1-1 By: Patterson S.B. No. 202
1-2 (In the Senate - Filed January 12, 1995; January 18, 1995,
1-3 read first time and referred to Committee on Economic Development;
1-4 April 28, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; April 28, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 202 By: Patterson
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the provision of certain services provided through
1-11 health maintenance organizations.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 2, Texas Health Maintenance Organization
1-14 Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by
1-15 amending Subsections (a), (e), (m), (n), and (s) and by adding
1-16 Subsections (u), (v), (w), (x), (y), (z), (aa), and (bb) to read as
1-17 follows:
1-18 (a) "Basic health care services" means health care services
1-19 which an enrolled population might reasonably require in order to
1-20 be maintained in good health, including, as a minimum, preventive
1-21 care, emergency care, inpatient and outpatient hospital and medical
1-22 services, and diagnostic laboratory and diagnostic and therapeutic
1-23 radiological <outpatient medical> services.
1-24 (e) "Evidence of coverage" means any certificate, agreement,
1-25 or contract, including a blended contract, issued to an enrollee
1-26 setting out the coverage to which the enrollee is entitled.
1-27 (m) "Physician" means:
1-28 (1) an individual <anyone> licensed to practice
1-29 medicine in this state;
1-30 (2) a professional association organized under the
1-31 Texas Professional Association Act (Article 1528f, Vernon's Texas
1-32 Civil Statutes) or a nonprofit corporation certified under Section
1-33 5.01, Medical Practice Act (Article 4495b, Vernon's Texas Civil
1-34 Statutes); or
1-35 (3) another person wholly owned by physicians <the
1-36 State of Texas>.
1-37 (n) "Provider" means:
1-38 (1) any person <practitioner> other than a physician,
1-39 including <such as> a licensed doctor of chiropractic, registered
1-40 nurse, pharmacist, optometrist, pharmacy, hospital, or other
1-41 institution or organization or person that <furnishes health care
1-42 services, who> is licensed or otherwise authorized to provide a
1-43 health care service <practice> in this state;
1-44 (2) a person who is wholly owned or controlled by a
1-45 person described by Subdivision (1) of this subsection or by a
1-46 group of those persons who are licensed to provide the same health
1-47 care service; or
1-48 (3) a person who is wholly owned or controlled by one
1-49 or more hospitals and physicians, including a physician-hospital
1-50 organization.
1-51 (s) "Single health care service plan" means a plan under
1-52 which any person undertakes to provide, arrange for, pay for, or
1-53 reimburse any part of the cost of a single health care service,
1-54 provided<,> that a part of the plan consists of arranging for or
1-55 the provision of the single health care service<,> as distinguished
1-56 from an indemnification against the cost of that service, on a
1-57 prepaid basis through insurance or otherwise and that no part of
1-58 that plan consists of arranging for the provision of more than one
1-59 health care need of a single specified nature. A plan that
1-60 provides only chemical dependency services under Article 3.51-9,
1-61 Insurance Code, or mental health services under Article 3.51-14,
1-62 Insurance Code, or both services, is a single health care service
1-63 plan.
1-64 (u) "Point of service arrangement" means an arrangement
1-65 under which:
1-66 (1) an individual may choose to obtain benefits,
1-67 services, or both benefits and services, other than emergency care
1-68 services, under either an indemnity plan or a health care plan
2-1 provided by a health maintenance organization in accordance with
2-2 specific provisions of a point of service contract; and
2-3 (2) indemnity benefits for the cost of the health care
2-4 services, other than emergency care services, are provided by an
2-5 insurer or group hospital service corporation in conjunction with
2-6 corresponding benefits arranged or provided by a health maintenance
2-7 organization, including a single service health maintenance
2-8 organization.
2-9 (v) "Blended contract" means a single document, including a
2-10 single contract, policy, certificate, or evidence of coverage, that
2-11 provides a combination of indemnity and health care plan benefits.
