By Averitt                                             H.B. No. 710

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the implementation of federal reforms and the Texas

 1-3     Health Insurance Risk Pool.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5                     PART 1.  HEALTH INSURANCE RISK POOL

 1-6           SECTION 1.01.   Section 2, Article 3.77, Insurance Code, is

 1-7     amended to read as follows:

 1-8           Sec. 2.  DEFINITIONS.  In this article:

 1-9                 (1)  "Benefits plan" means coverage to be offered by

1-10     the pool to eligible persons under Section 11 of this article.

1-11                 (2)  "Board" means the board of directors of the pool.

1-12                 (3)  "Commissioner" means the Commissioner of

1-13     Insurance.

1-14                 (4)  "Department" means the Texas Department of

1-15     Insurance.

1-16                 (5)  "Dependent" means a resident spouse or unmarried

1-17     child under the age of 18 years, a child who is a full-time student

1-18     under the age of 23 years and who is financially dependent upon the

1-19     parent, a child who is over 18 years of age and for whom a person

1-20     may be obligated to pay child support, or a child of any age who is

1-21     disabled and dependent upon the parent.

1-22                 (6)  "Family member" means a parent, grandparent,

1-23     brother, sister, or child of a dependent residing with the insured.

1-24                 (7)  "Health insurance" means individual or group

 2-1     health insurance and includes any hospital and medical expense

 2-2     incurred policy, a fraternal benefit society, a stipulated premium

 2-3     company, an approved nonprofit health corporation, health

 2-4     maintenance organization subscriber contract, coverage by a group

 2-5     hospital service plan, a multiple employer welfare arrangement

 2-6     subject to Subchapter I of this chapter, or any other health care

 2-7     plan or arrangement that pays for or furnishes medical or health

 2-8     care services whether by insurance or otherwise.  The term does not

 2-9     include short-term, accident, dental-only, vision-only, fixed

2-10     indemnity, credit insurance or other limited benefit insurance,

2-11     coverage issued as a supplement to liability insurance, insurance

2-12     arising out of a workers' compensation or similar law, automobile

2-13     medical-payment insurance, or insurance under which benefits are

2-14     payable with or without regard to fault and which is statutorily

2-15     required to be contained in any liability insurance policy or

2-16     equivalent self-insurance.

2-17                 (8)  "Health maintenance organization" means a health

2-18     maintenance organization that has a certificate of authority to

2-19     operate in this state under the Texas Health Maintenance

2-20     Organization Act (Chapter 20A, Vernon's Texas Insurance Code).

2-21                 (9)  "Hospital" means a licensed public or private

2-22     institution as defined by Chapter 241, Health and Safety Code, and

2-23     any hospital owned or operated by the federal or state government.

2-24                 (10)  "Insured" means a person who is a resident of

2-25     this state and a citizen of the United States and who is eligible

2-26     to receive benefits from the pool.  The term "insured" may include

2-27     dependents and family members.

 3-1                 (11)  "Insurer" means any entity that provides health

 3-2     insurance in this state, including stop-loss or excess loss

 3-3     insurance.  For the purposes of this Act, insurer includes but is

 3-4     not limited to an insurance company; a health maintenance

 3-5     organization operating under the Texas Health Maintenance

 3-6     Organization Act (Chapter 20A, Vernon's Texas Insurance Code); an

 3-7     approved nonprofit health corporation; a fraternal benefit society;

 3-8     a stipulated premium insurance company; a group hospital service

 3-9     corporation subject to Chapter 20 of this code; a multiple employer

3-10     welfare arrangement subject to Article 3.95-1, et seq. of this

3-11     code; a surplus lines carrier; an insurer providing stop-loss or

3-12     excess loss insurance to physicians, health care providers,

3-13     hospitals, or to any benefit arrangements to the extent permitted

3-14     by Section 3, Employee Retirement Income Security Act of 1974 (29

3-15     U.S.C. Section 1002); and any other entity providing a plan of

3-16     health insurance or health benefits subject to state insurance

3-17     regulation.

3-18                 (12)  "Insurance arrangement" means a plan, program,

3-19     contract, or other arrangement through which health care services

3-20     are provided by an employer to its officers, employees, or other

3-21     personnel but does not include health care services covered through

3-22     an insurer.

3-23                 (13)  "Medicare" means coverage provided by Part A and

3-24     Part B, Title XVII, Social Security Act (42 U.S.C. Section 1395 et

3-25     seq.).

3-26                 (14)  "Physician" means a person licensed to practice

3-27     medicine in this state under the Medical Practice Act (Article

 4-1     4495b, Vernon's Texas Civil Statutes).

 4-2                 (15)  "Plan of operation" means the plan of operation

 4-3     of the pool and includes the articles, bylaws, and operating rules

 4-4     of the pool that are adopted by the board under Section 5 of this

 4-5     article.

 4-6                 (16)  "Pool" means the Texas Health Insurance Risk

 4-7     Pool.

 4-8                 (17)  "Resident" means an individual who is legally

 4-9     domiciled in Texas.

4-10                 [(1)  "Pool" means the Texas Health Insurance Risk

4-11     Pool.]

4-12                 [(2)  "Board" means the board of directors of the pool.]

4-13                 [(3)  "Insurance board" means the State Board of

4-14     Insurance.]

4-15                 [(4)  "Commissioner" means the commissioner of

4-16     insurance.]

4-17                 [(5)  "Insured" means a person who is a resident of

4-18     this state and who is eligible to receive benefits from an insurer

4-19     or insurance arrangement.]

4-20                 [(6)  "Insurer" means an insurance company authorized

4-21     to transact a health insurance business in this state, including a

4-22     group hospital service corporation subject to Chapter 20 of this

4-23     code and a health maintenance organization operating under the

4-24     Texas Health Maintenance Organization Act (Chapter 20A, Vernon's

4-25     Texas Insurance Code).]

4-26                 [(7)  "Insurance arrangement" means a plan, program,

4-27     contract, or other arrangement through which health care services

 5-1     are provided by an employer to its officers, employees, or other

 5-2     personnel but does not include health care services covered through

 5-3     an insurer.]

 5-4                 [(8)  "Health insurance" means individual or group

 5-5     health insurance coverage and includes a medical expense incurred

 5-6     or hospital insurance coverage, or coverage by a group hospital

 5-7     service plan or health maintenance organization.  "Health

 5-8     insurance" does not include short-term insurance, accident-only

 5-9     insurance, coverage that is supplemental to liability insurance, or

5-10     workers' compensation insurance.]

5-11                 [(9)  "Medicare" means coverage provided by Part A and

5-12     Part B, Title XVII, Social Security Act (42 U.S.C. Section 1395 et

5-13     seq.)].

5-14                 [(10)  "Physician" means a person licensed to practice

5-15     medicine in this state under the Medical Practice Act (Article

5-16     4495b, Vernon's Texas Civil Statutes).]

5-17                 [(11)  "Hospital" means a licensed public or private

5-18     institution as defined by the Texas Hospital Licensing Law Chapter

5-19     241, Health and Safety Code and any hospital owned or operated by

5-20     the federal or state government.]

5-21                 [(12)  "Health maintenance organization" means a health

5-22     maintenance organization that has a certificate of authority to

5-23     operate in this state under the Texas Health Maintenance

5-24     Organization Act (Chapter 20A, Vernon's Texas Insurance Code).]

