By Smithee, Van de Putte                              H.B. No. 2766
          Substitute the following for H.B. No. 2766:
          By Smithee                                        C.S.H.B. No. 2766
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to providing fairness and choice to patient and providers
    1-3  under managed care health benefit plans; providing penalties.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  The Insurance Code is amended by adding
    1-6  Subchapter G to Chapter 21.
    1-7                   SUBCHAPTER G.  PATIENT PROTECTION ACT
    1-8        Art. 21.101.  SHORT TITLE.  This chapter may be cited as the
    1-9  Patient Protection Act.
   1-10        Art. 21.102.  DEFINITIONS.  In this subchapter:
   1-11              (1)  "Commissioner" means the Commissioner of
   1-12  Insurance.
   1-13              (2)  "Emergency care services" means medical services
   1-14  provided for an emergency medical condition.
   1-15              (3)  "Emergency medical condition" means:
   1-16                    (A)  a medical condition manifesting itself by
   1-17  acute symptoms of sufficient severity, including severe pain, such
   1-18  that the absence of immediate medical attention could reasonably be
   1-19  expected to result in:
   1-20                          (i)  placing the health of the individual
   1-21  (or, with respect to a pregnant woman, the health of the woman or
   1-22  her unborn child) in serious jeopardy;
   1-23                          (ii)  serious impairment to bodily
    2-1  functions; or
    2-2                          (iii)  serious dysfunction of any bodily
    2-3  organ or part; or
    2-4                    (B)  with respect to a pregnant woman who is
    2-5  having contractions,
    2-6                          (i)  that there is inadequate time to
    2-7  effect a safe transfer to another hospital before delivery, or
    2-8                          (ii)  that transfer may pose a threat to
    2-9  the health or safety of the woman or the unborn child.
   2-10              (4)  "Managed care entity" means a licensed insurance
   2-11  company, group hospital service corporation licensed under Chapter
   2-12  20, Texas Ins. Code, or health maintenance organization.
   2-13              (5)  "Managed care plan" or "plan" means a plan
   2-14  operated by a licensed insurance company, group hospital service
   2-15  plan, or health maintenance organization that provides for the
   2-16  financing and delivery of health care services to persons enrolled
   2-17  in such plan through:
   2-18                    (A)  arrangements with selected providers to
   2-19  furnish health care services;
   2-20                    (B)  explicit standards for the selection of
   2-21  participating providers;
   2-22                    (C)  organizational arrangements for ongoing
   2-23  quality assurance, utilization review programs, and dispute
   2-24  resolution; or
   2-25                    (D)  differential coverage or payments or
    3-1  financial incentives for persons enrolled in the plan to use the
    3-2  participating providers and procedures provided for by the plan.
    3-3              (6)  "Prospective enrollee" means an individual
    3-4  eligible for enrollment in a managed care plan offered by that
    3-5  individual's employer.
    3-6              (7)  "Utilization review law" means Article 21.58A of
    3-7  this code.
    3-8        Art. 21.103.  STANDARDS.  (a)(1)  The commissioner shall
    3-9  promulgate rules for managed care entities that conduct business in
   3-10  this state, including standards ensuring compliance with this
   3-11  subsection.
   3-12              (2)  Prospective enrollees in managed care plans must
   3-13  be provided information as to the terms and conditions of the plan.
   3-14  All written plan descriptions must be in a readable and
   3-15  understandable format.  Specific items that must be included are:
   3-16                    (A)  coverage provisions, benefits, including
   3-17  prescription drug coverage, both generic and brand name, and any
   3-18  exclusions by category of service, provider, or physician and, if
   3-19  applicable, by specific service, or types of drugs;
   3-20                    (B)  All prior authorization or other review
   3-21  requirements including preauthorization review, concurrent review,
   3-22  postservice review, and postpayment review,
   3-23                    (C)  an explanation of enrollee financial
   3-24  responsibility for payment for coinsurance or other noncovered or
   3-25  out-of-plan services;
    4-1                    (D)  Disclosure to enrollees that includes the
    4-2  following language:
    4-3                     YOUR RIGHTS UNDER TEXAS LAW:
    4-4        "As a participant in this medical plan, you have the right to
    4-5  information about the plan, such as how it operates, what general
    4-6  types of financial arrangements exist between providers and the
    4-7  plan, names and locations of providers, the numbers of enrollees
    4-8  and providers in the plan, the percentages of premiums allocated
    4-9  for medical care, administrative costs and profit, and an
   4-10  explanation of the benefits to which participants are entitled
   4-11  under the terms of the plan".
