BILL ANALYSIS C.S.H.B. 369 By: Averitt (Patterson) Economic Development 05-19-95 Senate Committee Report (Substituted) BACKGROUND The 73rd Legislature passed H.B. 2055, creating the Small Employer Health Insurance Availability Act in Chapter 26 of the Insurance Code with the intention of providing health insurance for small employers of Texas. Purchasing coops were created to allow small businesses to band together to purchase coverage with the benefit of large volume discounts similar to those enjoyed by larger employers. Some people have argued that the requirements of H.B. 2055 prevent many small employers from providing coverage for their employees. PURPOSE As proposed, H.B. 369 amends regulation of small employer benefit plans, small employer carriers, and health maintenance organizations to increase the availability of the health plans to small employers. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the commissioner of insurance under SECTION 9 (Article 26.44A, Subsections (a) and (c), Insurance Code) and SECTION 14 (Article 26.75, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 26.02, Insurance Code, by amending Subdivisions (8), (12), and (23) and by adding Subdivision (25), to redefine "eligible employee," "late enrollee," and "small employer health benefit plan." Defines "point-of-service contract." SECTION 2. Amends Article 26.06(b), Insurance Code, to provide that this chapter does not apply to an individual health insurance policy that is subject to individual underwriting, even if the premiums are remitted through a payroll deduction method. SECTION 3. Amends Article 26.14, Insurance Code, as follows: Art. 26.14. PRIVATE PURCHASING COOPERATIVE. (a) Makes no changes. (b) Requires the private purchasing cooperative (cooperative), on receipt of a certificate of incorporation or certificate of authority from the secretary of state, to file written notification of receipt of the certificate and a copy of the cooperative's organizational documents with the commissioner. (c) Redesignates existing Subsection (b). (d) Sets forth actions for which a cooperative or a member of the board of directors, the executive director, or an employee or agent of a cooperative is not liable. SECTION 4. Amends Article 26.21, Insurance Code, as follows: Art. 26.21. SMALL EMPLOYER HEALTH BENEFIT PLANS; EMPLOYER ELECTION. (a) Makes a nonsubstantive change. (b) Provides that this article does not impose a statutory mandate of an employer contribution to the premium paid to the small employer carrier. Authorizes the small employer carrier to require an employer contribution in accordance with the carrier's practices on all employer group health insurance plans in this state. Requires the premium contribution level to be applied uniformly to each small employer offered or issued coverage by the small employer carrier in this state. Authorizes the carrier, if two or more small carriers participate in a cooperative established under Article 26.14, to use the contribution requirement established by the cooperative for policies marketed by the cooperative. Provides that coverage is available under a small employer health benefit plan if at least 75, rather than 90, percent of a small employer's eligible employees elect to be covered. Deletes language providing circumstances in which coverage under a small employer health benefit plan is not available to a small employer. (c) Requires the collective enrollment of all plans, if a small employer offers multiple health benefit plans, to be at least 75 percent of the small employer's eligible employees or, if applicable, the lower participation level offered by the small employer carrier. Authorizes a small carrier to elect not to offer health benefit plans to a small employer who offers multiple health benefit plans if the plans are to be provided by more than one carrier and the small employer carrier would have less than 75 percent of the small employer's eligible employees enrolled in the small employer carrier's health benefit plan unless the coverage is provided through a cooperative. Provides that a small employer who elects to make contributions for payment of the premium is not required to pay any amount with respect to an employee who elects not to be covered. (d) Authorizes a small employer carrier to offer small employer health benefit plans to a small employer even if less than 75 percent of the eligible employees of that employer elect to be covered if the plans meet certain criteria. Deletes language authorizing an eligible employee to obtain coverage in addition to the coverage purchased by the employer. Redesignates existing Subsection (c). (e) Prohibits a small employer carrier from providing coverage to a small employer or the employees of a small employer if the health carrier or an agent for the health carrier knows that the small employer has induced or pressured an eligible employee or the employer's dependents to decline coverage because of an individual's risk characteristics. (f) Authorizes a small employer carrier, an