5-25                 [(13)  "Plan of operation" means the plan of operation

5-26     of the pool and includes the articles, bylaws, and operating rules

5-27     of the pool that are adopted by the board under Section 5 of this

 6-1     article.]

 6-2                 [(14)  "Benefits plan" means coverage to be offered by

 6-3     the pool to eligible persons under Section 11 of this article.]

 6-4                 [(15)  "Net premiums" means premiums charged by the

 6-5     pool less administrative expense allowances.]

 6-6           SECTION 1.02.   Section 4, Article 3.77, Insurance Code, is

 6-7     amended by amending Subsections (b)-(e) and (g) and by adding

 6-8     Subsection (h) to read as follows:

 6-9           (b)  The commissioner [insurance board] shall appoint members

6-10     of the board for staggered six-year terms as provided by this

6-11     section.

6-12           (c)  The board shall be [is] composed of:

6-13                 (1)  at least two persons [one person] affiliated with

6-14     an insurer [insurance company] admitted and authorized to write

6-15     health insurance in this state, but no more than four such persons;

6-16                 (2)  at least two persons who are insureds or parents

6-17     of insureds or who are reasonably expected to qualify for coverage

6-18     by the pool; [one person affiliated with a group hospital service

6-19     corporation operating under Chapter 20 of this code;]

6-20                 (3)  the remaining members of the board may be selected

6-21     from individuals such as a [one] physician licensed to practice in

6-22     this state by the Texas State Board of Medical Examiners, a [;

6-23     (4)  one] hospital administrator, an [; (5)  one] advanced nurse

6-24     practitioner, or[; and (6)  four] representatives of the general

6-25     public who are not employed by or affiliated with an insurance

6-26     company or plan, group hospital service corporation, or health

6-27     maintenance organization or licensed as or employed by or

 7-1     affiliated with a physician, hospital, or other health care

 7-2     provider.  A [(d)  The limitation on who may be a] representative

 7-3     of the general public does [not] include a person whose only

 7-4     affiliation with an insurance company or plan, group hospital

 7-5     service corporation, or health maintenance organization is as an

 7-6     insured or person who has coverage through a plan provided by the

 7-7     corporation or organization.

 7-8           (d)  For purposes of this section, an individual required to

 7-9     register with the secretary of state under Chapter 305, Government

7-10     Code, because of the individual's activities with respect to health

7-11     insurance-related matters is a person affiliated with an insurer.

7-12           (e)  If a vacancy occurs on the board, the commissioner

7-13     [insurance board] shall fill the vacancy for the unexpired term

7-14     with a person who has the appropriate qualifications to fill that

7-15     position on the board.

7-16           (g)  The commissioner [insurance board] shall designate one

7-17     of its appointees to the board to serve as chairman.  The chairman

7-18     serves in that capacity at the pleasure of the commissioner

7-19     [insurance board].

7-20           (h)  A member of the board of directors is not liable for an

7-21     action or omission performed in good faith in the performance of

7-22     powers and duties under this article, and cause of action does not

7-23     arise against a member for the action or omission.

7-24           SECTION 1.03.  Section 5, Article 3.77, Insurance Code, is

7-25     amended to read as follows:

7-26           Sec. 5.  Plan of Operation.  (a)  The pool's initial board

7-27     shall submit to the commissioner [insurance board] a plan of

 8-1     operation for the pool that will assure the fair, reasonable, and

 8-2     equitable administration of the pool.

 8-3           (b)  In addition to the other requirements of this article,

 8-4     the plan of operation must include procedures for:

 8-5                 (1)  operation of the pool;

 8-6                 (2)  selecting an administrator as provided under

 8-7     Section 7 of this article;

 8-8                 (3)  creating a fund, under management of the board,

 8-9     for administrative expenses;

8-10                 (4)  handling, [and] accounting, and auditing of [for]

8-11     money and other assets of the pool; [and]

8-12                 (5) [(2)]  developing and implementing a program to

8-13     publicize [provide public information regarding] the existence of

8-14     the pool, the eligibility requirements for coverage under the pool,

8-15     [and] enrollment procedures, and to foster public awareness of the

8-16     plan;

8-17                 (6)  creation of a grievance committee to review

8-18     complaints presented by applicants for coverage from the pool and

8-19     insureds who receive coverage from the pool; and

8-20                 (7)  other matters as may be necessary and proper for

8-21     the execution of the board's powers, duties, and obligations under

8-22     this article.

8-23           (c)  After notice and hearing, the commissioner [insurance

8-24     board] shall approve the plan of operation if it is determined

8-25     [determines] that the plan is suitable to assure the fair,

8-26     reasonable, and equitable administration of the pool.

8-27           (d)  The plan of operation takes effect on the date it is

 9-1     approved by commissioner [insurance board] order.

 9-2           (e)  If the initial board fails to submit a suitable plan of

 9-3     operation before the 180th day following the appointment of the

 9-4     initial board, the commissioner [insurance board], after notice and

 9-5     hearing, may adopt all necessary and reasonable rules to provide a

 9-6     plan for the pool.  The rules adopted under this subsection shall

 9-7     continue in effect until the initial board submits, and the

 9-8     commissioner [insurance board] approves, a plan of operation under

 9-9     this section.

9-10           (f)  The board shall amend the plan of operation as necessary

9-11     to carry out this article.  Amendments to the plan of operation

9-12     must be approved by the commissioner [insurance board] before they

9-13     become part of the plan.

9-14           SECTION 1.04.  Section 6, Article 3.77, Insurance Code, is

9-15     amended to read as follows:

9-16           Sec. 6.  Authority of the Pool.  (a)  The pool may exercise

9-17     any of the authority that an insurance company authorized to write

9-18     health insurance in this state may exercise under the law of this

9-19     state[, except the pool may not provide group insurance coverage].

9-20           (b)  As part of its authority, the pool may:

9-21                 (1)  provide [individual] health benefits coverage to

9-22     persons who are eligible for that coverage under this article;

9-23                 (2)  enter into contracts that are necessary to carry

9-24     out this article including, with the approval of the commissioner,

9-25     entering into contracts with similar pools in other states for the

9-26     joint performance of common administrative functions or with other

9-27     organizations for the performance of administrative functions;

 10-1                (3)  sue or be sued, including taking any legal actions

 10-2    necessary or proper to recover or collect assessments due the pool;

 10-3                (4)  institute any legal action necessary to avoid

 10-4    payment of improper claims against the pool or the coverage

 10-5    provided by or through the pool to recover any amounts erroneously

 10-6    or improperly paid by the pool, to recover any amounts paid by the

 10-7    pool as a mistake of fact or law, and to recover other amounts due

 10-8    the pool;

 10-9                (5)  establish appropriate rates, rate schedules, rate

10-10    adjustments, expense allowances, agents' referral fees, and claim

10-11    reserve formulas and perform any actuarial functions appropriate to

10-12    the operation of the pool;

10-13                (6)  adopt policy forms, endorsements, and riders and

10-14    applications for coverage;

10-15                (7)  issue insurance policies subject to this article

10-16    and the plan of operation;

10-17                (8)  appoint appropriate legal, actuarial, and other

10-18    committees that are necessary to provide technical assistance in

10-19    operating the pool and performing any of the functions of the pool;

10-20    [and]

10-21                (9)  employ and set the compensation of any persons

10-22    necessary to assist the pool in carrying out its responsibilities

10-23    and functions;

10-24                (10)  contract for stop-loss insurance for risks

10-25    incurred by the pool;

10-26                (11)  recover or collect assessments imposed under

10-27    Section 13 of this article;

 11-1                (12)  borrow money as necessary to implement the

 11-2    purposes of the pool;

 11-3                (13)  issue additional types of health insurance

 11-4    policies to provide optional coverages which comply with applicable

 11-5    provisions of state and federal law, including Medicare

 11-6    supplemental health insurance;

 11-7                (14)  provide for and employ cost containment measures

 11-8    and requirements including, but not limited to, preadmission

 11-9    screening, second surgical opinion, concurrent utilization review

11-10    subject to Article 21.58A of this code, and individual case

11-11    management for the purpose of making the benefit plans more cost

11-12    effective;

11-13                (15)  design, utilize, contract, or otherwise arrange

11-14    for the delivery of cost-effective health care services, including

11-15    establishing or contracting with preferred provider organizations

11-16    and health maintenance organizations; and

11-17                (16)  provide for reinsurance on either a facultative

11-18    or treaty basis or both.