2-12 (w) "Capitation" means a method of compensating a physician,
2-13 group of physicians, provider, group of providers, independent
2-14 physician association, or health maintenance organization based on
2-15 a predetermined payment for an enrollee for a month, applicable to
2-16 certain enrollees in exchange for arranging for or providing, and
2-17 guaranteeing the provision of, a defined set of covered health care
2-18 services to those enrollees for a specified period of time, without
2-19 regard to the amount of services actually provided.
2-20 (x) "Capitated person" means a physician, group of
2-21 physicians, or provider or agent for a physician, group of
2-22 physicians, or provider who is compensated by capitation under this
2-23 Act.
2-24 (y) "Subscriber" means an individual whose employment or
2-25 other status, other than family dependency, is the basis for
2-26 enrollment in the health maintenance organization.
2-27 (z) "Independent physician association" means an organized
2-28 prepaid health care system that contracts directly with one or more
2-29 of the following entities:
2-30 (1) physicians in independent practice;
2-31 (2) one or more associations of physicians in
2-32 independent practice; or
2-33 (3) one or more specialty group practices.
2-34 (aa) "Single service health maintenance organization" means
2-35 a health maintenance organization that arranges for or provides a
2-36 single health care service plan.
2-37 (bb) "Health maintenance organization delivery network"
2-38 means a health care delivery system in which a health maintenance
2-39 organization arranges for health care services directly or
2-40 indirectly through contracts and subcontracts with providers and
2-41 physicians.
2-42 SECTION 2. Subsection (a), Section 6, Texas Health
2-43 Maintenance Organization Act (Article 20A.06, Vernon's Texas
2-44 Insurance Code), is amended to read as follows:
2-45 (a) The powers of a health maintenance organization include,
2-46 but are not limited to, the following:
2-47 (1) the purchase, lease, construction, renovation,
2-48 operation, or maintenance of hospitals, medical facilities, or
2-49 both, and ancillary equipment and such property as may reasonably
2-50 be required for its principal office or for such other purposes as
2-51 may be necessary in the transaction of the business of the health
2-52 maintenance organization;
2-53 (2) the making of loans to a medical group, under an
2-54 independent contract with it in furtherance of its program, or
2-55 corporations under its control, for the purpose of acquiring or
2-56 constructing medical facilities and hospitals, or in the
2-57 furtherance of a program providing health care services to
2-58 enrollees;
2-59 (3) the furnishing of or arranging for medical care
2-60 services only through other health maintenance organizations or
2-61 physicians or groups of physicians who have independent contracts
2-62 with a <the> health maintenance organization <organizations>; the
2-63 furnishing of or arranging for the delivery of health care services
2-64 only through other health maintenance organizations or providers or
2-65 groups of providers who are under contract with or employed by a
2-66 <the> health maintenance organization or through other health
2-67 maintenance organizations or physicians or providers who have
2-68 contracted for health care services with those other health
2-69 maintenance organizations or physicians or providers, except for
2-70 the furnishing of or authorization for emergency services, services
3-1 by referral, and services to be provided outside of the service
3-2 area as approved by the commissioner; provided, however, that a
3-3 health maintenance organization is not authorized to employ or
3-4 contract with other health maintenance organizations or physicians
3-5 or providers in any manner which is prohibited by any licensing law
3-6 of this state under which such health maintenance organizations or
3-7 physicians or providers are licensed;
3-8 (4) the contracting with any person for the
3-9 performance on its behalf of certain functions such as marketing,
3-10 enrollment, and administration;
3-11 (5) the contracting with an insurance company licensed
3-12 in this state, or with a group hospital service corporation
3-13 authorized to do business in the state, for the provision of
3-14 insurance, reinsurance, indemnity, or reimbursement against the
3-15 cost of health care and medical care services provided by the
3-16 health maintenance organization;
3-17 (6) the offering of:
3-18 (A) indemnity benefits covering out-of-area
3-19 emergency services; <and>
3-20 (B) indemnity benefits in addition to those
3-21 relating to out-of-area and emergency services, provided through
3-22 insurers or group hospital service corporations;
3-23 (C) a point of service arrangement by
3-24 contracting with an insurer or group hospital service corporation
3-25 to provide indemnity benefits, including optional coverages for
3-26 out-of-area services or out-of-network care;
3-27 (D) a blended contract to an enrollee; and
3-28 (E) an evidence of coverage, as a single
3-29 document, that provides for coverage under one or more health care
3-30 plans or single health care service plans;
3-31 (7) receiving and accepting from government or private
3-32 agencies payments covering all or part of the cost of the services
3-33 provided or arranged for by the organization;
3-34 (8) the paying of compensation to a physician,
3-35 independent physician association, provider, or other health
3-36 maintenance organization based on a fee-for-service arrangement, a
3-37 risk-sharing arrangement, or a capitation arrangement;
3-38 (9) the furnishing of or arranging for mental health
3-39 services under Article 3.51-14, Insurance Code, or chemical
3-40 dependency services under Article 3.51-9, Insurance Code, through a
3-41 contract with a single service health maintenance organization; and
3-42 (10) all powers given to corporations (including
3-43 professional corporations and associations), partnerships, and
3-44 associations pursuant to their organizational documents which are
3-45 not in conflict with provisions of this Act, or other applicable
3-46 law.