   4-12                    (E)  The plan shall provide a phone number and
   4-13  address for the prospective enrollee to obtain additional
   4-14  information concerning the items in subsection D.
   4-15                    (F)  The plan may comply with the requirement in
   4-16  subsection D regarding the percentage of premium allocated for
   4-17  medical care, administrative costs, and profit by providing the
   4-18  information in its latest annual financial statement submitted to
   4-19  the Texas Department of Insurance.
   4-20              (3)  The entity must demonstrate that covered enrollees
   4-21  have adequate access through the entity's provider network to all
   4-22  items and services contained in the package of benefits for which
   4-23  coverage is provided, including access to emergency services on a
   4-24  24-hour basis where medically necessary.  Such access shall take
   4-25  into account the diverse needs of enrollees.
    5-1              (4)  The plan shall provide to the Commissioner, for
    5-2  information, an explanation of the targeted physician or, as
    5-3  appropriate, dental network configuration including geographic
    5-4  distribution of physicians and dentists by specialty and the
    5-5  physician and, as appropriate, dentist to enrollee ratio by
    5-6  specialty.  Such information shall be filed upon establishment of a
    5-7  new plan, expansion of a service area, no less than annually, and
    5-8  when such network configuration targets are significantly modified.
    5-9              (5)  In the development of the plan's criteria for
   5-10  hospital participation, if a hospital is certified by the Medicare
   5-11  program (Title XVIII of the Social Security Act (42 U.S.C. 1395, et
   5-12  seq.)), or accredited by the Joint Commission on Accreditation of
   5-13  Healthcare Organizations, the managed care plan shall accept such
   5-14  certification or accreditation.
   5-15              (6)  Financial incentive program shall not limit
   5-16  medically necessary and appropriate services.
   5-17              (7)  All plans shall be required to establish a
   5-18  mechanism under which physicians or, as appropriate, dentists
   5-19  participating in the plan provide consultation and advice on the
   5-20  plan's medical or dental policy including coverage of new
   5-21  technology and procedures, the development and utilization of a
   5-22  prescription drug formulary, utilization review criteria and
   5-23  procedures, quality and credentialing criteria, and medical or
   5-24  dental management procedures.
   5-25              (8)  All plans on request shall make available and
    6-1  disclose to providers, the application process and qualification
    6-2  requirements for participation as a provider in the plan.  Each
    6-3  physician or dentist not selected upon initial application shall be
    6-4  given the reason or reasons for non-selection.
    6-5              (9)(A)  When plans accept physicians and dentists, they
    6-6  must credential those physicians and dentists.
    6-7                    (B)  Each application shall be reviewed by a
    6-8  credentialing committee composed of network participating
    6-9  physicians or dentists.
   6-10                    (C)  Credentialing shall be based on identified
   6-11  standards with consultation from physicians or dentists
   6-12  credentialed in the plan, and such standards shall be available to
   6-13  applicants.  When economic considerations are part of the decision
   6-14  to select or deselect a provider from the plan, identified criteria
   6-15  must be used and must be available to applicants, participating
   6-16  physicians, and dentists.  Any economic profile of physicians or
   6-17  dentists must be adjusted to recognize the characteristics of a
   6-18  physician's or dentist's practice that may account for variations
   6-19  from expected costs.