11-19          (c)  The board shall promulgate a list of medical or health

11-20    conditions for which a person shall be eligible for pool coverage

11-21    without applying for health insurance.  The list shall be effective

11-22    on the first day of the operation of the pool and may be amended

11-23    from time to time as may be appropriate.

11-24          (d)  Not later than June 1 of each year, the board shall make

11-25    an annual report to the governor, the lieutenant governor, the

11-26    speaker of the house of representatives, and the commissioner.  The

11-27    report shall summarize the activities of the pool in the preceding

 12-1    calendar year, including information regarding net written and

 12-2    earned premiums, plan enrollment, administration expenses, and paid

 12-3    and incurred losses.

 12-4          SECTION 1.05.  Section 7, Article 3.77, Insurance Code, is

 12-5    amended by amending the heading and Subsections (a), (b), and (e)

 12-6    to read as follows:

 12-7          Sec. 7.  ADMINISTRATOR [ADMINISTERING INSURER].  (a)  After

 12-8    completing a competitive bidding process as provided by the plan of

 12-9    operation, the board may [shall] select one or more insurers or a

12-10    third party administrator certified by the department [State Board

12-11    of Insurance] to administer the pool.

12-12          (b)  The board shall establish criteria for evaluating the

12-13    bids submitted.  The criteria must include:

12-14                (1)  an insurer's or third party administrator's proven

12-15    ability to handle individual accident and health insurance;

12-16                (2)  the efficiency of an insurer's or third party

12-17    administrator's claims paying procedures;

12-18                (3)  an estimate of total charges for administering the

12-19    pool; [and]

12-20                (4)  an insurer's or third party administrator's

12-21    ability to administer the pool in a cost-efficient manner; and

12-22                (5)  the financial condition and stability of the

12-23    insurer or third party administrator.

12-24          (e)  The administering insurer or third party administrator

12-25    shall perform such functions relating to the pool as may be

12-26    assigned to it, including:

12-27                (1)  perform eligibility and administrative claims

 13-1    payment functions for the pool;

 13-2                (2)  establish a billing procedure for collection of

 13-3    premiums from persons insured by the pool;

 13-4                (3)  perform functions necessary to assure timely

 13-5    payment of benefits to persons covered under the pool, including:

 13-6                      (A)  providing information relating to the proper

 13-7    manner of submitting a claim for benefits to the pool and

 13-8    distributing claim forms; and

 13-9                      (B)  evaluating the eligibility of each claim for

13-10    payment by the pool;

13-11                (4)  submit regular reports to the board relating to

13-12    the operation of the pool; and

13-13                (5)  determine after the close of each calendar year

13-14    the net written and earned premiums, expense of administration, and

13-15    paid and incurred losses of the pool for that calendar year and

13-16    report this information to the board and the commissioner

13-17    [insurance board] on forms prescribed by the commissioner.

13-18          SECTION 1.06.  Section 8, Article 3.77, Insurance Code, is

13-19    amended to read as follows:

13-20          Sec. 8.  RULES [RULEMAKING AUTHORITY].  The commissioner may

13-21    by rule establish additional powers and duties of the board and may

13-22    adopt other rules as are necessary and proper to implement this

13-23    article.  The commissioner by rule shall provide the procedures,

13-24    criteria, and forms necessary to implement, collect, and deposit

13-25    assessments made and collected under Section 13.  [The board may

13-26    adopt rules it determines necessary to carry out this article and

13-27    other laws of this state under which it is authorized to operate.]

 14-1          SECTION 1.07.  Sections 9(b), (d), and (e), Article 3.77,

 14-2    Insurance Code, are amended to read as follows:

 14-3          (b)  Rates and rate schedules may be adjusted for appropriate

 14-4    risk factors including age and variation in claim costs, and the

 14-5    board may consider [shall take into consideration] appropriate risk

 14-6    factors in accordance with established actuarial and underwriting

 14-7    practices.

 14-8          (d)  The pool shall determine the standard risk rate by

 14-9    considering the premium rates charged by other insurers offering

14-10    health insurance coverage to individuals.  The standard risk rate

14-11    shall be established using reasonable actuarial techniques, and

14-12    shall reflect anticipated experience and expenses for such

14-13    coverage.  Initial pool rates may not be less than 125 percent and

14-14    may not exceed 150 percent of rates established as applicable for

14-15    individual standard rates.  Subsequent rates [calculating the

14-16    average individual standard rate charged by the five largest

14-17    insurers offering coverage in this state comparable to the pool

14-18    coverage.  If five insurers do not offer comparable coverage, the

14-19    standard risk rate shall be established using reasonable current

14-20    actuarial techniques and shall reflect anticipated experience and

14-21    expenses for that type of coverage.  Rates] shall be established to

14-22    provide fully for the expected costs of claims including recovery

14-23    of prior losses, expenses of operation, investment income of claim

14-24    reserves, and any other cost factors subject to the limitations

14-25    described in this subsection.  In no event shall pool [Pool] rates

14-26    [may not be less than 150 percent, and may not] exceed 200

14-27    percent[,] of rates applicable to individual standard risks.

 15-1          (e)  All rates and rate schedules shall be submitted to the

 15-2    commissioner [insurance board] for approval, and the commissioner

 15-3    [insurance board] must approve the rates and rate schedules of the

 15-4    pool before they are used by the pool.  The commissioner [insurance

 15-5    board] in evaluating the rates and rate schedules of the pool shall

 15-6    consider the factors provided by this section. [The insurance board

 15-7    by rule may adopt necessary procedures, criteria, and forms for the

 15-8    submission and approval of the pool's rates and rate schedules.]

 15-9          SECTION 1.08.  Section 10, Article 3.77, Insurance Code, is

15-10    amended to read as follows:

15-11          Sec. 10.  ELIGIBILITY FOR COVERAGE.  (a)  Any individual

15-12    person who is and continues to be a resident of Texas and a citizen

15-13    of the United States shall be eligible for coverage from the pool

15-14    if evidence is provided of:

15-15                (1)  a notice of rejection or refusal to issue

15-16    substantially similar insurance for health reasons by two insurers.

