1-1 By: Martin, McCall, Harris, et al. H.B. No. 2055
1-2 (Senate Sponsor - Parker)
1-3 (In the Senate - Received from the House April 29, 1993;
1-4 April 30, 1993, read first time and referred to Committee on
1-5 Economic Development; May 18, 1993, reported adversely, with
1-6 favorable Committee Substitute by the following vote: Yeas 10,
1-7 Nays 0; May 18, 1993, sent to printer.)
1-8 COMMITTEE VOTE
1-9 Yea Nay PNV Absent
1-10 Parker x
1-11 Lucio x
1-12 Ellis x
1-13 Haley x
1-14 Harris of Dallas x
1-15 Harris of Tarrant x
1-16 Leedom x
1-17 Madla x
1-18 Rosson x
1-19 Shapiro x
1-20 Wentworth x
1-21 COMMITTEE SUBSTITUTE FOR H.B. No. 2055 By: Parker
1-22 A BILL TO BE ENTITLED
1-23 AN ACT
1-24 relating to health insurance and health costs and the availability
1-25 of health insurance coverage for certain individuals and small
1-26 employers.
1-27 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-28 SECTION 1. The Insurance Code is amended by adding Chapter
1-29 26 to read as follows:
1-30 CHAPTER 26. HEALTH INSURANCE AVAILABILITY
1-31 SUBCHAPTER A. GENERAL PROVISIONS
1-32 Art. 26.01. SHORT TITLE. This chapter may be cited as the
1-33 Small Employer Health Insurance Availability Act.
1-34 Art. 26.02. DEFINITIONS. In this chapter:
1-35 (1) "Affiliated employer" means a person connected by
1-36 commonality of ownership with a small employer. The term includes
1-37 a person that owns a small employer, shares directors with a small
1-38 employer, or is eligible to file a consolidated tax return with a
1-39 small employer.
1-40 (2) "Agent" means a person who may act as an agent for
1-41 the sale of a health benefit plan under a license issued under
1-42 Section 15 or 15A, Texas Health Maintenance Organization Act
1-43 (Article 20A.15 or 20A.15A, Vernon's Texas Insurance Code), or
1-44 under Subchapter A, Chapter 21, of this code.
1-45 (3) "Base premium rate" means, for each class of
1-46 business and for a specific rating period, the lowest premium rate
1-47 that is charged or that could be charged under a rating system for
1-48 that class of business by the small employer carrier to small
1-49 employers with similar case characteristics for small employer
1-50 health benefit plans with the same or similar coverage.
1-51 (4) "Board of directors" means the board of directors
1-52 of the Texas Health Reinsurance System.
1-53 (5) "Case characteristics" means, with respect to a
1-54 small employer, the geographic area in which that employer's
1-55 employees reside, the age and gender of the individual employees
1-56 and their dependents, the appropriate industry classification as
1-57 determined by the small employer carrier, the number of employees
1-58 and dependents, and other objective criteria as established by the
1-59 small employer carrier that are considered by the small employer
1-60 carrier in setting premium rates for that small employer. The term
1-61 does not include claim experience, health status, duration of
1-62 coverage since the date of issuance of a health benefit plan, or
1-63 whether a covered person is or may become pregnant.
1-64 (6) "Class of business" means all small employers or a
1-65 separate grouping of small employers established under this
1-66 chapter.
1-67 (7) "Dependent" means:
1-68 (A) a spouse;
2-1 (B) a newborn child;
2-2 (C) a child under the age of 19 years;
2-3 (D) a child who is a full-time student under the
2-4 age of 23 years and who is financially dependent on the parent;
2-5 (E) a child of any age who is medically
2-6 certified as disabled and dependent on the parent; and
2-7 (F) any person who must be covered under:
2-8 (i) Section 3D or 3E, Article 3.51-6, of
2-9 this code; or
2-10 (ii) Section 2(L), Chapter 397, Acts of
2-11 the 54th Legislature, Regular Session, 1955 (Article 3.70-2,
2-12 Vernon's Texas Insurance Code).
2-13 (8) "Eligible employee" means an employee who works on
2-14 a full-time basis and who usually works at least 30 hours a week.
2-15 The term includes a sole proprietor, a partner, and an independent
2-16 contractor, if the sole proprietor, partner, or independent
2-17 contractor is included as an employee under a health benefit plan
2-18 of a small employer. The term does not include:
2-19 (A) an employee who works on a part-time,
2-20 temporary, or substitute basis; or
2-21 (B) an employee who is covered under:
2-22 (i) another health benefit plan; or
2-23 (ii) an employee welfare benefit plan that
2-24 provides health benefits and that is established in accordance with
2-25 the Employee Retirement Income Security Act of 1974 (29 U.S.C.
2-26 Section 1001 et seq.).
2-27 (9) "Health benefit plan" means a group, blanket, or
2-28 franchise insurance policy, a certificate issued under a group
2-29 policy, a group hospital service contract, or a group subscriber
2-30 contract or evidence of coverage issued by a health maintenance
2-31 organization that provides benefits for health care services. The
2-32 term does not include:
2-33 (A) accident-only insurance coverage;
2-34 (B) credit insurance coverage;
2-35 (C) disability insurance coverage;
2-36 (D) specified disease coverage or other limited
2-37 benefit policies;
2-38 (E) coverage of Medicare services under a
2-39 federal contract;
2-40 (F) Medicare supplement and Medicare Select
2-41 policies regulated in accordance with federal law;
2-42 (G) long-term care insurance coverage;
2-43 (H) coverage limited to dental care;
2-44 (I) coverage limited to care of vision;
2-45 (J) coverage provided by a single service health
2-46 maintenance organization;
2-47 (K) insurance coverage issued as a supplement to
2-48 liability insurance;
2-49 (L) insurance coverage arising out of a workers'
2-50 compensation system or similar statutory system;
2-51 (M) automobile medical payment insurance
2-52 coverage;
2-53 (N) jointly managed trusts authorized under 29
2-54 U.S.C. Section 141 et seq. that contain a plan of benefits for
2-55 employees that is negotiated in a collective bargaining agreement
2-56 governing wages, hours, and working conditions of the employees
2-57 that is authorized under 29 U.S.C. Section 157;
2-58 (O) hospital confinement indemnity coverage; or
2-59 (P) reinsurance contracts issued on a stop-loss,
2-60 quota-share, or similar basis.
2-61 (10) "Health carrier" means any entity authorized
2-62 under this code or another insurance law of this state that
2-63 provides health insurance or health benefits in this state,
2-64 including an insurance company, a group hospital service
2-65 corporation under Chapter 20 of this code, a health maintenance
2-66 organization under the Texas Health Maintenance Organization Act
2-67 (Chapter 20A, Vernon's Texas Insurance Code), and a stipulated
2-68 premium company under Chapter 22 of this code.
2-69 (11) "Index rate" means, for each class of business as
2-70 to a rating period for small employers with similar case
3-1 characteristics, the arithmetic average of the applicable base
3-2 premium rate and corresponding highest premium rate.
3-3 (12) "Late enrollee" means an eligible employee or
3-4 dependent who requests enrollment in a small employer's health
3-5 benefit plan after the expiration of the initial enrollment period
3-6 established under the terms of the first plan for which that
3-7 employee or dependent was eligible through the small employer. An
3-8 eligible employee or dependent is not a late enrollee if:
3-9 (A) the individual:
3-10 (i) was covered under another employer
3-11 health benefit plan at the time the individual was eligible to
3-12 enroll;
3-13 (ii) states, at the time of the initial
3-14 eligibility, that coverage under another employer health benefit
3-15 plan was the reason for declining enrollment;
3-16 (iii) has lost coverage under another
3-17 employer health benefit plan as a result of the termination of
3-18 employment, the termination of the other plan's coverage, the death
3-19 of a spouse, or divorce; and
3-20 (iv) requests enrollment not later than
3-21 the 31st day after the date on which coverage under another
3-22 employer health benefit plan terminates;
3-23 (B) the individual is employed by an employer
3-24 who offers multiple health benefit plans and the individual elects
3-25 a different health benefit plan during an open enrollment period;
3-26 or
3-27 (C) a court has ordered coverage to be provided
3-28 for a spouse or minor child under a covered employee's plan and
3-29 request for enrollment is made not later than the 31st day after
3-30 issuance of the date on which the court order is issued.
3-31 (13) "New business premium rate" means, for each class
3-32 of business as to a rating period, the lowest premium rate that is
3-33 charged or offered or that could be charged or offered by the small
3-34 employer carrier to small employers with similar case
3-35 characteristics for newly issued small employer health benefit
3-36 plans that provide the same or similar coverage.
3-37 (14) "Person" means an individual, corporation,
3-38 partnership, association, or other private legal entity.
3-39 (15) "Plan of operation" means the plan of operation
3-40 of the system established under Article 26.55 of this code.
3-41 (16) "Preexisting condition provision" means a
3-42 provision that denies, excludes, or limits coverage as to a disease
3-43 or condition for a specified period after the effective date of
3-44 coverage.
3-45 (17) "Premium" means all amounts paid by a small
3-46 employer and eligible employees as a condition of receiving
3-47 coverage from a small employer carrier, including any fees or
3-48 other contributions associated with a health benefit plan.
3-49 (18) "Rating period" means a calendar period for which
3-50 premium rates established by a small employer carrier are assumed
3-51 to be in effect.
3-52 (19) "Reinsured carrier" means a small employer
3-53 carrier participating in the system.
3-54 (20) "Risk-assuming carrier" means a small employer
3-55 carrier that elects not to participate in the system.
3-56 (21) "Small employer" means a person that is actively
3-57 engaged in business and that, on at least 50 percent of its working
3-58 days during the preceding calendar year, employed at least three
3-59 but not more than 50 eligible employees, including the employees of
3-60 an affiliated employer, the majority of whom were employed in this
3-61 state.
3-62 (22) "Small employer carrier" means a health carrier,
3-63 to the extent that that carrier is offering, delivering, issuing
3-64 for delivery, or renewing health benefit plans subject to this
3-65 chapter under Article 26.06(a) of this code.
3-66 (23) "Small employer health benefit plan" means the
3-67 preventive and primary care benefit plan, the in-hospital benefit
3-68 plan, or the standard health benefit plan described by Subchapter E
3-69 of this chapter or any other health benefit plan offered to a small
3-70 employer in accordance with Article 26.42(d) of this code.
4-1 (24) "System" means the Texas Health Reinsurance
4-2 System established under Subchapter F of this chapter.
4-3 Art. 26.03. AFFILIATED CARRIERS. (a) For purposes of this
4-4 chapter, health carriers that are affiliates or that are eligible
4-5 to file a consolidated tax return are considered to be one carrier,
4-6 and a restriction imposed by this chapter applies as if the health
4-7 benefit plans delivered or issued for delivery to small employers
4-8 in this state by the affiliates were issued by one carrier.
4-9 (b) An affiliate that is a health maintenance organization
4-10 is considered to be a separate health carrier for purposes of this
4-11 chapter.
4-12 (c) In this article, "affiliate" has the meaning assigned by
4-13 Article 21.49-1 of this code.
4-14 Art. 26.04. RULES. The board shall adopt rules to implement
4-15 this chapter.
4-16 Art. 26.05. STATUTORY REFERENCES. A reference in this
4-17 chapter to a statutory provision applies to all reenactments,
4-18 revisions, or amendments of that statutory provision.
4-19 Art. 26.06. APPLICABILITY. (a) An individual or group
4-20 health benefit plan is subject to this chapter if it provides
4-21 health care benefits covering three or more eligible employees of a
4-22 small employer and if it meets any one of the following conditions:
4-23 (1) a portion of the premium or benefits is paid by or
4-24 on behalf of a small employer;
4-25 (2) a covered individual is reimbursed, whether
4-26 through wage adjustments or otherwise, by or on behalf of a small
4-27 employer for a portion of the premium; or
4-28 (3) the health benefit plan is treated by the employer
4-29 or by a covered individual as part of a plan or program for the
4-30 purposes of Section 106 or 162, Internal Revenue Code of 1986 (26
4-31 U.S.C. Section 106 or 162).
4-32 (b) Except as provided by Subsection (a) of this article,
4-33 this chapter does not apply to an individual health insurance
4-34 policy that is underwritten individually.
4-35 (c) Except as expressly provided in this chapter, a small
4-36 employer health benefit plan is not subject to a law that requires
4-37 coverage or the offer of coverage of a health care service or
4-38 benefit.
