BILL ANALYSIS
Insurance Committee
04-05-95
Introduced
Committee Report (Substituted)
BACKGROUND
In the 73rd legislative session, House Bill 2055 was enacted
into law, creating the Small Employer Health Insurance Availability
Act, Chapter 26, Insurance Code. The intent was to provide health
insurance for the small employers of Texas.
PURPOSE
As proposed, House Bill 369 would amend Chapter 26 to address
the availability of affordable health insurance coverage for small
employers.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does grant
additional rulemaking authority to the Insurance Commissioner under
the following sections of the bill:
Section 8, Subsection (a) requires the commissioner by rule to
establish coverage requirements for the catastrophic care benefit
plan and the basic coverage benefit plan and to develop prototype
policies for use by small employer carriers that include all
contractual provisions required to produce an entire contract.
Subsection (b) requires the commissioner to establish deductibles
and coinsurance requirements to give the insured options for
obtaining affordable catastrophic coverage. Note that the
subsection does not, however, expressly state that the Commissioner
shall do so by rule.
Subsection (c) requires the commissioner to establish by rule
coverage requirements for the basic coverage benefit plan.
Section 13 of the bill changes the word "board" to "commissioner"
in art. 26.75 discussed above.
Section 15 provides that the commissioner shall develop and adopt
rules establishing small employer health benefit plans under
Subchapter E (COVERAGE), Chapter 26, Insurance Code.
Although existing art. 26.47 Standard Health Benefit Plan already
contained authorization for the adoption of certain rules as
outlined above, Section 14 of the bill would repeal that article )
SECTION BY SECTION ANALYSIS
SECTION 1. Amends the following definitions in Article 26.02:
"Eligible employee" is amended to exclude seasonal employees and
employees covered under a self-funded or self-insured employee
welfare benefit plan. In addition, the definition is amended to
permit the exclusion of any employee covered under the Medicaid
program, another federal program, including CHAMPUS or Medicare, or
a benefit plan established in another country if the employee
elects not to be covered.
"Late enrollee" is amended to include any enrollee who does not
enroll during the initial enrollment period OR after the expiration
of the open enrollment period.
"Small employer health benefit plan" is amended to mean the plans
developed by the Commissioner under Subchapter E or any other
health benefit plan offered in accordance with Article 26.42(c) or
26.48.
"Point of service contract" is added to the defined terms. It is
defined as a benefit plan offered through a health maintenance
organization (HMO) that includes corresponding indemnity benefits
and permits the insured to obtain coverage under either the HMO or
the indemnity plan.
SECTION 2.
Amends the Applicability provisions in Art. 26.06(b) to exclude an
individual health policy from the scope of the provisions of
Chapter 26 if the policy is subject to individual underwriting
(even if premiums are remitted through a payroll deduction method),
except as otherwise provided in Art. 26.06(a).
SECTION 3.
Amends the provisions in Art. 26.14, pertaining to private
purchasing cooperatives, to require written notification to the
Department of Insurance once a purchasing alliance obtains a
certificate of incorporation. It also requires a copy of
organizational documents to be filed with TDI in conjunction with
the notification.
SECTION 4.
Deletes the requirement (in Art 26.21) for a mandatory employer
contribution of 75% of the premium. Although there would be no
statutory requirement for an employer contribution of premium, the
amendments to the bill substitute would permit an insurance carrier
to establish a minimum employer contribution requirement as a
criteria for obtaining coverage through that carrier. If a carrier
has a minimum contribution requirement: it must be uniform for all
small employers; must be in accordance with usual and customary
practices for all employer group health benefit plans offered by
that carrier; and may not deviate from employer to employer.
The provisions of this SECTION also amend the minimum participation
levels in Art. 26.21 to eliminate the requirement for 90%
participation and include instead a requirement for 75%
participation by eligible employees; however, the provisions
further permit a carrier to establish a lower minimum participation
requirement. If a carrier elects to permit a lower participation
requirement, it must be required uniformly for all small employer
benefit plans offered by that carrier and may not deviate from
employer to employer.
This SECTION also establishes a collective enrollment provision for
any employer offering multiple health benefit plans under Art.
26.21. The collective enrollment must be 75% (or any lower
required participation) for ALL plans (rather than requiring each
plan to achieve a minimum participation requirement).
The substitute changes the initial enrollment period provided in
Art. 26.21 to be at least 31 days rather than 30 and adds a
requirement for provision of a 31-day open enrollment period
annually.
The bill adds a provision to Art. 26.21(g) that a new employee
and/or dependents may not be denied coverage if the application is
received within 31 days of the completion of any required waiting
period established by the employer.
