BILL ANALYSIS



C.S.H.B. 1194
By: Berlanga
04-27-95
Committee Report (Substituted)


BACKGROUND

     Dental provider organization plans are generally described as
plans which offer to their members the availability of dental
services at discounted rates.  The plans establish a network of
participating dentists who agree to provide dental services to plan
members at certain discounted rates.  The plans sell memberships on
a group and/or individual basis, in return for a fee.  The
membership fee entitles the member to seek dental care services
from participating dentists at discounted rates.  The earliest
dental provider plans in Texas appeared approximately 1984.

     The type of dental plan to be regulated under this legislation
was formerly designated as a "referral plan."  The terminology has
been changed in the legislation, however, to distinguish these
dental provider organization type plans from the traditional
referral service under which a prospective patient would call the
service and be "referred" to a participating dentist.  In most of
the dental provider plans, the patient is not referred to any
particular dentist; rather, the patient is free to choose to
receive dental services from any of the plan's participating
dentists.

     A true dental provider plan offers no prepayment to the
participating dentists, nor does it offer indemnification against
or reimbursement for the cost of the dental care services
ultimately rendered; therefore, dental provider plans do not
constitute "insurance" as that term has traditionally been defined. 
This was confirmed by Attorney General Jim Mattox in opinion No.
JM-1167, issued in April of 1990.

     Dental plan consumers often do not understand the distinction
between dental provider plans, health maintenance organizations
offering dental care, and traditional dental insurance coverage. 
The responsible dental provider organizations operators recognize
the need for effective, efficient licensing and regulation, to
preserve this distinction, to prohibit misleading the public, and
to protect dental plan consumers in Texas.

PURPOSE

     As substituted, House Bill 1194 would create a system of
regulation of dental provider organizations and dental provider
plans in a manner that assures they can perform on their
obligations to the public and that they are prohibited from
engaging in misrepresentation in the marketplace, while at the same
time recognizing and enhancing the distinction between dental
provider organizations and dental provider plans and dental health
maintenance organizations.

RULEMAKING AUTHORITY

     It is the committee's opinion that this bill does grant
additional rulemaking authority to the insurance commissioner under
SECTION 1 of the bill by adding Article 21.53C, Sec. 14, Insurance
Code,  which permits the commissioner to adopt reasonable rules as
necessary and proper to implement this article.

SECTION BY SECTION ANALYSIS

SECTION 1.  The legislation adds a new Article 21.53C to the Texas
Insurance Code.

Sec. 1:  Short Title.  Entitles the act as the Texas Dental
Provider Organization Act.

Sec. 2:  Definitions.  Outlines the definitions to be used
throughout the Act.

Sec. 3:  Requirement of Certificate of Authority.

(a)  This section authorizes any person to seek to obtain a
certificate of authority from the  Commissioner of the Texas
Department of Insurance, to establish and operate a dental  provider organization.

(b)  This section prohibits persons from establishing, operating or
marketing a dental provider   plan in this state without first
obtaining a certificate of authority.

(c)  Allows foreign corporations to apply for a certificate of
authority.

Sec. 4:  Initial Certificate.

(a)  This section outlines the contents of an application for
certificate of authority to be filed.

(b)  Requires the Commissioner of Insurance to review an
application, notify the applicant of    any deficiencies, and allow
the applicant 60 days to correct deficiencies.  The section also      requires the commissioner to delay final action on the
application to allow the applicant      an opportunity to correct
any deficiencies.

(c)  Requires the Commissioner to issue or deny a certificate of
authority no later than 60 days    after the application for
certificate of authority is filed, unless final action is delayed
to   allow the applicant to correct deficiencies in the
application.

(d)  States the grounds on which the Commissioner is required to
issue a certificate of   authority.

(e)  States the criteria which may be used by the Commissioner in
making the decision on   issuance or denial of a certificate of
authority.

(f)  States the basis on which the Commissioner may deny the
granting of a certificate of  authority.

Sec. 5:  Renewal.

(a)  States that a certificate of authority expires annually on
April 1.

