the date on which the employment begins.
  14-11        (g)  A late enrollee may be excluded from coverage for 12
  14-12  months from the date of application or may be subject to a 12-month
  14-13  preexisting condition exclusion.  If both a period of exclusion
  14-14  from coverage and a preexisting condition exclusion are applicable
  14-15  to a late enrollee, the combined period of exclusion may not exceed
  14-16  12 months from the date of the late application.
  14-17        (h)  A health carrier shall not exclude any eligible employee
  14-18  or dependent who would otherwise be covered under a small employer
  14-19  health benefit plan on the basis of an actual or expected health
  14-20  condition of such person.
  14-21        (i)  No small employer health benefit plan issued by a health
  14-22  carrier may limit or exclude, by use of a rider or amendment
  14-23  applicable to a specific individual, coverage by type of illness,
  14-24  treatment, medical condition, or accident, except for pre-existing
  14-25  conditions or diseases as permitted under Article 26.47 of this
   15-1  Act.
   15-2        (j)  A small employer plan may not limit or exclude initial
   15-3  coverage of a newborn child of the employee.  Any coverage of a
   15-4  newborn child of an employee under this subsection terminates on
   15-5  the 30th day after the birth date of the child unless:
   15-6              (1)  dependent children are eligible for coverage, and
   15-7              (2)  notification of the birth and any required
   15-8  additional premium is received by the insurer not later than the
   15-9  31st day after the date of birth.
  15-10        (k)  If the Consolidated Omnibus Budget Reconciliation Act of
  15-11  1985, as amended (Pub.L. No. 99-272, 100 Stat. 222), does not
  15-12  require continuation or conversion coverage for dependents of an
  15-13  employee, a dependent who has been covered by that small employer
  15-14  for at least one year or is an infant under one year of age may
  15-15  elect to continue coverage with the small employer, as long as the
  15-16  small employer plan is in force, if the dependent loses eligibility
  15-17  for coverage because of the death, divorce, or retirement of the
  15-18  employee, as required by Art. 3.51-3B of this code.
  15-19        Art. 26.22.  GEOGRAPHIC SERVICE AREA.  (a)  A health carrier
  15-20  is not required to issue the small employer health benefit plans to
  15-21  a small employer if a plan would cover an employer who is:
  15-22              (1)  not located within a geographic service area filed
  15-23  with the commissioner for that health carrier.  The commissioner
  15-24  shall have the authority to disapprove a geographic service area;
  15-25  or
   16-1              (2)  located in an area in which the commissioner
   16-2  determines that the health carrier will not have the capacity to
   16-3  deliver services adequately because of obligations to existing
   16-4  covered individuals.
   16-5        (b)  A health carrier that refuses to issue a small employer
   16-6  health benefit plan in a geographic service area filed with the
   16-7  commissioner may not offer a health benefit plan to a group of less
   16-8  than 50 individuals in the affected geographic service area before
   16-9  the fifth anniversary of the date of the refusal.
  16-10        Art. 26.23.  RENEWABILITY OF COVERAGE; CANCELLATION.  (a)
  16-11  Except as provided by Article 26.24 of this code, a health carrier
  16-12  shall renew the small employer health benefit plans for all covered
  16-13  small employers at the option of the small employer, except for:
  16-14              (1)  nonpayment of a premium;
  16-15              (2)  fraud or misrepresentation of a material fact by
  16-16  the small employer; or
  16-17              (3)  noncompliance with small employer health benefit
  16-18  plan provisions.
  16-19        (b)  A health carrier may not cancel the small employer
  16-20  health benefit plans except for the reasons specified for refusal
  16-21  to renew under Subsection (a) of this article.
  16-22        Art. 26.24.  REFUSAL TO RENEW ALL PLANS.  (a)  A health
  16-23  carrier may elect to refuse to renew all small employer health
  16-24  benefit plans delivered or issued for delivery by the carrier in
  16-25  this state or in a geographic service area approved under Article
   17-1  26.22 of this code.  The health carrier must notify the
   17-2  commissioner of the election not later than  the 180th day before
   17-3  the date coverage under the first small employer health benefit
   17-4  plan terminates under this subsection.
   17-5        (b)  The health carrier must notify each affected covered
   17-6  small employer not later than the 180th day before the date on
   17-7  which coverage terminates for that small employer.
   17-8        (c)  A health carrier that elects under Subsection (a) of
   17-9  this article to refuse to renew all small employer health benefit
  17-10  plans in this state or in an approved geographic service area may
  17-11  not write a new small employer health benefit plan in this state or
  17-12  in the geographic service area, as applicable, before the fifth
  17-13  anniversary of the date of notice to the commissioner under
  17-14  Subsection (a) of this article.
  17-15        (d)  A health carrier that elects under Subsection (a) of
  17-16  this article to refuse to renew all small employer health benefit
  17-17  plans in this state is subject to Article 21.49-2c of this code.
  17-18                SUBCHAPTER D.  UNDERWRITING AND RATING
  17-19        Art. 26.31.  ESTABLISHMENT OF CLASSES OF BUSINESS.  (a)  A
  17-20  health carrier may establish a separate class of business only to
  17-21  reflect substantial differences in expected claims experience or
  17-22  administrative costs related to the following reasons:
  17-23              (1)  The health carrier uses more than one type of
  17-24  system for the marketing and sale of small employer health benefit
  17-25  plans to small employers; or
   18-1              (2)  The health carrier has acquired a class of
   18-2  business from another health carrier.
   18-3        (b)  A health carrier may establish up to nine (9) separate
   18-4  classes of business under this article.
   18-5        (c)  The commissioner may establish regulations to provide
   18-6  for a period of transition in order for a health carrier to come
   18-7  into compliance with Subsection (b) in the instance of acquisition
   18-8  of an additional class of business from another health carrier.
   18-9        (d)  The commissioner may approve the establishment of
  18-10  additional classes of business upon application to the commissioner
  18-11  and a finding by the commissioner that such action would enhance
  18-12  the efficiency and fairness of the small employer marketplace.
  18-13        Art. 26.32.  INDEX RATES.  Premium rates for small employer
  18-14  health benefit plans subject to this Act shall be subject to the
  18-15  following provisions:
  18-16              (1)  The index rate for a rating period for any class
  18-17  of business shall not exceed the index rate for any other class of
  18-18  business by more than 20 percent.
  18-19              (2)  For a class of business, the premium rates charged
  18-20  during a rating period to small employers with similar case
  18-21  characteristics for the same or similar coverage, or the rates that
  18-22  could be charged to such employers under the rating system for that
  18-23  class of business, shall not vary from the index rate by more than
  18-24  25 percent of the index rate.
  18-25        Art. 26.33.  PREMIUM RATES; ADJUSTMENTS.  (a)  The percentage
   19-1  increase in the premium rate charged to a small employer for a new
   19-2  rating period may not exceed the sum of the following:
   19-3              (1)  The percentage change in the new business premium
   19-4  rate measured from the first day of the prior rating period to the
   19-5  first day of the new rating period.  In the case of a small
   19-6  employer health benefit plan into which the health carrier is no
   19-7  longer enrolling new small employers, the health carrier shall use
   19-8  the percentage change in the base premium rate, provided that such
   19-9  change does not exceed, on a percentage basis, the change in the
  19-10  new business premium rate for the most similar health benefit plan
  19-11  into which the health carrier is actively enrolling new small
  19-12  employers;
  19-13              (2)  Any adjustment, not to exceed 15 percent annually
  19-14  and adjusted pro rata for rating periods of less than one year, due
  19-15  to the claim experience, health status or duration of coverage of
  19-16  the employees or dependents of the small employer as determined
  19-17  from the health carrier's rate manual for the class of business;
  19-18  and
  19-19              (3)  Any adjustment due to change in coverage or change
  19-20  in the case characteristics of the small employer as determined
  19-21  from the health carrier's rate manual for the class of business.
