RS C.S.H.B. 2058 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 2058 By: Delisi 5-5-97 Committee Report (Substituted) BACKGROUND Currently, the Texas HMO Act (Article 20A of the Insurance Code) along with portions of the Utilization Review Act (Insurance Code, Article 21.58A) establish and regulate health maintenance organizations. Despite these statutes and extensive regulation, public concern about managed care remains evident. Issues that have received attention from the media and from legislative study include gag clauses, financial incentives to providers, determinations of inpatient length-of-stay, provider selection and de-selection, network restrictions, restrictions and denials of care, determinations of medical necessity, adequate complaint and appeals processes, disclosure of information to consumers, and inherent influences in for-profit health care delivery. This bill would establish and regulate a type of health maintenance organization called an Integrated Health Plan (IHP). Integrated Health Plans would address concerns about managed care, including those listed above, by providing a structural approach to ensuring quality. IHPs would be managed care organizations that are required to meet high structural and procedural standards. These high structural and procedural standards would promote and ensure quality by requiring: _leadership by physicians, not administrators or bureaucrats; _the structural elimination of financial incentives that could influence physician behavior; _a continuous and accountable quality improvement plan _significant reinvestment of premiums in services and programs to the community and members; _investment in continuously improving medical practice through affiliations with accredited medical schools; and _long-term viability through solvency and net worth requirements. PURPOSE This bill would establish and regulate integrated health plans. RULEMAKING AUTHORITY It is the committees opinion that rulemaking authority exists in SECTION 1 of the bill (Art. 20B.002, Insurance Code, and Article 20B.082(b), Insurance Code). SECTION BY SECTION ANALYSIS SECTION 1. - Insurance Code is amended by adding Chapter 20B as follows: Chapter 20B. INTEGRATED HEALTH PLANS Subchapter A. GENERAL PROVISIONS Art. 20B.001. DEFINITIONS: Defines "Basic health services," "Group Medical Practice," "Health maintenance organization," "Integrated health plan," "Life-threatening disease or condition," "Member," "Plan," "Provider," and "Subscriber." Art. 20B.002. RULES: The commissioner shall adopt rules as necessary to implement this article. Art. 20B.003. EFFECT OF CERTIFICATION. A health maintenance organization certified as an integrated health plan is subject to regulation only as provided by this chapter. Subchapter B. CERTIFICATION REQUIREMENTS Art. 20B.011. CERTIFICATION BY THE COMMISSIONER. On submission of an application to the department, the commissioner shall issue a certificate of authority as an IHP to an eligible nonprofit HMO that: meets the requirements of subchapter C, D, E, F, and G and is accredited by the National Committee on Quality Assurance or a similarly recognized review organization acceptable to the commissioner. Art. 20B.012. ELIGIBILITY. The commissioner may not issue a license to a single service or limited service HMO under this article. Art. 20B.013. REVOCATION OF CERTIFICATE. (a) After notice to an IHP and an opportunity for a hearing the commissioner may revoke a certificate issued under this chapter for violations. (b) The commissioner shall notify the IHP of the revocation at least 30 days prior to the revocation. (c) The IHP has 30 days after the notice is sent to correct the problems listed in the notice or show to the satisfaction of the commissioner that the information is incorrect. (d) An IHP that receives a notice under this article may dispute the assertions and request a hearing. Art. 20B.014 COMPLIANCE WITH STANDARDS OR RATIOS. Notwithstanding any other provisions of this chapter the commissioner may not issue a certificate of authority to and may revoke the certificate of authority of an IHP that fails to meet the standards set by the commissioner. Subchapter C. ADMINISTRATION AND ORGANIZATION OF PLAN Art. 20B.021. NONPROFIT ENTITY. Each plan must be organized as a nonprofit entity. Art. 20B.022. BOARD OF DIRECTORS. Each plan must have a board of directors that includes members and physicians or a combination of physicians or providers who provide health care services. Art. 20B.023. GROUP MEDICAL PRACTICE. (a) Each plan shall provide the majority of its professional medical services through a single group medical practice. (b) A plan shall appoint a C.E.O. who is a member of the group practice or adopt procedures that ensure cooperation between the group practice and the plan. (c) The procedures adopted under Subsection (b) must adopt measures by which interests of the enrollees, and physicians are represented at the decision making