RS C.S.H.B. 1212 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 1212 By: Averitt 4-3-97 Committee Report (Substituted) BACKGROUND During the 104th Congress, the passage of HR 3103 (Kassebaum/Kennedy) enabled the federal Government to institute several major health insurance reforms related to insurance portability and availability. The federal law requires the state of Texas to adopt certain provisions of the law in order to come into compliance with reforms related to preexisting condition restrictions, portability, and availability of health insurance. PURPOSE As proposed, HB 1212 revises Article 26, Texas Insurance Code, to bring the state of Texas into compliance with Public Law 104-191, the Health Insurance Portability and Accountability Act of 1996. The federal legislation requires states to comply with several major reforms. HB 1212 brings the state of Texas into compliance with the federal law by requiring the implementation of certain reforms. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority be granted to the commissioner of the Texas Department of Insurance under PART 1, SECTION 1.04, Article 26.04; PART 3, SECTION 3.01, Sec. 5, Art. 21.52G; and PART 4, SECTION 4.05, Art. 3.95-15 of this bill. In these sections, the commissioner's rulemaking authority is expanded to include rules necessary to meet minimum requirements of federal law and regulation. SECTION BY SECTION ANALYSIS SECTION 1.01 amends Article 26.01, Texas Insurance Code as follows: _"Short Title" is changed to reflect the broader scope of the bill. "Small Employer" is deleted and replaced with "Portability and." SECTION 1.02 amends definitions related to Art. 26, Insurance Code, to conform with federal law. _Defines: affiliation period, agent, base premium rate, board of directors, case characteristics, class of business, creditable coverage, dependent, eligible employee, health benefit plan, health carrier, health status related factor, index rate, large employer, large employer carrier, large employer health benefit plan, late enrollee, new business premium rate, participation criteria, person, plan of operation, point-of-service contract, preexisting condition provision, premium, rating period, reinsured carrier, risk assuming carrier, small employer, small employer character, small employer health benefit plan, system, waiting period. SECTION 1.03 adds Articles 26.035 and 26.036. _Article 26.035: This specifies the various types of coverage (e.g., self-funded plans, MEWA plans, individual plans, etc.) that are creditable towards preexisting conditions requirements. Also specifies coverages that are not creditable towards preexisting condition requirements (e.g., accident only or disability income insurance, supplements to liability insurance, workers comp., etc.) _Article 26.036: All school districts are eligible to participate in the small employer market plans. SECTION 1.04 amends rulemaking authority (Art. 26.04). The commissioner's rulemaking authority is expanded to include rules necessary to meet minimum requirements of federal law and regulation. SECTION 1.05 changes applicability provisions (Art. 26.06). _The minimum number of three eligible employees changes to two employees. _Eligibility of new employees is determined based on the employer's reasonable expectations of employment levels. SECTION 1.06 allows two or more small or large employers to form a purchasing cooperative (Art. 26.14 (a) & (d)). SECTION 1.07 allows for the inclusion of large employers within the scope of a purchasing cooperative's activities (Art. 26.15(a) & (b)). SECTION 1.08 changes certain small employer plan-related provisions (Art. 26.21 (a), (h), (k), & (n)). _Benefit plans must be offered regardless of health status related factors. _An initial enrollment period must last for an entire calendar month. If the open enrollment month is February, then the enrollment period shall last through March 2nd. _Preexisting condition provisions cannot be imposed for a period in excess of 18 months. _Unnecessary language is deleted. SECTION 1.09 relates to coverage for adopted children (Art 26.21A). _A small employer health plan may not limit or exclude coverage of an adopted child. SECTION 1.10 relates to small employer carriers (Art 26.22(a) & (e)). _A small employer carrier is not required to offer or issue small employer