BILL ANALYSIS


                                                        H.B. 2766
                                             By: Smithee (Turner)
                                             Economic Development
                                                         05-22-95
                              Senate Committee Report (Unamended)
BACKGROUND

Managed care is a growing part of health care delivery in Texas. 
Many Texans are covered by such plans.  While managed care has
succeeded in reducing some costs, patients and providers have
experienced various problems, including consumer confusion over
coverage, interruption of long-standing doctor-patient
relationships, and denial of needed and appropriate medical care.

PURPOSE

As proposed, H.B. 2766 establishes standards for managed care
organizations.  The standards address the delivery and payment for
emergency care; ensure that prospective enrollees in managed care
plans receive information about how the plans operate; and provide
a process by which physicians, dentists, and other providers may be
removed from managed care plans.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
to the commissioner of insurance under SECTION 1 (Section 21.103,
Insurance Code) and to the State Board of Insurance under SECTION
3 (Section 14(h), Article 21.58A, Insurance Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 21, Insurance Code, by adding Subchapter
G, as follows:

              SUBCHAPTER G.  PATIENT PROTECTION ACT

     Art. 21.101.  SHORT TITLE: Patient Protection Act.
     
     Art. 21.102.  DEFINITIONS.  Defines "commissioner," "emergency
     care services," "emergency medical condition," "managed care
     entity," "managed care plan," "prospective enrollee,"
     "provider," "physician," and "dentist."
     
     Art. 21.103.  STANDARDS.  Authorizes the commissioner of
     insurance (commissioner) to adopt rules regarding standards
     ensuring compliance with this subchapter by managed care
     entities that conduct business in this state, and to appoint
     an advisory committee to assist in the implementation of this
     Act.
     
     Art. 21.104.  ENROLLEE INFORMATION.  (a) Requires a managed
     care entity to provide a prospective enrollee a written plan
     description of the terms and conditions of the plan.  Requires
     the written plan to be in a readable and understandable
     format, and to include certain information.
     
     (b) Authorizes the managed care entity to provide the
       information under Subsection (a)(6) in the entity's annual
       financial statement most recently submitted to the Texas
       Department of Insurance (department).
       
       (c) Requires the managed care entity to demonstrate that
       each covered enrollee has adequate access through the
       entity's provider network to all items and services
       contained in the package of benefits for which coverage is
       provided.  Requires the access to be adequate.
       
       (d) Requires the managed care plan (plan) to establish and
       follow certain procedures if the plan uses a capitation
       method of compensation.
       
       Art.  21.105.  NETWORK CONFIGURATION.  Requires the managed
     care entity to provide to the commissioner, for information,
     an explanation of the targeted physician, dentist, and other
     provider network configuration.  Sets forth requirements for
     the information required by this subsection.  Prohibits this
     section from requiring a particular ratio for any type of
     provider.  Requires the infirmation to be made available to
     the public by the department on request.  Authorizes the
     department to charge a reasonable fee for providing the
     information.
     
     Art. 21.106.  HOSPITAL PARTICIPATION.  Requires the plan, in
     the development of the plan's criteria for hospital
     participation, if a hospital is certified under the Medicare
     program under Title XVIII of the Social Security Act, as
     amended, or accredited by the Joint Commission on
     Accreditation of Healthcare Organizations, to accept such
     certification or accreditation.  Declares that this article
     does not prohibit a managed care plan from establishing
     additional criteria for hospital participation.
     
     Art. 21.107.  FINANCIAL INCENTIVE PROGRAMS.  Prohibits a plan
     from using a financial incentive program that limits medically
     necessary and appropriate services.
     
     Art. 21.108.  PARTICIPATING PROVIDERS.  (a) Requires each plan
     to establish a mechanism under which physicians or dentists
     participating in the plan provide consultation and advice on
     the plan's medical or dental policy.  Requires other
     participating providers to be given an opportunity to comment
     on he plan's policies affecting their services.  Requires each
     plan to make available to providers the application process
     and qualification requirements for participation in the plan. 
     Requires the plan to give a provider not selected on initial
     application each reason the initial application was denied.
     
     (b) Requires each physician or dentist under consideration
       for inclusion in a plan to be reviewed by a credentialing
       committee composed of network participating physicians or
       dentists.  Authorizes other providers to be credentialed as
       appropriate as determined by the plan.  Requires the
       credentialing committee, when a provider other than a
       physician or dentist is credentialed by the plan, to include
       providers with the same license.
       
       (c) Requires credentialing of providers to be based on
       identified standards developed after consultation with
       providers credentialed in the plan.  Requires the plan to
       make the credentialing standards available to applicants.
       
       (d) Requires the plan to use identified criteria and to be
       available to applicant and participating providers, if
       economic considerations are part of the decision to select
       a provider or terminate a contract with a provider. 
       Requires the plan, if it uses an economic profile of a
       provider, to adjust the profile to recognize the
       characteristics of a provider's practice that may account
       for variations from expected costs.
       
       (e) Requires a plan that conducts or uses economic profiling
       of providers within the plan to make the profile available
       to the provider profiled.
       
       (f) Declares that a plan is not required to disclose
       proprietary information regarding marketplace strategies.
       
       (g) Prohibits a plan from excluding a provider solely
       because of a specialty practice or the anticipated
       characteristics of the patients of that provider.
       
       (h) Sets forth requirements for the plan before terminating
       a contract with a provider.
       
       (i) Requires the physician's or dentist's procedural rights,
       if the action that is under consideration is of a type that
       must be reported to the National Practitioner Data Bank or
       a state medical or dental board under federal or state law,
       to meet the standards of the federal Health Care Quality
       Improvement Act of 1986.  Describes a managed care entity.
       