15-17    A rejection or refusal by an insurer offering only stop-loss,

15-18    excess loss, or reinsurance coverage with respect to the applicant

15-19    shall not be sufficient evidence under this subsection;

15-20                (2)  an offer to issue insurance only with conditional

15-21    riders;

15-22                (3)  a refusal by an insurer to issue insurance except

15-23    at a rate exceeding the pool rate;

15-24                (4)  the individual has maintained health insurance

15-25    coverage for the previous 18 months with no gap in coverage greater

15-26    than 63 days; or

15-27                (5)  diagnosis of the individual with one of the

 16-1    medical or health conditions listed by the board under Section 6(c)

 16-2    of this article and for which a person shall be eligible for pool

 16-3    coverage without applying for health insurance coverage.  [Except

 16-4    as provided by Subsection (b) of this section, a person who is a

 16-5    resident of this state and who is diagnosed as having a condition

 16-6    designated as uninsurable by the board or who provides proof

 16-7    acceptable to the board from his insurer that he has been

 16-8    determined to be a substandard risk for whom the insurer's premium

 16-9    would exceed the premium charged by the pool is entitled to

16-10    coverage from the pool.]

16-11          (b)  Each dependent of a person who is eligible for coverage

16-12    from the pool shall also be eligible for coverage from the pool.

16-13    In the instance of a child who is the primary insured, resident

16-14    family members shall also be eligible for coverage.

16-15          (c)  A person may maintain pool coverage for the period of

16-16    time the person is satisfying a preexisting waiting period under

16-17    another health insurance policy or insurance arrangement intended

16-18    to replace the pool policy.

16-19          (d)  A person is not eligible for coverage from the pool if

16-20    the person:

16-21                (1)  has in effect on the date pool coverage takes

16-22    effect health insurance coverage from an insurer or insurance

16-23    arrangement;

16-24                (2)  is eligible for other health care benefits at the

16-25    time application is made to the pool, except for coverage

16-26    conditioned by the limitations described  by Subsections (a)(1)-(3)

16-27    of this section;

 17-1                (3)  has terminated coverage in the pool within 12

 17-2    months of the date that application is made to the pool, unless the

 17-3    person demonstrates a good faith reason for the termination; or

 17-4                (4)  [has had benefits paid by the pool on his behalf

 17-5    in the amount of $500,000;]

 17-6                [(5)]  is confined in a county jail or imprisoned in a

 17-7    state prison[; or]

 17-8                [(6)  is eligible for benefits under Medicare, Chapter

 17-9    32, Human Resources Code, or Chapter 35, Health and Safety Code].

17-10          (e)  Pool coverage shall cease:

17-11                (1)  on the date a person is no longer a resident of

17-12    this state, except for a child who is a student under the age of 23

17-13    years and who is financially dependent upon the parent, a child for

17-14    whom a person may be obligated to pay child support, or a child of

17-15    any age who is disabled and dependent upon the parent;

17-16                (2)  on the date a person requests coverage to end;

17-17                (3)  upon the death of the covered person;

17-18                (4)  on the date state law requires cancellation of the

17-19    policy;

17-20                (5)  at the option of the pool, 30 days after the pool

17-21    sends to the person any inquiry concerning the person's

17-22    eligibility, including an inquiry concerning the person's

17-23    residence, to which the person does not reply;

17-24                (6)  on the 31st day after the day on which a premium

17-25    payment for pool coverage becomes due if the payment is not made

17-26    before that date; or

17-27                (7)  at such time as the person ceases to meet the

 18-1    eligibility requirements of this section.

 18-2          (f) [(c)]  A person who ceases to meet the eligibility

 18-3    requirements of this section, may have his coverage terminated at

 18-4    the end of the policy period.

 18-5          [(d)  A person whose health insurance coverage is

 18-6    involuntarily terminated for any reason other than nonpayment of

 18-7    premium and who is not eligible for conversion under the terminated

 18-8    coverage is eligible to apply for coverage under the plan.  If

 18-9    application is made for the coverage not later than the 60th day

18-10    after the involuntary termination and if premiums are paid for the

18-11    entire coverage period, the effective date of coverage is the

18-12    termination date of the previous coverage.]

18-13          SECTION 1.09.  Section 11, Article 3.77, Insurance Code, is

18-14    amended to read as follows:

18-15          Sec. 11.  Minimum Pool Benefits.  (a)  The pool shall offer

18-16    pool coverage consistent with major medical expense coverage to

18-17    each eligible person who is not eligible for Medicare.  The board,

18-18    with the approval of the commissioner, shall establish:

18-19                (1)  the coverages to be provided by the pool;

18-20                (2)  the applicable schedules of benefits; and

18-21                (3)  any exclusions to coverage and other limitations.

18-22    [to each person who is eligible under Section 10 of this article.

18-23    The pool coverage shall be for covered expenses as follows:]

18-24                [(1)  hospital services;]

18-25                [(2)  professional services for the diagnosis or

18-26    treatment of injuries, illnesses, or conditions, other than mental

18-27    or dental, which are rendered by a physician, or by other licensed

 19-1    professionals at his direction;]

 19-2                [(3)  drugs requiring a physician's prescription;]

 19-3                [(4)  services of a licensed skilled nursing facility

 19-4    for not more than 120 days during a policy year;]

 19-5                [(5)  services of a home health agency up to a maximum

 19-6    of 270 services per year;]

 19-7                [(6)  use of radium or other radioactive materials;]

 19-8                [(7)  oxygen;]

 19-9                [(8)  anesthetics;]

19-10                [(9)  prostheses other than dental;]

19-11                [(10)  rental of durable medical equipment, other than

19-12    eyeglasses and hearing aids, for which there is no personal use in

19-13    the absence of the conditions for which it is prescribed;]

19-14                [(11)  diagnostic X rays and laboratory tests;]

19-15                [(12)  oral surgery for excision of partially or

19-16    completely unerupted, impacted teeth or the gums and tissues of the

19-17    mouth when not performed in connection with the extraction or

19-18    repair of teeth;]

19-19                [(13)  services of a licensed physical therapist;]

19-20                [(14)  transportation provided by a licensed ambulance

19-21    service to the nearest facility qualified to treat the condition;

19-22    and]

19-23                [(15)  services for diagnosis and treatment of mental

19-24    and nervous disorders, provided that the insured is required to

19-25    make a 50 percent copayment, and that the payment of the pool does

19-26    not exceed $4,000 for outpatient psychiatric treatment.]

19-27          (b)  The benefits provisions of the pool's health benefits

 20-1    coverages must include the following:

 20-2                (1)  all required or applicable definitions;

 20-3                (2)  a list of any exclusions or limitations to

 20-4    coverage;

 20-5                (3)  a description of covered services required under

 20-6    the pool; and

 20-7                (4)  the deductibles, coinsurance options, and

 20-8    copayment options that are required or permitted under the pool.