(b)  States the requirements for renewal of a certificate of
authority.

(c)  States that modifications and amendments to information
included in an application for     certificate of authority is
deemed approved unless the Commissioner specifically   disapproves
the change within thirty (30) days of its receipt.

(d)  Provides that a dental provider organization may continue
operating while its timely-filed   application for renewal is
pending.

(e)  Provides that Sections 4(c)-(f) apply to an application for
renewal.

Sec. 6:  Annual Report.

(a)  Requires each dental provider organization to file with the
Commissioner an annual report      with its application for renewal
of its certificate of authority.

(b)  Specifies that the annual report shall include an audited
balance sheet, statement of   income and retained earnings, and
statement of cash flows.

Sec. 7:    Notification of Change.  Requires that any change of
control or ownership of the        dental provider organization be
subject to prior approval by the Commissioner.
Sec. 8:  Powers of Dental Provider Organization and Plan.

(a)  Specifies the several powers of a dental provider organization
and dental provider plan.

(b)  Allows a dental provider organization to contract with a
person to perform marketing,  enrollment, and administration
services.  Provides that any management company or     administrator of a dental provider plan is not an "Administrator"
subject to Article 21.07-6    of the Texas Insurance Code.

(c)  Allows a dental provider organization all powers given to a
corporation, partnership, or  association under the entity's
organizational documents that do not conflict with this Act.

Sec. 9:  Schedule of Dental Care Service Fees and List of
Participating Dentists.

(a)  Provides that each member of a dental provider plan shall
receive a schedule of dental  care service fees, outlining the
services available from the participating dentists, and the      applicable fees.  Further provides that each member shall
receive a list of the participating     dentists in such member's
geographic or metropolitan area.

(b)  Prohibits unjust, unfair, inequitable, misleading or deceptive
provisions in the schedule    of dental care service fees.

(c)  Provides minimum standards for the schedule of dental care
service fees.

(d)  Provides for the right of a dental provider organization to
file with the Commissioner and     use a schedule of dental care
service fees.  Prohibits the use of any form of dental care      service fees if disapproved by the Commissioner.

(e)  Authorizes the Commissioner to disapprove any filed schedule
of dental care service fees.       Provides for the right of a
dental provider organization to appeal the disapproval of a      schedule of dental care service fees.

(f)  Allows the Commissioner to require the dental provider
organization to issue a corrected  schedule of dental care service
fees to replace any schedule previously issued and     subsequently
disapproved.  Provides that the use of a schedule of dental care
service fees   that is subsequently disapproved cannot be used as
a basis for disciplinary action against      the dental provider
organization, unless the schedule lacks the minimum requirements      under Sec. 9 (c).

(g)  Authorizes the Commissioner to require additional relevant
information deemed necessary  in considering a schedule of dental
care service fees.

Sec. 10:  Complaint Resolution Procedure.

(a)  Requires that every dental provider organization establish and
maintain a system of     complaint resolution.

(b)  Allows the Commissioner to examine a dental provider
organization's complaint      resolution system and recommend
improvements.

Sec. 11:  Protection Against Insolvency.

(a)  Requires each dental provider organization to maintain a
minimum surplus of  $100,000.00, valued according to generally
accepted accounting principles.

(b)  Allows the Commissioner to take appropriate action regarding
an organization which fails   to maintain such minimum surplus.

(c)  Requires each dental provider organization to post a surety
bond in the amount of    $100,000.00 with the Texas State Treasury.

(d)  Allows the commissioner to suspend, revoke, or refuse to renew
a certificate of authority    for failure to comply with these
requirements.

Sec. 12:  Prohibited Practices; Marketing and Advertising.

(a)  Prohibits the use by a dental provider organization of false
or misleading advertising,    solicitation, or forms.

(b)  Provides that Texas Insurance Code Art. 21.21 and the Texas
Deceptive Trade Practices-    Consumer Protection Act (Texas
Business and Commerce Code §17.41, et. seq.) is   applicable to the
sale of dental provider plans, and to the operation of a dental
provider   organization.

