Bill not drafted by TLC or Senate E&E.
Line and page numbers may not match official copy.
By Smithee H.B. No. 1103
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of health maintenance organizations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsections (i) through (u), Section 2, Texas
1-5 Health Maintenance Organization Act (Article 20A.02, Vernon's Texas
1-6 Insurance Code), are amended to read as follows:
1-7 (i) "Health care services" means any services, including the
1-8 furnishing to any individual of pharmaceutical services, medical,
1-9 chiropractic, or dental care, or hospitalization or incident to the
1-10 furnishing of such services, care, or hospitalization, as well as
1-11 the furnishing to any person of any and all other services for the
1-12 purpose of preventing, alleviating, curing or healing human illness
1-13 or injury, a limited health care service plan, or a single health
1-14 care service plan.
1-15 (j) "Health maintenance organization" means any person who
1-16 arranges for or provides a health care plan, a limited health care
1-17 service plan, or a single health care service plan to enrollees on
1-18 a prepaid basis.
1-19 (k) "Limited health care services" means health care
1-20 services that include more than a single health care service, that
1-21 an enrolled population might reasonably require in order to be
1-22 maintained in good health with respect to the health care services
1-23 specified in the application and certificate of authority for the
1-24 health maintenance organization for the purpose of preventing,
2-1 alleviating, curing, or healing human illness or injury, and that
2-2 are to be provided by one or more persons each of whom are licensed
2-3 by the state to provide the particular health care service or
2-4 services. The commissioner, in the commissioner's sole discretion,
2-5 determines whether a health maintenance organization provides
2-6 basic, limited, or single health care services, and a finding that
2-7 the health maintenance organization provides limited health care
2-8 services shall be contained in the certificate of authority and
2-9 corresponding approval order of the commissioner.
2-10 (l) "Limited health care service plan" means a plan under
2-11 which any person undertakes to provide, arrange for, pay for, or
2-12 reimburse any part of the cost of limited health care services,
2-13 provided that a part of the plan consists of arranging for or the
2-14 provision of limited health care services, as distinguished from an
2-15 indemnification against the cost of those services, on a prepaid
2-16 basis through insurance or otherwise.
2-17 (m) "Medical care" means furnishing those services defined
2-18 as practicing medicine under Section 1.03(8), Medical Practice Act
2-19 (Article 4495b, Vernon's Texas Civil Statutes).
2-20 (n) [(l)] "Person" means any natural or artificial person,
2-21 including, but not limited to, individuals, partnerships,
2-22 associations, organizations, trusts, hospital districts, limited
2-23 liability companies, limited liability partnerships, or
2-24 corporations.
2-25 (o) [(m)] "Physician" means:
2-26 (1) an individual licensed to practice medicine in
2-27 this state;
2-28 (2) a professional association organized under the
2-29 Texas Professional Association Act (Article 1528f, Vernon's Texas
2-30 Civil Statutes) or a nonprofit health corporation certified under
3-1 Section 5.01, Medical Practice Act (Article 4495b, Vernon's Texas
3-2 Civil Statutes); or
3-3 (3) another person wholly owned by physicians.
3-4 (p) [(n)] "Provider" means:
3-5 (1) any person other than a physician, including a
3-6 licensed doctor of chiropractic, registered nurse, pharmacist,
3-7 optometrist, pharmacy, hospital, or other institution or
3-8 organization or person that is licensed or otherwise authorized to
3-9 provide a health care service in this state;
3-10 (2) a person who is wholly owned or controlled by a
3-11 provider or by a group of providers who are licensed to provide the
3-12 same health care service; or
3-13 (3) a person who is wholly owned or controlled by one
3-14 or more hospitals and physicians, including a physician-hospital
3-15 organization.
3-16 (q) [(o)] "Sponsoring organization" means a person who
3-17 guarantees the uncovered expenses of the health maintenance
3-18 organization and who is financially capable, as determined by the
3-19 commissioner, of meeting the obligations resulting from those
3-20 guarantees.
