1-1 By: Smithee, et al. (Senate Sponsor - Turner) H.B. No. 2766
1-2 (In the Senate - Received from the House May 15, 1995;
1-3 May 17, 1995, read first time and referred to Committee on Economic
1-4 Development; May 22, 1995, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 8, Nays 1;
1-6 May 22, 1995, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 2766 By: Sibley
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to providing fairness and choice to patients and providers
1-11 under managed care health benefit plans.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Chapter 21, Insurance Code, is amended by adding
1-14 Subchapter G to read as follows:
1-15 SUBCHAPTER G. PATIENT PROTECTION ACT
1-16 Art. 21.101. SHORT TITLE. This subchapter may be cited as
1-17 the Patient Protection Act.
1-18 Art. 21.102. DEFINITIONS. In this subchapter:
1-19 (1) "Commissioner" means the Commissioner of
1-20 Insurance.
1-21 (2) "Emergency care services" means medical services
1-22 provided for an emergency medical condition.
1-23 (3) "Emergency medical condition" means:
1-24 (A) a medical condition manifesting itself by
1-25 acute symptoms of sufficient severity, including severe pain, so
1-26 that the absence of immediate medical attention could reasonably be
1-27 expected to result in:
1-28 (i) placing the health of the individual
1-29 or, if the individual is a pregnant woman, the health of the woman
1-30 or her unborn child, in serious jeopardy;
1-31 (ii) serious impairment to a bodily
1-32 function; or
1-33 (iii) serious dysfunction of an organ or
1-34 part of the body; or
1-35 (B) with respect to a pregnant woman who is
1-36 having contractions:
1-37 (i) that there is inadequate time to
1-38 effect a safe transfer to another hospital before delivery; or
1-39 (ii) that transfer to another hospital may
1-40 pose a threat to the health or safety of the woman or the unborn
1-41 child.
1-42 (4) "Managed care entity" means an insurance company
1-43 authorized to do business in this state only to the extent that the
1-44 insurance company is engaged in providing a managed care plan, a
1-45 group hospital service corporation licensed under Chapter 20 of
1-46 this code, or a health maintenance organization licensed under the
1-47 Texas Health Maintenance Organization Act (Chapter 20A, Vernon's
1-48 Texas Insurance Code).
1-49 (5) "Managed care plan" means a plan operated by a
1-50 managed care entity that provides for the financing and delivery of
1-51 health care services to persons enrolled in the plan through:
1-52 (A) arrangements with selected providers to
1-53 furnish health care services;
1-54 (B) explicit standards for the selection of
1-55 participating providers;
1-56 (C) organizational arrangements for ongoing
1-57 quality assurance, utilization review, and dispute resolution; or
1-58 (D) differential coverage or payments or
1-59 financial incentives for a person enrolled in the plan to use the
1-60 participating providers and procedures provided by the plan.
1-61 The term "managed care plan" or "plan" does not include
1-62 accident-only; specified disease; individual hospital indemnity;
1-63 credit; dental-only; vision only; long-term care; disability
1-64 income; insurance coverage issued as a supplement to liability
1-65 insurance; CHAMPUS supplement; workers' compensation, or other
1-66 similar insurance; or automobile medical payment insurance.
1-67 (6) "Prospective enrollee" means an individual
1-68 eligible for enrollment in a managed care plan offered by that
2-1 individual's employer.
2-2 (7) "Provider" means a physician, dentist, podiatrist,
2-3 pharmacist, optometrist, psychologist, clinical social worker,
2-4 advanced nurse practitioner, and chiropractor.
2-5 (8) "Physician" means a person licensed as a physician
2-6 by the Texas State Board of Medical Examiners.
2-7 (9) "Dentist" means a person licensed to practice
2-8 dentistry by the Texas State Board of Dental Examiners.
2-9 Art. 21.103. STANDARDS. The commissioner may adopt rules
2-10 regarding standards ensuring compliance with this subchapter by
2-11 managed care entities that conduct business in this state. The
2-12 commissioner may appoint an advisory committee to assist in the
2-13 implementation of this Act.