 20-9          (c)  [Covered expenses under Subsection (a) of this section

20-10    do not include:]

20-11                [(1)  any charge for treatment for cosmetic purposes

20-12    other than surgery for the repair or treatment of an injury or a

20-13    congenital bodily defect to restore normal bodily functions;]

20-14                [(2)  care which is primarily for custodial or

20-15    domiciliary purposes;]

20-16                [(3)  any charge for confinement in a private room to

20-17    the extent it is in excess of the institution's charge for its most

20-18    common semiprivate room, unless a private room is prescribed as

20-19    medically necessary by a physician;]

20-20                [(4)  that part of any charge for services rendered or

20-21    articles prescribed by a physician, dentist, or other health care

20-22    personnel that exceeds the prevailing charge in the locality or for

20-23    any charge not medically necessary;]

20-24                [(5)  any charge for services or articles that

20-25    provision of which is not within the scope of authorized practice

20-26    of the institution or individual providing the services or

20-27    articles;]

 21-1                [(6)  any expense incurred prior to the effective date

 21-2    of coverage by the pool for the person on whose behalf the expense

 21-3    is incurred;]

 21-4                [(7)  dental care except as provided in Subsection

 21-5    (a)(12) of this section;]

 21-6                [(8)  eyeglasses and hearing aids;]

 21-7                [(9)  illness or injury due to acts of war;]

 21-8                [(10)  services of blood donors and any fee for failure

 21-9    to replace the first three pints of blood provided to an eligible

21-10    person each policy year; and]

21-11                [(11)  personal supplies or services provided by a

21-12    hospital or nursing home or any other nonmedical or nonprescribed

21-13    supply or service.]

21-14          [(c)  Under this section, "covered expenses" includes only

21-15    those expenses for the prevailing charge in the locality for the

21-16    items listed in Subsection (a) of this section if prescribed by a

21-17    physician and determined by the pool to be medically necessary.]

21-18          [(d)  In authorizing pool coverage, the board must consider

21-19    levels of health insurance provided in the state and medical

21-20    economic factors that are considered appropriate and, subject to

21-21    the limitations provided by this section, shall adopt benefit

21-22    levels, deductibles, coinsurance factors, exclusions, and

21-23    limitations determined to be generally reflective of and

21-24    commensurate with health insurance provided through a

21-25    representative number of large employers in the state.]

21-26          [(e)  Pool coverage under this section shall provide both a

21-27    low deductible of not less than $250 per person and $500 per family

 22-1    a year and appropriate higher deductibles to be selected by the

 22-2    pool applicant.  The board shall purchase stop-loss coverage for

 22-3    the pool in amounts determined by the board but not more than

 22-4    $2,000 per person or $4,000 per family covered by the pool.] The

 22-5    board may adjust deductibles, the amounts of stop-loss coverage,

 22-6    and the time periods governing preexisting conditions under Section

 22-7    12 [Subsection (f)] of this article [section] to preserve the

 22-8    financial integrity of the pool.  If the board makes such an

 22-9    adjustment it shall report in writing that adjustment together with

22-10    its reasons for the adjustment to the commissioner [insurance board

22-11    and Legislative Budget Board].  The report must be submitted not

22-12    later than the 30th day after the date the adjustment is made.

22-13          [(f)  Pool coverage must exclude charges or expenses incurred

22-14    during the first six months following the effective date of

22-15    coverage with regard to any condition that during the six-month

22-16    period preceding the effective date of coverage:]

22-17                [(1)  had manifested itself in a manner that would

22-18    cause an ordinarily prudent person to seek diagnosis, care, or

22-19    treatment; or]

22-20                [(2)  for which medical advice, care, or treatment was

22-21    recommended or received.]

22-22          [(g)  Preexisting condition exclusions shall be waived to the

22-23    extent to which similar exclusions, if any, have been satisfied

22-24    under any previous health insurance coverage, health insurance

22-25    pool, or self-insured health or welfare benefits plan that was

22-26    involuntarily terminated, if application for pool coverage is made

22-27    not later than the 31st day after involuntary termination.  In that

 23-1    case, coverage in the pool is effective from the date on which the

 23-2    previous coverage was terminated.]

 23-3          (d) [(h)]  Benefits otherwise payable under pool coverage

 23-4    shall be reduced by amounts paid or payable through any other

 23-5    health insurance, or insurance arrangement, and by all hospital and

 23-6    medical expense benefits paid or payable under any workers'

 23-7    compensation coverage, automobile insurance whether provided on the

 23-8    basis of fault or no-fault, and by any hospital or medical benefits

 23-9    paid or payable under or provided pursuant to any state or federal

23-10    law or program.

23-11          (e) [(i)]  The [insurer or the] pool has a cause of action

23-12    against an eligible person for the recovery of the amount of

23-13    benefits paid that are not for covered expenses.  Benefits due from

23-14    the pool may be reduced or refused as an offset against any amount

23-15    recoverable under this subsection.

23-16          SECTION 1.10.  Sections 12 and 13, Article 3.77, Insurance

23-17    Code, are amended to read as follows:

23-18          Sec. 12.  PREEXISTING CONDITIONS.  (a)  Except as provided by

23-19    this section and Section 11(c) of this article, pool coverage shall

23-20    exclude charges or expenses incurred during the first 12 months

23-21    following the effective date of coverage with regard to any

23-22    condition for which medical advice, care, or treatment was

23-23    recommended or received during the six-month period preceding the

23-24    effective date of coverage.

23-25          (b)  A preexisting condition provision shall not apply to an

23-26    individual who was continuously covered for an aggregate period of

23-27    12 months by health insurance that was in effect up to a date not

 24-1    more than 63 days before the effective date of coverage under the

 24-2    pool, excluding any waiting period, provided that the application

 24-3    for pool coverage is made no later than 63 days following the

 24-4    termination of coverage.

 24-5          (c)  In determining whether a preexisting condition provision

 24-6    applies to an individual covered by the pool, the pool shall credit

 24-7    the time the individual was previously covered under health

 24-8    insurance if the previous coverage was in effect at any time during

 24-9    the 12 months preceding the effective date of coverage under the

24-10    pool.  Any waiting period that applied before that coverage became

24-11    effective also shall be credited against the preexisting condition

24-12    provision period.

24-13          Sec. 13.  Assessments.  (a)  The board may assess insurers

24-14    and make advance interim assessments as reasonable and necessary

24-15    for the plan's organizational and interim operating expenses.  Any

24-16    interim assessment shall be credited as offsets against any regular

24-17    assessments due following the close of the fiscal year.  [If during

24-18    any state fiscal year, the pool is unable to pay its claims and

24-19    meet its other financial obligations due to a shortage of available

24-20    funds, the board shall make an estimate of the amount that will be

24-21    necessary to fund the shortage and shall notify the insurance board

24-22    of this shortage and the estimated amount of money necessary to

24-23    fund the shortage.]

24-24          (b)  If assessments exceed the pool's actual losses and

24-25    administrative expenses, the excess shall be held in an

24-26    interest-bearing account and used by the board to offset future

24-27    losses or to reduce future assessments.  As used in this section,

 25-1    future losses includes reserves for incurred but not reported

 25-2    claims.  [On receiving notice under this section, the insurance

 25-3    board shall direct the commissioner of insurance to impose an

 25-4    assessment on each insurer authorized to write health insurance in

 25-5    this state.]

 25-6          (c)  After the end of each fiscal year, the board shall

 25-7    determine and report to the commissioner the net loss, if any, of

 25-8    the pool for the previous calendar year, including administrative

 25-9    expenses and incurred losses for the year, taking into account

25-10    investment income and other appropriate gains and losses.  Any net

25-11    loss for the year shall be recouped by assessments on insurers.

25-12    Each insurer's assessment shall be determined annually by the board

25-13    based on annual statements and other reports required by the board

25-14    and filed with the board.  [The total amount of assessments to be

25-15    collected by the commissioner shall be in an amount that is

25-16    sufficient to fund the pool's shortage.]

