By Averitt, Ramsay, Goodman, et al. H.B. No. 369
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the operation and funding of small employer health
1-3 benefit plans.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 26.02, Insurance Code, is amended by
1-6 amending Subdivisions (8), (12), and (23) and by adding Subdivision
1-7 (25) to read as follows:
1-8 (8) "Eligible employee" means an employee who works on
1-9 a full-time basis and who usually works at least 30 hours a week.
1-10 The term includes a sole proprietor, a partner, and an independent
1-11 contractor, if the sole proprietor, partner, or independent
1-12 contractor is included as an employee under a health benefit plan
1-13 of a small employer. The term does not include:
1-14 (A) an employee who works on a part-time,
1-15 temporary, seasonal, or substitute basis; or
1-16 (B) an employee who is covered under:
1-17 (i) another health benefit plan; <or>
1-18 (ii) a self-funded or self-insured <an>
1-19 employee welfare benefit plan that provides health benefits and
1-20 that is established in accordance with the Employee Retirement
1-21 Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.);
1-22 (iii) the Medicaid program if the employee
1-23 elects not to be covered;
2-1 (iv) another federal program, including
2-2 the CHAMPUS program or Medicare program, if the employee elects not
2-3 to be covered; or
2-4 (v) a benefit plan established in another
2-5 country if the employee elects not to be covered.
2-6 (12) "Late enrollee" means an eligible employee or
2-7 dependent who requests enrollment in a small employer's health
2-8 benefit plan after the expiration of the initial enrollment period
2-9 established under the terms of the first plan for which that
2-10 employee or dependent was eligible through the small employer or
2-11 after the expiration of an open enrollment period under Article
2-12 26.21(e) of this code. An eligible employee or dependent is not a
2-13 late enrollee if:
2-14 (A) the individual:
2-15 (i) was covered under another employer
2-16 health benefit plan at the time the individual was eligible to
2-17 enroll;
2-18 (ii) declines in writing, at the time of
2-19 the initial eligibility, stating that coverage under another
2-20 employer health benefit plan was the reason for declining
2-21 enrollment;
2-22 (iii) has lost coverage under another
2-23 employer health benefit plan as a result of the termination of
2-24 employment, the termination of the other plan's coverage, the death
2-25 of a spouse, or divorce; and
3-1 (iv) requests enrollment not later than
3-2 the 31st day after the date on which coverage under another
3-3 employer health benefit plan terminates;
3-4 (B) the individual is employed by an employer
3-5 who offers multiple health benefit plans and the individual elects
3-6 a different health benefit plan during an open enrollment period;
3-7 or
3-8 (C) a court has ordered coverage to be provided
3-9 for a spouse or minor child under a covered employee's plan and
3-10 request for enrollment is made not later than the 31st day after
3-11 issuance of the date on which the court order is issued.
3-12 (23) "Small employer health benefit plan" means a plan
3-13 developed by the commissioner under <the preventive and primary
3-14 care benefit plan, the in-hospital benefit plan, or the standard
3-15 health benefit plan described by> Subchapter E of this chapter or
3-16 any other health benefit plan offered to a small employer in
3-17 accordance with Article 26.42(c) or 26.48 <(d)> of this code.
3-18 (25) "Point-of-service contract" means a benefit plan
3-19 offered through a health maintenance organization that:
3-20 (A) includes corresponding indemnity benefits in
3-21 addition to benefits relating to out-of-area or emergency services
3-22 provided through insurers or group hospital service corporations;
3-23 and
3-24 (B) permits the insured to obtain coverage under
3-25 either the health maintenance organization conventional plan or the
4-1 indemnity plan as determined in accordance with the terms of the
4-2 contract.
4-3 SECTION 2. Article 26.06(b), Insurance Code, is amended to
4-4 read as follows:
4-5 (b) Except as provided by Subsection (a) of this article,
4-6 this chapter does not apply to an individual health insurance
4-7 policy that is subject to individual underwriting, even if the
4-8 premiums are remitted through a payroll deduction method
4-9 <underwritten individually>.
