RS S.B. 382 75(R) BILL ANALYSIS INSURANCE S.B. 382 By: Madla (Smithee) 4-22-97 Committee Report (Amended) BACKGROUND Currently, under Article 20A, Insurance Code, the Health Maintenance Insurance Act, a health maintenance organization (HMO) is licensed by the commissioner of insurance as a basic service HMO to provide a broad range of health services or a single service HMO to provide a single health care service to an enrolled population. Provider sponsored networks have begun to take on characteristics identical to or closely resembling HMOs. Often, individual and small groups of providers join forces with each other or with a health care facility such as a hospital to create an integrated provider network. Many of these networks contract with an HMO to provide services or contract directly with an employer group. This bill creates a limited service HMO in which physicians and providers may provide services beyond a single service HMO. Additionally, this bill would prohibit an HMO organized to do business in Texas from going to federal bankruptcy court upon the determination that it is insolvent, authorize the commissioner to deal with such HMOs, and readjust the surpluses required to be maintained by certain HMOs. PURPOSE As proposed, S.B. 382 provides for the regulation by the commissioner of insurance of health maintenance organizations (HMOs) that provide limited health care service plans, the regulation of insolvent HMOs by the commissioner instead of the proceedings of federal bankruptcy court, and the readjustment of the surpluses required to be maintained by certain HMOs. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. - Amends the definition of "health care services" and "health maintenance organization" under Art. 20A.02, by adding "a limited health care service plan" to the existing definition. This bill also adds the definition of "Limited health care services", "Limited health care service plan", and reletters the subsequent subsections. SECTION 2 - Amends Article 20A.04, the provisions of the HMO Act which define the contents of a certificate of authority application, by adding a requirement for a specific description of the health care services to be provided by a "limited health care service plan" when such entity applies for a license. SECTION 3 - Amends Article 20A.05, by adding references to "limited health care service plan" and "limited health care services." These references would include such plans and services in the provisions of the HMO Act which require that the plan constitute an "appropriate mechanism" for the provision of "limited health care services." This section also amends Art. 20A.05 by adding a provision which states that by applying for a certificate of authority, the HMO agrees and admits that it is not subject to the U.S. Bankruptcy Code and is not eligible to proceed under it. SECTION 4 - Amends Article 20A.09, relating to the evidence of coverage, by adding references to "limited health care services," and "limited health care service plan." This statute requires an evidence of coverage to provide a clear and complete statement of the types of services that an enrollee is entitled to under the plan. SECTION 5 - Amends Art. 20A.13, relating to Protection Against Insolvency. The added language would require an organization offering "limited health care services" to provide an initial deposit or other guarantee in the amount of $75,000, in order to obtain a license. This section changes reference to the State Treasurer to comptroller and references to the State Board of Insurance to commissioner. This section also changes statutory minimum surplus requirements for HMOs by increasing those amounts and phasing in the increases over the next five years. Specifically, the phase-in schedule and increased requirements would be as follows: Basic Service HMOs: $700,000 by December 31, 1998; $900,000 by December 31, 1999; $1,100,000 by December 31, 2000; $1,300,000 by December 31, 2001; $1,500,000 by December 31, 2002. Limited Service HMOs: $600,000 by December 31, 1998; $700,000 by December 31, 1999; $800,000 by December 31, 2000; $900,000 by December 31, 2001; $1,000,000 by December 31, 2002. Single Service HMOs: $200,000 by December 31, 1998; $275,000 by December 31, 1999; $350,000 by December 31, 2000; $425,000 by December 31, 2001; $500,000 by December 31, 2002. Under existing statutes, the minimum surplus requirements for basic service HMOs is $500,000 and for single service HMOs it is $125,000. This section also adds language to the statute which would require the commissioner to equitably allocate the group contracts of an insolvent HMO among other HMOs operating in the state and would establish requirements relating to the premium rates which may be charged under such allocated group contracts by the successor HMO. Nongroup enrollees who are allocated to HMO's shall offer these enrollees existing coverage for individuals or conversion coverage as determined by the type of coverage the had under the insolvent plan. The successor HMO's which do not offer direct nongroup coverage shall provide coverage as rates that reflect the average group rate of the successor HMO. SECTION 6 - Amends Article 20A.14, to add "limited" in order to include any HMO offering "limited health care service plans" in this statute. Article 20A.14 makes Arts. 21.21, 21.21A, 21.212, 21.21-3, 21.21-6, and 21.21-1, TIC, applicable to HMOs that are named in this statute. This section also changes "cancelled" is to "canceled," and "nonacceptance" is to "non-acceptance." SECTION 7 - Amends Art. 20A.20, by adding language to include "limited health care service plans" to the provision which allows the commissioner to suspend or revoke the certificate of authority of a HMO if "the limited health care services plan does not provide or arrange for its limited health care services." This section also adds HMOs which offer a limited health care service plan to the provisions which give the commissioner the statutory authority to suspend or revoke the certificate of authority of a HMO if the Board (Texas Department of Health) certifies to the commissioner that the HMO is unable to fulfill its obligation to furnish its limited health care services as required under its limited health care service plan. SECTION 8 - Amends Art. 20A.26, by adding language which requires any physician or provider that employs or enters into a contractual arrangement with a provider or group of providers to furnish basic, limited, or single health care services to obtain a certificate of authority. SECTION 9 - Amends Art. 20A.31, by adding language which expands the "Injunctions" provisions of the HMO Act to "Jurisdiction for injunctions and Receivership and Delinquency Proceedings." This language adds specific statutory authority for the Commissioner of Insurance to bring suit against HMOs, allows a court to find that a receiver should take charge of an HMO's assets, and to name the Commissioner of Insurance as receiver of the HMO, pursuant to Article 21.28, and 21.28-A, Texas Insurance Code. This section also defines the operations and business of an HMO as "the business of insurance" and establishes exclusive venue of receivership and delinquency proceedings in Travis county. SECTION 10 - Amends Art. 20A.33, by adding "limited health care service plans" to the statute relating to the rate of assessment of a per capita premium tax. This provision of the HMO Act allows for a difference in such rate between basic health care plans, limited health care service plans, and single health service plans. SECTION 11 - Amends Art. 20A.36 by adding language which includes a "Limited Service HMO" representative as a member of the HMO Solvency Surveillance Committee. This section also changes references to "State Board of Insurance" to "commissioner." SECTION 12 - Act takes effect on September 1, 1997. SECTION 13 - Emergency clause. EXPLANATION OF AMENDMENTS Amendment #1 by House Insurance Committee Removes all references to "limited health care services" and "limited health care service plan" and makes other minor wording changes to return these provisions of the statute back to current statutory language. Deletes minimum deposit requirements ($75,000) for a limited health care service plan. Deletes the minimum surplus requirements for a limited health care service. Deletes a limited health care services plan from membership on the Health Maintenance Organization Solvency Surveillance Committee. The bill would no longer provide for a separate and new type of HMO license to provideS limited health care services and would no longer provide specific minimum surplus requirements for a limited health care services plan. Amendment #2 by House Insurance Committee Adds a definition of "long term care services" to Article 20A.02 as follows: (m) "Long term care services" means medical, nursing, and other health care related services including personal care provided by one or more persons licensed or, in the case of personal care, authorized by the state to provide such services. Adds the following to the definition of "Single health care service plan" in Article 20A.02(u): "Single health care service plan" includes the provision of long term care services. These changes would permit entities offering long term care services to be licensed as a single service health maintenance organization. Such changes would also subject such entities to lower minimum surplus requirements established for single service health maintenance organizations rather, than the increased minimum surplus requirements contained in the Engrossed version of SB382.