(c)  Prohibits a marketing representative of a dental provider
organization from using  marketing or advertising materials
regarding the dental provider organization or dental   provider
plan unless such materials have been approved by the dental
provider   organization.  Requires that marketing representatives
are subject to the provisions of this   Article.  Requires
disclosures in the marketing and advertising materials that the
dental     provider plan is not dental insurance or a health
maintenance organization contract, and  that the organization does
not reimburse the dentists or indemnify its members for the cost      of dental care services received by members.

Sec. 13:  Suspension, Revocation or Non-Renewal of Certificate of
Authority.

(a)  Authorizes the Commissioner to suspend or revoke any dental
provider organization's  certificate of authority, and specifies
the grounds for taking such action.

(b)  Prohibits advertising, solicitation, or enrollment of new
members by a dental provider  organization whose certificate of
authority is under suspension. 

(c)  Requires the immediate winding up of affairs by a dental
provider organization whose   certificate of authority has been
revoked or has not been renewed.

(d)  Permits further operation of an organization by order of the
Commissioner.

Sec. 14:  Rules and Regulations. 

Confers rule-making authority upon the Texas Department of
Insurance in order to carry out the provisions of the Act.

Sec. 15:  Appeals.

Provides for the appeal of any rule, ruling or decision of the
Commissioner of Insurance, as outlined under Article 1.04 of the
Texas Insurance Code.

Sec. 16:  Statutory Construction in Relation to Other Laws.

(a)  Provides that solicitation of members by a dental provider
organization shall not be     construed to violate any prohibition
against dentists' solicitation or advertising.

(b)  States that the Act does not permit or allow the practice of
dentistry by a dental provider     organization.

(c)  States that factually accurate information regarding dental
provider does not constitute a     violation of any laws
prohibiting dentists' solicitation or advertising.

(d)  Exempts dental provider organizations from the provisions of
insurance laws, unless they   are specifically made applicable.



(e)  States that a dental provider organization holding a valid
certificate of authority is a      "qualified carrier" under the
Texas Insurance Code Art. 3.50-2.

(f)  States that a dental provider plan is not a health insurance
policy or an employee benefit      plan for purposes of the Texas
Insurance Code.

(g)  States that dental provider organizations are subject to
Section 7, Article 1.10, and Article    1.10A of the Texas
Insurance Code.

Sec. 17:  Public Record. 

Makes all applications, filings and reports required of dental
provider organizations under the Act public documents, except for
examination reports of the Texas Department of Insurance.

Sec. 18:  Injunctions.

Authorizes the Commissioner to bring suit in district court to
enjoin any violations of the Act.

Sec. 19:  Fees.

(a)  Limits allowable fees required under the Act to $4,000.00 for
filing an initial application      for certificate of authority,
and $3,000.00 for an application for renewal of a certificate    of authority, and certain other fees.

(b)  Permits the Texas Department of Insurance to prescribe the
fees to be charged, subject   to the limits as outlined above.

(c)  Requires that the fees collected to be deposited with the
State Treasury.

SECTION 2. Effective Date. Provides for an effective date of the
Act of September 1, 1995,          and provides that an existing
dental provider organization shall file an application           for certificate of authority by December 1, 1995.

SECTION 3.  Emergency Clause

COMPARISON OF ORIGINAL TO SUBSTITUTE

     As substituted, House Bill 1194 contains the following
changes:

     The name of the organizations regulated by the bill, was
changed to delete the word "preferred".  A new definition was added
to define "basic dental care services," to describe the minimum
level of services to be available under a dental provider plan to
include preventative, diagnostic, and restorative dental services. 
Additionally, another definition was added to make it clear that
generally accepted accounting principals ("GAAP") was to be applied
to dental provider organizations, rather than statutory insurance
accounting.

     A phrase was added throughout the bill to make it clear that
dental services are available in a dental provider plan at
predetermined fees and/or discounted fees.  A requirement was added
that samples of any marketing contracts used be included with an
application for certificate of authority.  A change was made to
make it clear that all schedules of dental care service fees to be
used by a dental provider organization are required to be filed
with the Texas Department of Insurance, rather than merely a sample
of a schedule of dental care service fees.  A change was made to
give applicants a period of 60 days, rather than an "adequate
opportunity" to correct deficiencies in an application for
certificate of authority.