  19-22        (b)  Adjustments in rates for claim experience, health status
  19-23  and duration of coverage shall not be charged to individual
  19-24  employees or dependents.  Any such adjustment shall be applied
  19-25  uniformly to the rates charged for all employees and dependents of
   20-1  the small employer.
   20-2        (c)  A health carrier may utilize industry as a case
   20-3  characteristic in establishing premium rates, provided that the
   20-4  highest rate factor associated with any industry classification
   20-5  shall not exceed the lowest rate factor associated with any
   20-6  industry classification by more than 15 percent.
   20-7        Art. 26.34.  PRIOR COVERAGE.  In the case of health benefit
   20-8  plans delivered or issued for delivery prior to the effective date
   20-9  of this Act, a premium rate for a rating period may exceed the
  20-10  ranges set forth in for a period of two years following the
  20-11  effective date of this Act.  In such cases, the percentage increase
  20-12  in the premium rate charged to a small employer for a new rating
  20-13  period shall not exceed the sum of the following:
  20-14              (1)  The percentage change in the new business premium
  20-15  rate measured from the first day of the prior rating period to the
  20-16  first day of the new rating period.  In the case of a health
  20-17  benefit plan into which the small employer carrier is no longer
  20-18  enrolling new small employers, the health carrier shall use the
  20-19  percentage change in the base premium rate, provided that such
  20-20  change does not exceed, on a percentage basis, the change in the
  20-21  new business premium rate for the most similar health benefit plan
  20-22  into which the health carrier is actively enrolling new small
  20-23  employers; and
  20-24              (2)  Any adjustment due to change in coverage or change
  20-25  in the base characteristics of the small employer as determined
   21-1  from the health carrier's rate manual for the class of business.
   21-2        Art. 26.35.  PREMIUM RATES; NONDISCRIMINATION.  (a)  Health
   21-3  carriers shall apply rating factors, including case
   21-4  characteristics, consistently with respect to all small employers
   21-5  in a class of business.  Rating factors shall produce premiums for
   21-6  identical groups which differ only by the amounts attributable to
   21-7  plan design and do not reflect differences due to the nature of the
   21-8  groups assumed to select particular health benefit plans.
   21-9        (b)  A health carrier shall treat all health benefit plans
  21-10  issued or renewed in the same calendar month as having the same
  21-11  rating period.
  21-12        (c)  A health carrier shall not use case characteristics
  21-13  other than age, gender, industry, geographic area, and group size
  21-14  without the prior approval of the commissioner.
  21-15        (d)  Premium rates for small employer health benefit plans
  21-16  shall comply with the requirements of this Act notwithstanding any
  21-17  assessments paid or payable by health carriers.
  21-18        (e)  The commissioner may establish regulations to implement
  21-19  the provisions of this section and to assure that rating practices
  21-20  used by health carriers are consistent with the purposes of this
  21-21  act, including regulations that:
  21-22              (1)  Assure that differences in rates charged for small
  21-23  employer health benefit plans are reasonable and reflect objective
  21-24  differences in plan design; and
  21-25              (2)  Prescribe the manner in which case characteristics
   22-1  may be used by health carriers.
   22-2        (f)  A health carrier shall not transfer a small employer
   22-3  involuntarily into or out of a class of business.  A health carrier
   22-4  shall not offer to transfer a small employer into or out of a class
   22-5  of business unless such offer is made to transfer all small
   22-6  employers in the class of business without regard to case
   22-7  characteristics, claim experience, health status or duration of
   22-8  coverage since issue.
   22-9        Art. 26.36.  RESTRICTED PROVIDER NETWORKS.  For the purposes
  22-10  of this subchapter, a small employee health benefit plan that
  22-11  utilizes a restricted provider network shall not be considered
  22-12  similar coverage to a small employer health benefit plan that does
  22-13  not utilize such a network, provided that utilization of the
  22-14  restricted provider network results in substantial differences in
  22-15  claim costs.
  22-16        Art. 26.37.  ENFORCEMENT.  If the commissioner finds that a
  22-17  health carrier under this Chapter exceeds the applicable rate
  22-18  established under this Subchapter, the commissioner may order
  22-19  restitution and assess penalties as prescribed under Article 1.10,
  22-20  Sec. 7, of this code.
  22-21        Art. 26.38.  DISCLOSURE.  (a)  In connection with the
  22-22  offering for sale of any small employer health benefit plan, each
  22-23  health carrier shall make a reasonable disclosure, as part of its
  22-24  solicitation and sales materials, of:
  22-25              (1)  the extent to which premium rates for a specific
   23-1  small employer are established or adjusted based upon the actual or
   23-2  expected variation in claims costs or actual or expected variation
   23-3  in health status of the employees of the small employer and their
   23-4  dependents;
   23-5              (2)  the provisions concerning such health carrier's
   23-6  right to change premium rates and the factors other than claims
   23-7  experience which affect changes in premium rates;
   23-8              (3)  provisions relating to renewability of policies
   23-9  and contracts; and
  23-10              (4)  provisions relating to any pre-existing condition
  23-11  provision.
  23-12        Art. 26.39.  REPORTING REQUIREMENTS.  (a)  Compliance with
  23-13  the underwriting and rating requirements contained in this Act
  23-14  shall be demonstrated through actuarial certification.  Health
  23-15  carriers offering small employer health benefit plans shall file
  23-16  annually with the Commissioner an actuarial certification stating
  23-17  that the underwriting and rating methods of the health carrier:
  23-18              (1)  comply with accepted actuarial practices,
  23-19              (2)  are uniformly applied to small employer health
  23-20  benefit plans covering small employers, and
  23-21              (3)  comply with the provisions of this Act.
  23-22        (b)  Each health carrier shall maintain at its principal
  23-23  place of business a complete and detailed description of its rating
  23-24  practices and renewal underwriting practices, including information
  23-25  and documentation that demonstrate that its rating methods and
   24-1  practices are based upon commonly accepted actuarial assumptions
   24-2  and are in accordance with sound actuarial principles.
   24-3        (c)  A health carrier shall make the information and
   24-4  documentation described in Subsection (b) of this article available
   24-5  to the commissioner upon request.  Except in cases of violations of
   24-6  this Act, the information shall be considered proprietary and trade
   24-7  secret information and shall not be subject to disclosure by the
   24-8  commissioner to persons outside of the Department except as agreed
   24-9  to by the health carrier or as ordered by a court of competent
  24-10  jurisdiction.
  24-11                        SUBCHAPTER E.  COVERAGE
  24-12        Art. 26.41.  SMALL EMPLOYER HEALTH BENEFIT PLANS.  (a)  A
  24-13  health carrier marketing to small employers shall offer three
  24-14  health benefit plans:  the Preventive and Primary Care Benefit
  24-15  Plan, the In-Hospital Benefit Plan and the Standard Health Benefit
  24-16  Plan.  These three plans will be collectively referred to as the
  24-17  small employer health benefit plans.
  24-18        (b)  A health carrier may offer to a small employer
  24-19  additional riders to the Standard Health Benefit Plan.
  24-20        (c)  A health carrier may not offer to a small employer
  24-21  riders to the:
  24-22              (1)  Preventive and Primary Care Benefit Plan except as
  24-23  provided by Art.  26.44(c);
  24-24              (2)  In-Hospital Benefit Plan, except as provided by
  24-25  Art. 26.45(c).
   25-1        Art. 26.42.  POLICY FORMS.  The commissioner shall promulgate
   25-2  the policy forms for the small employer health benefit plans.  A
   25-3  health carrier may not offer these three benefit plans through
   25-4  policy forms other than those promulgated by the commissioner under
   25-5  this article.