25-17          (d)  The assessment imposed against each insurer shall be in

25-18    an amount that is equal to the ratio of the gross premiums

25-19    collected by the insurer for health insurance in this state during

25-20    the preceding calendar year, except for Medicare supplement

25-21    premiums subject to Article 3.74 and small group health insurance

25-22    premiums subject to Articles 26.01 through 26.76, to the gross

25-23    premiums collected by all insurers for health insurance, except for

25-24    Medicare supplement premiums subject to Article 3.74 and small

25-25    group health insurance premiums subject to Articles 26.01 through

25-26    26.76, in this state during the preceding calendar year.

25-27          (e)  An insurer may petition the commissioner for an

 26-1    abatement or deferment of all or part of an assessment imposed by

 26-2    the board.  The commissioner may abate or defer, in whole or in

 26-3    part, such assessment if the commissioner determines that the

 26-4    payment of the assessment would endanger the ability of the

 26-5    participating insurer to fulfill its contractual obligations.  If

 26-6    an assessment against an insurer is abated or deferred in whole or

 26-7    in part, the amount by which such assessment is abated or deferred

 26-8    shall be assessed against the other insurers in a manner consistent

 26-9    with the basis for assessments set forth in this subsection.  The

26-10    insurer receiving such abatement or deferment shall remain liable

26-11    to the pool for the deficiency.  [The insurance board by rule shall

26-12    provide the procedures, criteria, and forms necessary to implement,

26-13    collect, and deposit assessments made and collected under this

26-14    section.]

26-15          [(f)  Each insurer that pays an assessment under this section

26-16    is entitled to reimbursement by the state in an amount equal to the

26-17    amount of the assessment paid under this section.  The state shall

26-18    reimburse an insurer not earlier than September 1 but not later

26-19    than September 15 of the first year of the first state biennium

26-20    that begins after the date on which the assessment is paid.  The

26-21    comptroller of public accounts by rule shall establish a procedure

26-22    under which claims for reimbursement under this section may be

26-23    submitted and paid.]

26-24          [Sec. 13.  MANAGED CARE, ETC.  The board as part of the

26-25    pool's program may adopt rules providing for quality of care,

26-26    management of costs and benefits, and managed care.]

26-27          SECTION 1.11.  Article 3.77, Insurance Code, is amended by

 27-1    adding Sections 14 and 15 to read as follows:

 27-2          Sec. 14.  COMPLAINT PROCEDURES.  An applicant or participant

 27-3    in coverage from the pool is entitled to have complaints against

 27-4    the pool reviewed by a grievance committee appointed by the board.

 27-5    The grievance committee shall report to the board after completion

 27-6    of the review of each complaint.  The board shall retain all

 27-7    written complaints regarding the pool at least until the third

 27-8    anniversary of the date the pool received the complaint.

 27-9          Sec. 15.  AUDIT.  (a)  The state auditor shall conduct

27-10    annually a special audit of the pool under Chapter 321, Government

27-11    Code.  The state auditor's report shall include a financial audit

27-12    and an economy and efficiency audit.

27-13          (b)  The state auditor shall report the cost of each audit

27-14    conducted under this article to the board and the comptroller, and

27-15    the board shall remit that amount to the comptroller for deposit to

27-16    the general revenue fund.

27-17                         PART 2.  GROUP COVERAGES

27-18          SECTION 2.01.  Section 1(d)(3), Article 3.51-6, Insurance

27-19    Code, is amended to read as follows:

27-20          (3)  Any insurer or group hospital service corporation

27-21    subject to Chapter 20, Insurance Code, who issues policies which

27-22    provide hospital, surgical, or major medical expense insurance or

27-23    any combination of these coverages on an expense incurred basis,

27-24    but not a policy which provides benefits for specified disease or

27-25    for accident only, shall provide a [conversion or] group

27-26    continuation privilege as required by this subsection.  Any

27-27    employee, member, or dependent whose insurance under the group

 28-1    policy has been terminated for any reason except involuntary

 28-2    termination for cause, including discontinuance of the group policy

 28-3    in its entirety or with respect to an insured class, and who has

 28-4    been continuously insured under the group policy and under any

 28-5    group policy providing similar benefits which it replaces for at

 28-6    least three consecutive months immediately prior to termination

 28-7    shall be entitled to such privilege as outlined in Paragraph (A)

 28-8    [(B), or (C)] below.  Involuntary termination for cause does not

 28-9    include termination for any health-related cause.

28-10                      (A)(i)  Policies subject to this section shall

28-11    provide continuation of group coverage for employees or members and

28-12    their eligible dependents subject to the eligibility provisions.

28-13    [An insurer shall first offer to each employee, member, or

28-14    dependent a conversion policy without evidence of insurability if

28-15    written application for and payment of the first premium is made

28-16    not later than the 31st day after the date of the termination.  The

28-17    converted policy shall provide similar coverage and benefits as

28-18    provided under the group policy or plan.  The lifetime maximum

28-19    benefits shall be computed from the initial date of the employee's,

28-20    member's, or dependent's coverage with the group.  An insurer shall

28-21    offer and an employee, member, or dependent may elect lesser

28-22    coverage and benefits.  An employee, member, or dependent shall not

28-23    be entitled to have a converted policy or plan issued if

28-24    termination of the insurance occurred because:  (aa) such person

28-25    failed to pay any required premium; or (bb) any discontinued group

28-26    coverage was replaced by similar group coverage within 31 days.]

28-27                            [(ii)  An insurer shall not be required to

 29-1    issue a converted policy covering any person if:  (aa)  such person

 29-2    is or could be covered by Medicare; (bb) such person is covered for

 29-3    similar benefits by another hospital, surgical, medical, or major

 29-4    medical expense insurance policy or hospital or medical service

 29-5    subscriber contract or medical practice or other prepayment plan or

 29-6    by any other plan or program; (cc)  such person is eligible for

 29-7    similar benefits whether or not covered therefor under any

 29-8    arrangement of coverage for individuals in a group, whether on an

 29-9    insured or uninsured basis; or (dd)  similar benefits are provided

29-10    for or available to such person, pursuant to or in accordance with

29-11    the requirements of any state or federal law. The board shall issue

29-12    rules and regulations to establish minimum standards for benefits

29-13    under policies issued pursuant to this subsection.]

29-14                      [(B)(i)  Policies subject to Paragraph (A) above

29-15    shall provide at the option of the employee, member, or dependent

29-16    in lieu of the requirements of Paragraph (A) continuation of group

29-17    coverage for employees or members and their eligible dependents

29-18    subject to the eligibility provisions of Paragraph (A).]

29-19                            (ii)  Continuation of group coverage must

29-20    be requested in writing within 31 days following the later of:

29-21    (aa) the date the group coverage would otherwise terminate; or (bb)

29-22    the date the employee, member, or dependent is given notice  in a

29-23    format prescribed by the commissioner of the right of continuation

29-24    by either the employer or the group policyholder.

29-25                            (iii)  [In no event may the employee or

29-26    member elect continuation more than 31 days after the date of such

29-27    termination.  (iv)]  An employee, [or] member, or dependent

 30-1    electing continuation must pay to the group policyholder or

 30-2    employer, on a monthly basis in advance, the amount of contribution

 30-3    required by the policyholder or employer, plus two percent of the

 30-4    group rate for the insurance being continued under the group policy

 30-5    on the due date of each payment.