2-14 Art. 21.104. ENROLLEE INFORMATION. (a) A managed care
2-15 entity shall provide a prospective enrollee a written plan
2-16 description of the terms and conditions of the plan. The written
2-17 plan description must be in a readable and understandable format
2-18 and must include:
2-19 (1) coverage provisions;
2-20 (2) benefits, including prescription drug coverage,
2-21 both generic and brand name;
2-22 (3) any exclusions by category of service, provider,
2-23 and, if applicable, by specific service or types of drugs;
2-24 (4) any prior authorization, including procedures for
2-25 and limitations or restrictions on referrals to providers other
2-26 than primary care physicians or dentists, or other review
2-27 requirements, including preauthorization review, concurrent review,
2-28 postservice review, and postpayment review;
2-29 (5) an explanation of enrollee financial
2-30 responsibility for payment for coinsurance or other noncovered or
2-31 out-of-plan services;
2-32 (6) a disclosure to prospective enrollees that
2-33 includes the following language:
2-34 YOUR RIGHTS UNDER TEXAS LAW:
2-35 "You have the right to information about the plan, including
2-36 how the plan operates, what general types of financial arrangements
2-37 exist between providers and the plan, names and locations of
2-38 providers, the numbers of enrollees and providers in the plan, the
2-39 percentage of premiums allocated for medical care, administrative
2-40 costs and profit, and an explanation of the benefits to which
2-41 participants are entitled under the terms of the plan."; and
2-42 (7) a phone number and address for the prospective
2-43 enrollee to obtain additional information concerning the items
2-44 described by Subdivision (6) of this subsection.
2-45 (b) The managed care entity may provide the information
2-46 under Subsection (a)(6) of this article regarding the percentage of
2-47 premiums allocated for medical care, administrative costs, and
2-48 profit by providing the information in the entity's annual
2-49 financial statement most recently submitted to the department.
2-50 (c) The managed care entity shall demonstrate that each
2-51 covered enrollee has adequate access through the entity's provider
2-52 network to all items and services contained in the package of
2-53 benefits for which coverage is provided. The access must be
2-54 adequate considering the diverse needs of enrollees.
2-55 (d) If the managed care plan uses a capitation method of
2-56 compensation, the plan must establish and follow procedures that
2-57 ensure that:
2-58 (1) each plan application form includes a space in
2-59 which each enrollee selects a primary care physician or dentist;
2-60 (2) each enrollee who fails to select a primary care
2-61 physician or dentist and is assigned a physician or dentist is
2-62 notified of the name and location of that physician or dentist; and
2-63 (3) a primary care physician or dentist to whom an
2-64 enrollee is assigned is physically located within a reasonable
2-65 travel distance, as established by rule adopted by the
2-66 commissioner, from the residence or place of employment of the
2-67 enrollee.
2-68 Art. 21.105. NETWORK CONFIGURATION. The managed care entity
2-69 shall provide to the commissioner, for information, an explanation
2-70 of the targeted physician, dentist, and as appropriate, other
3-1 provider network configuration, including geographic distribution
3-2 of physicians and dentists by specialty, and other providers, as
3-3 appropriate. Such information required by this subsection shall be
3-4 updated at least annually and:
3-5 (1) on establishment of a new managed care plan;
3-6 (2) on expansion of a service area; and
3-7 (3) when the network configuration targets are
3-8 significantly modified.
3-9 Nothing herein shall require a particular ratio for any type of
3-10 provider. The information shall be available to the public by the
3-11 department on request. The department may charge a reasonable fee
3-12 for providing the information.
3-13 Art. 21.106. HOSPITAL PARTICIPATION. In the development of
3-14 the plan's criteria for hospital participation, if a hospital is
3-15 certified by the Medicare program under Title XVIII, Social
3-16 Security Act, as amended (42 U.S.C. Section 1395 et seq) or
3-17 accredited by the Joint Commission on Accreditation of Health Care
3-18 Organizations, the managed care plan shall accept such
3-19 certification or accreditation. This article does not prohibit a
3-20 managed care plan from establishing additional criteria for
3-21 hospital participation.
3-22 Art. 21.107. FINANCIAL INCENTIVE PROGRAMS. A managed care
3-23 plan may not use a financial incentive program that limits
3-24 medically necessary and appropriate services.