4-39 Art. 26.07. CERTIFICATION. (a) Not later than March 1 of
4-40 each year, each health carrier shall certify to the commissioner
4-41 whether, as of January 1 of that year, it is offering a health
4-42 benefit plan subject to this chapter under Article 26.06(a) of this
4-43 code.
4-44 (b) The certification shall list each other health insurance
4-45 coverage that:
4-46 (1) the health carrier is offering, delivering,
4-47 issuing for delivery, or renewing to or through small employers in
4-48 this state; and
4-49 (2) is not subject to this chapter because it is
4-50 listed as excluded from the definition of a health benefit plan
4-51 under Article 26.02 of this code.
4-52 (c) The certification shall include a statement that the
4-53 carrier is not offering or marketing to small employers as a health
4-54 benefit plan the coverage listed under Subsection (b) of this
4-55 article and that the health carrier is complying with this chapter
4-56 to the extent it is applicable to the carrier.
4-57 Art. 26.08. COST CONTAINMENT. (a) A small employer carrier
4-58 may use cost containment and managed care features in a small
4-59 employer health benefit plan, including:
4-60 (1) utilization review of health care services,
4-61 including review of the medical necessity of hospital and physician
4-62 services;
4-63 (2) case management, including discharge planning and
4-64 review of stays in hospitals or other health care facilities;
4-65 (3) selective contracting with hospitals, physicians,
4-66 and other health care providers;
4-67 (4) reasonable benefit differentials applicable to
4-68 health care providers that participate or do not participate in
4-69 restricted network arrangements;
4-70 (5) precertification or preauthorization for certain
5-1 covered services; and
5-2 (6) coordination of benefits.
5-3 (b) A provision of a small employer health benefit plan that
5-4 provides for coordination of benefits must comply with this chapter
5-5 and guidelines established by the commissioner.
5-6 SUBCHAPTER B. PURCHASING COOPERATIVES
5-7 Art. 26.11. DEFINITIONS. In this subchapter:
5-8 (1) "Board of trustees" means the board of trustees of
5-9 the Texas cooperative.
5-10 (2) "Board of directors" means the board of directors
5-11 elected by a private purchasing cooperative.
5-12 (3) "Cooperative" means a purchasing cooperative
5-13 established under this subchapter.
5-14 (4) "Texas cooperative" means the Texas Health
5-15 Benefits Purchasing Cooperative established under Article 26.13 of
5-16 this code.
5-17 Art. 26.12. APPLICABILITY OF OTHER LAWS. (a) Section 1(a),
5-18 Article 3.51-6, of this code, does not limit the type of group that
5-19 may be covered by a group health benefit plan issued through a
5-20 cooperative.
5-21 (b) The Texas cooperative is subject to the open records
5-22 law, Chapter 424, Acts of the 63rd Legislature, Regular Session,
5-23 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
5-24 Art. 26.13. TEXAS HEALTH BENEFITS PURCHASING COOPERATIVE.
5-25 (a) The Texas Health Benefits Purchasing Cooperative is a
5-26 nonprofit organization established to make health care coverage
5-27 available to small employers and their eligible employees and
5-28 eligible employees' dependents.
5-29 (b) The Texas cooperative is administered by a six-member
5-30 board of trustees appointed by the governor with the advice and
5-31 consent of the senate. Three members must represent employers, two
5-32 members must represent employees, and one member must represent the
5-33 public. The executive director of the Texas Department of Commerce
5-34 shall serve as a nonvoting ex officio member of the board of
5-35 trustees.
5-36 (c) The appointed members of the board of trustees serve
5-37 staggered six-year terms, with the terms of two members expiring
5-38 February 1 of each odd-numbered year.
5-39 (d) A member of the board of trustees may not be compensated
5-40 for serving on the board of trustees but is entitled to
5-41 reimbursement for actual expenses incurred in performing functions
5-42 as a member of the board of trustees as provided by the General
5-43 Appropriations Act.
5-44 (e) The board of trustees shall employ an executive
5-45 director. The executive director may hire other employees as
5-46 necessary.
5-47 (f) The board of trustees may develop regional subdivisions
5-48 of the Texas cooperative and may authorize each subdivision to
5-49 separately exercise the powers and duties of a cooperative.
5-50 (g) Salaries for employees of the Texas cooperative and
5-51 related costs may be paid from administrative fees collected from
5-52 employers and participating carriers or other sources of funding
5-53 arranged by the Texas cooperative.
5-54 (h) A member of the board of trustees, the executive
5-55 director, and an employee or agent of the Texas cooperative are not
5-56 liable for an act performed in good faith in the execution of
5-57 duties in connection with the Texas cooperative.
5-58 (i) The Texas cooperative may not use money appropriated by
5-59 the state to pay or otherwise subsidize any portion of the premium
5-60 for a small employer insured through the cooperative.
5-61 Art. 26.14. PRIVATE PURCHASING COOPERATIVE. (a) Two or
5-62 more small employers may form a cooperative for the purchase of
5-63 small employer health benefit plans. A cooperative must be
5-64 organized as a nonprofit corporation and has the rights and duties
5-65 provided by the Texas Non-Profit Corporation Act (Article 1396-1.01
5-66 et seq., Vernon's Texas Civil Statutes).
5-67 (b) The board of directors shall file annually with the
5-68 commissioner a statement of all amounts collected and expenses
5-69 incurred for each of the preceding three years.
5-70 Art. 26.15. POWERS AND DUTIES OF TEXAS HEALTH BENEFITS
6-1 PURCHASING COOPERATIVE AND PRIVATE PURCHASING COOPERATIVES. (a) A
6-2 cooperative:
6-3 (1) shall arrange for small employer health benefit
6-4 plan coverage for small employer groups who participate in the
6-5 cooperative by contracting with small employer carriers who meet
6-6 the criteria established by Subsection (b) of this article;
6-7 (2) shall collect premiums to cover the cost of:
6-8 (A) small employer health benefit plan coverage
6-9 purchased through the cooperative; and
6-10 (B) the cooperative's administrative expenses;
6-11 (3) may contract with agents to market coverage issued
6-12 through the cooperative;
6-13 (4) shall establish administrative and accounting
6-14 procedures for the operation of the cooperative;
6-15 (5) shall establish procedures under which an
6-16 applicant for or participant in coverage issued through the
6-17 cooperative may have a grievance reviewed by an impartial person;
6-18 (6) may contract with a small employer carrier or
6-19 third-party administrator to provide administrative services to the
6-20 cooperative;
6-21 (7) shall contract with small employer carriers for
6-22 the provision of services to small employers covered through the
6-23 cooperative;
6-24 (8) shall develop and implement a plan to maintain
6-25 public awareness of the cooperative and publicize the eligibility
6-26 requirements for, and the procedures for enrollment in coverage
6-27 through, the cooperative; and
6-28 (9) may negotiate the premiums paid by its members.
6-29 (b) A cooperative may contract only with small employer
6-30 carriers who desire to offer coverage through the cooperative and
6-31 who demonstrate:
6-32 (1) that the carrier is a health carrier or health
6-33 maintenance organization licensed and in good standing with the
6-34 department;
6-35 (2) the capacity to administer the health benefit
6-36 plans;
6-37 (3) the ability to monitor and evaluate the quality
6-38 and cost effectiveness of care and applicable procedures;
6-39 (4) the ability to conduct utilization management and
6-40 applicable procedures and policies;
6-41 (5) the ability to assure enrollees adequate access to
6-42 health care providers, including adequate numbers and types of
6-43 providers;
6-44 (6) a satisfactory grievance procedure and the ability
6-45 to respond to enrollees' calls, questions, and complaints; and
6-46 (7) financial capacity, either through financial
6-47 solvency standards as applied by the commissioner or through
6-48 appropriate reinsurance or other risk-sharing mechanisms.
6-49 (c) A cooperative may not self-insure or self-fund any
6-50 health benefit plan or portion of a plan.
6-51 (d) A cooperative shall comply with federal laws applicable
6-52 to cooperatives and health benefit plans issued through
6-53 cooperatives.
6-54 Art. 26.16. COOPERATIVE NOT INSURER. (a) A cooperative is
6-55 not an insurer and the employees of the cooperative are not
6-56 required to be licensed under Subchapter A, Chapter 21, of this
6-57 code.
6-58 (b) An agent or third-party administrator used and
6-59 compensated by the cooperative must be licensed as required by
6-60 Subchapter A, Chapter 21, of this code.
6-61 SUBCHAPTER C. GUARANTEED ISSUE AND RENEWABILITY
6-62 Art. 26.21. SMALL EMPLOYER HEALTH BENEFIT PLANS; EMPLOYER
6-63 ELECTION. (a) Each small employer carrier shall provide the small
6-64 employer health benefit plans without regard to claim experience,
6-65 health status, or medical history. Each small employer carrier
6-66 shall issue the plan chosen by the small employer to each small
6-67 employer that elects to be covered under that plan, agrees to make
6-68 the required premium payments, and agrees to satisfy the other
6-69 requirements of the plan.
6-70 (b) Coverage under a small employer health benefit plan is
7-1 not available to a small employer unless the small employer pays at
7-2 least 75 percent of the insurance premium for its eligible
7-3 employees who elect to be covered by at least one of the small
7-4 employer health benefit plans selected by the small employer.
7-5 Coverage is available under a small employer health benefit plan if
7-6 at least 90 percent of a small employer's eligible employees elect
7-7 to be covered. A small employer is not required to pay any amount
7-8 with respect to an employee who elects not to be covered. The
7-9 small employer may elect to pay the premium cost for additional
7-10 coverage. This chapter does not require a small employer to
7-11 purchase health insurance coverage for the employer's employees.
7-12 (c) An eligible employee may obtain coverage in addition to
7-13 coverage purchased by the employer if at least 40 percent of the
7-14 eligible employees elect to obtain the same additional coverage.
7-15 Subject to insurability, any number of eligible employees may
7-16 otherwise obtain coverage in addition to coverage purchased by the
7-17 employer. The additional coverage may be paid for by the employer,
7-18 the employee, or both.
7-19 (d) The initial enrollment period for the employees and
7-20 their dependents must be at least 30 days.
7-21 (e) A new employee of a covered small employer and the
7-22 dependents of that employee may not be denied coverage if the
7-23 application for coverage is received by the small employer carrier
7-24 not later than the 31st day after the date on which the employment
7-25 begins.
7-26 (f) A late enrollee may be excluded from coverage for 18
7-27 months from the date of application or may be subject to a 12-month
7-28 preexisting condition provision as described by Articles 26.49(b),
7-29 (c), (d), and (e) of this code. If both a period of exclusion from
7-30 coverage and a preexisting condition provision are applicable to a
7-31 late enrollee, the combined period of exclusion may not exceed 18
7-32 months from the date of the late application.
7-33 (g) A small employer carrier may not exclude any eligible
7-34 employee or dependent, including a late enrollee, who would
7-35 otherwise be covered under a small employer group.
7-36 (h) A small employer health benefit plan issued by a small
7-37 employer carrier may not limit or exclude, by use of a rider or
7-38 amendment applicable to a specific individual, coverage by type of
7-39 illness, treatment, medical condition, or accident, except for
7-40 preexisting conditions or diseases as permitted under Article 26.49
7-41 of this code.
7-42 (i) A small employer health benefit plan may not limit or
7-43 exclude initial coverage of a newborn child of a covered employee.
7-44 Any coverage of a newborn child of an employee under this
7-45 subsection terminates on the 31st day after the date of the birth
7-46 of the child unless:
7-47 (1) dependent children are eligible for coverage; and
7-48 (2) notification of the birth and any required
7-49 additional premium are received by the small employer carrier not
7-50 later than the 30th day after the date of birth.
7-51 (j) If the Consolidated Omnibus Budget Reconciliation Act of
7-52 1985 (Pub. L. No. 99-272, 100 Stat. 222) does not require
7-53 continuation or conversion coverage for dependents of an employee,
7-54 a dependent who has been covered by that small employer for at
7-55 least one year or is under one year of age may elect to continue
7-56 coverage under a small employer health benefit plan, if the
7-57 dependent loses eligibility for coverage because of the death,
7-58 divorce, or retirement of the employee, as required by Section 3B,
7-59 Article 3.51-6, of this code.