 30-6                            (iv) [(v)]  The employee's, [or] member's,

 30-7    or dependent's written election of continuation, together with the

 30-8    first contribution required to establish contributions on a monthly

 30-9    basis in advance, must be given to the policyholder or employer

30-10    within the later of:  (aa) 31 days of the date coverage would

30-11    otherwise terminate, or (bb) the date the employee is given notice

30-12    of the right of continuation by either the employer or the group

30-13    policyholder.

30-14                            (v) [(vi)]  Continuation may not terminate

30-15    until the earliest of:  (aa) six months after the date the election

30-16    is made; (bb) the date on which failure to make timely payments

30-17    would terminate coverage; (cc) the date on which the group coverage

30-18    terminates in its entirety; (dd) the date on which the covered

30-19    person is or could be covered under Medicare; or one of the

30-20    conditions specified in items (aa) through (dd) of Subparagraph

30-21    (ii), Paragraph (A) above is met by the covered individual; (ee)

30-22    the date on which the covered person is covered for similar

30-23    benefits by another hospital, surgical, medical, or major medical

30-24    expense insurance policy or hospital or medical service subscriber

30-25    contract or medical practice or other prepayment plan or any other

30-26    plan or program; (ff) the date the covered person is eligible for

30-27    similar benefits whether or not covered therefor under any

 31-1    arrangement of coverage for individuals in a group, whether on an

 31-2    insured or uninsured basis; or (gg) similar benefits are provided

 31-3    or available to such person, pursuant to or in accordance with the

 31-4    requirements of any state or federal law.

 31-5                            (vi)  Not less than 30 days before the end

 31-6    of the six months after the date the employee, member, or dependent

 31-7    elects continuation of the policy, the insurer shall notify the

 31-8    employee, member, or dependent that he/she may be eligible for

 31-9    coverage under the Texas Health Insurance Risk Pool, as provided

31-10    under Article 3.77 of this code and the insurer shall provide the

31-11    address for applying to such pool to the employee, member, or

31-12    dependent.

31-13                      (B)(i)  An insurer may offer to each employee,

31-14    member, or dependent a conversion policy.  Such converted policy

31-15    shall be issued without evidence of insurability if written

31-16    application for and payment of the first premium is made not later

31-17    than the 31st day after the date of termination.  The converted

31-18    policy shall meet the minimum standards for benefits for conversion

31-19    policies.

31-20                            (ii)  Conversion coverage for any insured

31-21    person may not terminate until the earliest of:  (aa)  the date on

31-22    which failure to make timely payments would terminate coverage; or

31-23    (bb)  one of the conditions specified in items (dd)  through

31-24    (gg)  of Subparagraph (v), Paragraph (3)(A) above.  The

31-25    commissioner shall issue rules and regulations to establish minimum

31-26    standards for benefits under policies issued pursuant to this

31-27    subsection.

 32-1                            (iii) [(C)]  The insurer may elect to

 32-2    provide the conversion coverage on an individual or group basis.

 32-3          The premium for the converted policy issued under Paragraph

 32-4    (B) [(A)] of this subdivision shall be determined in accordance

 32-5    with the insurer's table of premium rates for coverage that was

 32-6    provided under the group policy or plan.  The premium may be based

 32-7    on the age and geographic location of each person to be covered and

 32-8    the type of converted policy.  The premium for the same coverage

 32-9    and benefits under a converted policy may not exceed 200 percent of

32-10    the premium determined in accordance with this paragraph.  The

32-11    premium must be based on the type of converted policy and the

32-12    coverage provided by the policy.

32-13                       PART 3.  INDIVIDUAL COVERAGES

32-14          SECTION 3.01.  Subsection (H), Section 1, Chapter 397, Acts

32-15    of the 54th Legislature, Regular Session, 1955 (Article 3.70-1,

32-16    Vernon's Texas Insurance Code), is amended by adding Subdivision

32-17    (4) to read as follows:

32-18                (4)(a)  A preexisting condition provision in an

32-19    individual health insurance policy shall not apply to an individual

32-20    who was continuously covered for an aggregate period of 18 months

32-21    by creditable coverage that was in effect up to a date not more

32-22    than 63 days before the effective date of the individual coverage,

32-23    excluding any waiting period, and whose most recent creditable

32-24    coverage was under a group health plan, governmental plan, or

32-25    church plan.

32-26                      (b)  For purposes of this section, creditable

32-27    coverage means coverage under any of the following:  coverage under

 33-1    a self-funded or self-insured employee welfare benefit plan that

 33-2    provides health benefits and is established in accordance with the

 33-3    Employee Retirement Income Security Act of 1974 (29 U.S.C.  Section

 33-4    1001, et seq.); coverage under any group or individual health

 33-5    benefit plan provided by a health insurance carrier or health

 33-6    maintenance organization; Part A or Part B of Title XVIII of the

 33-7    Social Security Act; Title XIX of the Social Security Act, other

 33-8    than coverage consisting solely of benefits under Section 1928;

 33-9    Chapter 55 of Title 10, United States Code; a medical care program

33-10    of the Indian Health Service or of a tribal organization; a state

33-11    health benefits risk pool; a health plan offered under Chapter 89

33-12    of Title 5, United States Code; a public health plan as defined by

33-13    federal regulations; or a health benefit plan under Section 5(e) of

33-14    the Peace Corps Act (22 U.S.C. Section 2504(e)).

33-15                      (c)  In determining whether a preexisting

33-16    condition provision applies to an individual, the individual

33-17    insurance carrier shall credit the time the individual was

33-18    previously covered under creditable coverage if the previous

33-19    coverage was in effect at any time during the 18 months preceding

33-20    the effective date of the individual coverage.

33-21          SECTION 3.02.  Subchapter G, Chapter 3, Insurance Code, is

33-22    amended by adding Article 3.70-1A to read as follows:

33-23          Art. 3.70-1A.  GUARANTEED RENEWABILITY OF CERTAIN INDIVIDUAL

33-24    HEALTH INSURANCE POLICIES.  (a)  Except as otherwise provided in

33-25    this article, an individual health insurance policy providing

33-26    benefits for medical care under a hospital, medical, or surgical

33-27    policy shall be renewed or continued in force at the option of the

 34-1    individual.

 34-2          (b)  An individual health insurance policy providing benefits

 34-3    for medical care under a hospital, medical, or surgical policy may

 34-4    be nonrenewed or discontinued based only on one or more of the

 34-5    following reasons:

 34-6                (1)  failure to pay premiums or contributions in

 34-7    accordance with the terms of the policy;

 34-8                (2)  fraud or intentional misrepresentation;

 34-9                (3)  the insurance company is ceasing to offer coverage

34-10    in the individual market in accordance with rules established by

34-11    the commissioner;

34-12                (4)  an individual no longer resides, lives, or works

34-13    in an area in which the insurer is authorized to provide coverage,

34-14    but only if such coverage is terminated under this paragraph

34-15    uniformly without regard to any health-status related factor of

34-16    covered individuals; or

34-17                (5)  in accordance with applicable federal law and

34-18    regulations.

34-19          (c)  The commissioner shall adopt rules necessary to

34-20    implement this article and to meet the minimum requirements of

34-21    federal law and regulations.

34-22        PART 4.  COVERAGE THROUGH HEALTH MAINTENANCE ORGANIZATIONS

34-23          SECTION 4.01.  Section 9, Texas Health Maintenance

34-24    Organization Act (Article 20A.09, Vernon's Texas Insurance Code),

34-25    is amended by adding Subsections (k) and (l) to read as follows:

34-26          (k)  Continuation of Coverage and Conversion.