3-21 (r) [(p)] "Uncovered expenses" means the estimated
3-22 administrative expenses and the estimated cost of health care
3-23 services that are not guaranteed, insured, or assumed by a person
3-24 other than the health maintenance organization. Health care
3-25 services may be considered covered if the physician or provider
3-26 agrees in writing that enrollees shall in no way be liable,
3-27 assessable, or in any way subject to payment for services except as
3-28 described in the evidence of coverage issued to the enrollee under
3-29 Section 9 of this Act. The amount due on loans in the next
3-30 calendar year will be considered uncovered expenses unless
4-1 specifically subordinated to uncovered medical and health care
4-2 expenses or unless guaranteed by the sponsoring organization.
4-3 (s) [(q)] "Uncovered liabilities" means obligations
4-4 resulting from unpaid uncovered expenses, the outstanding
4-5 indebtedness of loans that are not specifically subordinated to
4-6 uncovered medical and health care expenses or guaranteed by the
4-7 sponsoring organization, and all other monetary obligations that
4-8 are not similarly subordinated or guaranteed.
4-9 (t) [(r)] "Single health care service" means a health care
4-10 service that an enrolled population may reasonably require in order
4-11 to be maintained in good health with respect to a particular health
4-12 care need for the purpose of preventing, alleviating, curing, or
4-13 healing human illness or injury of a single specified nature and
4-14 that is to be provided by one or more persons each of whom is
4-15 licensed by the state to provide that specific health care service.
4-16 (u) [(s)] "Single health care service plan" means a plan
4-17 under which any person undertakes to provide, arrange for, pay for,
4-18 or reimburse any part of the cost of a single health care service,
4-19 provided[,] that a part of the plan consists of arranging for or
4-20 the provision of the single health care service, as distinguished
4-21 from an indemnification against the cost of that service, on a
4-22 prepaid basis through insurance or otherwise and that no part of
4-23 that plan consists of arranging for the provision of more than one
4-24 health care need of a single specified nature.
4-25 (v) [(t)] "Emergency care" means bona fide emergency
4-26 services provided after the sudden onset of a medical condition
4-27 manifesting itself by acute symptoms of sufficient severity,
4-28 including severe pain, such that the absence of immediate medical
4-29 attention could reasonably be expected to result in:
4-30 (1) placing the patient's health in serious jeopardy;
5-1 (2) serious impairment to bodily functions; or
5-2 (3) serious dysfunction of any bodily organ or part.
5-3 (w) [(u)] "Health maintenance organization delivery network"
5-4 means a health care delivery system in which a health maintenance
5-5 organization arranges for health care services directly or
5-6 indirectly through contracts and subcontracts with providers and
5-7 physicians.