7-60 Art. 26.22. GEOGRAPHIC SERVICE AREA. (a) A small employer
7-61 carrier is not required to offer or issue the small employer health
7-62 benefit plans:
7-63 (1) to a small employer that is not located within a
7-64 geographic service area of the small employer carrier;
7-65 (2) to an employee of a small employer who neither
7-66 resides nor works in the geographic service area of the small
7-67 employer carrier; or
7-68 (3) to a small employer located within a geographic
7-69 service area with respect to which the small employer carrier
7-70 demonstrates to the satisfaction of the commissioner that the small
8-1 employer carrier reasonably anticipates that it will not have the
8-2 capacity to deliver services adequately because of obligations to
8-3 existing covered individuals.
8-4 (b) A small employer carrier that refuses to issue a small
8-5 employer health benefit plan in a geographic service area may not
8-6 offer a health benefit plan to a group of not more than 50
8-7 individuals in the affected service area before the fifth
8-8 anniversary of the date of the refusal.
8-9 (c) A small employer carrier must file each of its
8-10 geographic service areas with the commissioner. The commissioner
8-11 may disapprove the use of a geographic service area by a small
8-12 employer carrier.
8-13 (d) A small employer carrier that is unable to offer
8-14 coverage in a geographic service area in accordance with a
8-15 determination made by the commissioner under Subsection (a)(3) of
8-16 this article may not offer a small employer benefit plan in the
8-17 applicable geographic service area before the 180th day after the
8-18 later of:
8-19 (1) the date of the refusal; or
8-20 (2) the date the carrier demonstrates to the
8-21 satisfaction of the commissioner that it has regained the capacity
8-22 to deliver services to small employers in the geographic service
8-23 area.
8-24 (e) If the commissioner determines that requiring the
8-25 acceptance of small employers under this subchapter would place a
8-26 small employer carrier in a financially impaired condition, the
8-27 small employer carrier is not required to provide coverage to small
8-28 employers for a period to be set by the commissioner.
8-29 Art. 26.23. RENEWABILITY OF COVERAGE; CANCELLATION.
8-30 (a) Except as provided by Article 26.24 of this code, a small
8-31 employer carrier shall renew the small employer health benefit plan
8-32 for any covered small employer at the option of the small employer,
8-33 except for:
8-34 (1) nonpayment of a premium as required by the terms
8-35 of the plan;
8-36 (2) fraud or misrepresentation of a material fact by
8-37 the small employer; or
8-38 (3) noncompliance with small employer health benefit
8-39 plan provisions.
8-40 (b) A small employer carrier may refuse to renew the
8-41 coverage of an eligible employee or dependent for fraud or
8-42 misrepresentation of a material fact by that individual.
8-43 (c) A small employer carrier may not cancel a small employer
8-44 health benefit plan except for the reasons specified for refusal to
8-45 renew under Subsection (a) of this article. A small employer
8-46 carrier may not cancel the coverage of an eligible employee or
8-47 dependent except for the reasons specified for refusal to renew
8-48 under Subsection (b) of this article.
8-49 Art. 26.24. REFUSAL TO RENEW. (a) A small employer carrier
8-50 may elect to refuse to renew each small employer health benefit
8-51 plan delivered or issued for delivery by the small employer carrier
8-52 in this state or in a geographic service area approved under
8-53 Article 26.22 of this code. The small employer carrier must notify
8-54 the commissioner of the election not later than the 180th day
8-55 before the date coverage under the first small employer health
8-56 benefit plan terminates under this subsection.
8-57 (b) The small employer carrier must notify each affected
8-58 covered small employer not later than the 180th day before the date
8-59 on which coverage terminates for that small employer.
8-60 (c) A small employer carrier that elects under Subsection
8-61 (a) of this article to refuse to renew all small employer health
8-62 benefit plans in this state or in an approved geographic service
8-63 area may not write a new small employer health benefit plan in this
8-64 state or in the geographic service area, as applicable, before the
8-65 fifth anniversary of the date of notice to the commissioner under
8-66 Subsection (a) of this article.
8-67 Art. 26.25. NOTICE TO COVERED PERSONS. Not later than the
8-68 30th day before the date on which termination of coverage is
8-69 effective, a small employer carrier that cancels or refuses to
8-70 renew coverage under a small employer health benefit plan under
9-1 Article 26.23 or 26.24 of this code shall notify the small employer
9-2 of the cancellation or refusal to renew. It is the responsibility
9-3 of the small employer to notify enrollees of the cancellation or
9-4 refusal to renew the coverage.
9-5 SUBCHAPTER D. UNDERWRITING AND RATING
9-6 Art. 26.31. ESTABLISHMENT OF CLASSES OF BUSINESS. (a) A
9-7 small employer carrier may establish a separate class of business
9-8 only to reflect substantial differences in expected claim
9-9 experience or administrative costs related to the following
9-10 reasons:
9-11 (1) the small employer carrier uses more than one type
9-12 of system for the marketing and sale of small employer health
9-13 benefit plans to small employers;
9-14 (2) the small employer carrier has acquired a class of
9-15 business from another health carrier; or
9-16 (3) the small employer carrier provides coverage to
9-17 one or more employer-based association groups.
9-18 (b) A small employer carrier may establish up to nine
9-19 separate classes of business under this article.
9-20 (c) The commissioner may establish regulations to provide
9-21 for a period of transition in order for a small employer carrier to
9-22 come into compliance with Subsection (b) of this article in the
9-23 instance of acquisition of an additional class of business from
9-24 another small employer carrier.
9-25 (d) The commissioner may approve the establishment of
9-26 additional classes of business on application to the commissioner
9-27 and a finding by the commissioner that the establishment of
9-28 additional classes would enhance the efficiency and fairness of the
9-29 insurance market for small employers.
9-30 Art. 26.32. INDEX RATES. (a) The premium rates for a small
9-31 employer health benefit plan are subject to this article.
9-32 (b) The index rate for a rating period for any class of
9-33 business may not exceed the index rate for any other class of
9-34 business by more than 20 percent.
9-35 (c) For a class of business, the premium rates charged
9-36 during a rating period to small employers with similar case
9-37 characteristics for the same or similar coverage, or the rates that
9-38 could be charged to those employers under the rating system for
9-39 that class of business, may not vary from the index rate by more
9-40 than 25 percent.
9-41 Art. 26.33. PREMIUM RATES; ADJUSTMENTS. (a) The percentage
9-42 increase in the premium rate charged to a small employer for a new
9-43 rating period may not exceed the sum of:
9-44 (1) the percentage change in the new business premium
9-45 rate measured from the first day of the prior rating period to the
9-46 first day of the new rating period;
9-47 (2) any adjustment, not to exceed 15 percent annually
9-48 and adjusted pro rata for rating periods of less than one year, due
9-49 to the claim experience, health status, or duration of coverage of
9-50 the employees or dependents of the small employer as determined
9-51 from the small employer carrier's rate manual for the class of
9-52 business; and
9-53 (3) any adjustment due to change in coverage or change
9-54 in the case characteristics of the small employer as determined
9-55 from the small employer carrier's rate manual for the class of
9-56 business.
9-57 (b) Adjustments in premium rates for claim experience,
9-58 health status, or duration of coverage may not be charged to
9-59 individual employees or dependents. Such an adjustment must be
9-60 applied uniformly to the rates charged for all employees and
9-61 dependents of employees of the small employer.
9-62 (c) A health carrier may use the industry classification to
9-63 which a small employer belongs as a case characteristic in
9-64 establishing premium rates, but the highest rate factor associated
9-65 with any industry classification may not exceed the lowest rate
9-66 factor associated with any industry classification by more than 15
9-67 percent.
9-68 Art. 26.34. EFFECT OF PRIOR COVERAGE. For a health benefit
9-69 plan delivered or issued for delivery before September 1, 1993, a
9-70 premium rate for a rating period may exceed the ranges set forth in
10-1 Articles 26.32 and 26.33 of this code until September 1, 1995. The
10-2 percentage increase in the premium rate charged to a small employer
10-3 under this article for a new rating period may not exceed the sum
10-4 of:
10-5 (1) the percentage change in the new business premium
10-6 rate measured from the first day of the prior rating period to the
10-7 first day of the new rating period; and
10-8 (2) any adjustment due to change in coverage or change
10-9 in the case characteristics of the small employer as determined
10-10 from the small employer carrier's rate manual for the class of
10-11 business.
10-12 Art. 26.35. RATE ADJUSTMENT IN CLOSED PLAN. In the case of
10-13 a health benefit plan into which a small employer carrier is no
10-14 longer enrolling new small employers, the small employer carrier
10-15 shall use the percentage change in the base premium rate to adjust
10-16 rates under Articles 26.33(1) and 26.34(1) of this code. The
10-17 portion of change in rates computed under those subdivisions may
10-18 not exceed, on a percentage basis, the change in the new business
10-19 premium rate for the most similar health benefit plan into which
10-20 the small employer carrier is actively enrolling new small
10-21 employers.
10-22 Art. 26.36. PREMIUM RATES; NONDISCRIMINATION. (a) A small
10-23 employer carrier shall apply rating factors, including case
10-24 characteristics, consistently with respect to all small employers
10-25 in a class of business. Rating factors shall produce premiums for
10-26 identical groups that differ only by the amounts attributable to
10-27 plan design and that do not reflect differences due to the nature
10-28 of the groups assumed to select particular health benefit plans.
10-29 (b) A small employer carrier shall treat each health
10-30 benefit plan issued or renewed in the same calendar month as having
10-31 the same rating period.
10-32 (c) A small employer carrier may not use case
10-33 characteristics without the prior approval of the commissioner
10-34 other than the geographic area in which the small employer's
10-35 employees reside, the age and gender of the individual employees
10-36 and their dependents, the appropriate industry classification, and
10-37 the number of employees and dependents.
10-38 (d) Premium rates for a small employer health benefit plan
10-39 must comply with the requirements of this chapter, notwithstanding
10-40 any assessments paid or payable by small employer carriers.
10-41 (e) The board may adopt rules to implement this article and
10-42 to ensure that rating practices used by small employer carriers are
10-43 consistent with the purposes of this chapter, including rules that
10-44 ensure that differences in rates charged for each small employer
10-45 health benefit plan are reasonable and reflect objective
10-46 differences in plan design.
10-47 (f) A small employer carrier may not transfer a small
10-48 employer involuntarily into or out of a class of business. A small
10-49 employer carrier may not offer to transfer a small employer into or
10-50 out of a class of business unless the offer is made to transfer all
10-51 small employers in that class of business without regard to case
10-52 characteristics, claim experience, health status, or duration of
10-53 coverage since the issuance of the health benefit plan.
10-54 Art. 26.37. RESTRICTED PROVIDER NETWORKS. For purposes of
10-55 this subchapter, a small employer health benefit plan may use a
10-56 restricted provider network to provide the benefits under the plan.
10-57 A plan that uses a restricted provider network does not provide
10-58 similar coverage to a small employer health benefit plan that does
10-59 not use a restricted provider network, if the use of the network
10-60 results in reduced premiums to the small employer or substantial
10-61 differences in claim costs.
10-62 Art. 26.38. HEALTH MAINTENANCE ORGANIZATION; APPROVED
10-63 HEALTH BENEFIT PLAN. The premium rates for a state-approved
10-64 health benefit plan offered by a health maintenance organization
10-65 under Article 26.48 of this code must be established in accordance
10-66 with formulas or schedules of charges filed with the department.
10-67 Art. 26.39. ENFORCEMENT. If the commissioner finds that a
10-68 small employer carrier subject to this chapter exceeds the
10-69 applicable rate established under this subchapter, the commissioner
10-70 may order restitution and assess penalties as provided by Section
11-1 7, Article 1.10, of this code.
11-2 Art. 26.40. DISCLOSURE. In connection with the offering for
11-3 sale of any small employer health benefit plan, each small employer
11-4 carrier and each agent shall make a reasonable disclosure, as part
11-5 of its solicitation and sales materials, of:
11-6 (1) the extent to which premium rates for a specific
11-7 small employer are established or adjusted based on the actual or
11-8 expected variation in claim costs or the actual or expected
11-9 variation in health status of the employees of the small employer
11-10 and their dependents;
11-11 (2) provisions concerning the small employer carrier's
11-12 right to change premium rates and the factors other than claim
11-13 experience that affect changes in premium rates;
11-14 (3) provisions relating to renewability of policies
11-15 and contracts; and
11-16 (4) any preexisting condition provision.