   25-6        Art. 26.43.  RIDERS; FILING WITH COMMISSIONER.  (a)  A health
   25-7  carrier shall file with the commissioner, in a form and manner
   25-8  prescribed by the commissioner, riders to the small employer health
   25-9  benefit plans as allowed under this subchapter to be used by the
  25-10  carrier.  A health carrier may use a rider filed under this article
  25-11  after the 30th day after the date the rider is filed unless the
  25-12  commissioner disapproves its use.
  25-13        (b)  The commissioner may, after notice and an opportunity
  25-14  for a hearing, disapprove the continued use by a health carrier of
  25-15  a rider if the rider does not meet the requirements of this
  25-16  chapter.
  25-17        Art. 26.44.  PREVENTIVE AND PRIMARY CARE BENEFIT PLAN.  (a)
  25-18  The Preventive and Primary Care Benefit Plan must include coverage
  25-19  for health services described in subsections (b) and (c) of this
  25-20  Article when they are provided by a physician, physician assistant,
  25-21  advanced nurse practitioner, or another licensed practitioner,
  25-22  including any practitioner required to be covered under Article
  25-23  21.52 of this code or under Section 2, Chapter 397, Acts of the
  25-24  54th Legislature, Regular Session, 1955 (Article 3.70-2, Vernon's
  25-25  Texas Insurance Code).
   26-1        (b)  Coverage for the following preventive care must be
   26-2  provided with no copayments or deductibles required:
   26-3              (1)  childhood immunizations;
   26-4              (2)  Pap tests;
   26-5              (3)  mammography, as required by Section 2, Chapter
   26-6  397, Acts of the 54th Legislature, Regular Session, 1955 (Article
   26-7  3.70-2, Vernon's Texas Insurance Code) and its subsequent
   26-8  amendments;
   26-9              (4)  colo-rectal screening;
  26-10              (5)  prostate cancer screening;
  26-11              (6)  vision and hearing tests for children under 19
  26-12  years of age;
  26-13        (c)  Coverage must include the following:
  26-14              (1)  outpatient hospital care and up to 5 days per
  26-15  policy year of inpatient hospital care;
  26-16              (2)  medically necessary emergency care;
  26-17              (3)  pregnancy-related care, including prenatal and
  26-18  postnatal care and high-risk pregnancy care;
  26-19              (4)  well-child care, including neonatal screening and
  26-20  routine physical check-ups;
  26-21              (5)  outpatient clinic or office visits for treatment
  26-22  of illness or injury;
  26-23              (6)  one physical examination per policy year;
  26-24              (7)  diagnostic examinations, laboratory, and x-ray
  26-25  services, with a limit of $5000 per policy year;
   27-1              (8)  mental health services, including outpatient
   27-2  evaluation, crisis intervention, and services for treatment of
   27-3  serious mental illness as defined in Sec. 1 of Art. 3.51-14 of this
   27-4  code, for 5 days of inpatient services and 40 outpatient visits per
   27-5  policy year;
   27-6              (9)  evaluation and treatment for the abuse of or
   27-7  addiction to alcohol or drugs, for 5 days of inpatient services and
   27-8  40 outpatient visits per policy year;
   27-9              (10)  home health services, as defined in Sec. 1 of
  27-10  Art. 3.70-3B of this code; and
  27-11              (11)  rehabilitative services, including outpatient
  27-12  diagnostic services and 40 outpatient treatment visits per policy
  27-13  year;
  27-14        (c)  The Preventive and Primary Care Benefit Plan may include
  27-15  a rider for coverage of prescription drugs but shall not include
  27-16  any additional riders.
  27-17        (d)  The Preventive and Primary Care Benefit Plan shall
  27-18  include a total benefit cap of $30,000 per policy year.
  27-19        (e)  Except for services excluded from deductible and
  27-20  copayment requirements in subsection (b) of this Article, a
  27-21  Preventive and Primary Care Benefit Plan may require a deductible
  27-22  of no more than $250 per policy year and shall pay at least 80
  27-23  percent of covered charges after the deductible has been satisfied.
  27-24  After an insured employee's copayments have reached $1000 in a
  27-25  policy year, the plan must pay 100 percent of covered charges for
   28-1  the remainder of that policy year.
   28-2        Art. 26.45.  IN-HOSPITAL BENEFIT PLAN.  (a)  The In-Hospital
   28-3  Benefit Plan shall include coverage for diagnostic, treatment, and
   28-4  rehabilitative services provided through inpatient hospital
   28-5  services and shall include outpatient care which is necessary as a
   28-6  follow-up to the in-hospital treatment for a period of 90 days
   28-7  after discharge from the hospital.
   28-8        (b)  The In-Hospital Benefit Plan is not subject to any law
   28-9  requiring the reimbursement, utilization, or consideration of a
  28-10  specific category of a licensed or certified health care
  28-11  practitioner.
  28-12        (c)  The In-Hospital Benefit Plan shall provide lifetime
  28-13  benefits of $1,000,000 and a total benefit cap of $100,000 per
  28-14  policy year.  The plan may require deductible payments of no more
  28-15  than $500 per policy year and shall pay at least 80 percent of
  28-16  covered charges after the deductible has been satisfied.  After an
  28-17  insured employee's copayments have reached $1000 in a policy year,
  28-18  the plan must pay 100 percent of covered charges for the remainder
  28-19  of that policy year.
  28-20        (d)  The In-Hospital Benefit Plan may include a primary and
  28-21  preventive care rider that includes all the provisions of Art.
  28-22  26.44 except for Subsection (c)(1) of that article.  The
  28-23  In-Hospital Benefit Plan may also include a supplementary accident
  28-24  benefit plan, but shall not include other riders or supplementary
  28-25  benefit plans.
   29-1        Art. 26.46.  STANDARD HEALTH BENEFIT PLAN.  (a)  The standard
   29-2  health benefit plan shall include coverage for:
   29-3              (1)  health care services, including consulting and
   29-4  referral services, provided by a physician, a physician assistant,
   29-5  an advanced nurse practitioner, or another licensed practitioner,
   29-6  including any practitioner required to be covered under Article
   29-7  21.52 of this code or under Section 2, Chapter 397, Acts of the
   29-8  54th Legislature, Regular Session, 1955 (Article 3.70-2, Vernon's
   29-9  Texas Insurance Code);
  29-10              (2)  inpatient and outpatient hospital care;
  29-11              (3)  medically necessary emergency care;
  29-12              (4)  pregnancy-related care, including prenatal and
  29-13  postnatal care and high-risk pregnancy care;
  29-14              (5)  well-child care, including neonatal screening and
  29-15  routine physical check-ups;
  29-16              (6)  outpatient clinic or office visits for treatment
  29-17  of illness or injury;
  29-18              (7)  one physical examination per policy year;
  29-19              (8)  mental health services, including inpatient and
  29-20  outpatient evaluation, crisis intervention, and services for
  29-21  treatment of a serious mental illness as defined in Sec. 1 of Art.
  29-22  3.51-14 of this code;
  29-23              (9)  medical treatment and referral services for the
  29-24  abuse of or addiction to alcohol or drugs, including coverage
  29-25  required by Art. 3.51-9 of this code;
   30-1              (10)  diagnostic examinations, laboratory, and X-ray
   30-2  services;
   30-3              (11)  rehabilitative services;
   30-4              (12)  home health services as defined in Sec. 1 of Art.
   30-5  3.70-3B of this code; and
   30-6              (13)  prescription drugs, with up to 50 percent
   30-7  copayment allowed.
   30-8        (b)  Coverage for the following preventive care must be
   30-9  provided with no copayments or deductibles required:
  30-10              (1)  childhood immunizations;
  30-11              (2)  Pap tests;
  30-12              (3)  mammography, as required by Section 2, Chapter
  30-13  397, Acts of the 54th Legislature, Regular Session, 1955 (Article
  30-14  3.70-2, Vernon's Texas Insurance Code) and its subsequent
  30-15  amendments;
  30-16              (4)  colo-rectal screening; and
  30-17              (5)  prostate cancer screening;
  30-18              (6)  vision and hearing tests for children under 19
  30-19  years of age;
  30-20        (c)  The Standard Health Benefit Plan shall provide lifetime
  30-21  benefits of at least $1,000,000 and benefits of at least $250,000
  30-22  per policy year.