The amended provisions of Art. 26.21 would permit the exclusion of
a "late enrollee" until the next annual open enrollment period AND
would permit the use of a 12-month preexisting condition provision.
The Bill deletes the maximum limitation and exclusion period of 18
months.
The newborn coverage provision is amended to provide for
termination on the 32nd day (rather than the 31st day) unless the
conditions for continued coverage are met. The provisions are also
amended to permit notification of birth not later than 31 days of
the birth (rather than 30 days).
SECTION 5.
Amends the provisions in Art. 26.38 of Chapter 26 to permit an HMO
contracting with a purchasing cooperative to use the same rating
methods as indemnity carriers in accordance with the rating
requirements under Chapter 26 (specifically age and sex rating may
be permitted in contracts with purchasing cooperatives).
SECTION 6.
Deletes the provisions in Art. 26.42 pertaining to the three
mandatory prototype plans (the preventive and primary, the in-hospital, and the standard plan, set forth in statute) and replaces
those three plans with two mandatory plans - the catastrophic plan
and the basic coverage plan. Additional benefit riders could be
offered with either plan.
SECTION 7.
Amends Art. 26.43(a) and requires the Commissioner to promulgate
the benefits sections of the two mandatory plans (the catastrophic
and basic coverage plans) and to develop prototype policies for
insurance contracts and health maintenance organization evidences
of coverage.
SECTION 8.
Adds a new Art. 26.44A which defines the provisions of the
mandatory benefit plans for the catastrophic and basic coverage
plans which must be developed by the Commissioner and requires the
Commissioner to develop prototype policies with all required
contractual provisions.
The catastrophic plan must be designed to provide coverage in the
event of catastrophic illness or injury. The Commissioner shall
develop deductible and coinsurance options which will permit
options for affordable coverage.
The basic coverage plan must be designed to provide only basic
hospital, medical, and surgical coverages. The benefits are to be
limited to only basic care requirements for illness or injury.
The benefit provisions are required to include definitions,
limitations and/or exclusions, descriptions of covered services,
and any deductible and coinsurance options permitted under the
plans.
SECTION 9.
Amends Art. 26.48 to specifically address the plans that may be
marketed by HMOs in the small employer market. In lieu of the
health benefit plans described in Chapter 26, HMOs may offer a
state approved plan which meets the requirements under the federal
law; a prototype benefit plan developed by the Commissioner (the
catastrophic or basic coverage plan), or a point-of-service
contract.
The indemnity portion of any permitted point-of-service contract
must comply with all provisions of Chapter 26, except that the
indemnity carrier is not required to make available the prototype
policies if its products are limited to the point-of-service
arrangements.
SECTION 10.
Amends the preexisting limitation provisions and waiting period
provisions in Art. 26.49.
No preexisting condition provision may apply to expenses incurred
on or after 12 months following the initial effective date of
coverage (for enrollees or late enrollees).
The permitted exclusion for a disease or condition "that would have
caused an ordinary prudent person to seek medical advice,
diagnosis, care or treatment during the six months before the
effective date of coverage" is omitted.
In addition, the separate reference allowing exclusion for "a
pregnancy existing on the effective date of coverage" has been
deleted and such pregnancy would fall under the normal preexisting
conditions permitted under these statutes .
The bill would permit a carrier that does not utilize a preexisting
limitation (in ANY of its health benefit plans) to impose an
"affiliation period." An "affiliation period" is defined as a
period which does not exceed 90 for new entrants or 180 days for
late enrollees during which the individual would not be charged
premium nor would any coverage become effective. A carrier may
have a waiting period for all new enrollees under the health
benefit plan; however, the waiting period may not exceed 90 days
and must be in lieu of a preexisting condition exclusion.
SECTION 11.
Adds a provision to Art. 26.5 to eliminate any potential liability
or cause of action against a member of the Board of Directors for
the Texas Health Reinsurance System.
SECTION 12.
Deletes requirements in Art. 26.71 related to the active marketing
of all prototype plans and replaces those requirements with a
requirement that prospective small employer policyholders be
provided a summary of the two required benefit plans. The summary
of the two plans is required to be prescribed by the Commissioner.
Upon inquiry and request by a small employer, the agent or carrier
would then be required to offer and explain each of the plans.
SECTION 13.
This section replaces references to the "Board" with the
appropriate reference to the Commissioner.
SECTION 14.
This section repeals Articles 26.45, 26.46, and 26.47, which
contained the three mandatory plans, and repeals Art. 26.47A, which
provided for exclusion of chemical dependency benefits if 50% of
the employees waived the requirements. The repeal would be
effective on June 1, 1996, the date that the two new plans would be
required to be offered.
SECTION 15.