11-17 Art. 26.41. REPORTING REQUIREMENTS. (a) Compliance with
11-18 the underwriting and rating requirements of this chapter shall be
11-19 demonstrated through actuarial certification. Small employer
11-20 carriers offering a small employer health benefit plan shall file
11-21 annually with the commissioner an actuarial certification stating
11-22 that the underwriting and rating methods of the small employer
11-23 carrier:
11-24 (1) comply with accepted actuarial practices;
11-25 (2) are uniformly applied to each small employer
11-26 health benefit plan covering a small employer; and
11-27 (3) comply with the provisions of this chapter.
11-28 (b) Each small employer carrier shall maintain at its
11-29 principal place of business a complete and detailed description of
11-30 its rating practices and renewal underwriting practices, including
11-31 information and documentation that demonstrate that its rating
11-32 methods and practices are based on commonly accepted actuarial
11-33 assumptions and are in accordance with sound actuarial principles.
11-34 (c) A small employer carrier shall make the information and
11-35 documentation described in Subsection (b) of this article
11-36 available to the commissioner on request. Except in cases of
11-37 violations of this chapter, the information shall be considered
11-38 proprietary and trade secret information and shall not be subject
11-39 to disclosure by the commissioner to persons outside the department
11-40 except as agreed to by the small employer carrier or as ordered by
11-41 a court of competent jurisdiction.
11-42 SUBCHAPTER E. COVERAGE
11-43 Art. 26.42. SMALL EMPLOYER HEALTH BENEFIT PLANS. (a) A
11-44 small employer carrier shall offer the following three health
11-45 benefit plans:
11-46 (1) the preventive and primary care benefit plan;
11-47 (2) the in-hospital benefit plan; and
11-48 (3) the standard health benefit plan.
11-49 (b) A small employer carrier may offer to a small employer
11-50 additional benefit riders to the standard health benefit plan.
11-51 (c) A small employer carrier may not offer to a small
11-52 employer benefit riders to:
11-53 (1) the preventive and primary care benefit plan,
11-54 except as provided by Article 26.45(d) of this code; or
11-55 (2) the in-hospital benefit plan, except as provided
11-56 by Article 26.46(e) of this code.
11-57 (d) Subject to the provisions of this chapter, a small
11-58 employer carrier may also offer to small employers any other health
11-59 benefit plan authorized under this code. Article 26.06(c) does not
11-60 apply to a health benefit plan offered to a small employer under
11-61 this subsection.
11-62 Art. 26.43. POLICY FORMS. (a) The commissioner shall
11-63 promulgate the benefits section of the preventive and primary
11-64 benefit plan, the in-hospital benefit plan, and the standard health
11-65 benefit plan policy forms. For all other portions of these policy
11-66 forms, a small employer carrier shall comply with Article 3.42 of
11-67 this code as it relates to policy form approval. A small employer
11-68 carrier may not offer these three benefit plans through a policy
11-69 form that does not comply with this article.
11-70 (b) A health insurer may not issue and the commissioner may
12-1 not approve a health insurance certificate or policy or an
12-2 endorsement to a health insurance certificate or policy unless it
12-3 is in plain language.
12-4 (c) Each provision of a health insurance certificate or
12-5 policy or an endorsement to a health insurance certificate or
12-6 policy relating to renewal of coverage, conditions of coverage, or
12-7 per occurrence or aggregate dollar limitations on coverage must be
12-8 clearly explained in plain language.
12-9 (d) A health insurer may not use and the commissioner may
12-10 not approve an insurance application form unless it is in plain
12-11 language.
12-12 (e) This section applies unless the specific language to be
12-13 used is mandated by federal law or state statute or by rules
12-14 implementing federal law.
12-15 (f) For purposes of this article, a health insurance
12-16 certificate or policy, an endorsement to or a provision of a health
12-17 insurance certificate or policy, or a health insurance application
12-18 form is written in plain language if it achieves the minimum score
12-19 established by the commissioner on the Flesch reading ease test or
12-20 an equivalent test selected by the commissioner.
12-21 Art. 26.44. RIDERS; FILING WITH COMMISSIONER. (a) A small
12-22 employer carrier shall file with the commissioner, in a form and
12-23 manner prescribed by the commissioner, riders to the small employer
12-24 health benefit plans as allowed under Article 26.42 of this code to
12-25 be used by the small employer carrier. A small employer carrier
12-26 may use a rider filed under this article after the 30th day after
12-27 the date the rider is filed unless the commissioner disapproves its
12-28 use.
12-29 (b) The commissioner, after notice and an opportunity for a
12-30 hearing, may disapprove the continued use by a small employer
12-31 carrier of a rider if the rider does not meet the requirements of
12-32 this chapter.
12-33 Art. 26.45. PREVENTIVE AND PRIMARY CARE BENEFIT PLAN.
12-34 (a) The preventive and primary care benefit plan must include
12-35 coverage for the health services described by Subsections (b) and
12-36 (c) of this article when those services are provided within the
12-37 scope of their practice by a physician, physician assistant,
12-38 advanced nurse practitioner, or another licensed practitioner,
12-39 including any practitioner required to be covered under Article
12-40 21.52 of this code or under Section 2, Chapter 397, Acts of the
12-41 54th Legislature, Regular Session, l955 (Article 3.70-2, Vernon's
12-42 Texas Insurance Code).
12-43 (b) Coverage for the following preventive care must be
12-44 provided without copayment or deductible:
12-45 (1) childhood immunizations;
12-46 (2) Pap tests;
12-47 (3) mammography, as required by Section 2, Chapter
12-48 397, Acts of the 54th Legislature, Regular Session, l955 (Article
12-49 3.70-2, Vernon's Texas Insurance Code);
12-50 (4) colo-rectal screening;
12-51 (5) prostate cancer screening; and
12-52 (6) vision and hearing tests for children under 19
12-53 years of age.
12-54 (c) Coverage must include the following:
12-55 (1) outpatient hospital care and up to five days per
12-56 policy year of inpatient hospital care;
12-57 (2) emergency care, as defined by Section 2, Chapter
12-58 397, Acts of the 54th Legislature, 1955 (Article 3.70-2, Vernon's
12-59 Texas Insurance Code), and Section 2(t), Texas Health Maintenance
12-60 Organization Act (Article 20A.02, Vernon's Texas Insurance Code);
12-61 (3) maternity-related care, including prenatal,
12-62 delivery, and postnatal care and high-risk pregnancy care;
12-63 (4) well-child care, as defined by the Texas
12-64 Department of Health based on the standards of the American Academy
12-65 of Pediatrics or its successor organization;
12-66 (5) outpatient clinic or office visits for treatment
12-67 of illness or injury;
12-68 (6) one physical examination per policy year;
12-69 (7) diagnostic examinations and laboratory and X-ray
12-70 services, with a limit of $5,000 per policy year;
13-1 (8) mental health services, including outpatient
13-2 evaluation, crisis intervention, and services for treatment of
13-3 serious mental illness as described by Section 1, Article 3.51-14,
13-4 of this code, for five days of inpatient services and 40 outpatient
13-5 visits per policy year;
13-6 (9) evaluation and treatment for the abuse of or
13-7 addiction to alcohol or drugs, for five days of inpatient services
13-8 and 40 outpatient visits per policy year;
13-9 (10) home health services, as defined by Section 1,
13-10 Article 3.70-3B, of this code subject to a maximum of 40 visits per
13-11 policy year; and
13-12 (11) physical therapy performed by a qualified
13-13 licensed physical therapist, occupational therapy performed by a
13-14 qualified licensed occupational therapist, or speech-language
13-15 therapy performed by a qualified licensed speech-language
13-16 pathologist, including outpatient diagnostic services and 40
13-17 outpatient treatment visits per policy year.
13-18 (d) A preventive and primary care benefit plan may include a
13-19 rider for coverage of prescription drugs but may not include any
13-20 other rider.
13-21 (e) A preventive and primary care benefit plan must include
13-22 a total benefit cap of $15,000 per policy year.
13-23 (f) Except as provided by Subsection (b) of this article, a
13-24 preventive and primary care benefit plan may require a deductible
13-25 of not more than $250 per policy year and must pay at least 80
13-26 percent of covered charges after the deductible has been satisfied.
13-27 After an insured's copayments have reached $1,000 in a policy year,
13-28 the plan must pay 100 percent of covered charges for the remainder
13-29 of that policy year.
13-30 (g) A small employer carrier may waive the limit on home
13-31 health services if the waiver will result in less expensive
13-32 treatment.
13-33 Art. 26.46. IN-HOSPITAL BENEFIT PLAN. (a) The in-hospital
13-34 benefit plan must include coverage for:
13-35 (1) diagnostic, treatment, and rehabilitative services
13-36 provided through inpatient hospital services; and
13-37 (2) outpatient care necessary as a follow-up to the
13-38 inpatient hospital services until the 90th day after the date of
13-39 discharge from the hospital.
13-40 (b) The in-hospital benefit plan is not subject to any law
13-41 requiring the reimbursement, use, or consideration of a specific
13-42 category of a licensed or certified health care practitioner.
13-43 (c) The in-hospital benefit plan must provide lifetime
13-44 benefits of $1 million with a total benefit cap of $100,000 per
13-45 policy year.
13-46 (d) The in-hospital benefit plan may include deductible and
13-47 copayment requirements.
13-48 (e) The in-hospital benefit plan may include a primary and
13-49 preventive care rider that includes the coverage required by
13-50 Article 26.45 of this code other than the coverage required by
13-51 Subsection (c)(1) of that article. The in-hospital benefit plan
13-52 may also include a supplementary accident benefit plan, but may not
13-53 include other riders or supplementary benefit plans.
13-54 Art. 26.47. STANDARD HEALTH BENEFIT PLAN. (a) The standard
13-55 health benefit plan shall include coverage for:
13-56 (1) health care services, including consulting and
13-57 referral services, provided within the scope of their practice by a
13-58 physician, a physician assistant, an advanced nurse practitioner,
13-59 or another licensed practitioner, including any practitioner
13-60 required to be covered under Article 21.52 of this code or under
13-61 Section 2, Chapter 397, Acts of the 54th Legislature, Regular
13-62 Session, 1955 (Article 3.70-2, Vernon's Texas Insurance Code);
13-63 (2) care in the following facilities:
13-64 (A) inpatient hospitals;
13-65 (B) outpatient hospitals;
13-66 (C) skilled nursing facilities, subject to a
13-67 maximum benefit of $10,000 per policy year; and
13-68 (D) hospice facilities, subject to a maximum
13-69 lifetime benefit of $10,000;
13-70 (3) emergency care, as defined by Section 2, Chapter
14-1 397, Acts of the 54th Legislature, 1955 (Article 3.70-2, Vernon's
14-2 Texas Insurance Code), and Section 2(t), Texas Health Maintenance
14-3 Organization Act (Article 20A.02, Vernon's Texas Insurance Code);
14-4 (4) maternity-related care, including prenatal,
14-5 delivery, and postnatal care and high-risk pregnancy care;
14-6 (5) well-child care, as defined by the Texas
14-7 Department of Health based on the standards of the American Academy
14-8 of Pediatrics or its successor organization;
14-9 (6) outpatient clinic or office visits for treatment
14-10 of illness or injury;
14-11 (7) one physical examination per policy year;
14-12 (8) mental health services, including coverage
14-13 described by Section 2(F), Chapter 397, Acts of the 54th
14-14 Legislature, 1955 (Article 3.70-2, Vernon's Texas Insurance Code),
14-15 and Article 3.72 of this code, subject to a limit of:
14-16 (A) 90 days of inpatient psychiatric care per
14-17 policy year; and
14-18 (B) 40 outpatient visits per policy year,
14-19 subject to a maximum benefit of $100 for each visit;
14-20 (9) medical treatment and referral services for the
14-21 abuse of or addiction to alcohol or drugs, as required by Article
14-22 3.51-9 of this code;
14-23 (10) inpatient and outpatient evaluation, crisis
14-24 intervention, and other treatment for serious mental illness as
14-25 described by Section 1, Article 3.51-14, of this code;
14-26 (11) diagnostic examinations and laboratory and X-ray
14-27 services;
14-28 (12) physical therapy performed by a qualified
14-29 licensed physical therapist, occupational therapy performed by a
14-30 qualified licensed occupational therapist, or speech-language
14-31 therapy performed by a qualified licensed speech-language
14-32 pathologist, subject to a maximum benefit of $10,000 per policy
14-33 year;
14-34 (13) home health services as required by Article
14-35 3.70-3B of this code, subject to a maximum limit of $10,000 per
14-36 policy year; and
14-37 (14) prescription drugs subject to a copayment of not
14-38 more than 50 percent.