4-10 SECTION 3. Article 26.14, Insurance Code, is amended to read
4-11 as follows:
4-12 Art. 26.14. PRIVATE PURCHASING COOPERATIVE. (a) Two or
4-13 more small employers may form a cooperative for the purchase of
4-14 small employer health benefit plans. A cooperative must be
4-15 organized as a nonprofit corporation and has the rights and duties
4-16 provided by the Texas Non-Profit Corporation Act (Article 1396-1.01
4-17 et seq., Vernon's Texas Civil Statutes).
4-18 (b) On receipt of a certificate of incorporation or
4-19 certificate of authority from the secretary of state, the
4-20 cooperative shall file written notification of the receipt of the
4-21 certificate and a copy of the cooperative's organizational
4-22 documents with the commissioner.
4-23 (c) The board of directors shall file annually with the
4-24 commissioner a statement of all amounts collected and expenses
4-25 incurred for each of the preceding three years.
5-1 SECTION 4. Article 26.21, Insurance Code, is amended to read
5-2 as follows:
5-3 Art. 26.21. SMALL EMPLOYER HEALTH BENEFIT PLANS; EMPLOYER
5-4 ELECTION. (a) Each small employer carrier shall provide the small
5-5 employer health benefit plans without regard to claim experience,
5-6 health status, or medical history. Each small employer carrier
5-7 shall issue the plan chosen by the small employer to each small
5-8 employer that elects to be covered under that plan<, agrees to make
5-9 the required premium payments,> and agrees to satisfy the other
5-10 requirements of the plan.
5-11 (b) This article does not impose a statutory mandate of an
5-12 employer contribution to the premium paid to the small employer
5-13 carrier. However, the small employer carrier may require an
5-14 employer contribution in accordance with the carrier's usual and
5-15 customary practices on all employer group health insurance plans in
5-16 this state. The premium contribution level shall be applied
5-17 uniformly to each small employer offered or issued coverage by the
5-18 small employer carrier in this state. <Coverage under a small
5-19 employer health benefit plan is not available to a small employer
5-20 unless the small employer pays at least 75 percent of the insurance
5-21 premium for its eligible employees who elect to be covered by at
5-22 least one of the small employer health benefit plans selected by
5-23 the small employer.> Coverage is available under a small employer
5-24 health benefit plan if at least 75 <90> percent of a small
5-25 employer's eligible employees elect to be covered.
6-1 (c) If a small employer offers multiple health benefit
6-2 plans, the collective enrollment of all of those plans must be at
6-3 least 75 percent of the small employer's eligible employees or, if
6-4 applicable, the lower participation level offered by the small
6-5 employer carrier under Subsection (d) of this article. A small
6-6 employer carrier may elect not to offer health benefit plans to a
6-7 small employer who offers multiple health benefit plans if such
6-8 plans are to be provided by more than one carrier and the small
6-9 employer carrier would have less than 75 percent of the small
6-10 employer's eligible employees enrolled in the small employer
6-11 carrier's health benefit plan. A small employer who elects to make
6-12 contributions for payment of the premium is not required to pay any
6-13 amount with respect to an employee who elects not to be covered.
6-14 The small employer may elect to pay the premium cost for additional
6-15 coverage. This chapter does not require a small employer to
6-16 purchase health insurance coverage for the employer's employees.
6-17 (d) A small employer carrier <(c) An eligible employee> may
6-18 offer small employer health benefit plans to a small <obtain
6-19 coverage in addition to coverage purchased by the> employer even if
6-20 less than 75 <at least 40> percent of the eligible employees of
6-21 that employer elect to be covered <obtain the same additional
6-22 coverage>. A small employer carrier that allows a smaller
6-23 percentage <Subject to insurability, any number> of eligible
6-24 employees to participate in a plan must permit that percentage of
6-25 participation as a qualifying percentage for each small <may
7-1 otherwise obtain coverage in addition to coverage purchased by the>
7-2 employer benefit plan offered by that carrier in this state. <The
7-3 additional coverage may be paid for by the employer, the employee,
7-4 or both.>
7-5 (e) <(d)> The initial enrollment period for the employees
7-6 and their dependents must be at least 31 <30> days, with a 31-day
7-7 open enrollment period provided annually.