The Commissioner is required to develop and adopt rules required by
the act no later than January 1, 1996.
SECTION 16.
The provisions of the act are applicable to any small employer
health benefit plan (including prototypes) offered, delivered, or
issued beginning on June 1, 1996. The transition of plans issued
prior to September 1, 1993, is maintained and those plans are
subject to the law in effect prior to September 1, 1993 (except for
the underwriting and rating requirements of Chapter 26). Any plan
issued from September 1, 1993 to May 31, 1996, must come into
compliance with the provisions of this Bill on the first renewal
date after June 1, 1996. The provisions of 26.38 (rating
provisions for HMOs with private cooperatives) will apply to any
small employer benefit plan issued on or after September 1, 1995.
SECTION 17. The Bill would be effective September 1, 1995.
SECTION 18. Emergency Clause
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute to H.B. 369 amends the definition of a
"eligible employee" to exclude seasonal employees and employees
covered under a self-funded or self-insured employee welfare
benefit plan and permits the exclusion of any employee covered
under the Medicaid program, including CHAMPUS or Medicare, or a
benefit plan established in another country if the employee elects
not to be covered. The substitute also amends the definition of
"small employer health benefit plan" to mean only the plans
developed by the Commissioner under Subchapter E or any other
health benefit plan offered in accordance with Article 26.42(c) or
26.48.
As substituted H.B. 369 amends the Applicability provisions in
Art. 26.06(b) to exclude an individual health policy from the scope
of the provisions of Chapter 26 if the policy is subject to
individual underwriting.
COMPARISON OF ORIGINAL TO SUBSTITUTE (CONTINUED)
The substitute deletes the requirement (in Art 26.21) for a
mandatory employer contribution of the premium, and changes the
initial enrollment period provided in Art. 26.21 to be at least 31
days rather than 30 and adds a requirement for provision of a 31-day open enrollment period annually. The substitute amends the
provisions in Art. 26.38 of Chapter 26 to permit an HMO contracting
with a purchasing cooperative to use the same rating methods as
indemnity carriers in accordance with the rating requirements under
Chapter 26.
The substitute requires the Commissioner to promulgate the
benefits sections of the two mandatory plans (the catastrophic and
basic coverage plans) and to develop prototype policies for
insurance contracts and health maintenance organization evidences
of coverage.
House Bill 369 as substituted adds a new Art. 26.44A which
defines the provisions of the mandatory benefit plans for the
catastrophic and basic coverage plans which must be developed by
the Commissioner. The substitute amends Art. 26.48 to specifically
address the plans that may be marketed by HMOs in the small
employer market and amends the preexisting limitation provisions
and waiting period provisions in Art. 26.49. The substitute
deletes requirements in Art. 26.71 related to the active marketing
of all prototype plans and replaces those requirements with a
requirement that prospective small employer policyholders be
provided a summary of the two required benefit plans.
SUMMARY OF COMMITTEE ACTION
In accordance with House Rules, H.B. 369 was heard in a public
hearing on April 5, 1995. The Chair laid out H.B. 369 and
recognized Representative Averitt who offered a substitute to H.B.
369 and explained the difference between the substitute to H.B. 369
and the filed bill. The Chair recognized the following persons to
testify in support of H.B. 369: Jim Calcote, Tascosa Brick Company
and NFIB; Keith White, Texas Association of Life Underwriters;
Robert Howden, NFIB; David Pinkus, Small Business United of Texas;
Robert W. Blevins, Texas Life Insurance Association; Robert C.
Hill, representing himself; E. Kenneth Tooley, Texas Association of
Life Underwriters; Jon Comola, Blue Cross Blue Shield of Texas;
Robert Schneider, Consumers Union; Dorothy Thorson, Golden Rule;
Janet Stokes, Texas Association of Health Underwriters.
The Chair recognized the following persons to testify in
opposition to H.B. 369:
David M. Hawkins, consulting actuary; David Hundahl, representing
himself; James L. Young, Statesman National Life Insurance Company;
G.K. Sprinkle, Texas Counseling Association.
The Chair recognized the following persons to testify neutrally on
H.B. 369: Pam Beachley, Business Insurance Consumers Association;
George B. Allen, Texas Apartment Association.
The Chair recognized Representative Averitt who moved the
Committee adopt the substitute to H.B. 369. The Chair heard no
objections and the substitute to H.B. 369 was adopted. The Chair
recognized Representative G. Lewis who moved the Committee report
H.B. 369 as substitute to the full House with the recommendation
that it do pass and be printed. Representative Shields seconded
the motion and the motion prevailed by the following vote:
AYES (7); NAYES (0); ABSENT (2); PNV (0).