14-39 (b) Coverage for the following preventive care must be
14-40 provided without copayment or deductible:
14-41 (1) childhood immunizations;
14-42 (2) Pap tests;
14-43 (3) mammography, as required by Section 2, Chapter
14-44 397, Acts of the 54th Legislature, Regular Session, l955 (Article
14-45 3.70-2, Vernon's Texas Insurance Code);
14-46 (4) colo-rectal screening;
14-47 (5) prostate cancer screening; and
14-48 (6) vision and hearing tests for children under 19
14-49 years of age.
14-50 (c) The standard health benefit plan shall provide lifetime
14-51 benefits of $1 million with a total benefit cap of at least
14-52 $250,000 per policy year.
14-53 (d) Except for services excluded from deductible and
14-54 copayment requirements by Subsection (b) of this article, a
14-55 standard health benefit plan may include deductible and copayment
14-56 requirements.
14-57 (e) A small employer carrier may waive the limit on home
14-58 health services if the waiver will result in less expensive
14-59 treatment.
14-60 (f) The board may adopt rules to implement this article.
14-61 Art. 26.48. HEALTH MAINTENANCE ORGANIZATION PLANS. Instead
14-62 of the small employer health benefit plans described by this
14-63 subchapter, a health maintenance organization may offer a
14-64 state-approved health benefit plan that complies with the
14-65 requirements of Title XI, Public Health Service Act (42 U.S.C.
14-66 Section 300e et seq.) and rules adopted under that Act.
14-67 Art. 26.49. PREEXISTING CONDITION PROVISIONS. (a) Except
14-68 as provided by Article 26.21(f) of this code, a preexisting
14-69 condition provision in a small employer health benefit plan may not
14-70 apply to expenses incurred after the first anniversary of the
15-1 effective date of coverage.
15-2 (b) A preexisting condition provision in a small employer
15-3 health benefit plan may not apply to coverage for a disease or
15-4 condition other than a disease or condition:
15-5 (1) for which medical advice, diagnosis, care, or
15-6 treatment was recommended or received during the six months before
15-7 the effective date of coverage; or
15-8 (2) that would have caused an ordinary, prudent person
15-9 to seek medical advice, diagnosis, care, or treatment during the
15-10 six months before the effective date of coverage.
15-11 (c) A preexisting condition provision in a small employer
15-12 health benefit plan may not apply to an individual who was
15-13 continuously covered for a minimum period of 12 months by a health
15-14 benefit plan that was in effect up to a date not more than 60 days
15-15 before the effective date of coverage under the small employer
15-16 health benefit plan.
15-17 (d) A preexisting condition provision may exclude coverage
15-18 for a pregnancy existing on the effective date of the coverage,
15-19 except as provided by Subsection (c) of this article.
15-20 (e) In determining whether a preexisting condition provision
15-21 applies to an individual covered by a small employer health benefit
15-22 plan, the small employer carrier shall credit the time the
15-23 individual was covered under a previous health benefit plan if the
15-24 previous coverage was in effect at any time during the 12 months
15-25 preceding the effective date of coverage under a small employer
15-26 health benefit plan. If the previous coverage was issued by a
15-27 health maintenance organization, any waiting period that applied
15-28 before that coverage became effective also shall be credited
15-29 against the preexisting condition provision period.
15-30 Art. 26.50. COORDINATION WITH FEDERAL LAW. The board by
15-31 rule may modify a small employer benefit plan described by this
15-32 subchapter or adopt a substitute for that plan to the extent
15-33 required to comply with federal law applicable to the plan. The
15-34 board shall use the Texas Health Benefits Purchasing Cooperative in
15-35 the implementation of this article.
15-36 SUBCHAPTER F. REINSURANCE
15-37 Art. 26.51. ELECTION TO BE RISK-ASSUMING OR REINSURED
15-38 CARRIER; NOTICE TO COMMISSIONER. (a) Each small employer carrier
15-39 shall notify the commissioner of the carrier's election to operate
15-40 as a risk-assuming carrier or a reinsured carrier. A small
15-41 employer carrier seeking to operate as a risk-assuming carrier
15-42 shall make an application under Article 26.52 of this code.
15-43 (b) A small employer carrier's election under Subsection (a)
15-44 of this article is effective until the fifth anniversary of the
15-45 election. The commissioner may permit a small employer carrier to
15-46 modify its decision at any time for good cause shown.
15-47 (c) The commissioner shall establish an application process
15-48 for small employer carriers seeking to change their status under
15-49 this article.
15-50 (d) A reinsured carrier that elects to change its status to
15-51 operate as a risk-assuming carrier may not continue to reinsure a
15-52 small employer health benefit plan with the system. The carrier
15-53 shall pay a prorated assessment based on business issued as a
15-54 reinsured carrier for any portion of the year that the business was
15-55 reinsured.
15-56 Art. 26.52. APPLICATION TO BECOME A RISK-ASSUMING CARRIER.
15-57 (a) A small employer carrier may apply to become a risk-assuming
15-58 carrier by filing an application with the commissioner in a form
15-59 and manner prescribed by the commissioner.
15-60 (b) In evaluating an application filed under Subsection (a)
15-61 of this article, the commissioner shall consider the small employer
15-62 carrier's:
15-63 (1) financial condition;
15-64 (2) history of rating and underwriting small employer
15-65 groups;
15-66 (3) commitment to market fairly to all small employers
15-67 in the state or in its established geographic service area; and
15-68 (4) experience managing the risk of small employer
15-69 groups.
15-70 (c) The commissioner shall provide public notice of an
16-1 application by a small employer carrier to be a risk-assuming
16-2 carrier and shall provide at least a 60-day period for public
16-3 comment before making a decision on the application. If the
16-4 application is not acted on before the 90th day after the date the
16-5 commissioner received the application, the carrier may request and
16-6 the commissioner shall grant a hearing.
16-7 (d) The commissioner, after notice and hearing, may rescind
16-8 the approval granted to a risk-assuming carrier under this article
16-9 if the commissioner finds that the carrier:
16-10 (1) is not financially able to support the assumption
16-11 of risk from issuing coverage to small employers without the
16-12 protection afforded by the system;
16-13 (2) has failed to market fairly to all small employers
16-14 in the state or its established geographic service area; or
16-15 (3) has failed to provide coverage to eligible small
16-16 employers.
16-17 Art. 26.53. TEXAS HEALTH REINSURANCE SYSTEM. (a) The Texas
16-18 Health Reinsurance System is created as a nonprofit entity.
16-19 (b) The system is administered by a board of directors and
16-20 operates subject to the supervision and control of the
16-21 commissioner.
16-22 Art. 26.54. BOARD OF DIRECTORS. (a) The board of directors
16-23 is composed of nine members appointed by the commissioner. The
16-24 commissioner or the commissioner's representative shall serve as an
16-25 ex officio member. Five members must be representatives of
16-26 reinsured carriers selected from individuals nominated by small
16-27 employer carriers in this state according to procedures developed
16-28 by the commissioner. Four members must represent the general
16-29 public. A member representing the general public may not be:
16-30 (1) an officer, director, or employee of an insurance
16-31 company, agency, agent, broker, solicitor, or adjuster or any other
16-32 business entity regulated by the department;
16-33 (2) a person required to register with the Texas
16-34 Ethics Commission under Chapter 305, Government Code; or
16-35 (3) related to a person described by Subdivision (1)
16-36 or (2) of this subsection within the second degree of affinity or
16-37 consanguinity.
16-38 (b) The members appointed by the commissioner serve two-year
16-39 terms. The terms expire on December 31 of each odd-numbered year.
16-40 A member's term continues until a successor is appointed.
16-41 (c) A member of the board of directors may not be
16-42 compensated for serving on the board of directors but is entitled
16-43 to reimbursement for actual expenses incurred in performing
16-44 functions as a member of the board of trustees as provided in the
16-45 General Appropriations Act.
16-46 (d) The board of directors is subject to the open meetings
16-47 law, Chapter 271, Acts of the 60th Legislature, Regular Session,
16-48 1967 (Article 6252-17, Vernon's Texas Civil Statutes), and the open
16-49 records law, Chapter 424, Acts of the 63rd Legislature, Regular
16-50 Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
16-51 Art. 26.55. PLAN OF OPERATION. (a) Not later than the
16-52 180th day after the date on which a majority of the members of the
16-53 board of directors have been appointed, the board of directors
16-54 shall submit to the commissioner a plan of operation and thereafter
16-55 any amendments necessary or suitable to ensure the fair,
16-56 reasonable, and equitable administration of the system. The
16-57 commissioner, after notice and hearing, may approve the plan of
16-58 operation if the commissioner determines the plan is suitable to
16-59 ensure the fair, reasonable, and equitable administration of the
16-60 system and provides for the sharing of system gains or losses on an
16-61 equitable and proportionate basis in accordance with the provisions
16-62 of this subchapter. The plan of operation is effective on the
16-63 written approval of the commissioner.
16-64 (b) If the board of directors fails to timely submit a
16-65 suitable plan of operation, the commissioner, after notice and
16-66 hearing, shall adopt a temporary plan of operation. The
16-67 commissioner shall amend or rescind any plan adopted under this
16-68 subsection at the time a plan of operation is submitted by the
16-69 board of directors and approved by the commissioner.
16-70 (c) The plan of operation must:
17-1 (1) establish procedures for the handling and
17-2 accounting of system assets and money and for an annual fiscal
17-3 report to the commissioner;
17-4 (2) establish procedures for the selection of an
17-5 administering carrier or third-party administrator and establish
17-6 the powers and duties of that administering carrier or third-party
17-7 administrator;
17-8 (3) establish procedures for reinsuring risks in
17-9 accordance with the provisions of this article;
17-10 (4) establish procedures for collecting assessments
17-11 from reinsured carriers to fund claims and administrative expenses
17-12 incurred or estimated to be incurred by the system, including the
17-13 imposition of penalties for late payment of an assessment; and
17-14 (5) provide for any additional matters necessary for
17-15 the implementation and administration of the system.
17-16 Art. 26.56. POWERS AND DUTIES OF SYSTEM. The system has the
17-17 general powers and authority granted under the laws of this state
17-18 to insurance companies and health maintenance organizations
17-19 licensed to transact business, except that the system may not
17-20 directly issue health benefit plans. The system is exempt from all
17-21 taxes. The system may:
17-22 (1) enter into contracts necessary or proper to carry
17-23 out the provisions and purposes of this subchapter and may, with
17-24 the approval of the commissioner, enter into contracts with similar
17-25 programs of other states for the joint performance of common
17-26 functions or with persons or other organizations for the
17-27 performance of administrative functions;
17-28 (2) sue or be sued, including taking legal actions
17-29 necessary or proper to recover assessments and penalties for, on
17-30 behalf of, or against the system or a reinsured carrier;
17-31 (3) take legal action necessary to avoid the payment
17-32 of improper claims against the system;
17-33 (4) issue reinsurance contracts in accordance with the
17-34 requirements of this subchapter;
17-35 (5) establish guidelines, conditions, and procedures
17-36 for reinsuring risks under the plan of operation;
17-37 (6) establish actuarial functions as appropriate for
17-38 the operation of the system;
17-39 (7) assess reinsured carriers in accordance with the
17-40 provisions of Article 26.60 of this code and make advance interim
17-41 assessments as may be reasonable and necessary for organizational
17-42 and interim operating expenses, provided that any interim
17-43 assessments shall be credited as offsets against regular
17-44 assessments due after the close of the fiscal year;
17-45 (8) appoint appropriate legal, actuarial, and other
17-46 committees as necessary to provide technical assistance in the
17-47 operation of the system, policy and other contract design, and any
17-48 other function within the authority of the system; and
17-49 (9) borrow money for a period not to exceed one year
17-50 to effect the purposes of the system, provided that any notes or
17-51 other evidence of indebtedness of the system not in default shall
17-52 be legal investments for small employer carriers and may be carried
17-53 as admitted assets.