       (j) Prohibits a communication relating to the subject matter
       provided for under Subsections (a) and (h), Article 21.108,
       from being the basis for a cause of action for libel or
       slander except for disclosures or communications with
       parties other than the plan or provider.
       
       (k) Requires the plan to establish reasonable procedures for
       assuring a transition of enrollees of the plan to new
       physicians, providers, or dentists.
       
       (l) Sets forth requirements relating to the cost of copies
       of certain medical or dental records in the event that a
       contract with a provider is terminated by a plan, or that a
       provider terminates the contract with the plan.
       
       (m) Declares that this subchapter does not prohibit a plan
       from rejecting an application from a provider based on the
       determination that the plan has sufficient qualified
       providers.
       
       (n) Authorizes a plan to charge certain fees to a provider
       other than a physician or dentist.
       
       Art. 21.109.  EMERGENCY SERVICES.  Requires a plan to cover
     emergency care services provided to covered individuals;
     provide that the prior authorization requirement for medically
     necessary services provided or originating in a hospital
     emergency room following treatment or stabilization of an
     emergency medical condition are approved, except under certain
     circumstances; and cover any medical screening examination to
     determine whether an emergency medical condition exists or
     other evaluation required by state or federal law to be
     provided in the emergency room of a hospital.
     
     Art. 21.110.  PRIOR AUTHORIZATION; CONSENT.  Requires a plan
     for which prior authorization is a condition to coverage of a
     service to ensure that enrollees are required to sign medical
     and dental information release consent forms on enrollment.
     
     Art. 21.111.  UTILIZATION REVIEW.  Requires a plan to be
     subject to and meet the requirements of Article 21.58A of this
     code.
     
     Art. 21.112.  POINT OF SERVICE OFFERING.  (a) Requires a
     health maintenance organization that has a point-of-service
     plan available in a service area and is the only entity
     providing services under a health benefit plan, to offer to
     all enrollees the opportunity to obtain coverage for out-of-network services through the point-of-service place at the
     time of enrollment and at least annually thereafter.
     
     (b) Defines "point-of-service plan."
       
       (c) Requires the premium for the point-of-service plan to be
       based on the actuarial value of such coverage.
       
       (d) Requires any additional costs for the point-of-service
       plan to be the responsibility of the enrollee.  Authorizes
       the employer to impose a reasonable administrative cost for
       providing the point-of-service option.
       
       (e) Prohibits the plan, when five percent or less of the
       group's eligible employees elect to purchase the point-of-service option, from being required to offer the point-of-service option during subsequent enrollment periods.
       
       (f) Prohibits this article from applying to a small employer
       as defined in Article 26.02, Insurance Code.
       
     Art. 21.113.  PRIVATE CAUSE OF ACTION.  Declares that this
     subchapter and related rules do not provide a private cause of
     action for damages or create a standard of care, obligation,
     or duty that provides a basis for a private cause of action
     for damages; or abrogate a statutory or common law cause of
     action, administrative remedy, or defense otherwise available
     and existing before June 1, 1996.
     
     Art. 21.114.  ANNUAL PERFORMANCE REPORT.  (a) Requires the
     office of public insurance counsel (office) to issue an annual
     report to consumers on the performance of managed care
     entities.
     
     (b) Grants the office access to certain information.
       
       (c) Requires the office to provide a copy of the report to
       a person on request on payment of a reasonable fee. 
       Requires the office to set the fee in the amount necessary
       to defray the cost of producing the report.
       
       SECTION 2.   Amends Section 4(i), Article 21.58A, Insurance Code, to
require screening criteria and review procedures to include
guidelines for appeals on behalf of a person with a special
circumstance who is denied services as a result of established
conditions of the plan, limitations of coverage, network
configuration, or requirements for participating specialists.

SECTION 3. Amends Sections 14(g) and (h), Article 21.58A, Insurance
Code, as follows:

     (g) Provides that this article does not prohibit or limit the
     distribution of a proportion of certain savings.  Deletes
     provisions relating to licensure of a health maintenance
     organization that performs utilization review.
     
     (h) Provides that an insurer or health maintenance
     organization which delivers or issues for delivery a health
     insurance policy or evidence of coverage in Texas and is
     subject to this code is not subject to this article.  Requires
     a health maintenance organization, if it performs utilization
     review as defined in this article, to comply with this
     article, and requires the State Board of Insurance (board) to
     adopt rules for appropriate verification and enforcement of
     compliance.  Requires such insurers and organizations to be
     subject to Article 20A.33, Insurance Code, to cover the costs
     of ensuring compliance under this section.  Makes conforming
     changes.
     
     SECTION 4.     Amends Section 161.091(f), Health and Safety Code, to
provide that this section shall not apply to, among others,
preferred provider organizations.

SECTION 5. (a) Effective date: September 1, 1995.

     (b) and (c) Make application of this Act prospective beginning
     June 1, 1996.
     
     (d) Provides that Subdivision (4), Article 21.102, Insurance
     Code, takes effect only if H.B. 3111, Acts of the 74th
     Legislature, Regular Session, 1995, or similar legislation
     authorizing nonprofit health corporations, does not become
     law.
     
     (e) Provides that, contingent on passage of H.B. 3111, Acts of
     the 74th Legislature, Regular Session, 1995, or similar
     legislation authorizing nonprofit health corporations, Article
     21.102, Insurance Code, is amended by adding Subdivision (4),
     to define "managed care entity."
     
SECTION 6. Emergency clause.