health benefit plans if the carrier demonstrates that it is uniformly offering coverage, regardless of claims experience or health related factors. _A small employer carrier that would be financially impaired (as determined by commissioner) by offering the aforementioned plans cannot offer coverage to small employers until the later of the 180th day after the date the commissioner makes said determination or the date the commissioner determines that no financial impairment would be experienced by the carrier. SECTION 1.11 relates to renewability (Art 26.23(a) & (b)). _Conditions for non-renewal are clarified and include termination in an association as long as the termination is not a health status related factor. SECTION 1.12 relates to discontinuation of coverage (Art. 26.24 (a) & (d)). _It clarifies the conditions under which a small employer carrier may discontinue coverage. _Discontinuation cannot be based on claims experience or health status related factors. SECTION 1.13 relates to notice of covered persons (Art 26.25). _Notice of cancellation by a small employer carrier is in addition to any other notice required by Article 26.23 or 26.24. SECTION 1.14 adds subsection (d) (Art. 26.33). _Small employer carriers may establish reduction in premiums in return for participant adherence to wellness programs, such as disease prevention. SECTION 1.15 relates to disclosure (Art. 26.40) . _Upon request of a small employer, a small employer carrier shall disclose all coverage information for which the employer is qualified. _Proprietary information is not required to be disclosed. _Disclosures must be in layman's terms. SECTION 1.16 relates to preexisting conditions provisions (Art 26.49). _A preexisting condition provision applies if the enrollee received medical advice or treatment within the six months prior to either the effective date of coverage or the first day of the waiting period, whichever is earlier. _Genetic information may not be considered a preex. _Pregnancy may not be considered a preex. _An individual must re-enroll in the plan within 63 days of lapse of coverage in order to avoid a preexisting condition provision. The prior coverage must have been continuous, creditable coverage (defined in SEC. 1.03) that lasted for at least 12 months. _A Health Maintenance Organization (HMO) may impose up to a two-month (maximum) affiliation period for an enrollee (or 90 days maximum for a late enrollee). SECTION 1.17 amends the headings of subchapters C, D, E, F, and G (Chapter 26). Part 2: Provisions Applicable to Large Employers SECTION 2.01: Adds Subchapter H. Large Employer Health Benefit Plans Art. 26.81 Applicability _This subchapter applies if the plan provides benefits to eligible employees of a large employer when the employer pays a portion of the premium, or if the plan is a benefit as described in the Internal Revenue Code, Sec. 106 or 162. _Determination of a new employer's applicability is based on reasonable expectations of employment levels. _This subchapter does not apply to individual policies. Art. 26.82 Certification _Health carriers must certify to the commissioner that it is only offering to large employers a health benefit plan in compliance with this subchapter. Art. 26.83 Coverage Requirements _A large employer carrier may refuse to provide coverage in accordance with the carrier's underwriting standards and criteria. Participation criteria may not be based on health status related factors. _A large employer carrier must accept all eligible employees who elect to participate. The carrier must accept or reject the entire group. _A carrier may not provide coverage to a large employer if the carrier is aware that the employer pressured an eligible employee to not participate. _A carrier may establish minimum contribution and participation requirements if applied uniformly throughout the state. _The initial enrollment period must be at least 31 days. There must be a 31-day annual open enrollment period. _An employer may establish a waiting period. _A late enrollee may be excluded from coverage until the next annual open enrollment period. The late enrollee may be subject to a 12-month preexisting condition provision, not to exceed 18 months from the date of initial application. _A benefit plan may not use a rider or an amendment to exclude coverage for a specific individual