7-8 (f) <(e)> A small employer may establish a waiting period
7-9 during which a new employee is not eligible for coverage. A
7-10 waiting period established as provided by this subsection may not
7-11 exceed 90 days from the first day of employment.
7-12 (g) <(f)> A new employee of a covered small employer and the
7-13 dependents of that employee may not be denied coverage if the
7-14 application for coverage is received by the small employer carrier
7-15 not later than the 31st day after the date on which the employment
7-16 begins or on completion of a waiting period established by the
7-17 employer under Subsection (f) of this article.
7-18 (h) <(g)> A late enrollee may be excluded from coverage
7-19 until the next annual open enrollment period and <for 18 months
7-20 from the date of application or> may be subject to a 12-month
7-21 preexisting condition provision as described by Article <Articles>
7-22 26.49<(b), (c), (d), and (e)> of this code. <If both a period of
7-23 exclusion from coverage and a preexisting condition provision are
7-24 applicable to a late enrollee, the combined period of exclusion may
7-25 not exceed 18 months from the date of the late application.>
8-1 (i) <(h)> A small employer carrier may not exclude any
8-2 eligible employee or dependent, including a late enrollee, who
8-3 would otherwise be covered under a small employer group.
8-4 (j) <(i)> A small employer health benefit plan issued by a
8-5 small employer carrier may not limit or exclude, by use of a rider
8-6 or amendment applicable to a specific individual, coverage by type
8-7 of illness, treatment, medical condition, or accident, except for
8-8 preexisting conditions or diseases as permitted under Article 26.49
8-9 of this code.
8-10 (k) <(j)> A small employer health benefit plan may not limit
8-11 or exclude initial coverage of a newborn child of a covered
8-12 employee. Any coverage of a newborn child of an employee under
8-13 this subsection terminates on the 32nd <31st> day after the date of
8-14 the birth of the child unless:
8-15 (1) dependent children are eligible for coverage; and
8-16 (2) notification of the birth and any required
8-17 additional premium are received by the small employer carrier not
8-18 later than the 31st <30th> day after the date of birth.
8-19 (l) <(k)> If the Consolidated Omnibus Budget Reconciliation
8-20 Act of 1985 (Pub. L. No. 99-272, 100 Stat. 222) does not require
8-21 continuation or conversion coverage for dependents of an employee,
8-22 a dependent who has been covered by that small employer for at
8-23 least one year or is under one year of age may elect to continue
8-24 coverage under a small employer health benefit plan, if the
8-25 dependent loses eligibility for coverage because of the death,
9-1 divorce, or retirement of the employee, as required by Section 3B,
9-2 Article 3.51-6, of this code.
9-3 SECTION 5. Article 26.38, Insurance Code, is amended to read
9-4 as follows:
9-5 Art. 26.38. HEALTH MAINTENANCE ORGANIZATION; APPROVED HEALTH
9-6 BENEFIT PLAN. (a) The premium rates for a state-approved health
9-7 benefit plan offered by a health maintenance organization under
9-8 Article 26.48 of this code must be established in accordance with
9-9 formulas or schedules of charges filed with the department.
9-10 (b) A health maintenance organization that participates in a
9-11 purchasing cooperative that provides employees of small employers a
9-12 choice of benefit plans, that has established a separate class of
9-13 business as provided by Article 26.31 of this code, and that has
9-14 established a separate line of business as provided under Article
9-15 26.48(a) of this code and Title XIII, Public Health Service Act (42
9-16 U.S.C. Section 300e et seq.) may use rating methods in accordance
9-17 with this subchapter that are used by other small employer carriers
9-18 participating in the same cooperative, including rating by age and
9-19 gender.