3-47 SECTION 3. Section 9, Texas Health Maintenance Organization
3-48 Act (Article 20A.09, Vernon's Texas Insurance Code), is amended by
3-49 amending Subsections (b) and (f) and by adding Subsection (k) to
3-50 read as follows:
3-51 (b) The formula or method for calculating the schedule of
3-52 charges for enrollee coverage for medical services or health care
3-53 services must be filed with the commissioner before it is used in
3-54 conjunction with any health care plan. The formula or method must
3-55 be established in accordance with actuarial principles for the
3-56 various categories of enrollees. The charges resulting from the
3-57 application of the formula or method may not be altered for an
3-58 individual enrollee based on the status of that enrollee's health,
3-59 except that the charges may be based on the age and gender of an
3-60 individual enrollee and the enrollee's dependents for an individual
3-61 contract. The formula or method must produce charges that are not
3-62 excessive, inadequate, or unfairly discriminatory, and benefits
3-63 must be reasonable with respect to the rates produced by the
3-64 formula or method. A statement by a qualified actuary that
3-65 certifies the appropriateness of the formula or method must
3-66 accompany the filing together with supporting information
3-67 considered adequate by the commissioner.
3-68 (f) Article 3.51-9, <of the Texas> Insurance Code, applies
3-69 to health maintenance organizations offering basic health care
3-70 services and to single service <other than those> health
4-1 maintenance organizations offering chemical dependency services
4-2 <only a single health care service plan>.
4-3 (k) A health maintenance organization shall offer and make
4-4 available to each enrollee, on termination of coverage, a privilege
4-5 to continue with group coverage or to convert to coverage with at
4-6 least two standard benefit plans established by rule adopted by the
4-7 commissioner. Coverage under this subsection shall be provided
4-8 without:
4-9 (1) evidence of insurability; or
4-10 (2) a new preexisting condition, limitation, or
4-11 exclusion.
4-12 SECTION 4. Section 22, Texas Health Maintenance Organization
4-13 Act (Article 20A.22, Vernon's Texas Insurance Code), is amended by
4-14 adding Subsections (c) and (d) to read as follows:
4-15 (c) The commissioner may adopt rules as the commissioner
4-16 considers to be appropriate concerning:
4-17 (1) standardization of benefits for coverage offered
4-18 by a health maintenance organization, including conversion,
4-19 continuation, and individual coverage; and
4-20 (2) formulas and methods for calculating the schedule
4-21 of charges for enrollee coverage issued on a group and an
4-22 individual basis.
4-23 (d) The rulemaking authority granted by Subsection (c) of
4-24 this section does not limit the rulemaking authority granted under
4-25 Subsection (a) of this section.
4-26 SECTION 5. Subsection (f), Section 26, Texas Health
4-27 Maintenance Organization Act (Article 20A.26, Vernon's Texas
4-28 Insurance Code), is amended by adding Subdivision (5) to read as
4-29 follows:
4-30 (5) This Act does not apply to a person to the extent
4-31 that person is a physician, group of physicians, or provider who
4-32 provides or arranges to provide health care services or medical
4-33 care directly or indirectly through a contract or subcontract with
4-34 a health maintenance organization that holds a certificate of
4-35 authority under this Act.
