BILL ANALYSIS


                                                    C.S.H.B. 3111
                                            By: Berlanga (Sibley)
                                             Economic Development
                                                         05-23-95
                            Senate Committee Report (Substituted)
BACKGROUND

Section 5.01(a), Art. 4495b, V.T.C.S. (Medical Practice Act)
authorizes certain nonprofit health corporations to provide health
care to the public on a fee-for-services basis.  However, if the
corporations are paid on a capitated or prepaid fee basis, they are
acting as health maintenance corporations and should be licensed
and regulated by the Texas Department of Insurance.

PURPOSE

As proposed, C.S.H.B. 3111 requires certain nonprofit health
corporations to obtain a certificate of authority from the
commissioner of insurance before contracting to deliver health
care.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
to the Texas State Board of Medical Examiners in SECTION 1 (Section
5(b), Article 21.52F, Insurance Code), and to the commissioner of
insurance under SECTION 1 (Sec. 7, Insurance Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 21E, Insurance Code, by adding Article
21.52F, as follows:

     Art. 21.52F. CERTIFICATION OF CERTAIN NONPROFIT HEALTH
                          CORPORATIONS

     Sec. 1. DEFINITIONS. Defines "applicant," "approved nonprofit
     health corporation," "certificate holder," "health care plan,"
     and "health maintenance organization."
     
     Sec. 2. CERTIFICATE OF AUTHORITY REQUIRED; EXCEPTIONS. (a)
     Authorizes an approved nonprofit health corporation to arrange
     for or provide a health care plan to enrollees on a prepaid
     basis only if the corporation obtains and maintains a
     certificate of authority issued by the department under this
     article.
     
     (b) Provides that this article does not apply to an approved
       nonprofit health corporation that contracts to arrange for
       or provide health care services on a fee-for-service basis;
       contracts entered into by a certificate holder to arrange
       for or provide health care services on a fee-for-service
       basis; or an activity exempt from regulation under Section
       26(f), Chapter 20A, V.T.I.C. (Texas Health Maintenance
       Organization Act).
       
       (c) Authorizes an approved nonprofit health corporation to
       arrange for or provide health care services on a risk-sharing or capitated risk arrangement on behalf of a health
       maintenance organization.  Provides that an approved
       nonprofit health corporation is not required to obtain a
       certificate of authority under this article or under Chapter
       20A, V.T.I.C.
       
       Sec. 3. QUALIFICATIONS FOR CERTIFICATE OF AUTHORITY.
     Authorizes the commissioner of insurance (commissioner) to
     issue a certificate of authority only to an approved nonprofit
     health corporation that meets certain qualifications.
     
     Sec. 4. ACCREDITATION REQUIRED. (a) Requires an applicant to
     establish and a certificate holder to maintain accreditation
     by the National Committee on Quality Assurance; the Joint
     Commission on Accreditation of Healthcare Organization's
     accreditation for health care networks; or an accrediting
     organization recognized by rule of the commissioner.
     
     (b) Requires the commissioner to grant a provisional
       certificate of authority to an applicant if the applicant
       meets certain requirements.
       
       Sec. 5. UNFAIR COMPETITION.  (a) Prohibits a certificate
     holder from engaging in unfair and disruptive provider hiring
     or contracting practices, the purpose of which is to limit
     competition from traditional community providers.
     
     (b) Requires the Texas State Board of Medical Examiners to
       adopt rules to implement this section.
     Sec. 6. POWERS AND DUTIES OF CERTIFICATE HOLDER. Provides that
     a certificate holder has all the powers granted to and duties
     imposed on a health maintenance organization under Chapter
     20A, V.T.I.C. (Texas Health Maintenance Organization Act) and
     the insurance laws of this state, and is subject to regulation
     and regulatory enforcement under those laws in the same manner
     as a health maintenance organization.
     
     Sec. 7. RULES. Requires the commissioner, except as provided
     by Section 5(b), to adopt rules to implement this article.
     
     SECTION 2.     (a) Requires the commissioner, no later than September
16, 1995, to establish an advisory committee composed of:

            (1) five members representing nonprofit health corporations
       certified under Section 5.01(a), Article 4495b, V.T.C.S.
       (Medical Practice Act); and
       
       (2) four members representing the public, two of whom are
       employers.
     (b) Requires the advisory committee, no later than October 16,
     1995, to recommend to the commissioner rules necessary to
     implement Article 21.52F, Insurance Code, as added by this
     Act.
     
     (c) Requires the commissioner to publish proposed rules
     necessary to implement Article 21.52F, Insurance Code, as
     added by this Act, no later than January 1, 1996.  Requires
     the commissioner, in developing the rules, to consider the
     recommendations of the advisory committee.
     
     SECTION 3.     Prohibits the Texas Department of Insurance from issuing
a certificate of authority to an approved nonprofit health
corporation under Article 21.52F, Insurance Code, as added by this
Act, before April 1, 1996.

SECTION 4. Effective date: September 1, 1995.

SECTION 5. Emergency clause.