     A revision was made to require a timely filing of an
application to renew a certificate of authority, in order for
existing dental provider organizations to be able to continue
operating.
Another revision was made to require the prior approval of the
commissioner of insurance as to any change of control of a dental
provider organization, rather than merely prior notice of such
change of control to the commissioner.

     Revisions were made to require that a schedule of dental care
service fees, and a list of participating dentists be given to each
member of the dental provider organization.  A change was made to
make it clear that all schedules of dental care service fees to be
used by a dental provider organization are required to be filed
with the commissioner of insurance prior to their use; the manner
for filing is similar to the "file and use" provisions under Art.
3.42 of the Texas Insurance Code.

     A revision was made that would remove the requirement of
notice and hearing for the commissioner to be able to disapprove a
schedule of dental care service fees; a provision was added to
allow the dental provider organization to appeal any such
disapproval of dental care service fees.  A provision was added to
require that any marketing materials used by marketing
representatives be approved by the dental provider organization,
and that all such marketing materials clearly disclose that the
dental provider plan is not insurance and is not an HMO contract.

     The failure of the marketing materials used by a dental
provider organization to have the required disclosures is added as
a reason for taking disciplinary action against the dental provider
organization.  A provision was added to make it clear that a dental
provider organization holding a valid certificate of authority is
a "qualified carrier" for purposes of Art. 3.50-2 of the Texas
Insurance.

     A provision was added to make it clear that a dental provider
plan is not a health insurance policy or an employee benefit plan
for purposes of the Texas Insurance Code.
A provision was added to make Art. 1.10A, Art. 21.21, and Sec. 7 of
Art. 1.10 of the Texas Insurance Code apply to dental provider
organizations.  The fees for filing the initial and renewal
applications for certificate of authority were raised from $2,500
to $4,000 and $3,000, respectively, to address the fiscal concerns
of the Texas Department of Insurance.

SUMMARY OF COMMITTEE ACTION

     In accordance with House rules, H.B. 1194 was heard in a
public hearing on April 12, 1995.  The Chair laid out H.B. 1194 and
a substitute to H.B. 1194 and recognized Representative Berlanga to
explain the difference between the substitute to H.B. 1194 and the
filed bill.

     The Chair recognized the following persons to testify in
support of H.B. 1194: L. Dean Cobb, Texas Dental Plans; Hector
DeLeon, Texas Dental Pans, Inc.; Hank Gonzales, Hispanic American
Republicans of Texas; Dr. W. David Jenkins, Texas Dental Plans
Inc.; Thomas P. Washburn, Texas Dental Plans, Inc.

     The Chair recognized the following persons to testify in
opposition to H.B. 1194: Gary Downey, Texas HMO Association,
American Dental Corporation; Dennis B. Martinez, Safeguard Health
Plans, Inc.; Vincent Contorno, Prudential.  The Chair recognized
the following person to testify neutrally on H.B. 1194:  Rhonda
Myron, Texas Department of Insurance.  The Chair left H.B. 1194
pending before the Committee.

     Pursuant to an announcement filed with the Journal Clerk and
read by the Reading Clerk, the House Committee on Insurance met in 
a formal meeting on April 27, 1995 on the House Floor and was
called to order by the Chair, Representative John Smithee.

     The Chair laid out H.B. 1194 and a substitute to H.B. 1194
recognized Representative Shields who moved the Committee adopt the
substitute to H.B. 1194.  The Chair heard no objections and the
substitute to H.B. 1194 was adopted.

     The Chair recognized Representative Shields who moved the
Committee report H.B. 1194 as substituted to the full House with
the recommendation that it do pass and be printed.  Representative
De La Garza seconded the motion and the motion prevailed by the
following vote:
AYES (6); NAYES (2); ABSENT (1); PNV (0).