4-36 SECTION 6. Subsection (h), Section 26, Texas Health
4-37 Maintenance Organization Act (Article 20A.26, Vernon's Texas
4-38 Insurance Code), is amended to read as follows:
4-39 (h) The <Activities permitted under authority of Chapter
4-40 491, Acts of the 52nd Legislature, 1951, as amended, shall not be
4-41 considered subject to the provisions of this Act nor shall the>
4-42 provisions of the Insurance Code are <Chapter 491, Acts of the 52nd
4-43 Legislature, 1951, be> applicable to organizations permitted under
4-44 the authority of this Act.
4-45 SECTION 7. Article 3.51-14, Insurance Code, is amended by
4-46 adding Section 4 to read as follows:
4-47 Sec. 4. SINGLE SERVICE HEALTH MAINTENANCE ORGANIZATIONS;
4-48 EXCEPTION. (a) In this section, "basic health care services" and
4-49 "single service health maintenance organization" have the meanings
4-50 assigned by Section 2, Texas Health Maintenance Organization Act
4-51 (Article 20A.02, Vernon's Texas Insurance Code).
4-52 (b) An entity subject to Section 2 of this article may
4-53 satisfy the requirements of this article by offering and making
4-54 available the coverage required under this article through a
4-55 contract with a single service health maintenance organization. A
4-56 single service health maintenance organization shall offer and make
4-57 available the same level of coverage under Section 3 of this
4-58 article as is required of a health maintenance organization
4-59 offering basic health care services.
4-60 (c) A single service health maintenance organization that
4-61 provides only mental health services or chemical dependency
4-62 services, or both, is subject to this article and shall offer and
4-63 make available the same level of coverage under Section 3 of this
4-64 article as is required of a health maintenance organization
4-65 offering basic health care services.
4-66 (d) A single service health maintenance organization may
4-67 also offer and make available different levels of coverage for
4-68 mental health services in addition to the level of coverage
4-69 required under Section 3 of this article, but the coverage must be
4-70 at least as favorable as the minimum requirements provided by 42
5-1 C.F.R. Section 417.101(a)(4) for qualification of health
5-2 maintenance organizations.
5-3 SECTION 8. Section 2A, Article 3.51-9, Insurance Code, is
5-4 amended by amending Subsection (e) and by adding Subsection (f) to
5-5 read as follows:
5-6 (e) In <For purposes of> this section:
5-7 (1) "Chemical<, the term "chemical> dependency
5-8 treatment center" means a facility which provides a program for the
5-9 treatment of chemical dependency pursuant to a written treatment
5-10 plan approved and monitored by a physician and which facility is
5-11 also:
5-12 (A) <(1)> affiliated with a hospital under a
5-13 contractual agreement with an established system for patient
5-14 referral; <or>
5-15 (B) <(2)> accredited as such a facility by the
5-16 Joint Commission on Accreditation of Hospitals; <or>
5-17 (C) <(3)> licensed as a chemical dependency
5-18 treatment program by the Texas Commission on Alcohol and Drug
5-19 Abuse; or
5-20 (D) <(4)> licensed, certified, or approved as a
5-21 chemical dependency treatment program or center by any other state
5-22 agency having legal authority to so license, certify, or approve.
5-23 (2) "Single service health maintenance organization"
5-24 has the meaning assigned by Section 2, Texas Health Maintenance
5-25 Organization Act (Article 20A.02, Vernon's Texas Insurance Code).
5-26 (f) An entity subject to this section may provide the
5-27 coverage required under this article through a contract with a
5-28 single service health maintenance organization. A single service
5-29 health maintenance organization shall provide the same level of
5-30 coverage under this section as is required of a health maintenance
5-31 organization offering basic health care services.