17-54 Art. 26.57. AUDIT BY STATE AUDITOR. (a) The state auditor
17-55 shall conduct annually a special audit of the system under Chapter
17-56 321, Government Code. The state auditor's report shall include a
17-57 financial audit and an economy and efficiency audit.
17-58 (b) The state auditor shall report the cost of each audit
17-59 conducted under this article to the board of directors and the
17-60 comptroller, and the board of directors shall remit that amount to
17-61 the comptroller for deposit to the general revenue fund.
17-62 Art. 26.58. REINSURANCE. (a) A small employer carrier may
17-63 reinsure risks covered under the small employer health benefit
17-64 plans with the system as provided by this article.
17-65 (b) The system shall reinsure the level of coverage provided
17-66 under the small employer health benefit plans.
17-67 (c) A small employer carrier may reinsure an entire small
17-68 employer group not later than the 60th day after the date on which
17-69 the group's coverage under the small employer health benefit plans
17-70 takes effect. A small employer carrier may reinsure an eligible
18-1 employee of a small employer or the employee's dependent not later
18-2 than the 60th day after the date on which that individual's
18-3 coverage takes effect. A newly eligible employee or dependent of a
18-4 reinsured small employer group or an individual covered under the
18-5 small employer health benefit plans may be reinsured not later than
18-6 the 60th day after the date on which that individual's coverage
18-7 takes effect.
18-8 (d) The system may not reimburse a reinsured carrier for the
18-9 claims of any reinsured individual until the carrier has incurred
18-10 an initial level of claims for that individual in a calendar year
18-11 of $5,000 for benefits covered by the system. In addition, the
18-12 reinsured carrier is responsible for 10 percent of the next $50,000
18-13 of benefit payments during a calendar year, and the system shall
18-14 reinsure the remainder. A reinsured carrier's liability to any
18-15 insured individual may not exceed a maximum of $10,000 in any one
18-16 calendar year for that individual.
18-17 (e) The board of directors annually shall adjust the initial
18-18 level of claims and the maximum to be retained by the carrier
18-19 established under Subsection (d) of this article to reflect
18-20 increases in costs and in use for small employer health benefit
18-21 plans in this state. The adjustment may not be less than the
18-22 annual change in the medical component of the Consumer Price Index
18-23 for All Urban Consumers published by the Bureau of Labor Statistics
18-24 of the United States Department of Labor unless the board of
18-25 directors proposes and the commissioner approves a lower adjustment
18-26 factor.
18-27 (f) A small employer carrier may terminate reinsurance with
18-28 the system for one or more of the reinsured employees or dependents
18-29 of employees of a small employer on a contract anniversary of the
18-30 small employer health benefit plans.
18-31 (g) Except as provided in the plan of operation, a reinsured
18-32 carrier shall apply consistently with respect to reinsured and
18-33 nonreinsured business all managed care procedures, including
18-34 utilization review, individual case management, preferred provider
18-35 provisions, and other managed care provisions or methods of
18-36 operation.
18-37 Art. 26.59. PREMIUM RATES. (a) As part of the plan of
18-38 operation, the board of directors shall adopt a method to determine
18-39 premium rates to be charged by the system for reinsuring small
18-40 employer groups and individuals under this subchapter.
18-41 (b) The method adopted must include classification systems
18-42 for small employer groups that reflect the variations in premium
18-43 rates allowed in this chapter and must provide for the development
18-44 of base reinsurance premium rates that reflect the allowable
18-45 variations. The base reinsurance premium rates shall be
18-46 established by the board of directors, subject to the approval of
18-47 the board, and shall be set at levels that reasonably approximate
18-48 the gross premiums charged to small employers by small employer
18-49 carriers for the small employer health benefit plans, adjusted to
18-50 reflect retention levels required under this subchapter. The board
18-51 of directors periodically shall review the method adopted under
18-52 this subsection, including the classification system and any rating
18-53 factors, to ensure that the method reasonably reflects the claim
18-54 experience of the system. The board of directors may propose
18-55 changes to the method. The changes are subject to the approval of
18-56 the board.
18-57 (c) An entire small employer group may be reinsured at a
18-58 rate that is 1-1/2 times the base reinsurance premium rate for that
18-59 group. An eligible employee of a small employer or the employee's
18-60 dependent covered under the small employer health benefit plans may
18-61 be reinsured at a rate that is five times the base reinsurance
18-62 premium rate for that individual.
18-63 (d) The board of directors may consider adjustments to the
18-64 premium rates charged by the system to reflect the use of effective
18-65 cost containment and managed care arrangements.
18-66 Art. 26.60. ASSESSMENTS. (a) Not later than March 1 of
18-67 each year, the board of directors shall determine and report to the
18-68 commissioner the system net loss for the previous calendar year,
18-69 including administrative expenses and incurred losses for the year,
18-70 taking into account investment income and other appropriate gains
19-1 and losses. Any net loss for the year must be recouped by
19-2 assessments on reinsured carriers. Each reinsured carrier's
19-3 assessment shall be determined annually by the board of directors
19-4 based on annual statements and other reports required by the board
19-5 of directors and filed with that board. The board of directors
19-6 shall establish, as part of the plan of operation, a formula by
19-7 which to make assessments against reinsured carriers. With the
19-8 approval of the commissioner, the board of directors may change the
19-9 assessment formula from time to time as appropriate. The board of
19-10 directors shall base the assessment formula on each reinsured
19-11 carrier's share of:
19-12 (1) the total premiums earned in the preceding
19-13 calendar year from the small employer health benefit plans
19-14 delivered or issued for delivery by reinsured carriers to small
19-15 employer groups in this state; and
19-16 (2) the premiums earned in the preceding calendar year
19-17 from newly issued small employer health benefit plans delivered or
19-18 issued for delivery during the calendar year by reinsured carriers
19-19 to small employer groups in this state.
19-20 (b) The formula established under Subsection (a) of this
19-21 article may not result in an assessment share for a reinsured
19-22 carrier that is less than 50 percent or more than 150 percent of an
19-23 amount based on the proportion of the total premium earned in the
19-24 preceding calendar year from the small employer health benefit
19-25 plans delivered or issued for delivery to small employer groups in
19-26 this state by that reinsured carrier to the total premiums earned
19-27 in the preceding calendar year from standard small employer health
19-28 benefit plans delivered or issued for delivery to small employer
19-29 groups in this state by all reinsured carriers. Premiums earned by
19-30 a reinsured carrier that are less than an amount determined by the
19-31 board of directors to justify the cost of collection of an
19-32 assessment based on those premiums may not be considered by the
19-33 board of directors in determining assessments.
19-34 (c) With the approval of the commissioner, the board of
19-35 directors may adjust the assessment formula for reinsured carriers
19-36 that are approved health maintenance organizations that are
19-37 federally qualified under Subchapter XI, Public Health Service Act
19-38 (42 U.S.C. Section 300e et seq.), to the extent that any
19-39 restrictions are imposed on those health maintenance organizations
19-40 that are not imposed on other health carriers.
19-41 Art. 26.61. EVALUATION OF SYSTEM. (a) Not later than March
19-42 1 of each year, the board of directors shall file with the
19-43 commissioner an estimate of the assessments necessary to fund the
19-44 losses for small employer groups incurred by the system during the
19-45 previous calendar year.
19-46 (b) If the board of directors determines that the necessary
19-47 assessments exceed five percent of the total premiums earned in the
19-48 previous calendar year from small employer health benefit plans
19-49 delivered or issued for delivery by reinsured carriers to small
19-50 employer groups in this state, the board of directors shall
19-51 evaluate the operation of the system and shall report its findings,
19-52 including any recommendations for changes to the plan of operation,
19-53 to the commissioner not later than April 1 of the year following
19-54 the calendar year in which the losses were incurred. The
19-55 evaluation must include an estimate of future assessments and must
19-56 consider the administrative costs of the system, the
19-57 appropriateness of the premiums charged, the level of insurer
19-58 retention under the system, and the costs of coverage for small
19-59 employer groups.
19-60 (c) If the board of directors fails to timely file a report,
19-61 the commissioner may evaluate the operations of the system and may
19-62 implement amendments to the plan of operation as considered
19-63 necessary by the commissioner to reduce future losses and
19-64 assessments.
19-65 (d) Reinsured carriers may not write small employer health
19-66 benefit plans on a guaranteed issue basis during a calendar year if
19-67 the assessment amount payable for the previous calendar year is at
19-68 least five percent of the total premiums earned in that calendar
19-69 year from small employer health benefit plans delivered or issued
19-70 for delivery by reinsured carriers in this state.
20-1 (e) Reinsured carriers may not write small employer health
20-2 benefit plans on a guaranteed issue basis after the board of
20-3 directors determines that the expected loss from the reinsurance
20-4 system for a year will exceed the total amount of assessments
20-5 payable at a rate of five percent of the total premiums earned for
20-6 the previous calendar year. Reinsured carriers may not resume
20-7 writing small employer health benefit plans on a guaranteed issue
20-8 basis until the board of directors determines that the expected
20-9 loss will be less than the maximum established by this subsection.
20-10 (f) The maximum assessment amount payable for a calendar
20-11 year may not exceed five percent of the total premiums earned in
20-12 the preceding calendar year from small employer health benefit
20-13 plans delivered or issued for delivery by reinsured carriers in
20-14 this state.
20-15 Art. 26.62. DEFERMENT OF ASSESSMENT. (a) A reinsured
20-16 carrier may petition the commissioner for a deferment in whole or
20-17 in part of an assessment imposed by the board of directors.
20-18 (b) The commissioner may defer all or part of the assessment
20-19 of a reinsured carrier if the commissioner determines that the
20-20 payment of the assessment would endanger the ability of the
20-21 reinsured carrier to fulfill its contractual obligations.
20-22 (c) If an assessment against a reinsured carrier is
20-23 deferred, the amount deferred shall be assessed against the other
20-24 reinsured carriers in a manner consistent with the basis for
20-25 assessment established by this subchapter.
20-26 (d) A reinsured carrier receiving a deferment is liable to
20-27 the system for the amount deferred and is prohibited from
20-28 marketing, delivering, or issuing for delivery a small employer
20-29 health benefit plan or reinsuring any individual or group with the
20-30 system until it pays the outstanding assessment.
20-31 SUBCHAPTER G. MARKETING
20-32 Art. 26.71. FAIR MARKETING. (a) Each small employer
20-33 carrier shall market the small employer health benefit plan through
20-34 properly licensed agents to eligible small employers in this state.
20-35 Each small employer purchasing a small employer health benefit plan
20-36 must affirm that the agent who sold the plan offered and explained
20-37 all three plans to that employer.
20-38 (b) The department may require periodic demonstration by
20-39 small employer carriers and agents that those carriers and agents
20-40 are marketing or issuing small employer health benefit plans to
20-41 small employers in fulfillment of the purposes of this article.
20-42 (c) The department may require periodic reports by small
20-43 employer carriers and agents regarding small employer health
20-44 benefit plans issued by those carriers and agents. The reporting
20-45 requirements shall include information regarding case
20-46 characteristics and the numbers of small employer health benefit
20-47 plans in various categories that are marketed or issued to small
20-48 employers.
20-49 Art. 26.72. HEALTH STATUS AND CLAIMS EXPERIENCE; PROHIBITED
20-50 ACTS. (a) A small employer carrier or agent may not, directly or
20-51 indirectly:
20-52 (1) encourage or direct a small employer to refrain
20-53 from applying for coverage with the small employer carrier because
20-54 of health status or claim experience of the eligible employees and
20-55 dependents of the small employer;
20-56 (2) encourage or direct a small employer to seek
20-57 coverage from another health carrier because of health status or
20-58 claim experience of the eligible employees and dependents of the
20-59 small employer; or
20-60 (3) encourage or direct a small employer to apply for
20-61 a particular small employer health benefit plan because of health
20-62 status or claim experience of the eligible employees and dependents
20-63 of the small employer.
20-64 (b) A small employer carrier may not, directly or
20-65 indirectly, enter into an agreement or arrangement with an agent
20-66 that provides for or results in the compensation paid to an agent
20-67 for the sale of the small employer health benefit plans to be
20-68 varied because of health status or claim experience.
20-69 (c) Subsection (b) of this article does not apply to an
20-70 arrangement that provides compensation to an agent on the basis of
21-1 percentage of premium, provided that the percentage may not vary
21-2 because of health status or claim experience.
21-3 (d) A small employer carrier or agent may not encourage a
21-4 small employer to exclude an eligible employee from health coverage
21-5 provided in connection with the employee's employment.