employer, or an agent to not use the provisions of Subsection (d)(2) to circumvent the requirements of this chapter. (g) Prohibits a small employer carrier from establishing a separate class or classes of businesses for small employers. (h) Requires the initial enrollment period for the employees and their dependents to be at least 31, rather than 30, days, with a 31-day open enrollment period provided annually. Redesignates existing Subsection (d). (i) Redesignates existing Subsection (e). (j) Makes a conforming change. Redesignates existing Subsection (f). (k) Authorizes a late enrollee to be excluded from coverage until the next annual open enrollment period, rather than 18 months from the date of the application. Deletes language regarding exclusion from coverage. Makes a nonsubstantive change. Redesignates existing Subsection (g). (l) and (m) Redesignate existing Subsections (h) and (i). (n) Provides that any coverage of a newborn child of an employee under this subsection terminates on the 32nd, rather than 31st, day after the birth of the child unless dependent children are eligible for coverage; and notification of the birth and any required additional premium are received by the small employer carrier by the 31st, rather than 30th, day after birth. Redesignates existing Subsection (j). (o) Redesignates existing Subsection (k). SECTION 5. Amends Article 26.31, Insurance Code, by adding Subsections (e) and (f), as follows: (e) Prohibits a small employer carrier from establishing a separate class of business based on participation requirements. (f) Prohibits a small employer carrier from establishing a separate class of business based on whether the coverage provided to a small employer group is provided on a guaranteed issue basis or is subject to underwriting or proof of insurability. SECTION 6. Amends Article 26.38, Insurance Code, as follows: Art. 26.38. HEALTH MAINTENANCE ORGANIZATION; APPROVED HEALTH BENEFIT PLAN. (a) Created from existing text. (b) Authorizes a health maintenance organization that participates in a purchasing cooperative that provides employees of small employers a choice of benefit plans, that has established a separate class of business, and that has established a separate line of business to use rating methods in accordance with this subchapter that are used by other small employer carriers participating in the same cooperative, including rating by age and gender. SECTION 7. Amends Article 26.42, Insurance Code, as follows: Art. 26.42. SMALL EMPLOYER HEALTH BENEFIT PLANS. (a) Requires a small employer carrier to offer two, rather than three, health benefit plans as adopted by the commissioner, including the catastrophic, instead of preventive and primary, care benefit plan; and the basic coverage, rather than in-hospital, benefit plan; deletes the standard health benefit plan. (b) Authorizes a small employer carrier to offer to a small employer additional benefit riders to either of the benefit plans, rather than the standard health plans. (c) Deletes existing Subsection (c) prohibiting a small employer carrier from offering to a small employer benefit riders to certain plans. Redesignates existing Subsection (d). SECTION 8. Amends Article 26.43(a), Insurance Code, to require the commissioner of insurance (commissioner) to promulgate the benefits section of the catastrophic care benefit plan and the basic coverage benefit plan policy forms in accordance with Article 26.44A. Requires the commissioner to develop prototype policies for each of the benefit plans. Requires a small employer to comply with Article 20A.01 et seq., V.T.I.C. (Texas Health Maintenance Organizations Act), among other acts, as it relates to approval of an evidence of coverage. Prohibits a small employer carrier from offering these benefit plans through a policy form or evidence coverage that does not comply with this chapter, instead of this article. Makes conforming changes. SECTION 9. Amends Chapter 26E, Insurance Code, by adding Article 26.44A, as follows: Article 26.44A. BENEFIT PLANS. (a) Requires the commissioner, by rule, to establish the coverage requirements for the catastrophic care benefit plan and the basic coverage benefit plan. Requires the commissioner to develop the prototype policies for use by small employer carriers that include all contractual provisions required to produce an entire contract. (b) Requires coverage under the catastrophic care benefit plan to be designed to provide necessary coverage in the event of catastrophic illness or injury. Requires the commissioner to establish deductibles and coinsurance requirements at levels that permit options for the insured to obtain affordable catastrophic coverage. (c) Requires the commissioner, by rule, to establish coverage requirements for the basic coverage benefit plan. Requires coverage under the basic coverage benefit plan to be designed to provide basic hospital, medical, and surgical coverages. Provides that benefits under the plan are limited to basic care requirements for illness or injury. (d) Sets