5-8 SECTION 2. Subsection (a), Section 4, Texas Health
5-9 Maintenance Organization Act (Article 20A.04, Vernon's Texas
5-10 Insurance Code), is amended to read as follows:
5-11 (a) Each application for a certificate of authority shall be
5-12 on a form prescribed by rule of the commissioner and shall be
5-13 verified by the applicant, an officer, or other authorized
5-14 representative of the applicant, and shall set forth or be
5-15 accompanied by the following:
5-16 (1) a copy of the basic organizational document, if
5-17 any, of the applicant, such as the articles of incorporation,
5-18 articles of association, partnership agreement, trust agreement, or
5-19 other applicable documents, and all amendments thereto;
5-20 (2) a copy of the bylaws, rules and regulations, or
5-21 similar document, if any, regulating the conduct of the internal
5-22 affairs of the applicant;
5-23 (3) a list of the names, addresses, and official
5-24 positions of the persons who are to be responsible for the conduct
5-25 of the affairs of the applicant, including all members of the board
5-26 of directors, board of trustees, executive committee, or other
5-27 governing body or committee, the principal officer in the case of a
5-28 corporation, and the partnership or members in the case of a
5-29 partnership or association;
5-30 (4) a copy of any independent or other contract made
6-1 or to be made between any provider, physician, or persons listed in
6-2 Paragraph (3) hereof and the applicant;
6-3 (5) a copy of the form of evidence of coverage to be
6-4 issued to the enrollee;
6-5 (6) a copy of the form of the group contract, if any,
6-6 which is to be issued to employers, unions, trustees, or other
6-7 organizations;
6-8 (7) a current financial statement that includes:
6-9 (A) the sources and application of funds;
6-10 (B) projected financial statements during the
6-11 initial period of operations;
6-12 (C) a balance sheet beginning as of the date of
6-13 the expected start of operations;
6-14 (D) a statement of revenue and expenses with
6-15 expected member months; and
6-16 (E) a cash flow statement that states any
6-17 capital expenditures, purchase and sale of investments, and
6-18 deposits with the state;
6-19 (8) the schedule of charges to be used during the
6-20 first 12 months of operation;
6-21 (9) a statement acknowledging that all lawful process
6-22 in any legal action or proceeding against the health maintenance
6-23 organization on a cause of action arising in this state is valid if
6-24 served in accordance with Article 1.36, Insurance Code;
6-25 (10) a statement reasonably describing the geographic
6-26 area or areas to be served;
6-27 (11) a description of the complaint procedures to be
6-28 utilized;
6-29 (12) a description of the procedures and programs to
6-30 be implemented to meet the quality of health care requirements set
7-1 forth herein; [and]
7-2 (13) for a limited health care service plan, a
7-3 specific description of the health care services to be provided;
7-4 and
7-5 (14) such other information as the commissioner may
7-6 require to make the determinations required by this Act.
7-7 SECTION 3. Section 5, Texas Health Maintenance Organization
7-8 Act (Article 20A.05, Vernon's Texas Insurance Code), is amended by
7-9 amending Subsection (b) and adding Subsection (e) to read as
7-10 follows:
7-11 (b) The commissioner shall, after notice and hearing, issue
7-12 or deny a certificate of authority to any person filing an
7-13 application pursuant to Section 4 of this Act within 75 days of the
7-14 receipt of the certification of the board; provided, however, that
7-15 the commissioner may grant a delay of final action on the
7-16 application to an applicant. Issuance of the certificate of
7-17 authority shall be granted upon payment of the application fee
7-18 prescribed in Section 32 of this Act if:
7-19 (1) the board certifies that the health maintenance
7-20 organization's proposed plan of operation meets the requirements of
7-21 Subsection (a)(2) of this section; and
7-22 (2) the commissioner is satisfied that:
7-23 (A) the person responsible for the conduct of
7-24 the affairs of the applicant is competent, trustworthy, and
7-25 possesses a good reputation;
7-26 (B) the health care plan, limited health care
7-27 service plan, or single health care service plan constitutes an
7-28 appropriate mechanism whereby the health maintenance organization
7-29 will effectively provide or arrange for the provision of basic
7-30 health care services, limited health care services, or single
8-1 health care service on a prepaid basis, through insurance or
8-2 otherwise, except to the extent of reasonable requirements for
8-3 co-payment;
8-4 (C) the health maintenance organization is fully
8-5 responsible and may reasonably be expected to meet its obligations
8-6 to enrollees and prospective enrollees. In making this
8-7 determination, the commissioner shall consider:
8-8 (i) the financial soundness of the health
8-9 care plan's arrangement for health care services and a schedule of
8-10 charges used in connection therewith;
8-11 (ii) the adequacy of working capital;
8-12 (iii) any agreement with an insurer, group
8-13 hospital service corporation, a political subdivision of
8-14 government, or any other organization for insuring the payment of
8-15 the cost of health care services or the provision for automatic
8-16 applicability of an alternative coverage in the event of
8-17 discontinuance of plan;
8-18 (iv) any agreement which provides for the
8-19 provision of health care services; and
8-20 (v) any deposit of cash or securities
8-21 submitted in accordance with Section 13 of this Act as a guarantee
8-22 that the obligations will be duly performed;
8-23 (D) nothing in the proposed method of operation,
8-24 as shown by the information submitted pursuant to Section 4 of this
8-25 Act, or by independent investigation, is contrary to Texas law.