21-6 Art. 26.73. AGENTS. (a) A small employer carrier shall pay
21-7 the same commission, percentage of premium or other amount to an
21-8 agent for renewal of a small employer health benefit plan as the
21-9 carrier paid for original placement of the plan. Compensation for
21-10 renewal of a plan may be adjusted upward to reflect an increase in
21-11 the cost of living or similar factors.
21-12 (b) A small employer carrier may not terminate, fail to
21-13 renew, or limit its contract or agreement of representation with an
21-14 agent for any reason related to the health status or claim
21-15 experience of a small employer group placed by the agent with the
21-16 carrier.
21-17 Art. 26.74. WRITTEN STATEMENT OF DENIAL, CANCELLATION, OR
21-18 REFUSAL TO RENEW. Denial by a small employer carrier of an
21-19 application for coverage from a small employer or a cancellation or
21-20 refusal to renew must be in writing and must state the reason or
21-21 reasons for the denial, cancellation, or refusal.
21-22 Art. 26.75. RULES. The board may adopt rules setting forth
21-23 additional standards to provide for the fair marketing and broad
21-24 availability of small employer health benefit plans to small
21-25 employers in this state.
21-26 Art. 26.76. VIOLATION. (a) A violation of Article 26.72 of
21-27 this code by a small employer carrier or an agent is an unfair
21-28 method of competition and an unfair or deceptive act or practice
21-29 under Article 21.21 of this code.
21-30 (b) If a small employer carrier enters into an agreement
21-31 with a third-party administrator to provide administrative,
21-32 marketing, or other services related to the offering of small
21-33 employer health benefit plans to small employers in this state, the
21-34 third-party administrator is subject to this subchapter.
21-35 SECTION 2. Subchapter E, Chapter 21, Insurance Code, is
21-36 amended by adding Article 21.52C to read as follows:
21-37 Art. 21.52C. UNIFORM CLAIM BILLING FORMS. (a) In this
21-38 article:
21-39 (1) "Health benefit plan" means a group, blanket, or
21-40 franchise insurance policy, a group hospital service contract, or a
21-41 group subscriber contract or evidence of coverage issued by a
21-42 health maintenance organization that provides benefits for health
21-43 care services.
21-44 (2) "Health carrier" means any entity authorized under
21-45 this code or another insurance law of this state that provides
21-46 health insurance or health benefits in this state, including an
21-47 insurance company, a group hospital service corporation under
21-48 Chapter 20 of this code, a health maintenance organization under
21-49 the Texas Health Maintenance Organization Act (Chapter 20A,
21-50 Vernon's Texas Insurance Code), and a stipulated premium company
21-51 authorized under Chapter 22 of this code.
21-52 (3) "Provider" means a person who provides health care
21-53 under a license issued by this state, including a person listed in
21-54 Section 2(B), Chapter 397, Acts of the 54th Legislature, Regular
21-55 Session, 1955 (Article 3.70-2, Vernon's Texas Insurance Code), or
21-56 in Article 21.52 of this code.
21-57 (b) A provider seeking payment or reimbursement under a
21-58 health benefit plan and the health carrier that issued that plan
21-59 must use uniform claim billing form UB-82/HCFA or HCFA 1500, or
21-60 their successors, as developed by the National Uniform Billing
21-61 Committee or its successor.
21-62 SECTION 3. Section 1(d)(3), Article 3.51-6, Insurance Code,
21-63 is amended to read as follows:
21-64 (3) Any insurer or group hospital service corporation
21-65 subject to Chapter 20, Insurance Code, who issues policies which
21-66 provide hospital, surgical, or major medical expense insurance or
21-67 any combination of these coverages on an expense incurred basis,
21-68 but not a policy which provides benefits for specified disease or
21-69 for accident only, shall provide a conversion or group continuation
21-70 privilege as required by this subsection. Any employee, member, or
22-1 dependent whose insurance under the group policy has been
22-2 terminated for any reason except involuntary termination for cause,
22-3 including discontinuance of the group policy in its entirety or
22-4 with respect to an insured class, and who has been continuously
22-5 insured under the group policy and under any group policy providing
22-6 similar benefits which it replaces for at least three consecutive
22-7 months immediately prior to termination shall be entitled to such
22-8 privilege as outlined in Paragraph (A), (B), or (C) below.
22-9 Involuntary termination for cause does not include termination for
22-10 any health-related cause.
22-11 (A)(i) An insurer shall offer to each employee,
22-12 member, or dependent a conversion policy without evidence of
22-13 insurability if written application for and payment of the first
22-14 premium is made not later than the 31st day after the date of the
22-15 termination. The converted policy shall provide the same coverage
22-16 and benefits as provided under the group policy or plan. The
22-17 lifetime maximum benefits shall be computed from the initial date
22-18 of the employee's, member's, or dependent's coverage with the
22-19 group. An employee, member, or dependent may elect lesser coverage
22-20 and benefits. <Coverage under an individual policy or group
22-21 conversion policy of accident and health insurance without evidence
22-22 of insurability if written application and payment of the first
22-23 premium is made within 31 days after such termination.> An
22-24 employee, member, or dependent shall not be entitled to have a
22-25 converted policy or plan issued if termination of the insurance
22-26 <under the group policy> occurred because: (aa) such person failed
22-27 to pay any required premium; or (bb) any discontinued group
22-28 coverage was replaced by similar group coverage within 31 days.
22-29 (ii) An insurer shall not be required to
22-30 issue a converted policy covering any person if: (aa) such person
22-31 is or could be covered by Medicare; (bb) such person is covered for
22-32 similar benefits by another hospital, surgical, medical, or major
22-33 medical expense insurance policy or hospital or medical service
22-34 subscriber contract or medical practice or other prepayment plan or
22-35 by any other plan or program; (cc) such person is eligible for
22-36 similar benefits whether or not covered therefor under any
22-37 arrangement of coverage for individuals in a group, whether on an
22-38 insured or uninsured basis; or (dd) similar benefits are provided
22-39 for or available to such person, pursuant to or in accordance with
22-40 the requirements of any state or federal law<; or (ee) the benefits
22-41 provided under the sources herein enumerated, together with the
22-42 benefits provided by the converted policy, would result in
22-43 overinsurance according to the insurer's standards. The insurer's
22-44 standards must bear some reasonable relationship to actual health
22-45 care costs in the area in which the insured lives at the time of
22-46 conversion and must be filed with the commissioner of insurance
22-47 prior to their use in denying coverage>. The board shall issue
22-48 rules and regulations to establish minimum standards for benefits
22-49 under policies issued pursuant to this subsection.
22-50 (B)(i) Policies subject to Paragraph (A) above
22-51 shall provide at the <insurer's> option of the employee, member, or
22-52 dependent in lieu of the requirements of Paragraph (A) continuation
22-53 of group coverage for employees or members and their eligible
22-54 dependents subject to the eligibility provisions of Paragraph (A).
22-55 (ii) Continuation of group coverage <need
22-56 not include dental, vision care, or prescription drug benefits and>
22-57 must be requested in writing within 31 <21> days following the
22-58 later of: (aa) the date the group coverage would otherwise
22-59 terminate; or (bb) the date the employee is given notice of the
22-60 right of continuation by either the employer or the group
22-61 policyholder.
22-62 (iii) In no event may the employee or
22-63 member elect continuation more than 31 days after the date of such
22-64 termination.
22-65 (iv) An employee or member electing
22-66 continuation must pay to the group policyholder or employer, on a
22-67 monthly basis in advance, the amount of contribution required by
22-68 the policyholder or employer, plus two percent of <but not more
22-69 than> the group rate for the insurance being continued under the
22-70 group policy on the due date of each payment.
23-1 (v) The employee's or member's written
23-2 election of continuation, together with the first contribution
23-3 required to establish contributions on a monthly basis in advance,
23-4 must be given to the policyholder or employer within 31 days of the
23-5 date coverage would otherwise terminate.
23-6 (vi) Continuation may not terminate until
23-7 the earliest of: (aa) six months after the date the election is
23-8 made; (bb) failure to make timely payments; (cc) the date on which
23-9 the group coverage terminates in its entirety; (dd) or one of the
23-10 conditions specified in items (aa) through (dd) <(ee)> of
23-11 Subparagraph (ii), Paragraph (A) above is met by the covered
23-12 individual.
23-13 (C) The insurer may elect to provide the
23-14 conversion coverage on an individual or group basis <group
23-15 insurance coverage in lieu of the issuance of a converted policy
23-16 under Paragraph (A) above>.
23-17 The premium for the converted policy issued under Paragraph
23-18 (A) of this subdivision shall <or the group coverage under
23-19 Paragraph (C) of this subdivision, should> be determined in
23-20 accordance with the insurer's table of premium rates for coverage
23-21 that was provided under the group policy or plan <applicable to the
23-22 age and class of risk of each person to be covered under that
23-23 policy and the type and amount of insurance provided>. The premium
23-24 may be based on the age and geographic location of each person to
23-25 be covered and the type of converted policy. The premium for the
23-26 same coverage and benefits under a converted policy may not exceed
23-27 200 percent of the premium determined in accordance with this
23-28 paragraph. The premium must be based on the type of converted
23-29 policy and the coverage provided by the policy.
23-30 SECTION 4. Subchapter E, Chapter 21, Insurance Code, is
23-31 amended by adding Article 21.52D to read as follows:
23-32 Art. 21.52D. REVIEW OF MANDATED COVERAGE IN HEALTH BENEFIT
23-33 PLANS
23-34 Sec. 1. DEFINITIONS. In this article:
23-35 (1) "Commissioner" means the commissioner of
23-36 insurance.
23-37 (2) "Health benefit plan" means:
23-38 (A) an individual, group, blanket, or franchise
23-39 insurance policy, insurance agreement, or group hospital service
23-40 contract that provides benefits for medical or surgical expenses
23-41 incurred as a result of an accident or sickness; or
23-42 (B) an evidence of coverage or group subscriber
23-43 contract issued by a health maintenance organization.
23-44 (3) "Mandated benefit provision" means a provision of
23-45 law that requires a health benefit plan to:
23-46 (A) cover a particular health care service or
23-47 provide a particular benefit;
23-48 (B) cover a particular class of persons; or
23-49 (C) provide for the reimbursement, use, or
23-50 consideration of a particular category of health care
23-51 practitioners.
23-52 (4) "Panel" means the mandated benefit review panel
23-53 appointed under this article.
23-54 Sec. 2. MANDATED BENEFIT REVIEW PANEL. (a) The mandated
23-55 benefit review panel is composed of three senior researchers
23-56 appointed by the commissioner. Two members of the panel must be
23-57 experts in health research or biostatistics and must serve on the
23-58 faculty of a university located in this state.
23-59 (b) Members of the panel serve staggered six-year terms,
23-60 with the term of one member expiring February 1 of each
23-61 odd-numbered year. If there is a vacancy during a term, the
23-62 commissioner shall appoint a replacement who meets the
23-63 qualifications of the vacated office to fill the unexpired term.
23-64 (c) A member of the panel is not entitled to compensation
23-65 but is entitled to reimbursement for actual and necessary expenses
23-66 incurred in performing duties as a member of the panel at the rate
23-67 provided for that reimbursement by the General Appropriations Act.
23-68 (d) The department shall provide staff for the panel in
23-69 accordance with legislative appropriation.
23-70 Sec. 3. REFERRAL OF BILL; REPORT. (a) The presiding
24-1 officer of either house of the legislature shall refer a bill
24-2 proposing a mandated benefit provision or an amendment to a
24-3 mandated benefit provision to the panel for a review and report in
24-4 accordance with this article.
24-5 (b) Not later than the 30th day after the date the bill is
24-6 referred to the panel, the panel shall issue a report.
24-7 (c) The panel shall provide a summary and copy of the
24-8 panel's report to the presiding officer of each house of the
24-9 legislature and to the commissioner.
24-10 (d) The summary must include:
24-11 (1) a brief description of the mandated benefit
24-12 provision;
24-13 (2) the panel's conclusion on the necessity, cost,
24-14 cost effectiveness, and medical efficacy of the provision;
24-15 (3) research evidencing the medical efficacy of the
24-16 health care service; and
24-17 (4) the manner in which similar mandated benefit
24-18 provisions enacted in other states have affected health care and
24-19 health insurance costs in those states.