in the group. Art. 26.84 Dependent Children _Coverage of a newborn (of a covered employee) terminates on the 32nd day after the child's birth, unless the newborn is eligible for coverage and notification of the birth and premium are received by the carrier within 31 days of the birth. _An adopted child is considered a newborn and is subject to the above conditions. Art. 26.85 Geographic Service Area _A large employer carrier is not required to offer coverage to an employer located outside the carrier's service area. _A carrier does not have to cover an employee who lives and works outside the service area. _A carrier does not have to offer a plan if the carrier reasonably anticipates inability to adequately deliver services and can demonstrate this to the commissioner of insurance. _A carrier must define its service area for the commissioner. Art. 26.86 Renewability of Coverage; Cancellation _A large employer carrier shall renew a benefit plan unless: (1) premium is not paid; (2) the employer commits fraud; (3) the employer is not in compliance with the plan's terms; (4) no enrollees live or work in the service area; or (5) membership of an employer in an association ends. _A carrier may refuse to renew an eligible employee if the employee commits fraud. Art. 26.87 Refusal to Renew _A carrier may refuse to renew all large employer benefit plans in a geographic service area if the carrier gives at least a 180-day notice to the commissioner and the employer(s). _The carrier will not be allowed to issue new policies in the geographic service area for five years if the carrier does not renew the plan(s). _A carrier may elect to discontinue a particular coverage (1) with a 90-day notice to the employer, (2) with an offering of the option to purchase other coverage, and (3) if the carrier is acting uniformly, regardless of health status factors. Art. 26.88 Notice to Covered Persons _A carrier must give a 30-day notice when it refuses renewal. Art. 26.89 Premium Rates, Adjustments _A carrier may not charge an adjustment to premium rates for a single employee due to health status factors. _This subsection does not restrict the amount that an employer may be charged for coverage. _A carrier may establish criteria for discounts. Art. 26.90 Preexisting Condition Provisions _Following the initial coverage effective date, a preex condition provision may be twelve months, maximum. _The preex condition must be identified during the 6 months prior to the (1) effective date of coverage or (2) first day of the waiting period. _Genetic information may not be treated as a preex. _Pregnancy may not be treated as a preex. _A preex condition may not apply to a person who was covered for 12 months prior to the effective date of new coverage. _Credit will be given to an individual for time covered elsewhere (subject to creditable coverage requirements). _An HMO may impose an affiliation period uniformly without regard to health status related factors. Art. 26.91 Fair Marketing _Upon an employer's request, a carrier must provide an inclusive plan summary of all plans for which the employer is eligible. Art. 26.92 Health Status and Claims Experience; Prohibited _Carriers and agents cannot encourage an employer to exclude an eligible employee. Art. 26.93 Agents _A carrier may not terminate an agent on the basis of health status related factors of a group which the agent placed with the carrier. Art. 26.94 Written Statement of Denial, Cancellation, or Refusal to Renew _A carrier's denial must be written. It must state the reasons for denial, cancellation, or refusal. Art. 26.95 Third Party Administrator _Third party administrators who market large employer plans are subject to this subchapter. Part 3: Certification of Coverage SECTION 3.01 amends Subchapter E, Chapter 21, Texas Insurance Code Art. 21.52G Certification and Disclosure of Coverage Under Health Benefit Plan Sec. 1 Definitions _"Creditable coverage" and "Health benefit plan" are defined in other sections. Sec. 2 Health Benefit Plan _"Health benefit plan" lists types of plans that are subject to this article. Sec. 3 Creditable Coverage _Creditable coverage lists the types of coverages that are acceptable and unacceptable for purposes of this article. Sec. 4 Certification of Coverage _Issuers of health benefits plans must provide a certification of coverage