9-20 SECTION 6. Article 26.42, Insurance Code, is amended to read
9-21 as follows:
9-22 Art. 26.42. SMALL EMPLOYER HEALTH BENEFIT PLANS. (a) A
9-23 small employer carrier shall offer the following two <three> health
9-24 benefit plans as adopted by the commissioner:
9-25 (1) the catastrophic <preventive and primary> care
10-1 benefit plan; and
10-2 (2) the basic coverage <in-hospital> benefit plan<;
10-3 and>
10-4 <(3) the standard health benefit plan>.
10-5 (b) A small employer carrier may offer to a small employer
10-6 additional benefit riders to either of the <standard health>
10-7 benefit plans <plan>.
10-8 (c) <A small employer carrier may not offer to a small
10-9 employer benefit riders to:>
10-10 <(1) the preventive and primary care benefit plan,
10-11 except as provided by Article 26.45(d) of this code; or>
10-12 <(2) the in-hospital benefit plan, except as provided
10-13 by Article 26.46(e) of this code.>
10-14 <(d)> Subject to the provisions of this chapter, a small
10-15 employer carrier may also offer to small employers any other health
10-16 benefit plan authorized under this code. Article 26.06(c) does not
10-17 apply to a health benefit plan offered to a small employer under
10-18 this subsection.
10-19 SECTION 7. Article 26.43(a), Insurance Code, is amended to
10-20 read as follows:
10-21 (a) The commissioner shall promulgate the benefits section
10-22 of the catastrophic care <preventive and primary> benefit plan
10-23 and<,> the basic coverage <in-hospital> benefit plan<, and the
10-24 standard health benefit plan> policy forms in accordance with
10-25 Article 26.44A of this code and shall develop prototype policies
11-1 for each of the benefit plans. For all other portions of these
11-2 policy forms, a small employer carrier shall comply with Article
11-3 3.42 of this code as it relates to policy form approval and with
11-4 the Texas Health Maintenance Organization Act (Article 20A.01 et
11-5 seq., Vernon's Texas Insurance Code) as it relates to approval of
11-6 an evidence of coverage. A small employer carrier may not offer
11-7 these <three> benefit plans through a policy form or evidence of
11-8 coverage that does not comply with this chapter <article>.
11-9 SECTION 8. Subchapter E, Chapter 26, Insurance Code, is
11-10 amended by adding Article 26.44A to read as follows:
11-11 Art. 26.44A. BENEFIT PLANS. (a) The commissioner by rule
11-12 shall establish the coverage requirements for the catastrophic care
11-13 benefit plan and the basic coverage benefit plan. The commissioner
11-14 shall develop prototype policies for use by small employer carriers
11-15 that include all contractual provisions required to produce an
11-16 entire contract in accordance with this article and this code.
11-17 (b) Coverage under the catastrophic care benefit plan must
11-18 be designed to provide necessary coverage in the event of
11-19 catastrophic illness or injury. The commissioner shall establish
11-20 deductibles and coinsurance requirements at levels that permit
11-21 options for the insured to obtain affordable catastrophic coverage.
11-22 (c) The commissioner by rule shall establish coverage
11-23 requirements for the basic coverage benefit plan. Coverage under
11-24 the basic coverage benefit plan must be designed to provide basic
11-25 hospital, medical, and surgical coverages. Benefits under the plan
12-1 are limited to basic care requirements for illness and injury.
12-2 (d) The benefits provisions of the benefit plan policies
12-3 must include the following:
12-4 (1) all required or applicable definitions;
12-5 (2) a list of any exclusions or limitations to
12-6 coverage;
12-7 (3) a description of covered services required under
12-8 the plan; and
12-9 (4) the deductible and coinsurance options that are
12-10 required or permitted under the plan.