   6-20                    (D)  Plans that conduct or utilize economic
   6-21  profiling of physicians or dentists within the plan shall, on a
   6-22  periodic basis, make the profile available to the appropriate
   6-23  provider.
   6-24                    (E)  Plans may not exclude a physician or dentist
   6-25  solely on the basis of specialty practice nor the anticipated
    7-1  patient characteristics of that physician or dentist.  However,
    7-2  nothing in this Act prohibits a plan from rejecting an application
    7-3  based upon the plan's determination that it has a sufficient number
    7-4  of qualified providers.
    7-5                    (F)  Applicants shall be provided with the
    7-6  reasons for credentialing denial or contract nonrenewal.
    7-7                    (G)  Prior to termination of a contract the
    7-8  physician or dentist shall be provided a written explanation of the
    7-9  reasons for termination, an opportunity for discussion, and an
   7-10  opportunity to enter into and complete a corrective action plan, if
   7-11  appropriate, as determined by the plan.  Except in cases in which
   7-12  there is imminent harm to patient health or an action by a state
   7-13  medical or dental board or other government agency that effectively
   7-14  impairs the physician's or dentist's ability to practice medicine
   7-15  or dentistry within the jurisdiction, or in cases of fraud or
   7-16  malfeasance, upon request and prior to termination, the physician
   7-17  or dentist is entitled to a review by a plan advisory panel
   7-18  composed of his or her peers of the proposed action of the plan.
   7-19  Such review may include the appropriateness and requirements of a
   7-20  corrective action plan.  The decision of the advisory panel shall
   7-21  be considered but is not binding on the plan.
   7-22                    (H)  If the action that is under consideration is
   7-23  of a type that must be reported to the National Practitioner Data
   7-24  Bank or a state medical board under federal or state law, the
   7-25  physician's procedural rights, must meet the standards set forth in
    8-1  the federal Health Care Quality Improvement Act of 1986, 42 U.S.C.,
    8-2  Secs. 11101-11152.  For purposes of this subdivision (H), a managed
    8-3  care entity shall be considered a health care entity as defined in
    8-4  Article 4495(b) Texas Revised Civil Statutes, Section 1.03(a)(5).
    8-5                    (I)  The plan must establish reasonable
    8-6  procedures for assuring a transition of enrollees of the plan to
    8-7  new physicians or dentists.
    8-8                    (J)  When contracts with physicians or dentists
    8-9  are terminated under the plan, the plan shall reimburse the
   8-10  physician or dentist the reasonable cost for copies of medical or
   8-11  dental records that are created, kept, or maintained by a physician
   8-12  or dentist and requested by the patient to be provided by the
   8-13  physician or dentist to another physician or dentist.  If a
   8-14  physician or dentist terminates the contract with the plan, the
   8-15  physician or dentist shall bear the reasonable cost of providing
   8-16  copies of medical or dental records that are created, kept, or
   8-17  maintained by a physician or dentist and provided upon request from
   8-18  the patient, by the physician or dentist to a provider designated
   8-19  by the patient.
   8-20              (10)  Plans must:  (A)  cover emergency care services
   8-21  provided to covered individuals, without regard to whether or not
   8-22  the provider furnishing such services has a contractual or other
   8-23  arrangement with the entity to provide items or services to covered
   8-24  individuals including the treatment and stabilization of an
   8-25  emergency medical condition, as defined herein;
    9-1                    (B)  provide that the prior authorization
    9-2  requirement for medically necessary services provided or
    9-3  originating in a hospital emergency department following treatment
    9-4  or stabilization of an emergency medical condition shall be deemed
    9-5  to be approved unless denied in the time appropriate to the
    9-6  circumstances relating to the delivery of such services and the
    9-7  condition of the patient, as determined by the treating physician;
    9-8  and
    9-9                    (C)  cover any medical screening examination to
   9-10  determine whether or not an emergency medical condition exists or
   9-11  other evaluation required by state or federal law to be provided in
   9-12  the emergency department of a hospital.