24-20 Sec. 4. REPORT ON EXISTING MANDATED BENEFIT PROVISIONS.
24-21 (a) Not later than February 1, 1995, the panel shall issue a
24-22 report on each mandated benefit provision that is in effect on the
24-23 date the report is issued.
24-24 (b) The panel shall provide a copy of the panel's report to
24-25 the presiding officer of each house of the legislature and to the
24-26 commissioner.
24-27 (c) The panel's report under this section must include:
24-28 (1) a brief description of each mandated benefit
24-29 provision;
24-30 (2) the panel's conclusion on the necessity, cost,
24-31 cost effectiveness, and medical efficacy of each provision;
24-32 (3) research evidencing the medical efficacy of each
24-33 health care service; and
24-34 (4) the manner in which similar mandated benefit
24-35 provisions enacted in other states have affected health care and
24-36 health insurance costs in those states.
24-37 SECTION 5. HEALTH INSURANCE ACCESS STUDY. (a) A
24-38 comprehensive study of guaranteed issue as a feature of health
24-39 insurance reform shall be conducted on behalf of the legislature.
24-40 (b) The study shall be conducted by a committee composed of:
24-41 (1) two members of the senate appointed by the
24-42 lieutenant governor;
24-43 (2) two members of the house of representatives
24-44 appointed by the speaker of the house of representatives;
24-45 (3) a representative of the business community in this
24-46 state appointed by the lieutenant governor;
24-47 (4) a representative of the business community in this
24-48 state appointed by the speaker of the house of representatives;
24-49 (5) a representative of the insurance industry
24-50 appointed by the lieutenant governor;
24-51 (6) a representative of the insurance industry
24-52 appointed by the speaker of the house of representatives;
24-53 (7) a representative of health care providers
24-54 appointed by the lieutenant governor;
24-55 (8) a representative of health care providers
24-56 appointed by the speaker of the house of representatives;
24-57 (9) a representative of consumer groups appointed by
24-58 the lieutenant governor; and
24-59 (10) a representative of consumer groups appointed by
24-60 the speaker of the house of representatives.
24-61 (c) A member of the committee is entitled to reimbursement
24-62 for expenses incurred in carrying out official duties as a member
24-63 of the committee at the rate specified in the General
24-64 Appropriations Act.
24-65 (d) The committee shall:
24-66 (1) investigate and evaluate the experience of other
24-67 jurisdictions in which guaranteed issue of health benefit plans has
24-68 been required;
24-69 (2) collect and evaluate data regarding the effect of
24-70 guaranteed issue requirements on health insurance availability and
25-1 accessibility; and
25-2 (3) collect and evaluate data regarding the effect of
25-3 guaranteed issue requirements on health insurance rates.
25-4 (e) Not later than January 1, 1995, the committee shall
25-5 prepare and present its report. The report shall include
25-6 recommended statutory or rule changes to implement the committee's
25-7 recommendations. The committee shall file copies of the report
25-8 with the Legislative Reference Library, the governor's office, the
25-9 secretary of the senate, the chief clerk of the house of
25-10 representatives, the Texas Department of Insurance, and the Office
25-11 of Public Insurance Counsel.
25-12 (f) On request of the committee, the Texas Legislative
25-13 Council, senate, and house of representatives shall provide staff
25-14 as necessary to carry out the duties of the committee.
25-15 (g) The operating expenses of the committee shall be paid
25-16 from available funds of the legislature.
25-17 SECTION 6. REINSURANCE STUDY. (a) The Texas Department of
25-18 Insurance shall initiate a comprehensive study of the reinsurance
25-19 system established by Subchapter F, Chapter 26, Insurance Code, as
25-20 added by this Act.
25-21 (b) The department shall review and analyze, from an
25-22 actuarial standpoint, the potential cost of catastrophic losses to
25-23 the system and recommend funding methods to adequately finance any
25-24 anticipated losses to the system. The department shall also
25-25 develop an actuarial model for the system's operation. The
25-26 department shall fully investigate the experience of other states
25-27 with health reinsurance systems.
25-28 (c) The department shall report its findings to the
25-29 governor, lieutenant governor, and speaker of the house of
25-30 representatives not later than January 1, 1995.
25-31 SECTION 7. (a) Not later than November 1, 1993, each health
25-32 carrier subject to Chapter 26, Insurance Code, as added by this
25-33 Act, shall file a report with the commissioner that states the
25-34 carrier's gross premiums derived from health benefit plans
25-35 delivered, issued for delivery, or renewed to small employers in
25-36 1992.
25-37 (b) Not later than November 1, 1994, each health carrier
25-38 subject to Chapter 26, Insurance Code, as added by this Act, shall
25-39 file with the commissioner an update to the report required by
25-40 Subsection (a) of this section.
25-41 SECTION 8. Not later than July 1, 1995, a small employer
25-42 carrier subject to Chapter 26, Insurance Code, as added by this
25-43 Act, shall notify the commissioner of its initial election to
25-44 operate as a risk-assuming or reinsured carrier under Article
25-45 26.51, Insurance Code, as added by this Act.
25-46 SECTION 9. In making the initial appointments to the board
25-47 of trustees of the Texas Health Benefits Purchasing Cooperative
25-48 established under Subchapter B, Chapter 26, Insurance Code, as
25-49 added by this Act, the governor shall appoint two members for terms
25-50 expiring February 1, 1995, two members for terms expiring February
25-51 1, 1997, and two members for terms expiring February 1, 1999.
25-52 SECTION 10. (a) Except as otherwise provided by this
25-53 section, this Act takes effect September 1, 1993.
25-54 (b) A health carrier is not required to offer, deliver, or
25-55 issue for delivery a small employer health benefit plan, as
25-56 required by Subchapter E, Chapter 26, Insurance Code, as added by
25-57 this Act, before January 1, 1994.
25-58 (c) The Texas Health Reinsurance System may not reinsure a
25-59 risk in accordance with Subchapter F, Chapter 26, Insurance Code,
25-60 as added by this Act, before September 1, 1995.
25-61 (d) Article 21.52C, Insurance Code, as added by this Act,
25-62 applies only to the use of a claim billing form on or after January
25-63 1, 1994.
25-64 (e) Section 1(d)(3), Article 3.51-6, Insurance Code, as
25-65 amended by this Act, applies only to conversion of a policy
25-66 delivered, issued for delivery, or renewed on or after January 1,
25-67 1994. Conversion of a policy that was delivered, issued for
25-68 delivery, or renewed before January 1, 1994, is governed by the law
25-69 in effect immediately before the effective date of this Act, and
25-70 that law is continued in effect for this purpose.
26-1 (f) Article 26.21(a), Insurance Code, as added by this Act,
26-2 is effective September 1, 1995.
26-3 SECTION 11. In making the initial appointments to the
26-4 mandated benefit review panel created under Article 21.52D,
26-5 Insurance Code, as added by this Act, the commissioner of insurance
26-6 shall appoint one member for a term expiring February 1, 1995, one
26-7 member for a term expiring February 1, 1997, and one member for a
26-8 term expiring February 1, 1999.
26-9 SECTION 12. To the extent that any provision of this law
26-10 conflicts with Section 14, Chapter 214, Acts of the 64th
26-11 Legislature, Regular Session, 1975 (Article 20A.14, Vernon's Texas
26-12 Insurance Code), or Article 21.52, 21.52B, or 21.53, Insurance
26-13 Code, the provisions of that section or article shall prevail.
26-14 SECTION 13. The importance of this legislation and the
26-15 crowded condition of the calendars in both houses create an
26-16 emergency and an imperative public necessity that the
26-17 constitutional rule requiring bills to be read on three several
26-18 days in each house be suspended, and this rule is hereby suspended.
26-19 * * * * *
26-20 Austin,
26-21 Texas
26-22 May 18, 1993
26-23 Hon. Bob Bullock
26-24 President of the Senate
26-25 Sir:
26-26 We, your Committee on Economic Development to which was referred
26-27 H.B. No. 2055, have had the same under consideration, and I am
26-28 instructed to report it back to the Senate with the recommendation
26-29 that it do not pass, but that the Committee Substitute adopted in
26-30 lieu thereof do pass and be printed.
26-31 Parker,
26-32 Chairman
26-33 * * * * *
26-34 WITNESSES
26-35 FOR AGAINST ON
26-36 ___________________________________________________________________
26-37 Name: Will D. Davis x
26-38 Representing: TLROA
26-39 City: Austin
26-40 -------------------------------------------------------------------
26-41 Name: David Pinkus x
26-42 Representing: Small Business United of Tx
26-43 City: Austin
26-44 -------------------------------------------------------------------
26-45 Name: Henry Dawson x
26-46 Representing: United Insurance
26-47 City: Dallas
26-48 -------------------------------------------------------------------
26-49 Name: Sara Perkins x
26-50 Representing: American Cancer Society
26-51 City: Dallas
26-52 -------------------------------------------------------------------
26-53 Name: Shirley Hutzler x
26-54 Representing: Tx Assn. of Health Underwriters
26-55 City: Austin
26-56 -------------------------------------------------------------------
26-57 FOR AGAINST ON
26-58 ___________________________________________________________________
26-59 Name: Dorothy Thorson x
26-60 Representing: Golden Rule Insurance Co.
26-61 City: Bourbonnais, IL
26-62 -------------------------------------------------------------------
26-63 Name: Ted B. Roberts x
26-64 Representing: Tx Assn. of Business
26-65 City: Austin
26-66 -------------------------------------------------------------------
26-67 Name: Rhonda Myron x
26-68 Representing: TDI
26-69 City: Austin
26-70 -------------------------------------------------------------------
27-1 Name: Lisa McGiffert x
27-2 Representing: Consumers Union
27-3 City: Austin
27-4 -------------------------------------------------------------------
27-5 Name: Gene Fondren x
27-6 Representing: Tx Auto Dealers Assn.
27-7 City: Austin
27-8 -------------------------------------------------------------------
27-9 Name: Joe Da Silva x
27-10 Representing: Texas Hospital Assn.
27-11 City: Austin
27-12 -------------------------------------------------------------------
27-13 Name: Allan Patek x
27-14 Representing: Employers Health Ins./HIAA
27-15 City: Green Bay, WI
27-16 -------------------------------------------------------------------
27-17 Name: Karen Elinski x
27-18 Representing: Prudential Insurance Co.
27-19 City: Newark, NJ
27-20 -------------------------------------------------------------------
27-21 Name: Bill Kowalski x
27-22 Representing: CIGNA Companies
27-23 City: Hartford, CT
27-24 -------------------------------------------------------------------
27-25 Name: Gilbert Turrieda x
27-26 Representing: Natl Assn. Self-Employed NASE
27-27 City: Austin
27-28 -------------------------------------------------------------------
27-29 Name: Robert W. Blevins x
27-30 Representing: Texas Life Ins. Assoc.
27-31 City: Austin
27-32 -------------------------------------------------------------------
27-33 Name: Jim Nelson x
27-34 Representing: Golden Rule Ins. Co.
27-35 City: Austin
27-36 -------------------------------------------------------------------
27-37 Name: Daryl B. Dorcy x
27-38 Representing: G. D. Searle & Co.
27-39 City: Austin
27-40 -------------------------------------------------------------------
27-41 Name: Robert Howden x
27-42 Representing: Natl Fed. of Ind. Business/Tx
27-43 City: Austin
27-44 -------------------------------------------------------------------
27-45 Name: Pam Beachley x
27-46 Representing: Business Ins. Consumers Assn.
27-47 City: Austin
27-48 -------------------------------------------------------------------
27-49 Name: Chris Shields x
27-50 Representing: Tx Chamber of Commerce
27-51 City: Austin
27-52 -------------------------------------------------------------------
27-53 Name: Karen Lindell x
27-54 Representing: Tx Rural Health Assn.
27-55 City: Austin
27-56 -------------------------------------------------------------------
27-57 FOR AGAINST ON
27-58 ___________________________________________________________________
27-59 Name: Ruthann Geer x
27-60 Representing: Tx League of Women Voters
27-61 City: Austin
27-62 -------------------------------------------------------------------
27-63 Name: Anita Bradberry x
27-64 Representing: Tx Assn. for Home Care
27-65 City: Austin
27-66 -------------------------------------------------------------------
27-67 Name: J. P. Word x
27-68 Representing: Texas Chiropractic Assn.
27-69 City: Austin
27-70 -------------------------------------------------------------------