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.