8-26 (e) By applying for and receiving a certificate of authority
8-27 to do business in this state, the health maintenance organization
8-28 agrees and admits that it is not subject to the United States
8-29 Bankruptcy Code and is not eligible to proceed under the United
8-30 States Bankruptcy Code.
9-1 SECTION 4. Subsection (a), Section 9, Texas Health
9-2 Maintenance Organization Act (Article 20A.09, Vernon's Texas
9-3 Insurance Code), is amended to read as follows:
9-4 (a)(1) Every enrollee residing in this state is entitled to
9-5 evidence of coverage under a health care plan. If the enrollee
9-6 obtains coverage under a health care plan through an insurance
9-7 policy or a contract issued by a group hospital service
9-8 corporation, whether by option or otherwise, the insurer or the
9-9 group hospital service corporation shall issue the evidence of
9-10 coverage. Otherwise, the health maintenance organization shall
9-11 issue the evidence of coverage.
9-12 (2) No evidence of coverage, or amendment thereto,
9-13 shall be issued or delivered to any person in this state until a
9-14 copy of the form of evidence of coverage, or amendment thereto, has
9-15 been filed with and approved by the commissioner.
9-16 (3) An evidence of coverage shall contain:
9-17 (A) no provisions or statements which are
9-18 unjust, unfair, inequitable, misleading, deceptive, which encourage
9-19 misrepresentation, or which are untrue, misleading, or deceptive as
9-20 defined in Section 14 of this Act; and
9-21 (B) a clear and complete statement, if a
9-22 contract, or a reasonably complete facsimile, if a certificate, of:
9-23 (i) the medical, health care services,
9-24 limited health care services, or single health care service and the
9-25 issuance of other benefits, if any, to which the enrollee is
9-26 entitled under the health care plan, limited health care service
9-27 plan, or single health care service plan;
9-28 (ii) any limitation on the services, kinds
9-29 of services, benefits, or kinds of benefits to be provided,
9-30 including any deductible or co-payment feature;
10-1 (iii) where and in what manner information
10-2 is available as to how services may be obtained; and
10-3 (iv) a clear and understandable
10-4 description of the health maintenance organization's methods for
10-5 resolving enrollee complaints. Any subsequent changes may be
10-6 evidenced in a separate document issued to the enrollee.
10-7 (4) Any form of the evidence of coverage or group
10-8 contract to be used in this state, and any amendments thereto, are
10-9 subject to the filing and approval requirements of Subsection (c)
10-10 of this section, unless it is subject to the jurisdiction of the
10-11 commissioner under the laws governing health insurance or group
10-12 hospital service corporations, in which event the filing and
10-13 approval provisions of such law shall apply. To the extent,
10-14 however, that such provisions do not apply to the requirements of
10-15 Subdivision (3)[, Subsection (a)] of this subsection [section], the
10-16 requirements of Subdivision (3) shall be applicable.
10-17 SECTION 5. Section 13, Texas Health Maintenance Organization
10-18 Act (Article 20A.13, Vernon's Texas Insurance Code), is amended to
10-19 read as follows:
10-20 Sec. 13. Protection Against Insolvency. (a) Unless
10-21 otherwise provided by this section, each health maintenance
10-22 organization shall deposit with the comptroller [State Treasurer]
10-23 cash or securities, or any combination of these or other guarantees
10-24 that are acceptable to the commissioner [State Board of Insurance],
10-25 in an amount as set forth in this section.
