BG S.B. 276 75(R)BILL ANALYSIS PUBLIC HEALTH S.B. 276 By: Patterson, Jerry (Coleman) 5-14-97 Committee Report (Amended) BACKGROUND Community MHMR centers are effective alternatives to treatment in a large residential facility. They provide services for persons who are mentally ill or mentally retarded and may provide requested services to persons with a chemical dependency problem. The Texas Department of Mental Health and Mental Retardation is responsible for approving the creation of centers and the majority of center funds flow from the Department via a performance contract. There are 37 centers statewide, with approximately $650 million in budget: state, federal, local and third party. Centers also receive funds from the Texas Department of Criminal Justice, the Texas Rehabilitation Commission and the Texas Commission on Alcohol and Drug Abuse. By statute, community MHMR centers have been allowed to self insure. A statewide "risk pool" is administered on their behalf for liability, workers' compensation, property and health insurance. This pool was successfully capitalized by the centers. Capitation is a desirable contracting mode for much of health and mental health care, but current law does not permit it except for HMO's and HMO-like organizations. This bill authorizes a government entity (centers) to form a private, nonprofit HMO for MHMR services. The focus is the public business, as private corporations that provide mental health and mental retardation services can already create HMO's or 501(a)'s. PURPOSE S.B. 276 allows Community MHMR Centers to enter into capitated and other at-risk agreements to provide state plan approved services through the creation and/or operation of a non-profit corporation having a certificate of authority as a health maintenance organization. RULEMAKING AUTHORITY It is the committee's opinion that this bill expressly grants additional rulemaking authority to the Texas Department of Insurance in SECTION 2 and requires that those rules be adopted by September 1, 1997. In addition, the rulemaking authority of the Texas Department of Insurance is referenced in Sections 534.102 and 534.103, Chapter 534C, Health and Safety Code. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 534, Health and Safety Code, by adding Subchapter C, as follows: SUBCHAPTER C. HEALTH MAINTENANCE ORGANIZATIONS Sec. 534.101. HEALTH MAINTENANCE ORGANIZATION CERTIFICATE OF AUTHORITY. Authorizes one or more community centers to create and operate a non-profit corporation pursuant to the laws of this state for purposes as specified. Requires a non-profit corporation to obtain the appropriate certificate of authority from the Texas Department of Insurance to operate as a health maintenance organization pursuant to the Texas Health Maintenance Organization Act, before the nonprofit corporation accepts or enters into any capitated or other at-risk payment arrangement for services designated in a plan approved by the Texas Department of Mental Health and Mental Retardation (department) as specified. Requires a nonprofit corporation operating under this subchapter to disclose in writing to the department certain provided services, prior to submitting any bids. Requires the department to verify that the services provided under any capitated or other at-risk payment arrangement are within the scope of services approved by the department in each center's plan required under Chapter 534A. Sets forth the requirements to be provided by the board and the nonprofit corporation. Sets forth the requirements of a nonprofit corporation operating under this chapter. Sec. 534.102. LAW AND RULES. Authorizes certain nonprofit corporations to exercise the powers and authority and to be subject to the conditions and limitations provided by this subchapter, the Texas Health Maintenance Organization Act, the Texas Non-Profit Corporation Act, and rules of the Texas Department of Insurance. Sec. 534.103. APPLICATION OF LAWS AND RULES. Requires a health maintenance organization created and operating under this subchapter to be governed as and is subject to the same laws and rules of the Texas Department of Insurance as any other health maintenance organization of the same type. Sec. 534.104. APPLICATION OF SPECIFIC LAWS. Provides that a health maintenance organization created and operating under this subchapter is a governmental unit and a unit of local government, as defined by Chapters 101 and 102, Civil Practices and Remedies Code, and a local government as defined by Section 791.003, Government Code. Provides that nothing in this subchapter precludes one or more community centers from forming a nonprofit organization under Section 5.01, Article 4495b, Vernon's Texas Civil Statutes, (Medical Practices Act) to provide services on a risk-sharing or capitated basis as permitted under Article 21.52F, Insurance Code. SECTION 2. Requires the Department of Insurance to adopt rules by September 1, 1997, which describe the procedures an entity must follow and the standards an entity shall meet in obtaining a certificate of authority as a single health care service plan providing behavioral health care services SECTION 3. Effective date: September 1, 1997. SECTION 4. Emergency clause. EXPLANATION OF AMENDMENTS The committee amendment adds Section 534.105, which requires the department's equal consideration of bids, to the newly created Subchapter C of Chapter 534, Health and Safety Code.