  30-23        (d)  The board may adopt rules to implement this article.
  30-24        Art. 26.47.  PREEXISTING CONDITION PROVISIONS.  (a)  In this
  30-25  article, "preexisting condition provision" means a plan provision
   31-1  that denies, excludes, or limits coverage for expenses incurred
   31-2  during a period not more than 12 months following the effective
   31-3  date of coverage as to a disease or condition for which medical
   31-4  advice, diagnosis, or treatment was recommended or received during
   31-5  a period not more than 12 months before the effective date of
   31-6  coverage.
   31-7        (b)  A preexisting condition provision in the small employer
   31-8  health benefit plans may not apply to an individual who was
   31-9  continuously covered by a health benefit plan for a minimum period
  31-10  of 9 months which was in effect up to a date not more than 3 months
  31-11  before the effective date of the small employer health benefit
  31-12  plan.
  31-13        (c)  A preexisting condition provision may exclude coverage
  31-14  for a pregnancy existing on the effective date of coverage, except
  31-15  as provided by subsection (b) of this article.
  31-16        (d)  In determining whether a preexisting condition provision
  31-17  applies to an individual covered by the small employer health
  31-18  benefit plans, the carrier shall credit the time the individual was
  31-19  covered under a previous health benefit plan, if the previous
  31-20  coverage was in effect at any time during the 12 months preceding
  31-21  the effective date of a small employer health benefit plan
  31-22  coverage.  If the previous coverage was issued by a health
  31-23  maintenance organization, any waiting period that applied before
  31-24  that coverage became effective also shall be credited against the
  31-25  preexisting condition provision period.
   32-1                      SUBCHAPTER F.  REINSURANCE
   32-2        Art. 26.51.  ELECTION TO BE RISK-ASSUMING OR REINSURING
   32-3  CARRIER; NOTICE TO COMMISSIONER.  (a)  Each health carrier shall
   32-4  notify the commissioner of the carrier's election to operate as a
   32-5  risk-assuming carrier or a reinsuring carrier.  A health carrier
   32-6  seeking to operate as a risk-assuming carrier shall make an
   32-7  application under Art. 26.52 of this code.
   32-8        (b)  A health carrier's election under Subsection (a) of this
   32-9  article is effective until the fifth anniversary of the election.
  32-10  The commissioner may permit a health carrier to modify its decision
  32-11  at any time for good cause shown.
  32-12        (c)  The commissioner shall establish an application process
  32-13  for health carriers seeking to change their status under this
  32-14  article.
  32-15        (d)  A reinsuring carrier that elects to operate as a
  32-16  risk-assuming carrier may not continue to reinsure a small employer
  32-17  health benefit plan with the system.  The carrier shall pay a
  32-18  prorated assessment based on business issued as a reinsuring
  32-19  carrier for any portion of the year that the business was
  32-20  reinsured.
  32-21        Art. 26.52.  APPLICATION TO BECOME A RISK-ASSUMING CARRIER.
  32-22  (a)  A health carrier may apply to become a risk-assuming carrier
  32-23  by filing an application with the commissioner in a form and manner
  32-24  prescribed by the commissioner.
  32-25        (b)  In evaluating an application filed under Subsection (a)
   33-1  of this article, the commissioner shall consider the carrier's:
   33-2              (1)  financial condition;
   33-3              (2)  history of rating and underwriting small employer
   33-4  groups.
   33-5              (3)  commitment to market fairly to all small employers
   33-6  in the state or in its approved geographic service area; and
   33-7              (4)  experience with managing the risk of small
   33-8  employer groups.
   33-9        (c)  The commissioner shall provide public notice of an
  33-10  application by a health carrier to be a risk-assuming carrier and
  33-11  shall provide at least a 60-day period for public comment before
  33-12  making a decision on the application.  If the application is not
  33-13  acted on before the 90th day after the date the commissioner
  33-14  received the application, the carrier may request a hearing.
  33-15        (d)  The commissioner may rescind the approval granted to a
  33-16  risk-assuming carrier under this article if the commissioner finds
  33-17  that the carrier:
  33-18              (1)  is not financially able to support the assumption
  33-19  of risk from issuing coverage to small employers without the
  33-20  protection afforded by the system;
  33-21              (2)  has failed to market fairly to all small employers
  33-22  in the state or its established geographic service area; or
  33-23              (3)  has failed to provide coverage to eligible small
  33-24  employers.
  33-25        Art. 26.53.  TEXAS HEALTH REINSURANCE SYSTEM.  (a)  The Texas
   34-1  Health Reinsurance System is created.  The system is a nonprofit
   34-2  entity.
   34-3        (b)  The system is administered by a board of directors and
   34-4  operates subject to the supervision and control of the
   34-5  commissioner.
   34-6        Art. 26.54.  BOARD OF DIRECTORS.  (a)  The board of directors
   34-7  is composed of nine members, appointed by the commissioner.  The
   34-8  commissioner or the commissioner's designated representative shall
   34-9  serve as an ex officio member.  Five members must be
  34-10  representatives of reinsuring carriers selected from individuals
  34-11  nominated by health carriers in this state according to procedures
  34-12  developed by the commissioner.  Four members must represent the
  34-13  general public.  A member representing the general public may not
  34-14  be:
  34-15              (1)  an officer, director, or employee of an insurance
  34-16  company, agency, agent, broker, solicitor, adjuster, or any other
  34-17  business entity regulated by the department;
  34-18              (2)  a person required to register with the Texas
  34-19  Ethics Commission under Chapter 305, Government Code; or
  34-20              (3)  related to a person described by Subdivision (1)
  34-21  or (2) of this subsection within the second degree of affinity or
  34-22  consanguinity.
  34-23        (b)  The directors appointed by the commissioner serve
  34-24  two-year terms.  The terms expire on December 31 of each
  34-25  odd-numbered year.  A member's term continues until a successor is
   35-1  appointed.
   35-2        (c)  A member of the board of trustees may not be compensated
   35-3  for serving on the board of trustees but is entitled to
   35-4  reimbursement for actual expenses incurred in performing functions
   35-5  as a member of the board of trustees as provided in the General
   35-6  Appropriations Act.
   35-7        (d)  The board of directors is subject to the open meetings
   35-8  law, Chapter 271, Acts of the 60th Legislature, Regular Session,
   35-9  1967 (Article 6252-17, Vernon's Texas Civil Statutes), and the open
  35-10  records law, Chapter 424, Acts of the 63rd Legislature, Regular
  35-11  Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
  35-12        Art. 26.55.  PLAN OF OPERATION.  (a)  Not later than the
  35-13  180th day after the date on which a majority of the board of
  35-14  directors has been appointed, the board of directors shall submit
  35-15  to the commissioner a plan of operation and thereafter any
  35-16  amendments necessary or suitable to ensure the fair, reasonable,
  35-17  and equitable administration of the system.  The commissioner,
  35-18  after notice and hearing, may approve the plan of operation if the
  35-19  commissioner determines the plan is suitable to ensure the fair,
  35-20  reasonable, and equitable administration of the system and provides
  35-21  for the sharing of system gains or losses on an equitable and
  35-22  proportionate basis in accordance with the provisions of this
  35-23  article.  The plan of operation is effective on the written
  35-24  approval of the commissioner.
  35-25        (b)  If the board of directors fails to timely submit a
   36-1  suitable plan of operation, the commissioner, after notice and
   36-2  hearing, shall adopt a temporary plan of operation.  The
   36-3  commissioner shall amend or rescind any plan adopted under this
   36-4  subsection at the time a plan of operation is submitted by the
   36-5  board of directors and approved by the commissioner.