forth required benefit provisions of the benefit plan policies. SECTION 10. Amends Article 26.48, Insurance Code, as follows: Art. 26.48. HEALTH MAINTENANCE ORGANIZATION PLANS. (a) Authorizes a health maintenance organization to offer a state approved benefit plan that complies with Title XIII, Public Health Service Act, rather than Title XI; a plan developed by the commissioner under Article 26.44A and additional benefit riders to the plan; or a point-of-service contract in connection with an insurance carrier that includes optional coverage for out-of-area services, emergency care, or out-of-network care. (b) Subjects a contract offered by an insurance carrier under Subsection (a)(3) to all provisions of this chapter unless specifically exempted. Provides that the insurance carrier with which the health maintenance organization contracts for a point-of-service contract is not required to otherwise make available the benefit plans adopted under Subchapter E if the insurance carrier's small employer products are limited to the point-of-service contract. SECTION 11. Amends Article 26.49, Insurance Code, as follows: Art. 26.49. New heading: PREEXISTING CONDITION AND WAITING PERIOD PROVISIONS. (a) Prohibits a preexisting condition provision in a small employer health benefit plan from applying to expenses incurred on or after the expiration of 12 months following, rather than the first anniversary of, the initial effective date of coverage of the enrollee or late enrollee. (b) Deletes language prohibiting a preexisting condition provision in a small employer health benefit plan from applying coverage for a disease or condition other than 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. (c) Prohibits a preexisting condition in a small employer health benefit plan from applying to an individual who was continuously covered for at least 12 months by a health benefit plan that was in effect up to a date not more than 60 days before the effective date of coverage under the small employer health benefit plan, excluding any waiting period. (d) Deletes existing Subsection (d) authorizing a preexisting condition provision to exclude pregnancy coverage. Redesignates existing Subsection (e). (e) Authorizes a carrier that does not use a preexisting condition provision in any of its health benefits plans to impose an affiliation period. Defines "affiliation period." (f) Provides that Subsection (e) does not preclude application of any waiting period applicable to all new enrollees under the health benefit plan. Prohibits any carrier-imposed waiting period from exceeding 90 days. Requires any carrier-imposed waiting period to be used in lieu of a preexisting condition provision. SECTION 12. Amends Article 26.54, Insurance Code, by adding Subsection (e), to provide that there is no liability on the part of, and no cause of action of any nature arises against, a member of the board of directors of the Texas Health Reinsurance System for action or omission performed in good faith in the performance of powers and duties under this subchapter. SECTION 13. Amends Article 26.71, Insurance Code, as follows: Art. 26.71. FAIR MARKETING. (a) Requires each small employer purchasing a small employer health benefit plan to be given a summary of the benefit plans established by the commissioner under Subchapter E. Requires the commissioner to prescribe the format of the summary. Requires the agent to offer and explain each of the plans to the small employer on inquiry and request by the small employer. Deletes language requiring a small employer to confirm that an agent explained all three plans to that employer. (b) Deletes existing Subsection (b) authorizing the department to require small employer carriers and agents to demonstrate that they are marketing small employer health benefit plans in fulfillment of the purposes of this article. Redesignates existing Subsection (c). SECTION 14. Amends Article 26.75, Insurance Code, to authorize the commissioner, rather than the State Board of Insurance, to adopt rules to prescribe additional standards for the marketing and broad availability of small employer benefit health plans to small employers. SECTION 15. Amends Section 1(d)(3)(A)(i), Article 3.51-6, Insurance Code, to make a nonsubstantive change. SECTION 16. Repealer: Articles 26.45, 26.46, 26.47, and 26.47A, Insurance Code (Preventive and Primary Care Benefit Plan-In-Hospital Benefit Plan-Standard Health Benefit Plan-Alcohol and Substance Abuse Benefits), effective June 1, 1996. SECTION 17. Requires the commissioner to develop and adopt rules establishing small employer health benefit plans under Chapter 26E, Insurance Code, as amended by this Act, by January 1, 1996. SECTION 18. (a) Requires each small employer health benefit plan, including prototype plans developed by the commissioner, to be offered, delivered, or issued for delivery to small employers beginning June 1, 1996. (b)-(d) Make application of this Act prospective. SECTION 19. Effective date: September 1, 1995. SECTION 20. Emergency clause.