3-25 Art. 21.108. PARTICIPATING PROVIDERS. (a) Each managed
3-26 care plan shall establish a mechanism under which physicians or
3-27 dentists participating in the plan provide consultation and advice
3-28 on the plan's medical or dental policy, including coverage of new
3-29 technology and procedures, the development and use of a
3-30 prescription drug formulary, utilization review criteria and
3-31 procedures, quality and credentialing criteria, and medical or
3-32 dental management procedures. Other participating providers shall
3-33 be given an opportunity to comment on the plan's policies affecting
3-34 their services. Each managed care plan on request shall make
3-35 available and disclose to providers the application process and
3-36 qualification requirements for participation in the plan. The plan
3-37 must give a provider not selected on initial application each
3-38 reason the initial application was denied.
3-39 (b) Each physician or dentist under consideration for
3-40 inclusion in a managed care plan shall be reviewed by a
3-41 credentialing committee composed primarily of network participating
3-42 physicians or dentists. Other providers may be credentialed, if
3-43 appropriate, as determined by the plan. When a provider, other
3-44 than a physician or dentist, is credentialed by the plan, the
3-45 credentialing committee shall include providers with the same
3-46 license.
3-47 (c) Credentialing of providers shall be based on identified
3-48 standards developed after consultation with providers credentialed
3-49 in the plan. The managed care plan shall make the credentialing
3-50 standards available to applicants.
3-51 (d) If economic considerations are part of the decision to
3-52 select a provider or terminate a contract with a provider, the plan
3-53 shall use identified criteria which shall be available to
3-54 applicants and participating providers. If the plan uses an
3-55 economic profile of a provider, the plan must adjust the profile to
3-56 recognize the characteristics of a provider's practice that may
3-57 account for variations from expected costs.
3-58 (e) A managed care plan that conducts or uses economic
3-59 profiling of providers within the plan shall, on a periodic basis,
3-60 make the profile available to the provider profiled.
3-61 (f) Unless specifically required by this act, a managed care
3-62 plan is not required to disclose proprietary information regarding
3-63 marketplace strategies.
3-64 (g) A managed care plan may not exclude a provider solely
3-65 because of the provider's specialty practice or the anticipated
3-66 characteristics of the patients of that provider.
3-67 (h) Before terminating a contract with a provider, the
3-68 managed care plan shall provide a written explanation of the
3-69 reasons for termination, an opportunity for discussion, and an
3-70 opportunity to enter into and complete a corrective action plan, if
4-1 appropriate, as determined by the plan. Except in cases in which
4-2 there is imminent harm to patient health or an action by a state
4-3 medical, dental, or other provider licensing board or other
4-4 government agency that effectively impairs the provider's ability
4-5 to practice medicine, dentistry, or another health care profession
4-6 or in cases of fraud or malfeasance, on request and before the
4-7 effective date of the termination, the provider is entitled to a
4-8 review of the plan's proposed action by a plan advisory panel. For
4-9 a physician or a dentist, the plan advisory panel must be primarily
4-10 composed of the physician's or dentist's peers. If the review
4-11 involves another type of provider, the plan advisory panel must
4-12 include providers with the same license. Such review may include
4-13 the appropriateness and requirements of a corrective action plan.
4-14 The decision of the advisory panel shall be considered but is not
4-15 binding on the plan.
4-16 (i) If the action that is under consideration is of a type
4-17 that must be reported to the National Practitioner Data Bank or a
4-18 state medical or dental board under federal or state law, the
4-19 physician's or dentist's procedural rights must meet the standards
4-20 set forth in the federal Health Care Quality Improvement Act of
4-21 1986 (42 U.S.C. Section 11101 et seq.). For purposes of this
4-22 subsection, a managed care entity shall be considered a health care
4-23 entity as defined by Section 1.03, Medical Practice Act (Article
4-24 4495b, Vernon's Texas Civil Statutes).
4-25 (j) A communication relating to the subject matter provided
4-26 for under Subsections (a) and (h) of Article 21.108 may not be the
4-27 basis for a cause of action for libel or slander except for
4-28 disclosures or communications with parties other than the plan or
4-29 provider.
4-30 (k) The managed care plan shall establish reasonable
4-31 procedures for assuring a transition of enrollees of the plan to
4-32 new providers.