   36-6        (c)  The plan of operation must:
   36-7              (1)  establish procedures for the handling and
   36-8  accounting of system assets and money and for an annual fiscal
   36-9  reporting to the commissioner;
  36-10              (2)  establish procedures for the selection of an
  36-11  administering carrier or third party administrator and establish
  36-12  the powers and duties of that administering carrier or third party
  36-13  administrator;
  36-14              (3)  establish procedures for reinsuring risks in
  36-15  accordance with the provisions of this article;
  36-16              (4)  establish procedures for collecting assessments
  36-17  from reinsuring carriers to fund claims and administrative expenses
  36-18  incurred or estimated to be incurred by the system, including the
  36-19  imposition of penalties for late payment of an assessment; and
  36-20              (5)  provide for any additional matters necessary for
  36-21  the implementation and administration of the system.
  36-22        Art. 26.56.  POWERS AND DUTIES OF SYSTEM.  The system has the
  36-23  general powers and authority granted under the laws of this state
  36-24  to insurance companies and health maintenance organizations
  36-25  licensed to transact business, except that the system may not
   37-1  directly issue health benefit plans.  The system is exempt from all
   37-2  taxes.  The system may:
   37-3              (1)  enter into contracts necessary or proper to carry
   37-4  out the provisions and purposes of this subchapter and may, with
   37-5  the approval of the commissioner, enter into contracts with similar
   37-6  programs of other states for the joint performance of common
   37-7  functions or with persons or other organizations for the
   37-8  performance of administrative functions;
   37-9              (2)  sue or be sued, including taking legal actions
  37-10  necessary or proper to recover assessments and penalties for, on
  37-11  behalf of, or against the system or a reinsuring carrier;
  37-12              (3)  take legal action necessary to avoid the payment
  37-13  of improper claims against the system;
  37-14              (4)  issue reinsurance policies, in accordance with the
  37-15  requirements of this subchapter;
  37-16              (5)  establish guidelines, conditions, and procedures
  37-17  for reinsuring risks under the plan of operation;
  37-18              (6)  establish actuarial functions as appropriate for
  37-19  the operation of the system;
  37-20              (7)  assess reinsuring carriers in accordance with the
  37-21  provisions of Article 26.60 of this code and make advance interim
  37-22  assessments as may be reasonable and necessary for organizational
  37-23  and interim operating expenses, provided that any interim
  37-24  assessments shall be credited as offsets against regular
  37-25  assessments due after the close of the fiscal year;
   38-1              (8)  appoint appropriate legal, actuarial, and other
   38-2  committees as necessary to provide technical assistance in the
   38-3  operation of the system, policy and other contract design, and any
   38-4  other function within the authority of the system; and
   38-5              (9)  borrow money for a period not to exceed one year
   38-6  to effect the purposes of the system, provided that any notes or
   38-7  other evidence of indebtedness of the system not in default shall
   38-8  be legal investments for carriers and may be carried as admitted
   38-9  assets.
  38-10        Art. 26.57.  AUDIT BY STATE AUDITOR.  (a)  The state auditor
  38-11  shall conduct annually a special audit of the system under Chapter
  38-12  321, Government Code.  The state auditor's report shall include a
  38-13  financial audit and an economy and efficiency audit.
  38-14        (b)  The state auditor shall report the cost of each audit
  38-15  conducted under this article to the board of directors and the
  38-16  comptroller, and the board of directors shall remit that amount to
  38-17  the comptroller for deposit to the general revenue fund.
  38-18        Art. 26.58.  REINSURANCE.  (a)  A health carrier may reinsure
  38-19  risks covered under the small employer health benefit plans with
  38-20  the system as provided by this article.
  38-21        (b)  The system shall reinsure the level of coverage provided
  38-22  under the small employer health benefit plans.
  38-23        (c)  A health carrier may reinsure an entire small employer
  38-24  group not later than the 60th day after the date on which the
  38-25  group's coverage under the small employer health benefit plans
   39-1  takes effect.  A health carrier may reinsure an eligible employee
   39-2  of a small employer or the employee's dependent not later than the
   39-3  60th day after the date on which that individual's coverage takes
   39-4  effect.  A newly eligible employee or dependent of a reinsured
   39-5  small employer group or an individual covered under the small
   39-6  employer health benefit plans may be reinsured not later than the
   39-7  60th day after the date on which that individual's coverage takes
   39-8  effect.
   39-9        (d)  The system may not reimburse a reinsuring carrier for
  39-10  the claims of any reinsured individual until the carrier has
  39-11  incurred an initial level of claims for that individual in a
  39-12  calendar year of $5,000 for benefits covered by the system.  In
  39-13  addition, the reinsuring carrier is responsible for 10 percent of
  39-14  the next $50,000 of benefit payments during a calendar year, and
  39-15  the system shall reinsure the remainder.  A reinsuring carrier's
  39-16  liability under this subsection may not exceed a maximum of $10,000
  39-17  in any one calendar year for any reinsured individual.
  39-18        (e)  The board of directors annually shall adjust the initial
  39-19  level of claims and the maximum to be retained by the carrier
  39-20  established under Subsection (d) of this article to reflect
  39-21  increases in costs and use for small employer health benefit plans
  39-22  within this state.  The adjustment may not be less than the annual
  39-23  change in the medical component of the Consumer Price Index for All
  39-24  Urban Consumers published by the Bureau of Labor Statistics of the
  39-25  United States Department of Labor unless the board of directors
   40-1  proposes and the commissioner approves a lower adjustment factor.
   40-2        (f)  A health carrier may terminate reinsurance with the
   40-3  system for one or more of the reinsured employees or dependents of
   40-4  a small employer on a contract anniversary of the small employer
   40-5  health benefit plans.
   40-6        (g)  Except as provided in the plan of operation, a
   40-7  reinsuring carrier shall apply consistently with respect to
   40-8  reinsured and nonreinsured business all managed care procedures,
   40-9  including utilization review, individual case management, preferred
  40-10  provider provisions, and other managed care provisions or methods
  40-11  of operation.
  40-12        Art. 26.59.  PREMIUM RATES.  (a)  As part of the plan of
  40-13  operation, the board of directors shall adopt a method to determine
  40-14  premium rates to be charged by the system for reinsuring small
  40-15  employer groups and individuals under this subchapter.
  40-16        (b)  The method adopted must include classification systems
  40-17  for small employer groups that reflect the variations in premium
  40-18  rates allowed in this chapter and must provide for the development
  40-19  of base reinsurance premium rates that reflect the allowable
  40-20  variations.  The base reinsurance premium rates shall be
  40-21  established by the board of directors, subject to the approval of
  40-22  the board, and shall be set at levels that reasonably approximate
  40-23  the gross premiums charged to small employers by health carriers
  40-24  for the small employer health benefit plans, adjusted to reflect
  40-25  retention levels required under this subchapter.  The board of
   41-1  directors periodically shall review the method adopted under this
   41-2  subsection, including the classification system and any rating
   41-3  factors, to ensure that the method reasonably reflects the claims
   41-4  experience of the system.  The board of directors may propose
   41-5  changes to the method.  The changes are subject to the approval of
   41-6  the board.
   41-7        (c)  An entire small employer group may be reinsured at a
   41-8  rate that is 1-1/2 times the base reinsurance premium rate for that
   41-9  group.  An eligible employee of a small employer or the employee's
  41-10  dependent covered under the small employer health benefit plans may
  41-11  be reinsured at a rate that is five times the base reinsurance
  41-12  premium rate for that individual.
  41-13        (d)  The board of directors may consider adjustments to the
  41-14  premium rates charged by the system to reflect the use of effective
  41-15  cost containment and managed care arrangements.