   9-13              (11)  A plan for which prior authorization is a
   9-14  condition to coverage of a service must ensure that enrollees are
   9-15  required to sign medical and dental information release consent
   9-16  forms on enrollment.
   9-17              (12)  Notwithstanding the provision of any other law,
   9-18  all managed care plans are subject to and shall meet the
   9-19  requirements of the utilization review law.
   9-20        Art. 21.105.  VIOLATIONS.  (a)  If applicable and after
   9-21  notice and hearing, the commissioner may, for a violation of this
   9-22  chapter:
   9-23              (1)  impose sanctions under Section 7, Article 1.10 of
   9-24  this code; or
   9-25              (2)  issue a cease and desist order under Article 1.10A
   10-1  of this code.
   10-2        (b)  The authority vested in the Commissioner under this
   10-3  Article shall not be construed in any way to limit the authority
   10-4  vested in the Commissioner under Chapter One of this Code to
   10-5  administer, enforce and carry out the provisions of this Act.
   10-6        (c)  Nothing in this Subchapter nor rules promulgated
   10-7  thereunder shall:
   10-8              (1)  provide a private cause of action for damages or
   10-9  create a standard of care, obligation or duty which provides the
  10-10  basis for a private cause of action for damages; or
  10-11              (2)  abrogate any statutory or common law cause of
  10-12  action, administrative remedy or defense otherwise available and
  10-13  existing prior to the effective date of this Act.
  10-14        (d)  A health care provider aggrieved by the action of a
  10-15  health care plan may petition the Commissioner for relief within 30
  10-16  days of the action.  The health care provider must provide notice
  10-17  of the petition to the health care plan.  The Commissioner may:
  10-18              (1)  deny the petition;
  10-19              (2)  issue a cease and desist order; or
  10-20              (3)  decide to conduct a contested case hearing in
  10-21  accordance with the Administrative Procedures Act after providing
  10-22  notice to the health care provider and the managed care plan.  If
  10-23  the Commissioner does not act within 90 days of the date the
  10-24  petition is filed, the petition is deemed to have been denied.  If
  10-25  the Commissioner elects to conduct a contested case hearing and the
   11-1  Commissioner does not render a decision within 180 days of the date
   11-2  the petition was filed, the petition is deemed to have been denied.
   11-3  The parties may agree to extend the deadline provided in this
   11-4  subsection.
   11-5        SECTION 2.  Section 14, Article 21.58A, Insurance Code, is
   11-6  amended to read as follows:
   11-7        Sec. 14.  Application.  (a)  This article shall not apply to
   11-8  a person who provides information to enrollees about scope of
   11-9  coverage or benefits provided under a health insurance policy or
  11-10  health benefit plan and who does not determine whether particular
  11-11  health care services provided or to be provided to and are
  11-12  medically necessary or appropriate.
  11-13        (b)(1)  This article shall not apply to any contract with the
  11-14  federal government for utilization review of patients eligible for
  11-15  services under Title XVIII or XIX of the Social Security Act (42
  11-16  U.S.C. Section 1395 et seq. or Section 1396 et seq.).
  11-17              (2)  This article shall not apply to the Texas Medicaid
  11-18  Program, the chronically ill and disabled children's services
  11-19  program created pursuant to Chapter 35, Health and Safety Code, any
  11-20  program administered under Title 2, Human Resources Code, any
  11-21  program of the Texas Department of Mental Health and Mental
  11-22  Retardation, or any program of the Texas Department of Criminal
  11-23  Justice.
  11-24        (c)  This article shall not apply to utilization review of
  11-25  health care services provided to patients under the authority of
   12-1  the Texas Workers' Compensation Act (Article 8308-1.01 et seq.,
   12-2  Vernon's Texas Civil Statutes).
   12-3        (d)  This article shall not apply to utilization review of
   12-4  health care services provided under a policy of contract of
   12-5  automobile insurance promulgated by the board under Subchapter A,
   12-6  Chapter 5 of this code of issued pursuant to Article 1.14-2 of this
   12-7  code.