4-33 (l) If a contract with a provider is terminated by a managed
4-34 care plan, the plan shall reimburse the provider the reasonable
4-35 cost for copies of medical or dental records that are furnished to
4-36 another provider at the patient's request. If a provider
4-37 terminates the contract with the plan, the provider shall bear the
4-38 reasonable cost of providing copies of medical or dental records
4-39 that are furnished to another provider at the patient's request.
4-40 (m) This subchapter does not prohibit a managed care plan
4-41 from rejecting an application from a provider based on the
4-42 determination that the plan has sufficient qualified providers.
4-43 (n) A managed care plan may charge to a provider, other than
4-44 a physician or dentist:
4-45 (1) a reasonable application fee to cover the cost of
4-46 processing applications and informing the provider of selection or
4-47 nonselection under the plan;
4-48 (2) a reasonable credentialing fee to cover the cost
4-49 of the credentialing process; and
4-50 (3) a reasonable fee for providing to a provider a
4-51 copy of credentialing standards, identified criteria for selection,
4-52 and economic profiles requested by the provider.
4-53 Art. 21.109. EMERGENCY SERVICES. A managed care plan shall:
4-54 (1) cover emergency care services provided to covered
4-55 individuals, without regard to whether the provider furnishing the
4-56 services has a contractual or other arrangement with the entity to
4-57 provide items or services to covered individuals, including the
4-58 treatment and stabilization of an emergency medical condition;
4-59 (2) provide that the prior authorization requirement
4-60 for medically necessary services provided or originating in a
4-61 hospital emergency room following treatment or stabilization of an
4-62 emergency medical condition are approved unless denied in the time
4-63 appropriate to the circumstances relating to the delivery of the
4-64 services and the condition of the patient, as determined by the
4-65 treating provider and communicated to the plan; and
4-66 (3) cover any medical screening examination to
4-67 determine whether an emergency medical condition exists or other
4-68 evaluation required by state or federal law to be provided in the
4-69 emergency room of a hospital.
4-70 Art. 21.110. PRIOR AUTHORIZATION; CONSENT. A plan for which
5-1 prior authorization is a condition to coverage of a service must
5-2 ensure that enrollees are required to sign medical and dental
5-3 information release consent forms on enrollment.
5-4 Art. 21.111. UTILIZATION REVIEW. A managed care plan is
5-5 subject to and shall meet the requirements of Article 21.58A of
5-6 this code.
5-7 Art. 21.112. POINT OF SERVICE OFFERING. (a) When a health
5-8 maintenance organization has a point-of-service plan available in a
5-9 service area and is the only entity providing services under a
5-10 health benefit plan, it must offer to all eligible enrollees the
5-11 opportunity to obtain coverage for out-of-network services through
5-12 the point-of-service plan as defined by Subsection (b) of this
5-13 article, at the time of enrollment and at least annually
5-14 thereafter.
5-15 (b) For purposes of this subchapter, a "point-of-service
5-16 plan" means a plan provided through an arrangement whereby
5-17 indemnity benefits for the cost of health care services, other than
5-18 emergency care services, are provided by an insurer or group
5-19 hospital service corporation in conjunction with corresponding
5-20 benefits arranged or provided by a health maintenance organization,
5-21 including a single service health maintenance organization. An
5-22 individual may choose to obtain benefits or services under either
5-23 the indemnity plan or the health maintenance organization plan in
5-24 accordance with specific provisions of a point-of-service contract.
5-25 (c) The premium for the point-of-service plan shall be based
5-26 on the actuarial value of such coverage.
5-27 (d) Any additional costs for the point-of-service plan shall
5-28 be the responsibility of the enrollee, and the employer may impose
5-29 a reasonable administrative cost for providing the point-of-service
5-30 option.
5-31 (e) When five percent or less of the group's eligible
5-32 employees elect to purchase the point-of-service option, the plan
5-33 shall not be required to offer the point-of-service option during
5-34 subsequent open enrollment periods.
5-35 (f) This Article shall not apply to a small employer as
5-36 defined in Article 26.02, Insurance Code.