12-11 SECTION 9. Article 26.48, Insurance Code, is amended to read
12-12 as follows:
12-13 Art. 26.48. HEALTH MAINTENANCE ORGANIZATION PLANS. (a)
12-14 Instead of the small employer health benefit plans described by
12-15 this subchapter, a health maintenance organization may offer:
12-16 (1) a state-approved health benefit plan that complies
12-17 with the requirements of Title XIII <XI>, Public Health Service Act
12-18 (42 U.S.C. Section 300e et seq.) and rules adopted under that Act;
12-19 (2) a plan developed by the commissioner under Article
12-20 26.44A of this code and additional benefit riders to the plan; or
12-21 (3) a point-of-service contract in connection with an
12-22 insurance carrier that includes optional coverage for out-of-area
12-23 services, emergency care, or out-of-network care.
12-24 (b) A contract offered by an insurance carrier under
12-25 Subsection (a)(3) of this article is subject to all provisions of
13-1 this chapter unless specifically exempted. The insurance carrier
13-2 with which the health maintenance organization contracts for a
13-3 point-of-service contract is not required to otherwise make
13-4 available the benefit plans adopted under Subchapter E of this
13-5 chapter if the insurance carrier's small employer products are
13-6 limited to the point-of-service contract.
13-7 SECTION 10. Article 26.49, Insurance Code, is amended to
13-8 read as follows:
13-9 Art. 26.49. PREEXISTING CONDITION AND WAITING PERIOD
13-10 PROVISIONS. (a) A <Except as provided by Article 26.21(g) of this
13-11 code, a> preexisting condition provision in a small employer health
13-12 benefit plan may not apply to expenses incurred on or after the
13-13 expiration of the 12 months following <first anniversary of> the
13-14 initial effective date of coverage of the enrollee or late
13-15 enrollee.
13-16 (b) A preexisting condition provision in a small employer
13-17 health benefit plan may not apply to coverage for a disease or
13-18 condition other than a disease or condition<:>
13-19 <(1)> for which medical advice, diagnosis, care, or
13-20 treatment was recommended or received during the six months before
13-21 the effective date of coverage<; or>
13-22 <(2) that would have caused an ordinary, prudent
13-23 person to seek medical advice, diagnosis, care, or treatment during
13-24 the six months before the effective date of coverage>.
13-25 (c) A preexisting condition provision in a small employer
14-1 health benefit plan may not apply to an individual who was
14-2 continuously covered for a minimum period of 12 months by a health
14-3 benefit plan that was in effect up to a date not more than 60 days
14-4 before the effective date of coverage under the small employer
14-5 health benefit plan, excluding any waiting period.
14-6 (d) <A preexisting condition provision may exclude coverage
14-7 for a pregnancy existing on the effective date of the coverage,
14-8 except as provided by Subsection (c) of this article.>
14-9 <(e)> In determining whether a preexisting condition
14-10 provision applies to an individual covered by a small employer
14-11 health benefit plan, the small employer carrier shall credit the
14-12 time the individual was covered under a previous health benefit
14-13 plan if the previous coverage was in effect at any time during the
14-14 12 months preceding the effective date of coverage under a small
14-15 employer health benefit plan. If the previous coverage was issued
14-16 by a health maintenance organization, any waiting period that
14-17 applied before that coverage became effective also shall be
14-18 credited against the preexisting condition provision period.
14-19 (e) A carrier that does not use a preexisting condition
14-20 provision in any of its health benefit plans may impose an
14-21 affiliation period. For purposes of this subsection, "affiliation
14-22 period" means a period not to exceed 90 days for new enrollees and
14-23 not to exceed 180 days for late enrollees during which premiums are
14-24 not collected and the issued coverage is not effective.
14-25 (f) Subsection (e) of this article does not preclude
15-1 application of any waiting period applicable to all new enrollees
15-2 under the health benefit plan. However, any carrier-imposed
15-3 waiting period may not exceed 90 days and must be used in lieu of a
15-4 preexisting condition provision.