   12-8        (e)  This article shall not apply to the terms or benefits of
   12-9  employee welfare benefit plans as defined in Section 31(I) of the
  12-10  Employee Retirement Income Security Act of 1974 (29 U.S.C. Section
  12-11  1002).
  12-12        (f)  Any regulations promulgated pursuant to this article
  12-13  shall relate only to persons or entities subject to this article.
  12-14        (g)  <A health maintenance organization is not subject to
  12-15  this article except as expressly provided in this subsection and
  12-16  Subsection (i) of this section.  If such health maintenance
  12-17  organization performs utilization review as defined herein, it
  12-18  shall, as a condition of licensure:>
  12-19              <(1)  comply with Sections 4(b), (c), (e), (f), (h),
  12-20  (i), and (l) of this article, and the board shall promulgate rules
  12-21  for appropriate verification and enforcement of compliance.>
  12-22  However, nothing in this article shall be construed to prohibit or
  12-23  limit the distribution of a proportion of the savings from the
  12-24  reduction or elimination of unnecessary medical services,
  12-25  treatment, supplies, confinements, or days of confinement in a
   13-1  health care facility through profit sharing, bonus, or withhold
   13-2  arrangements to participating physicians or participating health
   13-3  care providers for rendering health care services to enrollees;
   13-4              <(2)  establish and maintain a system for:>
   13-5                    <(A)  handling and responding to complaints by
   13-6  enrollees, patients, or health care providers;>
   13-7                    <(B)  providing health care providers with notice
   13-8  of medical necessity or program requirements that have not been
   13-9  met, including a reasonable opportunity to discuss the plan of
  13-10  treatment and clinical basis for a utilization review determination
  13-11  with a physician; and>
  13-12                    <(C)  providing the enrollee, patient, and health
  13-13  care provider an opportunity to appeal the determination; and>
  13-14              <(3)  submit to assessment of maintenance taxes under
  13-15  Article 20A.33, Texas Health Maintenance Organization Act (Article
  13-16  20A.33, Vernon's Texas Insurance Code), to cover the costs of
  13-17  administering compliance of health maintenance organizations under
  13-18  this section.>
  13-19        (h)  An insurer or HMO which delivers or issues for delivery
  13-20  a health insurance policy or coverage agreement in Texas and is
  13-21  subject to this code is not subject to this article except as
  13-22  expressly provided in this subsection and Subsection (i) of this
  13-23  section.  If an insurer performs utilization review as defined
  13-24  herein it shall, as a condition of licensure, comply with Sections
  13-25  4 through 8 of this article, and the board shall promulgate rules
   14-1  for appropriate verification and enforcement of compliance.  If a
   14-2  health maintenance organization performs utilization review as
   14-3  defined herein, it shall, as a condition of licensure, comply with
   14-4  this article, and the board shall promulgate rules for appropriate
   14-5  verification and enforcement of compliance.  Such insurers and HMOs
   14-6  shall be subject to assessment of maintenance tax under Article
   14-7  4.17 of this code or Article 20A.33, Texas Health Maintenance
   14-8  Organization Act, to cover the costs of administering compliance of
   14-9  insurers and HMOs under this section.
  14-10        (i)  However, when an insurer subject to this code or a
  14-11  health maintenance organization performs utilization review for a
  14-12  person or entity subject to this article other than one for which
  14-13  it is the payor, such insurer or health maintenance organization
  14-14  shall be required to obtain a certificate under Section 3 of this
  14-15  article and comply with all the provisions of this article.
  14-16        SECTION 3.  Subchapter G. Chapter 21, Insurance Code, as
  14-17  added by Section 1 of this Act, takes effect June 1, 1996.
  14-18        SECTION 4.  The importance of this legislation and the
  14-19  crowded condition of the calendars in both houses create an
  14-20  emergency and an imperative public necessity that the
  14-21  constitutional rule requiring bills to be read on three several
  14-22  days in each house be suspended, and this rule is hereby suspended.