5-37 Art. 21.113. PRIVATE CAUSE OF ACTION. This subchapter and
5-38 rules adopted under this subchapter do not:
5-39 (1) provide a private cause of action for damages or
5-40 create a standard of care, obligation, or duty that provides a
5-41 basis for a private cause of action for damages; or
5-42 (2) abrogate a statutory or common law cause of
5-43 action, administrative remedy, or defense otherwise available and
5-44 existing before June 1, 1996.
5-45 Art. 21.114. ANNUAL PERFORMANCE REPORT. (a) The office of
5-46 public insurance counsel shall issue an annual report to consumers
5-47 on the performance of managed care entities.
5-48 (b) The office of public insurance counsel shall have access
5-49 to:
5-50 (1) information provided under Article 21.105 of this
5-51 code;
5-52 (2) information contained in complaints relating to
5-53 managed care entities made to the department or to the Texas
5-54 Department of Health, provided that the office shall maintain as
5-55 confidential any information in the complaint that relates to a
5-56 patient or that is made confidential by another law; and
5-57 (3) any statistical information relating to
5-58 utilization, quality assurance, and complaints that a health
5-59 maintenance organization is required to maintain under rules
5-60 adopted by the commissioner or the Texas Department of Health.
5-61 (c) The office of public insurance counsel shall provide a
5-62 copy of the report to a person on request on payment of a
5-63 reasonable fee. The public insurance counsel shall set the fee in
5-64 the amount necessary to defray the cost of producing the report.
5-65 SECTION 2. Section 4(i), Article 21.58A, Insurance Code, is
5-66 amended to read as follows:
5-67 (i) Each utilization review agent shall utilize written
5-68 medically acceptable screening criteria and review procedures which
5-69 are established and periodically evaluated and updated with
5-70 appropriate involvement from physicians, including practicing
6-1 physicians, and other health care providers. The screening
6-2 criteria and review procedures must include guidelines for appeals
6-3 on behalf of a person with a special circumstance, such as a
6-4 disability or life-threatening illness, who is denied services as a
6-5 result of established conditions of the plan, limitations of
6-6 coverage, network configuration, or requirements for participating
6-7 specialists. Such written screening criteria and review procedures
6-8 shall be available for review and inspection by the commissioner
6-9 and copying as necessary for the commissioner to carry out his or
6-10 her lawful duties under this code, provided, however, that any
6-11 information obtained or acquired under the authority of this
6-12 subsection and article is confidential and privileged and not
6-13 subject to the open records law or subpoena except to the extent
6-14 necessary for the board or commissioner to enforce this article.
6-15 SECTION 3. Sections 14(g) and (h), Article 21.58A, Insurance
6-16 Code, are amended to read as follows:
6-17 (g) This <A health maintenance organization is not subject
6-18 to this article except as expressly provided in this subsection and
6-19 Subsection (i) of this section. If such health maintenance
6-20 organization performs utilization review as defined herein, it
6-21 shall, as a condition of licensure:>
6-22 <(1) comply with Sections 4(b), (c), (e), (f), (h),
6-23 (i), and (l) of this article, and the board shall promulgate rules
6-24 for appropriate verification and enforcement of compliance.
6-25 However, nothing in this> article does not <shall be construed to>
6-26 prohibit or limit the distribution of a proportion of the savings
6-27 from the reduction or elimination of unnecessary medical services,
6-28 treatment, supplies, confinements, or days of confinement in a
6-29 health care facility through profit sharing, bonus, or withhold
6-30 arrangements to participating physicians or participating health
6-31 care providers for rendering health care services to enrollees<;>
6-32 <(2) establish and maintain a system for:>
6-33 <(A) handling and responding to complaints by
6-34 enrollees, patients, or health care providers;>
6-35 <(B) providing health care providers with notice
6-36 of medical necessity or program requirements that have not been
6-37 met, including a reasonable opportunity to discuss the plan of
6-38 treatment and clinical basis for a utilization review determination
6-39 with a physician; and>
6-40 <(C) providing the enrollee, patient, and health
6-41 care provider an opportunity to appeal the determination; and>
6-42 <(3) submit to assessment of maintenance taxes under
6-43 Article 20A.33, Texas Health Maintenance Organization Act (Article
6-44 20A.33, Vernon's Texas Insurance Code), to cover the costs of
6-45 administering compliance of health maintenance organizations under
6-46 this section>.
