BILL ANALYSIS C.S.S.B. 202 By: Patterson Economic Development 4-29-95 Committee Report (Substituted) BACKGROUND Many behavioral health care companies are contracting with employers, insurance companies, and HMOs to provide mental health and substance abuse treatment services on a capitated basis. These companies wish to obtain a certificate of authority to operate as a single service HMO or single health care service plan. Current law makes the issuance of these types of certificates difficult if not impossible. PURPOSE As proposed, C.S.S.B. 202 provides for certain services through health maintenance organizations. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the commissioner of insurance under SECTION 3 (Section 9(k), Article 20A.09, V.T.I.C.) SECTION 4 (Section 22(c), Article 20A.22, V.T.I.C.) and SECTION 9 (Article 3.64(e), Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 2, Article 20A.02, V.T.I.C. (Texas Health Maintenance Organization Act), by amending Subsections (a), (e), (m), (n), and (s), and adding Subsections (u), (v), (w), (x), (y), (z), (aa) and (bb), as follows: (a) Redefines "basic health care services." (e) Redefines "evidence of coverage." (m) Redefines "physician." (n) Redefines "provider." (s) Redefines "single health care service plan." (u) Defines "point of service arrangement." (v) Defines "blended contract." (w) Defines "capitation." (x) Defines "capitated person." (y) Defines "subscriber." (z) Defines "independent physician association." (aa) Defines "single service health maintenance organization." (bb) Defines "health maintenance organization delivery network." SECTION 2. Amends Section 6(a), Article 20A.06, V.T.I.C., to provide that the powers of a health maintenance organization (HMO) include: (a)(3) the furnishing of or arranging for medical care services through other HMOs or physicians or groups of physicians who have independent contracts with a HMO. Makes conforming changes. (6) the offering of: (C) a point of service arrangement by contracting with an insurer or group hospital service corporation to provide indemnity benefits, including optional coverages for out-of-area services or out-of-network care; (D) a blended contract to an enrollee; and (E) an evidence of coverage, as a single document, that provides for coverage under one or more health care plans or single health care service plans; (8) the paying of compensation to a physician, independent physician association, provider, or other HMO based on a fee-for-service arrangement, a risk-sharing arrangement, or a capitation arrangement; (9) the furnishing of or arranging for mental health services under Article 3.51-14, Insurance Code, or chemical dependency services under Article 3.51-9, Insurance Code, through a contract with a single service HMO. (10) Redesignates existing Subdivision (8). SECTION 3. Amends Section 9, Article 20A.09, V.T.I.C., by amending Subsections (b) and (f), and adding Subsection (k), as follows: (b) Prohibits the charges resulting from the application of the formula or method from being altered for an individual enrollee based on the status of that enrollee's health, except that the charges may be based on the age and gender of an individual enrollee and the enrollee's dependents for an individual contract. (f) Provides that Article 3.51-9, Insurance Code, applies to HMOs offering basic health care services and to single service HMOs offering chemical dependency services, rather than to HMOs other than those offering only a single health care service plan. (k) Requires an HMO to offer and make available to each enrollee, on termination of coverage, a privilege to continue with group coverage or to convert to coverage with at least two standard benefit plans established, by rule, adopted by the commissioner of insurance (commissioner). Requires coverage under this subsection to be provided without evidence of insurability; or a new preexisting condition, limitation, or exclusion. SECTION 4. Amends Section 22, Article 20A.22, V.T.I.C., by adding Subsections (c) and (d), as follows: (c) Authorizes the commissioner to adopt rules as the commissioner considers to be appropriate concerning: (1) standardization of benefits for coverage offered by an HMO, including conversion, continuation, and individual coverage; and (2) formulas and methods for calculating the schedule of charges for enrollee coverage issued on a group and an individual basis. (d) Provides the rulemaking authority granted by Subsection (c) of this section does not limit the rulemaking authority granted under Subsection (a) of this section. SECTION 5. Amends Section 26(f), Article 20A.26, V.T.I.C., by adding Subdivision (5), to provide that this Act does not apply to a person to the extent that person is a physician, group of physicians, or provider who provides or arranges to provide health care services or medical care directly or indirectly through a contract or subcontract with an HMO that holds a certificate of authority under this Act. SECTION 6. Amends Section 26(h), Article 20A.26, V.T.I.C., to provide that the provisions of the Insurance Code are applicable to organizations permitted under the authority of this Act. SECTION 7. Amends Article 3.51-14, Insurance Code, by adding Section 4, as follows: Sec. 4. SINGLE SERVICE HEALTH MAINTENANCE ORGANIZATIONS; EXCEPTION. (a) Defines "basic health care services" and "single service health maintenance organization." (b) Authorizes an entity subject to Section 2 of this article to satisfy the requirements of this article by offering and making available the coverage required under this article through a contract with a single service HMO. Requires a single service HMO to offer and make available the same level of coverage under Section 3 of this article as is required of an HMO offering basic health care services. (c) Subjects a single service HMO that provides only mental health services or chemical dependency services, or both, to this article and to offer and make available the same level of coverage under Section 3 of this article as is required of an HMO offering basic health care services. (d) Authorizes a single service HMO to also offer and make available different levels of coverage for mental health services in addition to the level of coverage required under Section 3 of this article, but the coverage must be at least as favorable as the minimum requirements provided by 42 CFR Section 417.101(a)(4) for qualification of HMOs. SECTION 8. Amends Section 2A, Article 3.51-9, Insurance Code, by amending Subsection (e), and adding Subsection (f), as follows: (e) Defines "single service health maintenance organization." Makes nonsubstantive changes. (f) Authorizes an entity subject to this section to provide the coverage required under this article through a contract with a single service HMO. Requires a single service HMO to provide the same level of coverage under this section as is required of an HMO offering basic health care services. SECTION 9. Amends Chapter 3F, Insurance Code, by adding Article 3.64, as follows: Art. 3.64. INSURERS CONTRACTING WITH HEALTH MAINTENANCE ORGANIZATIONS. (a) Defines "insurance carrier," "health maintenance organization," "point of service arrangement," and "blended contract." (b) Authorizes an insurance carrier to contract with an HMO to provide a point of service arrangement, including optional coverages for out-of-area services or out-of-network care. (c) Authorizes an insurance carrier and an HMO to offer a blended contract if indemnity benefits are combined with health care plan benefits offered by the HMO. Provides that the use of a blended contract is limited to point of service arrangements and contracting arrangements between an insurance carrier and a single service HMO as approved by the commissioner. Prohibits an insurance carrier from using a blended contract for a purpose other than as provided by this article. (d) Provides that a blended contract delivered, issued, or used in this state is subject to and must be filed with the department for approval as provided by Article 3.42 of this code and Section 9, Article 20A.09, V.T.I.C. (e) Authorizes the commissioner to adopt rules to implement this article. SECTION 10. (a) Requires an existing organization that provides only mental health services and substance abuse services that is required by Chapter 20A, V.T.I.C., to apply for a certificate of authority to operate as an HMO to submit an application as provided by Chapter 20A, V.T.I.C. Requires the application to be postmarked no later than 5 p.m. on December 31, 1995. Authorizes an applicant to continue to operate until the commissioner of insurance acts on the application. Requires an application, if the applicant is denied, to be treated as an HMO whose certificate of authority has been revoked. (b) Effective date: September 1, 1995. Makes application of this Act prospective beginning January 1, 1996. SECTION 11. Emergency clause.