to the commissioner so as to determine the period of applicable creditable coverage of the plans. Sec. 5 Rules _The commissioner shall adopt rules necessary to meet minimum requirements of federal law and regulations. Part 4. Multiple Employer Welfare Arrangements SECTION 4.01 amends Art. 3.95-1, Texas Insurance Code Art. 3.95-1 Definitions _Definitions are added and updated to conform with definitions in the code. _Defines: Board, Commissioner, Creditable coverage, Employee welfare benefit plan, Fully insured multiple employer welfare arrangement, Health benefit plan, Health status related factor, Late-participating employee, Multiple employer welfare arrangement, Participation criteria, Preexisting condition provision, and Waiting period. SECTION 4.02 amends Subchapter I, Chapter 3, Texas Insurance Code Art. 3.95-1.5 Creditable Coverage _This article lists the types of coverage that are acceptable and unacceptable as creditable for the purposes of this subchapter. Art. 3.95-1.6 Health Benefit Plan _Lists the types of plans subject to this subchapter. Art. 3.95-1.7 Late-participating employee _An individual is considered a late-participating employee if the individual (1) is an employee or dependent eligible for enrollment, (2) requests enrollment in a participating employer's health benefit plan after the expiration of the initial enrollment period. _An individual is not considered a late-participating employee if (1) the person was covered under another plan at the time the individual was eligible to enroll in the new plan, (2) the person lost coverage under another plan due to certain circumstances, or (3) the person requests coverage in a timely manner. SECTION 4.03 amends Subchapter I, Chapter 3, Texas Insurance Code Art. 3.95-4.1 Coverage Requirements and Art. 3.95-4.2 Dependent Children _This section is the same as PART 2, SECTION 2.01, Art. 26.83 "Coverage Requirements," and 26.84 "Dependent Children." Art. 3.95-4.3 Renewability of Coverage Cancellation _This article is the same as PART 2, SECTION 2.01, Art. 26.86 "Renewability of Coverage, Cancellation." Art. 3.95-4.4 Refusal to Renew _This article is the same as PART 2, SECTION 2.01, Art. 26.87 "Refusal to Renew." Art. 3.95-4.5 Notice to Covered Persons _This article is the same as PART 2, SECTION 2.01, Art. 26.88 "Notice to Covered Persons." Art. 3.95-4.6 Premium Rates; Adjustments _This article is the same as PART 2, SECTION 2.01, Art. 26.89 "Premium Rates; Adjustments." Art. 3.95-4.7 Fair Marketing _This article is the same as PART 2, SECTION 2.01, Art. 26.91 "Fair Marketing." Art. 3.95-4.8 Preexisting Condition Provisions _This article is the same as PART 2, SECTION 2.01, Art. 26.90, "Preexisting Condition Provisions." Art. 3.95-4.9 Written Statement of Denial, Cancellation, or Refusal to Renew _This article is the same as PART 2, SECTION 2.01, Art. 26.94 "Written Statement of Denial, Cancellation, or Refusal to Renew." Art. 3.95-4.10 Third Party Administrator _This article is the same as PART 2, SECTION 2.01, Art. 26.95 "Third Party Administrator." SECTION 4.04 amends Art. 3.95-8, Texas Insurance Code. _Every multiple employer welfare arrangement (MEWA) in Texas must submit to the commissioner any changes in plan terms, including a trustees' statement that said changes meet this subchapter's minimum requirements. _The commissioner may take action against plans in noncompliance. SECTION 4.05 amends Art. 3.95-15, Texas Insurance Code. Art. 3.95-15 Proceedings Before Commissioner of Insurance; Rules. _The commissioner shall adopt rules necessary to meet minimum requirements of federal law and regulation. PART 5. EFFECTIVE DATE; TRANSITION; EMERGENCY SECTION 5.01 - Act applies to policies enacted or renewed after effective date. SECTION 5.02 - Effective Date, July 1, 1997. SECTION 5.03 - Emergency Clause COMPARISON OF ORIGINAL TO SUBSTITUTE Several non-substantive changes in language occur in the committee substitute. These changes are strictly for clarification purposes of certain terms in the introduced version and for clarification of denoting certain conditions (i.e., "shall" vs. "may"). In SECTION 1.02, a provision that participation criteria may not be based on health status related factors is added to the definitions section. "Child" replaces "person" in definition (8)"Dependent." A governmental entity may opt in for