6-47 (h) An insurer or health maintenance organization which
6-48 delivers or issues for delivery a health insurance policy or
6-49 evidence of coverage in Texas and is subject to this code is not
6-50 subject to this article except as expressly provided in this
6-51 subsection and Subsection (i) of this section. If an insurer
6-52 performs utilization review as defined herein it shall, as a
6-53 condition of licensure, comply with Sections 4 through 8 of this
6-54 article, and the board shall promulgate rules for appropriate
6-55 verification and enforcement of compliance. If a health
6-56 maintenance organization performs utilization review as defined in
6-57 this article, it shall, as a condition of licensure, comply with
6-58 this article, and the board shall adopt rules for appropriate
6-59 verification and enforcement of compliance. Such insurers and
6-60 health maintenance organizations shall be subject to assessment of
6-61 maintenance tax under Article 4.17 of this code or Section 33,
6-62 Texas Health Maintenance Organization Act (Article 20A.33, Vernon's
6-63 Texas Insurance Code), to cover the costs of administering
6-64 compliance of insurers and health maintenance organizations under
6-65 this section.
6-66 SECTION 4. Section 161.091(f), Health and Safety Code, is
6-67 amended to read as follows:
6-68 (f) This section shall not apply to licensed insurers,
6-69 governmental entities, including intergovernmental risk pools
6-70 established under Chapter 172, Local Government Code, and
7-1 institutions as defined in the Texas State College and University
7-2 Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
7-3 Texas Insurance Code), group hospital service corporations,
7-4 preferred provider organizations, or health maintenance
7-5 organizations which reimburse, provide, offer to provide, or
7-6 administer hospital, medical, dental, or other health-related
7-7 benefits under a health benefits plan for which it is the payor.
7-8 SECTION 5. (a) This Act takes effect September 1, 1995.
7-9 (b) This Act applies only to coverage under a managed care
7-10 plan that is delivered, issued for delivery, or renewed on or after
7-11 June 1, 1996. Coverage under a managed care plan that is
7-12 delivered, issued for delivery, or renewed before June 1, 1996, is
7-13 governed by the law as it existed immediately before the effective
7-14 date of this Act, and that law is continued in effect for that
7-15 purpose.
7-16 (c) This Act applies only to credentialing of health care
7-17 providers under a managed care plan on or after June 1, 1996.
7-18 Credentialing of health care providers before June 1, 1996, is
7-19 governed by the law as it existed immediately before the effective
7-20 date of this Act, and that law is continued in effect for that
7-21 purpose.
7-22 (d) Subdivision (4) of Article 21.102, Insurance Code, as
7-23 added by Section 1 of this Act, takes effect only if H.B. 3111,
7-24 74th Legislature, Regular Session, or similar legislation
7-25 authorizing nonprofit health corporations, does not become law. If
7-26 H.B. 3111 or similar legislation does become law, that provision,
7-27 as added by Section 1 of this Act, has no effect.
7-28 (e) Contingent on the passage of H.B. 3111, 74th
7-29 Legislature, Regular Session, or similar legislation authorizing
7-30 nonprofit health corporations, Article 21.102, Insurance Code, as
7-31 added by this Act, is amended by adding Subdivision (4) to read as
7-32 follows:
7-33 (4) "Managed care entity" means an insurance company
7-34 authorized to do business in this state only to the extent that the
7-35 insurance company is engaged in providing a managed care plan, a
7-36 group hospital service corporation licensed under Chapter 20 of
7-37 this code, an approved nonprofit health corporation that holds a
7-38 certificate of authority under Article 21.52F, Insurance Code, or a
7-39 health maintenance organization licensed under the Texas Health
7-40 Maintenance Organization Act (Chapter 20A, Vernon's Texas Insurance
7-41 Code).
7-42 SECTION 6. The importance of this legislation and the
7-43 crowded condition of the calendars in both houses create an
7-44 emergency and an imperative public necessity that the
7-45 constitutional rule requiring bills to be read on three several
7-46 days in each house be suspended, and this rule is hereby suspended.
7-47 * * * * *