  41-16        Art. 26.60.  ASSESSMENTS.  (a)  Not later than March 1 of
  41-17  each year, the board of directors shall determine and report to the
  41-18  commissioner the system net loss for the previous calendar year,
  41-19  including administrative expenses and incurred losses for the year,
  41-20  taking into account investment income and other appropriate gains
  41-21  and losses.  Any net loss for the year must be recouped by
  41-22  assessments on reinsuring carriers.  Each reinsuring carrier's
  41-23  assessment shall be determined annually by the board of directors
  41-24  based on annual statements and other reports required by the board
  41-25  of directors and filed with that board.  The board of directors
   42-1  shall establish, as part of the plan of operation, a formula by
   42-2  which to make assessments against reinsuring carriers.  With the
   42-3  approval of the commissioner, the board of directors may change the
   42-4  assessment formula from time to time as appropriate.  The board of
   42-5  directors shall base the assessment formula on each reinsuring
   42-6  carrier's share of:
   42-7              (1)  the total premiums earned in the preceding
   42-8  calendar year from the small employer health benefit plans
   42-9  delivered or issued for delivery by reinsuring carriers to small
  42-10  employer groups; and
  42-11              (2)  the premiums earned in the preceding calendar year
  42-12  from newly issued small employer health benefit plans delivered or
  42-13  issued for delivery during the calendar year by reinsuring carriers
  42-14  to small employer groups in this state.
  42-15        (b)  The formula established under Subsection (a) of this
  42-16  article may not result in an assessment share for a reinsuring
  42-17  carrier that is less than 50 percent or more than 150 percent of an
  42-18  amount based on the proportion of the total premium earned in the
  42-19  preceding calendar year from the small employer health benefit
  42-20  plans delivered or issued for delivery to small employer groups in
  42-21  this state by that reinsuring carrier to the total premiums earned
  42-22  in the preceding calendar year from standard small employer health
  42-23  benefit plans delivered or issued for delivery to small employer
  42-24  groups in this state by all reinsuring carriers.  Premiums earned
  42-25  by a reinsuring carrier that are less than an amount determined by
   43-1  the board of directors to justify the cost of collection of an
   43-2  assessment based on those premiums may not be considered by the
   43-3  board in determining assessments.
   43-4        (c)  With the approval of the commissioner, the board of
   43-5  directors may adjust the assessment formula for reinsuring carriers
   43-6  that are approved health maintenance organizations that are
   43-7  federally qualified under Subchapter XI, Public Health Service Act
   43-8  (42 U.S.C. Section 300e et seq.), to the extent that any
   43-9  restrictions are imposed on those health maintenance organizations
  43-10  that are not imposed on other health carriers.
  43-11        Art. 26.61.  EVALUATION OF SYSTEM.  (a)  Not later than March
  43-12  1 of each year, the board of directors shall file with the
  43-13  commissioner an estimate of the assessments necessary to fund the
  43-14  losses for small employer groups incurred by the system during the
  43-15  previous calendar year.
  43-16        (b)  If the board of directors determines that the necessary
  43-17  assessments exceed five percent of the total premiums earned in the
  43-18  previous calendar year from small employer health benefit plans
  43-19  delivered or issued for delivery by reinsuring carriers to small
  43-20  employer groups in this state, the board shall evaluate the
  43-21  operation of the system and shall report its findings, including
  43-22  any recommendations for changes to the plan of operation, to the
  43-23  commissioner not later than the 90th day after December 31 of the
  43-24  calendar year in which the losses were incurred.  The evaluation
  43-25  must include an estimate of future assessments and must consider
   44-1  the administrative costs of the system, the appropriateness of the
   44-2  premiums charged, the level of insurer retention under the system,
   44-3  and the costs of coverage for small employer groups.
   44-4        (c)  If the board of directors fails to timely file a report,
   44-5  the commissioner may evaluate the operations of the system and may
   44-6  implement amendments to the plan of operation as considered
   44-7  necessary by the commissioner to reduce future losses and
   44-8  assessments.
   44-9        (d)  For any calendar year, the maximum assessment amount
  44-10  payable shall not exceed five percent of total premiums earned in
  44-11  the previous calendar year from small employer health benefit plans
  44-12  delivered or issued for delivery by reinsuring carriers in this
  44-13  state.
  44-14        Art. 26.62.  DEFERRMENT OF ASSESSMENT.  (a)  A reinsuring
  44-15  carrier may petition the commissioner for a deferrment in whole or
  44-16  in part of an assessment imposed by the board of directors.
  44-17        (b)  The commissioner may defer all or part of the assessment
  44-18  of a reinsuring carrier if the commissioner determines that the
  44-19  payment of the assessment would endanger the ability of the
  44-20  reinsuring carrier to fulfill its contractual obligations.
  44-21        (c)  If an assessment against a reinsuring carrier is
  44-22  deferred, the amount deferred shall be assessed against the other
  44-23  participating carriers in a manner consistent with the basis for
  44-24  assessment established by this subchapter.
  44-25        (d)  A reinsuring carrier receiving a deferment is liable to
   45-1  the system for the amount deferred and is prohibited from
   45-2  reinsuring any individual or group with the system until it pays
   45-3  the outstanding assessment.
   45-4                       SUBCHAPTER G.  MARKETING
   45-5        Art. 26.71.  FAIR MARKETING.  (a)  Each health carrier shall
   45-6  actively market the small employer health benefit plan through
   45-7  properly licensed agents to eligible small employers in this state.
   45-8  Each small employer purchasing a small employer health benefit plan
   45-9  must affirm that the agent who sold the plan offered and explained
  45-10  all three plans to that employer.
  45-11        (b)  The department shall require periodic demonstration by
  45-12  health carriers and agents that those carriers and agents are
  45-13  marketing or issuing health care benefit plans to small employers
  45-14  in fulfillment of the purposes of this article.
  45-15        (c)  The department may require periodic reports by health
  45-16  carriers and agents regarding small employer health care benefit
  45-17  plans issued by those carriers and agents.  The reporting
  45-18  requirements shall include but not be limited to information
  45-19  regarding case characteristics and the numbers of health care
  45-20  benefit plans in various categories that are marketed or issued to
  45-21  small employers.
  45-22        Art. 26.72.  HEALTH STATUS AND CLAIMS EXPERIENCE; PROHIBITED
  45-23  ACTS.  (a)  A health carrier or agent may not, directly or
  45-24  indirectly:
  45-25              (1)  encourage or direct a small employer to refrain
   46-1  from applying for coverage with the health carrier because of
   46-2  health status or claims experience; or
   46-3              (2)  encourage or direct a small employer to seek
   46-4  coverage from another health carrier because of health status or
   46-5  claims experience.
   46-6        (b)  A health carrier may not, directly or indirectly, enter
   46-7  into any agreement or arrangement with an agent that provides for
   46-8  or results in the compensation paid to an agent for the sale of the
   46-9  small employer health benefit plans to be varied because of health
  46-10  status or claims experience.
  46-11        (c)  Subsection (b) of this article does not apply to an
  46-12  arrangement that provides compensation to an agent on the basis of
  46-13  percentage of premium, provided that the percentage may not vary
  46-14  because of health status or claims experience.
  46-15        (d)  A health carrier or agent may not encourage a small
  46-16  employer to exclude an eligible employee from health coverage
  46-17  provided in connection with the employee's employment.
  46-18        Art. 26.73.  AGENTS.  (a)  A health carrier shall pay the
  46-19  same commission, percentage of premium or other amount to an agent
  46-20  for renewal of a small employer health benefit plan as the carrier
  46-21  paid for original placement of the plan.  Compensation for renewal
  46-22  of a plan may be adjusted upward to reflect an increase in the cost
  46-23  of living or similar factors.