level. (d) Physicians from the group practice shall make determinations regarding medical utilization management, medical quality assurance, medical issues relating to coverage, medical necessity and appropriateness of treatment, and issues relating to pre and post authorization of treatment. Art. 20B.024. RIGHTS OF PROVIDERS. (a) A plan may not restrict a physician or other provider from discussing various forms of treatment. But the plan is not required to provide or cover forms of treatment not included in the applicable benefit plan. (b) The plan or group practice shall, as appropriate, make available and disclose to each interested applicant its application procedures and qualification requirements, and provide a written notice of reasons an initial application by a provider may be denied. Art. 20B.025. CREDENTIALING PROGRAM; REQUIREMENTS. (a) Plan shall use physicians and other providers whose credentials are verified through a program that meets the requirements of this article. (b) The plan shall implement its credentialing program through written policies and procedures. (c) Lists areas the credentialing program will review to find evidence. (d) The credentialing program will also establish methods for periodic review to evaluate members comments, plan quality and reviews, utilization management, member satisfaction surveys. Art. 20B.026 PROVIDER INCENTIVE AND ARRANGEMENTS. (a) A plan may not provide incentives or rewards to its providers for limiting care to its members. (b) A plan's payment arrangement may not place a provider at such financial risk that it forces the provider to restrict medical care. Art. 20B.027. REVENUE TO BE SPENT ON SERVICE TO MEMBERS. (a) Over a three year period each plan shall spend at least 85% of its revenue received from its members on providing services to its members. (b) The commissioner shall consider a plan to be in compliance with subsection (a) through information inferred from periodic reports made to the National Association of Insurance Companies. Art. 20B.028. MARKETING REQUIREMENTS (a) Each plan shall provide adequate written descriptions of its rules, procedures, benefits, fees, and other services. (b) The plan shall publicize its enrollment period through appropriate methods, and shall specify whether the enrollment is limited or continuous. (c) On request by a member, the plan shall provide a list of member rules and rights with specified information. (d) The plan shall not discriminate in its marketing by discouraging participation on the basis of age and race, or attempting to enroll high income members without a comparable effort to enroll low income members. (e) The plan may not mislead in its attempt to market itself. (f) The plan may not offer gifts or payments as inducements in its attempts to attract enrollees, except for marketing materials, meals, souvenirs and other items of nominal value. Subchapter D. QUALITY IMPROVEMENT Art. 20B.041. QUALITY IMPROVEMENT PROGRAM. (a) Each plan shall adopt an ongoing quality improvement program monitor and evaluate the quality of its care and services. The scope and content of the program shall include the quality and clinical care of its services. Lists topics for consideration for quality improvement statement. (b)The quality improvement program shall list areas for improvement. Evaluation of important aspects of care shall include high-volume, and high-risk services. Lists aspects of the plan that shall be evaluated and established through the evaluation program. Art. 20B.042. ORGANIZATIONAL DESCRIPTION. Each plan shall specify within its quality improvement program, its organizational arrangements, and responsibilities for quality improvement. The plan shall maintain a written description of the program that outlines the program structure and design. This description will be subject to periodic review and updates. Art. 20B.043. PROGRAM IMPLEMENTATION. (a) A designated senior executive shall be responsible for implementation of this program. (b) If quality improvement programs are delegated to independent contractors, the improvement program must require oversight of the delegated activities, and include periodic reporting by the contractor. Art. 20B.044. QUALITY IMPROVEMENT COMMITTEE. (a) Each plan shall appoint a committee to oversee and support quality improvement activities. (b) The committee shall maintain records reflecting the actions of the committee. The committee shall annually adopt improvement plans to deal with objectives and planned projects, monitoring of previously identified activities, evaluation of improvement programs. (c) The committee shall be accountable to the governing party or a committee of senior managers. The committee shall demonstrate strong accountability standards. Art. 20B.045. REPORTS; COORDINATION OF ACTIVITIES. The quality improvement program shall document suggestions, findings, and results of actions taken. Quality improvement activities shall be coordinated