10-26 (b) For a health maintenance organization which has not
10-27 received a certificate of authority from the State Board of
10-28 Insurance or the commissioner prior to September 1, 1987:
10-29 (1) the amount of the initial deposit or other
10-30 guarantee shall be $100,000 for an organization offering basic
11-1 health care services, $75,000 for an organization offering limited
11-2 health care services, and $50,000 for an organization offering a
11-3 single health care service plan;
11-4 (2) on or before March 15 of the year following the
11-5 year in which the health maintenance organization receives a
11-6 certificate of authority, it shall deposit with the comptroller
11-7 [State Treasurer] an amount equal to the difference between the
11-8 initial deposit and 100 percent of its estimated uncovered health
11-9 care expenses for the first 12 months of operation;
11-10 (3) on or before March 15 of each subsequent year, it
11-11 shall deposit the difference between its total uncovered health
11-12 care expenses based on its annual statement from the previous year
11-13 and the total amount previously deposited and not withdrawn from
11-14 the State Treasury; and
11-15 (4) in any year in which the amount determined in
11-16 accordance with Subdivision (3) of this subsection is zero or less
11-17 than zero, the commissioner [State Board of Insurance] may not
11-18 require the health maintenance organization to make any additional
11-19 deposit under this subsection.
11-20 (c) For a health maintenance organization which has received
11-21 a certificate of authority from the State Board of Insurance prior
11-22 to September 1, 1987:
11-23 (1) on or before March 15, 1988, the organization
11-24 shall deposit an amount equal to the sum of:
11-25 (A) $100,000 for an organization offering basic
11-26 health care services or $50,000 for an organization offering a
11-27 single health care service plan; and
11-28 (B) 100 percent of the uncovered health care
11-29 expenses for the preceding 12 months of operation;
11-30 (2) on or before March 15 of each subsequent year, the
12-1 organization shall make additional deposits of the difference
12-2 between its total uncovered health care expenses based on its
12-3 annual statement from the previous year and the total amount
12-4 previously deposited and not withdrawn from the State Treasury; and
12-5 (3) in any year in which the amount determined in
12-6 accordance with Subdivision (2) of this subsection is zero or less
12-7 than zero, the commissioner [State Board of Insurance] may not
12-8 require the health maintenance organization to make any additional
12-9 deposit under this subsection.
12-10 (d) If, on application made not more than once in each
12-11 calendar year by a health maintenance organization under this
12-12 subsection, the commissioner determines that the amount previously
12-13 deposited by the organization under this section has exceeded the
12-14 amount required under this section by more than $50,000 for a
12-15 continuous 12-month period, the commissioner shall allow the
12-16 organization to withdraw the portion of the deposit that exceeds by
12-17 more than $50,000 the amount required to be on deposit for that
12-18 organization, unless the commissioner considers that the release of
12-19 a portion of the deposit could be hazardous to enrollees,
12-20 creditors, or the general public.
12-21 (e) On application made not sooner than the 24th month after
12-22 the effective date of this subsection, if the commissioner
12-23 determines that the amount previously deposited by an organization
12-24 under this section continues to exceed the amount required under
12-25 this section, the commissioner shall allow the organization to
12-26 withdraw the portion of the deposit that exceeds the amount
12-27 required to be on deposit for that organization, unless the
12-28 commissioner considers that the release of the deposit could be
12-29 hazardous to enrollees, creditors, or the general public.
12-30 (f) Upon application by a health maintenance organization
13-1 operating for more than one year under a certificate of authority
13-2 issued by the State Board of Insurance or the commissioner, the
13-3 commissioner [State Board of Insurance] may waive some or all of
13-4 the requirements of Subsection (b) or (c) of this section for any
13-5 period of time it shall deem proper whenever it finds that one or
13-6 more of the following conditions justifies such waiver:
13-7 (1) the total amount of the deposit or other guarantee
13-8 is equal to 25 percent of the health maintenance organization's
13-9 estimated uncovered expenses for the next calendar year;
13-10 (2) the health maintenance organization's net worth is
13-11 equal to at least 25 percent of its estimated uncovered expenses
13-12 for the next calendar year; or
13-13 (3) either the health maintenance organization has a
13-14 net worth of $5,000,000 or its sponsoring organization has a net
13-15 worth of at least $5,000,000 for each health maintenance
13-16 organization whose uncovered expenses it guarantees.