  46-24        (b)  A health carrier may not terminate, fail to renew, or
  46-25  limit its contract or agreement of representation with an agent for
   47-1  any reason related to the health status or claims experience of a
   47-2  small employer group placed by the agent with the carrier.
   47-3        Art. 26.74.  WRITTEN STATEMENT OF DENIAL, CANCELLATION, OR
   47-4  REFUSAL TO RENEW.  Denial by a health carrier of an application for
   47-5  coverage from a small employer or a cancellation or refusal to
   47-6  renew must be in writing and must state the reason or reasons for
   47-7  the denial, cancellation, or refusal.
   47-8        Art. 26.75.  RULES.  The board may adopt rules setting forth
   47-9  additional standards to provide for the fair marketing and broad
  47-10  availability of small employer health benefit plans to small
  47-11  employers in this state.
  47-12        Art. 26.76.  VIOLATION.  (a)  A violation of this subchapter
  47-13  by a health carrier or an agent is an unfair method of competition
  47-14  and an unfair or deceptive act or practice under Article 21.21 of
  47-15  this code.
  47-16        (b)  If a health carrier enters into an agreement with a
  47-17  third-party administrator to provide administrative, marketing, or
  47-18  other services related to the offering of small employer health
  47-19  benefit plans to small employers in this state, the third-party
  47-20  administrator is subject to this article.
  47-21        SECTION 2.  Subchapter E, Chapter 21, Insurance Code, is
  47-22  amended by adding Articles 21.52C and 21.52D to read as follows:
  47-23        Art. 21.52C.  PRIMARY AND PREVENTIVE CARE.  (a)  In this
  47-24  article, "health benefit plan" means a group, blanket, or franchise
  47-25  insurance policy, a certificate issued under a group policy, a
   48-1  group hospital service contract, a group subscriber contract, or
   48-2  evidence of coverage issued by a health maintenance organization
   48-3  that provides benefits for health care services.
   48-4        (b)  A health benefit plan must provide coverage for primary
   48-5  and preventive care services.
   48-6        (c)  Coverage for preventive care services may not be subject
   48-7  to a deductible or copayment and must include coverage for:
   48-8              (1)  immunizations;
   48-9              (2)  Pap tests;
  48-10              (3)  colo-rectal screenings;
  48-11              (4)  prostate cancer screenings;
  48-12              (5)  mammography, as required by Section 2, Chapter
  48-13  397, Acts of the 54th Legislature, Regular Session, 1955 (Article
  48-14  3.70-2, Vernon's Texas Insurance Code) and its subsequent
  48-15  amendments; and
  48-16              (6)  vision and hearing examinations for children under
  48-17  the age of 19.
  48-18        (d)  The board shall adopt rules governing the type of
  48-19  coverage to be provided, the services covered, and the amount of
  48-20  any allowable deductible or copayment.
  48-21        Art. 21.52D.  UNIFORM POLICY APPLICATIONS AND CLAIM FORMS AND
  48-22  PROCEDURES
  48-23        Sec. 1.  DEFINITIONS.  In this article:
  48-24              (1)  "Application form" means the first form signed and
  48-25  submitted to a health carrier by an applicant for coverage under a
   49-1  health benefit plan.
   49-2              (2)  "Claim form" means a form used to claim a benefit
   49-3  payable under a health benefit plan.
   49-4              (3)  "Health carrier" means any insurer, group hospital
   49-5  service corporation, health maintenance organization, or other
   49-6  entity authorized to issue a health benefit plan in this state.
   49-7              (4)  "Health benefit plan" means an individual, group,
   49-8  blanket, or franchise insurance policy, a group hospital service
   49-9  contract, or a group subscriber contract or evidence of coverage
  49-10  issued by a health maintenance organization that provides benefits
  49-11  for health care services.  The term includes the health benefit
  49-12  plans issued under Chapter 26 of this code and its subsequent
  49-13  amendments.
  49-14        Sec. 2.  UNIFORM FORMS.  (a)  The board shall adopt a uniform
  49-15  application form and a uniform claim form to be used by all health
  49-16  carriers in this state.  A health carrier may not use an
  49-17  application form other than the uniform application form or a claim
  49-18  form other than the uniform claim form.
  49-19        (b)  The board may not adopt a form under Subsection (a) of
  49-20  this section unless it is written in plain language.  For purposes
  49-21  of this subsection, a form is written in plain language if it
  49-22  achieves the minimum score established by the commissioner on the
  49-23  Flesch reading ease test or an equivalent test selected by the
  49-24  commissioner.  This subsection does not apply to language appearing
  49-25  on the form that is mandated by state or federal law.
   50-1        Sec. 3.  UNIFORM PROCEDURES.  The board by rule shall adopt a
   50-2  uniform claims procedure.  A health carrier may not use a claims
   50-3  procedure other than the uniform claims procedure adopted by the
   50-4  board.
   50-5        SECTION 3.  Section 1(d)(3), Article 3.51-6, Insurance Code,
   50-6  is amended to read as follows:
   50-7              (3)  Any insurer or group hospital service corporation
   50-8  subject to Chapter 20, Insurance Code, and its subsequent
   50-9  amendments, who issues policies which provide hospital, surgical,
  50-10  or major medical expense insurance or any combination of these
  50-11  coverages on an expense incurred basis, but not a policy which
  50-12  provides benefits for specified disease or for accident only, shall
  50-13  provide a conversion or group continuation privilege as required by
  50-14  this subsection.  Any employee, member, or dependent whose
  50-15  insurance under the group policy has been terminated for any reason
  50-16  except involuntary termination for cause, including discontinuance
  50-17  of the group policy in its entirety or with respect to an insured
  50-18  class, and who has been continuously insured under the group policy
  50-19  and under any group policy providing similar benefits which it
  50-20  replaces for at least three consecutive months immediately prior to
  50-21  termination shall be entitled to such coverages as outlined in
  50-22  Paragraph (A), (B), or (C) below.  Involuntary termination for
  50-23  cause does not include termination for any health-related cause.
  50-24                    (A)(i)  <Coverage under>  An insurer shall offer
  50-25  to each employee, member or dependent an individual or a group
   51-1  conversion policy without evidence of insurability if written
   51-2  application and payment of the first premium is made within 31 days
   51-3  after such termination.  The converted policy shall provide the
   51-4  same coverage and benefits as provided under the group policy or
   51-5  plan unless the employee, member or dependent elects lesser
   51-6  coverage and benefits which shall only be provided on policy forms
   51-7  containing the same coverage and benefits as the PREVENTIVE AND
   51-8  PRIMARY CARE BENEFIT PLAN, the IN-HOSPITAL BENEFIT PLAN, and the
   51-9  STANDARD HEALTH BENEFIT PLAN promulgated under Subchapter E,
  51-10  Chapter 26.  <an individual policy or group conversion policy of
  51-11  accident and health insurance without evidence of insurability if
  51-12  written application and payment of the first premium is made within
  51-13  31 days after such termination>.  An employee, member, or dependent
  51-14  shall not be entitled to have a converted policy or plan issued if
  51-15  termination of the insurance under the group policy occurred
  51-16  because:  (aa) such person failed to pay any required premium; or
  51-17  (bb) any discontinued group coverage was replaced by similar group
  51-18  coverage within 31 days.