with other monitoring activities. Art. 20B.046. DATA ANALYSIS. The quality improvement program shall analyze measurements of quality and quantity of improvements. Objective measurements will be used to measure and evaluate aspects of care and service. The program shall analyze all data collected. Art. 20B.047. EVALUATION. (a) Each quality improvement program shall ensure that its recommendations take effect as necessary. (b) The results of evaluations conducted under this article shall be used to provide clinical care and service. Art. 20B.048. ANNUAL ASSESSMENT BY PLAN; REPORT. Each plan shall annually assess the effectiveness of its quality improvement program and issue annual reports about improvements. Subchapter E. DELIVERY OF HEALTH CARE SERVICE TO MEMBERS. Art. 20B.061. SERVICE DELIVERY SYSTEM. Each plan shall provide or arrange for the provision of services to its members. The services shall be accessible with respect to location, hours, and after-hour services. Services may be provided at extended ranges if necessary to provide a higher level of skill or services than that which is available. Emergency services shall be available at all times. Appropriate methods shall be employed to monitor accessibility to services. Art. 20B.062. STANDARDS FOR DELIVERY OF CARE; MEMBER ACCESS. Each plan shall maintain standards regarding the availability of primary care providers and access to services provided. Performance of each plan shall be assessed against these standards. Art. 20B.063 HEALTH MANAGEMENT EFFORTS. Each plan shall take an active role in relation to its members by identifying those members with chronic illnesses and implementing appropriate responses. The plan shall inform and educate each provider about using the health management program for the members assigned to that provider. Art. 20B.064. MEDICAL RECORDS AND CONTINUITY OF CARE. (a) A plan shall ensure continuity of care through use of a health care professional who is primarily responsible for coordinating overall health, and a system that maintains or ensures the maintenance of necessary health and medical records. (b) A plan shall have policies and procedures governing the maintenance of health and medical records to ensure they are properly maintained. (c) A plan shall ensure that records are confidential and will refuse the release of information except for specified circumstances. Art. 20B.065. PAYMENT OF CERTAIN EMERGENCY SERVICES. (a) The plan is financially responsible and shall provide reimbursement for necessary emergency services that are obtained from a provider outside the plan even if provided without prior authorization. (b)The plan is financially responsible for the charges incurred by a hospital emergency department for an examination to determine a medical emergency. (c) After stabilization, the plan shall respond in a timely manner appropriate to the case for provision of additional services through the hospital emergency department. (d) On submission of written notice by a member of a valid claim, the plan shall promptly reimburse for emergency services. Art. 20B.066. MEMBER RIGHTS AND RESPONSIBILITIES. (a) The plan shall adopt written policies to protect specified rights of a member. (b) Written policies shall be adopted to address the responsibility of a member to cooperate with providers. Specifies members responsibilities. (c) The plan shall provide a copy of its policies on request to each participating provider and directly to each subscriber. Art. 20B.067. GRIEVANCE RESOLUTION. Each plan shall inform each subscriber in writing of the appeal and grievance process. The plan shall have a formal system for resolving grievances. Art. 20B.068. DIRECT ACCESS. (a) The plan shall have a written procedure to allow an enrollee with a chronic or life threatening condition to apply for direct access to specialist to care for that condition. This may include approval by the primary care physician. (b) The plan may set conditions for direct access to a specialist. (c) A member may appeal the denial of direct access to a specialist. Subchapter F. PROTECTION AGAINST INSOLVENCY. Art. 20B.081. NO PRIVATE INTEREST. No individual or other person may own interest in a plan. Art. 20B.082. NET WORTH; RETAINED EARNINGS. (a) A plan's total net worth shall represent its earnings. Explains what earnings will reflect. The commissioner will determine the total net worth each plan shall maintain. The commissioner shall accept a plan's total net worth, if it's average worth for the three years prior to filing to be IHP exceeds $10 million. Art. 20B.083. LIQUID ASSETS. Each plan shall maintain sufficient assets to meet their financial obligations when due. Art. 20B.084. SOLVENCY PROTECTION PROGRAM. Each plan shall maintain a solvency protection program that includes methods to protect plan members from liability on payment of fees for services that are part of the plan. Subchapter G. UTILIZATION MANAGEMENT Art. 20B.101. UTILIZATION