34-27                (A)  A health maintenance organization shall provide a

 35-1    group continuation privilege as required by this subsection.  Any

 35-2    enrollee whose coverage under the group contract has been

 35-3    terminated for any reason except involuntary termination for cause,

 35-4    and who has been continuously insured under the group contract and

 35-5    under any group contract providing similar services and benefits

 35-6    which it replaces for at least three consecutive months immediately

 35-7    prior to termination shall be entitled to such privilege as

 35-8    outlined below.  Involuntary termination for cause does not include

 35-9    termination for any health-related cause.  Health maintenance

35-10    organization contracts subject to this section shall provide

35-11    continuation of group coverage for enrollees subject to the

35-12    eligibility provisions below:

35-13                      (1)  Continuation of group coverage must be

35-14    requested in writing within 31 days following the later

35-15    of:  (aa)  the date the group coverage would otherwise terminate;

35-16    or (bb)  the date the enrollee is given notice of the right of

35-17    continuation by either the employer or the group contractholder.

35-18                      (2)  An enrollee electing continuation must pay

35-19    to the group contractholder or employer on a monthly basis, in

35-20    advance, the amount of contribution required by the contractholder

35-21    or employer, plus two percent of the group rate for the coverage

35-22    being continued under the group contract, on the due date of each

35-23    payment.

35-24                      (3)  The enrollee's written election of

35-25    continuation, together with the first contribution required to

35-26    establish contributions on a monthly basis, in advance, must be

35-27    given to the contractholder or employer within 31 days following

 36-1    the later of:  (aa)  the date the group coverage would otherwise

 36-2    terminate; or (bb)  the date the enrollee is given notice of the

 36-3    right of continuation by either the employer or the group

 36-4    contractholder.

 36-5                      (4)  Continuation may not terminate until the

 36-6    earliest of:  (aa)  six months after the date the election is made;

 36-7    (bb)  the date on which failure to make timely payments would

 36-8    terminate coverage; (cc)  the date on which the covered person is

 36-9    covered for similar services and benefits by another hospital,

36-10    surgical, medical, or major medical expense insurance policy or

36-11    hospital or medical service subscriber contract or medical practice

36-12    or other prepayment plan or any other plan or program; or (dd)  the

36-13    date on which the group coverage terminates in its entirety.

36-14                      (5)  Not less than 30 days before the end of the

36-15    six months after the date the enrollee elects continuation of the

36-16    contract, the health maintenance organization shall notify the

36-17    enrollee that he/she may be eligible for coverage under the Texas

36-18    Health Insurance Risk Pool, as provided under Article 3.77 of this

36-19    code, and the health maintenance organization shall provide the

36-20    address for applying to such pool to the enrollee.

36-21                (B)  A health maintenance organization may offer to

36-22    each enrollee a conversion contract.  Such conversion contract

36-23    shall be issued without evidence of insurability if written

36-24    application for and payment of the first premium is made not later

36-25    than the 31st day after the date of termination.  The conversion

36-26    contract shall meet the minimum standards for services and benefits

36-27    for conversion contracts.  The commissioner shall issue rules and

 37-1    regulations to establish minimum standards for services and

 37-2    benefits under contracts issued pursuant to this subsection.

 37-3                (C)  The premium for a conversion contract issued under

 37-4    this Act shall be determined in accordance with the health

 37-5    maintenance organization's premium rates for coverage that were

 37-6    provided under the group contract or plan.  The premium may be

 37-7    based on geographic location of each person to be covered and the

 37-8    type of conversion contract and coverage provided.  The premium for

 37-9    the same coverage under a conversion contract may not exceed 200

37-10    percent of the premium determined in accordance with this

37-11    paragraph.  The premium must be based on the type of conversion

37-12    contract and the coverage provided by contract.

37-13          (l)  Individual Health Care Plan.  A health maintenance

37-14    organization may provide an individual health care plan as required

37-15    by this subsection.

37-16                (A)  For purposes of this subsection, an "individual

37-17    health care plan" means:

37-18                      (1)  a health care plan providing health care

37-19    services for individuals and their dependents;

37-20                      (2)  a health care plan in which an enrollee pays

37-21    the premium and is not being covered under the contract pursuant to

37-22    continuation of services and benefits provisions applicable under

37-23    federal or state law; and

37-24                      (3)  a plan in which the evidence of coverage

37-25    meets the requirements of Section 2(a) of this Act.

37-26                (B)  A health maintenance organization may limit its

37-27    enrollees to those who live, reside, or work within the service

 38-1    area for such network plan.

 38-2                (C)  Renewability of Coverage.  An individual health

 38-3    care plan or a conversion contract providing health care services

 38-4    shall be renewable with respect to an enrollee at the option of the

 38-5    enrollee, and may be nonrenewed based only on one or more of the

 38-6    following reasons:

 38-7                      (1)  failure to pay premiums or contributions in

 38-8    accordance with the terms of the plan or the issuer has not

 38-9    received timely premium payments;

38-10                      (2)  fraud or intentional misrepresentation;

38-11                      (3)  the health maintenance organization is

38-12    ceasing to offer coverage in the individual market in accordance

38-13    with rules established by the commissioner;

38-14                      (4)  enrollee no longer resides, lives, or works

38-15    in the area in which the health maintenance organization is

38-16    authorized to provide coverage, but only if such coverage is

38-17    terminated under this paragraph uniformly without regard to any

38-18    health-status related factor of covered enrollees; or

38-19                      (5)  in accordance with applicable federal law

38-20    and regulations.

38-21                (D)  The commissioner may adopt rules necessary to

38-22    implement this article and to meet the minimum requirements of

38-23    federal law and regulations.

38-24              PART 5.  TRANSITION; EFFECTIVE DATE; EMERGENCY

38-25          SECTION 5.01.  Except as provided in Section 5.02, this Act

38-26    applies only to an insurance policy or evidence of coverage that is

38-27    delivered, issued for delivery, or renewed on or after July 1,

 39-1    1997.  A policy or evidence of coverage that is delivered, issued

 39-2    for delivery, or renewed before July 1, 1997, is governed by the

 39-3    law as it existed immediately before the effective date of this

 39-4    Act, and that law is continued in effect for that purpose.

 39-5          SECTION 5.02.  Coverages available under the Texas Health

 39-6    Insurance Risk Pool as provided in Part 1 of this Act must be made

 39-7    available not later than January 1, 1998.  The provisions of this

 39-8    Act as provided under Part 2, Section 2.01, apply only to an

 39-9    insurance policy that is delivered, issued for delivery, or renewed

39-10    on or after January 1, 1998.  A policy that is delivered, issued

39-11    for delivery, or renewed before January 1, 1998, is governed by the

39-12    law as it existed immediately before the effective date of this

39-13    Act, and that law is continued in effect for that purpose.

39-14          SECTION 5.03.  This Act takes effect July 1, 1997.

39-15          SECTION 5.04.  The importance of this legislation and the

39-16    crowded condition of the calendars in both houses create an

39-17    emergency and an imperative public necessity that the

39-18    constitutional rule requiring bills to be read on three several

39-19    days in each house be suspended, and this rule is hereby suspended,

39-20    and that this Act take effect and be in force according to its

39-21    terms, and it is so enacted.