  51-19                    (ii)  An insurer shall not be required to issue a
  51-20  converted policy covering any person if:  (aa) such person is or
  51-21  could be covered by Medicare; (bb) such person is covered for
  51-22  similar benefits by another hospital, surgical, medical, or major
  51-23  medical expense insurance policy or hospital or medical service
  51-24  subscriber contract or medical practice or other prepayment plan or
  51-25  by any other plan or program; (cc) such person is eligible for
   52-1  similar benefits whether or not covered therefor under any
   52-2  arrangement of coverage for individuals in a group, whether on an
   52-3  insured or uninsured basis; or (dd) similar benefits are provided
   52-4  for or available to such person, pursuant to or in accordance with
   52-5  the requirements of any state or federal law. <or (ee) the benefits
   52-6  provided under the sources herein enumerated, together with the
   52-7  benefits provided by the converted policy, would result in
   52-8  overinsurance according to the insurer's standards.  The insurer's
   52-9  standards must bear some reasonable relationship to actual health
  52-10  care costs in the area in which the insured lives at the time of
  52-11  conversion and must be filed with the commissioner of insurance
  52-12  prior to their use in denying coverage.  The board shall issue
  52-13  rules and regulations to establish minimum standards for benefits
  52-14  under policies issued pursuant to this subsection.>
  52-15                    (B)(i)  Policies subject to Paragraph (A) above
  52-16  shall provide at the <insurer's> option of the employee, member or
  52-17  dependent in lieu of the requirements of Paragraph (A) continuation
  52-18  of group coverage for employees or members and their eligible
  52-19  dependents subject to the eligibility provisions of Paragraph (A).
  52-20                    (ii)  Continuation of group coverage <need not
  52-21  include dental, vision care, or prescription drug benefits and
  52-22  must> shall be requested in writing within 21 days following the
  52-23  later of:  (aa) the date the group coverage would otherwise
  52-24  terminate; or (bb) the date the employee is given notice of the
  52-25  right of continuation by either the employer or the group
   53-1  policyholder.
   53-2                    (iii)  In no event may the employee or member
   53-3  elect continuation more than 31 days after the date of such
   53-4  termination.
   53-5                    (iv)  An employee or member electing continuation
   53-6  must pay to the group policyholder or employer, on a monthly basis
   53-7  in advance, the amount of contribution required by the policyholder
   53-8  or employer, but not more than the group rate for the insurance
   53-9  being continued under the group policy, plus two % of that group
  53-10  rate, on the due date of each payment.
  53-11                    (v)  The employee's or member's written election
  53-12  of continuation, together with the first contribution required to
  53-13  establish contributions on a monthly basis in advance, must be
  53-14  given to the policyholder or employer within 31 days of the date
  53-15  coverage would otherwise terminate.
  53-16                    (vi)  Continuation may not terminate until the
  53-17  earliest of:  (aa) six months after the date the election is made;
  53-18  (bb) failure to make timely payments; (cc) the date on which the
  53-19  group coverage terminates in its entirety; (dd) or one of the
  53-20  conditions specified in items (aa) through (dd) <(ee)> of
  53-21  Subparagraph (ii), Paragraph (A) above is met by the covered
  53-22  individual.
  53-23                    (C)  <The insurer may elect to provide group
  53-24  insurance coverage in lieu of the issuance of a converted policy
  53-25  under Paragraph (A) above.>  The premium for the converted policy
   54-1  issued under Paragraph (A) of this subdivision (or the group
   54-2  coverage under Paragraph (C) of this subdivision) shall<, should>
   54-3  be determined in accordance with the insurer's table of premium
   54-4  rates for coverage which was provided under the group policy or
   54-5  plan.  <applicable to the age and class of risk of each person to
   54-6  be covered under that policy and the type and amount of insurance
   54-7  provided.>
   54-8                    (i)  The premium may be based on the age of each
   54-9  person to be covered and the type of converted policy.
  54-10                    (ii)  The premium for the same coverage and
  54-11  benefits under a coverted policy shall not exceed 200% of the
  54-12  premium determined in accordance with this paragraph.
  54-13                    (iii)  The premium for lesser coverage and
  54-14  benefits under a converted policy shall not exceed 100% of the
  54-15  premium determined in accordance with this paragraph.
  54-16        SECTION 4.  REINSURANCE STUDY.  (a)  The Texas Department of
  54-17  Insurance shall initiate a comprehensive study into the future
  54-18  solvency of the reinsurance system established by Subchapter F,
  54-19  Chapter 26, Insurance Code, as added by this Act.
  54-20        (b)  The department shall review and analyze, from an
  54-21  actuarial standpoint, the potential cost of catastrophic losses to
  54-22  the system and recommend funding methods to adequately finance any
  54-23  anticipated losses to the system.  The department shall also
  54-24  develop an actuarial model to assess the system's future operation.
  54-25  The department shall fully investigate the experience of other
   55-1  states with health reinsurance systems.
   55-2        (c)  The department shall report its finds to the Legislature
   55-3  no later than January 1, 1995.
   55-4        SECTION 5.  Not later than November 1, 1993, each carrier
   55-5  subject to Chapter 26, Insurance Code, as added by this Act, shall
   55-6  file a report with the commissioner that states the carrier's gross
   55-7  premiums derived from health benefit plans delivered, issued for
   55-8  delivery, or renewed to small employers in 1992.
   55-9        SECTION 6.  Not later than November 1, 1993, a carrier
  55-10  subject to Chapter 26, Insurance Code, as added by this Act, shall
  55-11  notify the commissioner of its initial election to operate as a
  55-12  risk-assuming or reinsuring carrier under Article 26.51, Insurance
  55-13  Code, as added by this Act.
  55-14        SECTION 7.  In making the initial appointments to the board
  55-15  of trustees of the Texas Health Benefits Purchasing Cooperative
  55-16  established under Subchapter B, Chapter 26, Insurance Code, as
  55-17  added by this Act, the governor shall appoint two members for terms
  55-18  expiring February 1, 1995, two members for terms expiring February
  55-19  1, 1997, and two members for terms expiring February 1, 1999.
  55-20        SECTION 8.  (a)  Except as otherwise provided by this
  55-21  section, this Act takes effect September 1, 1993.
  55-22        (b)  A health carrier is not required to issue a small
  55-23  employer health benefit plan, as required by Subchapter E, Chapter
  55-24  26, Insurance Code, as added by this Act, before January 1, 1994.
  55-25  After that date, a carrier may not deliver or issue for delivery to
   56-1  a small employer a health benefit plan other than a small employer
   56-2  health benefit plan, as required by Subchapter E, Chapter 26,
   56-3  Insurance Code, as added by this Act.
   56-4        (c)  A health carrier may not market a health benefit plan
   56-5  other than the small employer health benefit plan, as required by
   56-6  Subchapter E, Chapter 26, Insurance Code, as added by this Act,
   56-7  after January 1, 1995.
   56-8        (d)  The Texas Health Reinsurance System may not reinsure a
   56-9  risk in accordance with Subchapter E, Chapter 26, Insurance Code,
  56-10  as added by this Act, before January 1, 1994.
  56-11        (e)  Article 21.52C, Insurance Code, as added by this Act,
  56-12  applies only to a health benefit plan that is delivered, issued for
  56-13  delivery, or renewed on or after January 1, 1994.  A health benefit
  56-14  plan that is delivered, issued for delivery, or renewed before
  56-15  January 1, 1994, is governed by the law as it existed immediately
  56-16  before the effective date of this Act, and that law is continued in
  56-17  effect for that purpose.
  56-18        (f)  Article 21.52D, Insurance Code, as added by this Act,
  56-19  applies only to the use of an application form, claim form, or
  56-20  claims procedure on or after January 1, 1994.
  56-21        (g)  Section 1(d) (3), Article 3.51-6, Insurance Code, as
  56-22  amended by this Act, applies only to conversion of a policy
  56-23  delivered, issued for delivery, or renewed on or after January 1,
  56-24  1994.  Conversion of a policy that was delivered, issued for
  56-25  delivery, or renewed before January 1, 1994, is governed by the law
   57-1  in effect immediately before the effective date of this Act, and
   57-2  that law is continued in effect for this purpose.
   57-3        SECTION 9.  The importance of this legislation and the
   57-4  crowded condition of the calendars in both houses create an
   57-5  emergency and an imperative public necessity that the
   57-6  constitutional rule requiring bills to be read on three several
   57-7  days in each house be suspended, and this rule is hereby suspended.