MANAGEMENT PROGRAM. (a) Each plan shall adopt a utilization management program to ensure that care provided is appropriate and of high quality. (b) The program must provide for review of new medical procedures, provider performance, service utilization, procedures for pre-authorization if it is used, and concurrent review. (c) Program must require that pre-authorization requirements are supervised by qualified medical professionals, and that denial of care must be reviewed by a physician. Art. 20B.102. PROCEDURES FOR DENIAL OF TREATMENT. (a) A program must provide that utilization management decisions are done in a timely manner, reasons for denial are clearly documented and available, procedures for appeal are provided to the member. (b) The program must include a process for appeal of an adverse determination, with specified conditions listed. (c) Unless it is a life-threatening situation, an appeal of adverse determination must be resolved within 30 days after receipt of all necessary medical information. If the situation constitutes a life-threatening situation, it must be decided in an expedited manner. (d) The program must include an expedited process for appeal of a denial of treatment for a life threatening situation. An appeal of a life threatening situation must be resolved not later than the seventh day after receipt of the request. Art. 20B.103. HOSPITAL STAY. The program shall ensure that an appropriate length of stay in a hospital is made by the attending physician and patient. Determination of an appropriate length of stay may not be based on economic criteria. Subchapter H. OPERATION OF AN INTEGRATED HEALTH PLAN. Art. 20B.121. DETERMINATION OF MEDICAL NECESSITY. (a)An IHP must have a written set of policies and procedures for making determinations as to whether a treatment is medically necessary, experimental, or investigational. (b) The medical director of an IHP will make the determination described in subsection (a), and may delegate this responsibility to one or more physicians licensed to practice in this state, and who are affiliated with the group medical practice. (c) The IHP or group medical practice shall subscribe or have access to an organized technology assessment service which is not affiliated with the plan or practice. (d) The IHP or group plan shall have a committee composed of licensed physicians affiliated with the group and, as necessary, other types of licensed professionals that serve as an advisory body to the medical director in making these determinations. (e) Sets out list of actions to be completed before a procedure can be determined not medically necessary. (f) An enrollee may appeal a determination through the grievance resolution procedure under this chapter. Art. 20B.122. LIABILITY. (a) An IHP that complies with the policies and procedures required under Art. 20B.121 is not liable for personal injury, property damage, or death that arises as a result of a decision by the plan to cover or not cover treatment. If the member fails to request approval from the plan for the treatment prior to the treatment being performed then the plan is not liable for personal injury, property damage, or death that arises as a result of the decision. (b) An IHP and group medical practice may indemnify the other with respect to a negligent act or omission. Art. 20B.123. APPLICATION OF INSURANCE LAWS. (a) Except as provided by this article, an IHP is exempt from the application of all insurance laws of this state including this code. (b) An IHP is subject to specified laws listed as they existed on January 15, 1997. (c) An amendment to the laws listed applies to an IHP only if it is specifically stated in an amendment. (d) No laws added after January 15, 1997 apply to an IHP unless they explicitly say so. (e) Unless specifically stated, a law or rule regardless of the effective date may not prohibit an IHP from doing the following: selectively contracting or declining to contract with any or all providers as the IHP considers necessary, selectively contracting or declining to contract for an individual health care service or range of services as the IHP considers necessary, require enrolled members of an IHP to use specified providers affiliated with the plan. SECTION 2. Effective Date, September 1, 1997. SECTION 3. Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE Changes definition of "Group medical practice" by making it a group that voluntarily supports medical education "and" research through a formal affiliation with a medical school. Adds Article 20B.014 entitled "Compliance with Standards or Ratios" stating that the commissioner may not issue a certificate of authority to an IHP that fails to maintain complaint standards or ratios, quality of care standards or ratios, or financial stability or viability standards or ratios considered appropriate by the commissioner. Amends page 19, line 12 by changing from "including" to "excluding" surplus notes arrangements.