coverage under large and small employer plans due to additions made in definitions (14) and (28) of SECTION 1.02, Art. 26.02. SECTION 1.04 allows that the Commissioner will adopt rules "as necessary" to implement that section. Wording of language is rearranged in SECTION 1.06 (Art. 26.14(a)) for clarification purposes. SECTION 1.08, Art. 26.21 allows that the existing initial enrollment period of 31 days shall consist of an entire calendar month. SECTION 1.09, Art. 26.21A(b) contains a necessary clarification that an adopted child may be enrolled at the option of the insured (the same as a biological offspring who is an eligible dependent). In SECTION 2.01, Art. 26.82(b) is deleted (re: certification). Art. 26.83(e) adds language to clarify that participation requirements may determine the percentage of individuals that must be enrolled in the plan (in accordance with he participation criteria established by the employer). Art. 26.83(f) allows that the existing initial enrollment period of 31 days shall consist of an entire calendar month. Art. 26.84 is reworded to clarify that a child must be dependent and eligible. Subsections (a) and (b) are removed from Art. 26.92. The letter "(c)" is removed and the language clarifying that an employee must meet participation criteria is thus shifted to (a). Art. 26.93 deletes language that determines certain methods of compensating agents. SECTION 4.01 changes "multiple employer welfare arrangement" to "large employer" and allows that criteria may not be based on health status related factors. SECTION 4.03, Art. 3.954.1 allows that the existing initial enrollment period of 31 days shall consist of an entire calendar month. Art. 3.95-4.2 contains the same changes as seen in PART 2, SEC. 2.01, Art. 26.84(c-d). SECTION 4.05, Art. 3.95-15 does not delete subsections (b-c) as the introduced version did. SECTION 5.01 does not contain conforming amendments language; the transition clause is placed here. SECTION 5.02 contains the effective date of July 1, 1997. SECTION 5.03 contains the emergency clause. PART 6 of the introduced version is not included in the substitute, as it is unnecessary because these clauses were shifted to PART 5, as described above. "May" changes to "shall" in the following sections: SECTION 1.10, Art. 26.22(e) (re: issuance of benefits plans by small employer carriers) SECTION 1.16, Art. 26.49(g) (re: HMO enrollee affiliation period) SECTION 2.01, Art. 26.90(c) (re: prohibiting the use of genetic information) SECTION 2.01, Art. 26.90(e) (re: continuous coverage) SECTION 2.01, Art. 26.90(g) (re: HMO enrollee affiliation period) Some of the sections are renumbered and/or renamed. Certain complaint-related language in SECTION 1.03 is transferred to 1.11 and titled "COMPLAINT PROCEDURES." SECTION 1.05 title changes from "Administering Insurer" to "ADMINISTRATOR." SECTION 1.06 title changes from "Rulemaking Authority" to "RULES." An "AUDIT" section is added (SECTION 1.11). SECTION 1.10 title changes from "Preexisting conditions provisions" to "PREEXISTING CONDITIONS." SECTION 1.10 adds Sec. 13(a), "ASSESSMENTS," allowing the Board to assess insurers, and requiring interim assessments to be credited as offsets for regular assessments. PART 2 of the bill is entirely renumbered. However, the legislative intent remains intact. Paragraph (b)(ii) adds a member or dependent as an eligible participant. Paragraph (B)(v) cites conditions with regards to continuation or termination. SECTION 3.01 amends Subsection (H) in CSHB 1212 instead of (G). SECTION 4 is renumbered as SECTION 3.02 in CSHB 1212. SECTION 5 is renumbered as SECTION 4.01. Language that was deleted from the code in the introduced bill, but reinstated in CSHB 1212 is found in SECTION 1.08 (Sec. 10(f)) and SECTION 2.01 (Sec. 1(d)(3)). PART 2 of the bill is entirely renumbered. However, the legislative intent remains intact. Paragraph (b)(ii) adds a member or dependent as an eligible participant. Paragraph (B)(v) cites conditions with regards to continuation or termination. SECTION 3.01 amends Subsection (H) in CSHB 1212 instead of (G). SECTION 4 is renumbered as SECTION 3.02 in CSHB 1212. SECTION 5 is renumbered as SECTION 4.01. Language that was deleted from the code in the introduced bill, but reinstated in CSHB 1212 is found in SECTION 1.08 (Sec. 10(f)) and SECTION 2.01 (Sec. 1(d)(3)).