15-5 SECTION 11. Article 26.54, Insurance Code, is amended by
15-6 adding Subsection (e) to read as follows:
15-7 (e) There is no liability on the part of, and no cause of
15-8 action of any nature arises against, a member of the board of
15-9 directors for action or omission performed in good faith in the
15-10 performance of powers and duties under this subchapter.
15-11 SECTION 12. Article 26.71, Insurance Code, is amended to
15-12 read as follows:
15-13 Art. 26.71. FAIR MARKETING. (a) Each small employer
15-14 carrier shall market the small employer health benefit plan through
15-15 properly licensed agents to eligible small employers in this state.
15-16 Each small employer purchasing a small employer health benefit plan
15-17 shall be given a summary of the benefit plans established by the
15-18 commissioner under Subchapter E of this chapter. The commissioner
15-19 shall prescribe the format of the summary. The <must affirm that
15-20 the> agent shall offer and explain each of the plans to the small
15-21 employer on inquiry and request by the small <who sold the plan
15-22 offered and explained all three plans to that> employer.
15-23 (b) <The department may require periodic demonstration by
15-24 small employer carriers and agents that those carriers and agents
15-25 are marketing or issuing small employer health benefit plans to
16-1 small employers in fulfillment of the purposes of this article.>
16-2 <(c)> The department may require periodic reports by small
16-3 employer carriers and agents regarding small employer health
16-4 benefit plans issued by those carriers and agents. The reporting
16-5 requirements shall include information regarding case
16-6 characteristics and the numbers of small employer health benefit
16-7 plans in various categories that are marketed or issued to small
16-8 employers.
16-9 SECTION 13. Article 26.75, Insurance Code, is amended to
16-10 read as follows:
16-11 Art. 26.75. RULES. The commissioner <board> may adopt rules
16-12 setting forth additional standards to provide for the fair
16-13 marketing and broad availability of small employer health benefit
16-14 plans to small employers in this state.
16-15 SECTION 14. Articles 26.45, 26.46, 26.47, and 26.47A,
16-16 Insurance Code, are repealed effective June 1, 1996.
16-17 SECTION 15. The commissioner of insurance shall develop and
16-18 adopt rules establishing small employer health benefit plans under
16-19 Subchapter E, Chapter 26, Insurance Code, as amended by this Act,
16-20 not later than January 1, 1996.
16-21 SECTION 16. (a) Each small employer health benefit plan,
16-22 including prototype plans developed by the commissioner of
16-23 insurance, under Chapter 26, Insurance Code, as amended by this
16-24 Act, shall be offered, delivered, or issued for delivery to small
16-25 employers beginning June 1, 1996.
17-1 (b) A small employer health benefit plan issued before
17-2 September 1, 1993, is governed by the law in effect immediately
17-3 before September 1, 1993, except that on and after September 1,
17-4 1995, those plans are subject to the provisions of Subchapter D,
17-5 Chapter 26, Insurance Code, as amended by this Act.
17-6 (c) A small employer health benefit plan issued on or after
17-7 September 1, 1993, but before June 1, 1996, must comply with
17-8 Chapter 26, Insurance Code, as amended by this Act, beginning on
17-9 the first renewal date of the health benefit plan following June 1,
17-10 1996.
17-11 (d) Article 26.38, Insurance Code, as amended by this Act,
17-12 applies to small employer health benefit plans offered, issued, or
17-13 issued for delivery on or after September 1, 1995.
17-14 SECTION 17. This Act takes effect September 1, 1995.
17-15 SECTION 18. The importance of this legislation and the
17-16 crowded condition of the calendars in both houses create an
17-17 emergency and an imperative public necessity that the
17-18 constitutional rule requiring bills to be read on three several
17-19 days in each house be suspended, and this rule is hereby suspended.