5-32 SECTION 9. Subchapter F, Chapter 3, Insurance Code, is
5-33 amended by adding Article 3.64 to read as follows:
5-34 Art. 3.64. INSURERS CONTRACTING WITH HEALTH MAINTENANCE
5-35 ORGANIZATIONS. (a) In this article:
5-36 (1) "Insurance carrier" means an insurance company,
5-37 group hospital service corporation, association, or organization
5-38 authorized to do business in this state under this chapter or
5-39 Chapter 8, 10, 11, 12, 13, 14, 15, 18, 19, 20, or 22 of this code.
5-40 (2) "Health maintenance organization" has the meaning
5-41 assigned by Section 2, Texas Health Maintenance Organization Act
5-42 (Article 20A.02, Vernon's Texas Insurance Code).
5-43 (3) "Point of service arrangement" means an
5-44 arrangement under which:
5-45 (A) an individual may choose to obtain benefits,
5-46 services, or both benefits and services, other than emergency care
5-47 services, under either an indemnity plan or a health care plan
5-48 provided by a health maintenance organization in accordance with
5-49 specific provisions of a point of service contract; and
5-50 (B) indemnity benefits for the cost of the
5-51 health care services, other than emergency care services, are
5-52 provided by an insurer or group hospital service corporation in
5-53 conjunction with corresponding benefits arranged or provided by a
5-54 health maintenance organization, including a single service health
5-55 maintenance organization.
5-56 (4) "Blended contract" means a single document,
5-57 including a single contract, policy, certificate, or evidence of
5-58 coverage, that provides a combination of indemnity and health care
5-59 plan benefits provided by a health maintenance organization.
5-60 (b) An insurance carrier may contract with a health
5-61 maintenance organization to provide a point of service arrangement,
5-62 including optional coverages for out-of-area services or
5-63 out-of-network care.
5-64 (c) An insurance carrier and a health maintenance
5-65 organization may offer a blended contract if indemnity benefits are
5-66 combined with health care plan benefits offered by the health
5-67 maintenance organization. The use of a blended contract is limited
5-68 to point of service arrangements and contracting arrangements
5-69 between an insurance carrier and a single service health
5-70 maintenance organization as approved by the commissioner. An
6-1 insurance carrier may not use a blended contract for a purpose
6-2 other than as provided by this article.
6-3 (d) A blended contract delivered, issued, or used in this
6-4 state is subject to and must be filed with the department for
6-5 approval as provided by Article 3.42 of this code and Section 9,
6-6 Texas Health Maintenance Organization Act (Article 20A.09, Vernon's
6-7 Texas Insurance Code).
6-8 (e) The commissioner may adopt rules to implement this
6-9 article.
6-10 SECTION 10. (a) An existing organization that provides only
6-11 mental health services and substance abuse services that is
6-12 required by the Texas Health Maintenance Organization Act (Chapter
6-13 20A, Vernon's Texas Insurance Code) to apply for a certificate of
6-14 authority to operate as a health maintenance organization shall
6-15 submit an application as provided by the Texas Health Maintenance
6-16 Organization Act (Chapter 20A, Vernon's Texas Insurance Code). The
6-17 application must be postmarked not later than 5 p.m. on December
6-18 31, 1995. An applicant may continue to operate until the
6-19 Commissioner of Insurance acts on the application. If an
6-20 application is denied, the applicant shall be treated as a health
6-21 maintenance organization whose certificate of authority has been
6-22 revoked.
6-23 (b) This Act takes effect September 1, 1995, and applies
6-24 only to an insurance policy, contract, or self-funded or
6-25 self-insured plan, program, or arrangement that is delivered,
6-26 issued for delivery, or renewed on or after January 1, 1996. An
6-27 insurance policy, contract, or self-funded or self-insured plan,
6-28 program, or arrangement that is delivered, issued for delivery, or
6-29 renewed before January 1, 1996, is governed by the law as it
6-30 existed immediately before the effective date of this Act, and
6-31 that law is continued in effect for that purpose.
6-32 SECTION 11. The importance of this legislation and the
6-33 crowded condition of the calendars in both houses create an
6-34 emergency and an imperative public necessity that the
6-35 constitutional rule requiring bills to be read on three several
6-36 days in each house be suspended, and this rule is hereby suspended.
6-37 * * * * *