13-17 (g) If one or more of the requirements is waived, any amount
13-18 previously deposited shall remain on deposit until released in
13-19 whole or in part by the comptroller [State Treasurer] upon order of
13-20 the commissioner [State Board of Insurance] pursuant to Subsection
13-21 (f) of this section.
13-22 (h) A health maintenance organization that has made a
13-23 deposit with the comptroller [State Treasurer] may, at its option,
13-24 withdraw the deposit or any part thereof, first having deposited
13-25 with the comptroller [State Treasurer], in lieu thereof, a deposit
13-26 of cash or securities of equal amount and value to that withdrawn.
13-27 Any securities shall be approved by the commissioner [State Board
13-28 of Insurance] before being substituted.
13-29 (i) Subject to the phase-in provisions of Subsections (j),
13-30 (k), and (l) of this section, a [Each] health maintenance
14-1 organization offering basic health care services shall maintain a
14-2 minimum surplus of not less than $1,500,000 [$500,000], net of
14-3 accrued uncovered liabilities, a health maintenance organization
14-4 offering limited health care services shall maintain a minimum
14-5 surplus of not less than $1,000,000, net of accrued uncovered
14-6 liabilities, and a[. Each] health maintenance organization
14-7 offering only a single care service shall maintain a minimum
14-8 surplus of not less than $500,000 [$125,000], net of accrued
14-9 uncovered liabilities. The minimum surplus shall consist only of
14-10 cash, bonds of the United States, bonds of this state, or a
14-11 combination of these. If a health maintenance organization fails
14-12 to comply with the surplus requirements [requirement of this
14-13 subsection or Subsection (j)] of this section, the commissioner is
14-14 authorized to take appropriate action to assure that the continued
14-15 operation of the health maintenance organization will not be
14-16 hazardous to its enrollees.
14-17 (j) Notwithstanding any other provision of this section, the
14-18 [The] minimum surplus for a health maintenance organization
14-19 authorized to provide basic health care services [operate on the
14-20 effective date of Subsection (i) of this section] and having a
14-21 surplus of less than $1,500,000 [$500,000] shall be as follows:
14-22 (1) $700,000 [$200,000] by December 31, 1998 [1987];
14-23 (2) $900,000 [$250,000] by December 31, 1999 [1988];
14-24 (3) $1,100,000 [$300,000] by December 31, 2000 [1989];
14-25 (4) $1,300,000 [$350,000] by December 31, 2001 [1990];
14-26 and
14-27 (5) $1,500,000 [$400,000] by December 31, 2002 [1991];
14-28 [(6) $450,000 by December 31, 1992; and]
14-29 [(7) $500,000 by December 31, 1993].
14-30 (k) Notwithstanding any other provision of this section
15-1 [article], a health maintenance organization providing limited
15-2 health care services [authorized to offer only a single health care
15-3 service plan authorized to operate on September 1, 1987,] and
15-4 having a surplus of less than $1,000,000 must possess a minimum
15-5 surplus [$125,000 shall be] as follows:
15-6 (1) $600,000 [$50,000] by December 31, 1998 [1987];
15-7 (2) $700,000 [$62,500] by December 31, 1999 [1988];
15-8 (3) $800,000 [$75,000] by December 31, 2000 [1989];
15-9 (4) $900,000 [$87,500] by December 31, 2001 [1990];
15-10 and
15-11 (5) $1,000,000 [$100,000] by December 31, 2002 [1991;]
15-12 [(6) $112,500 by December 31, 1992; and]
15-13 [(7) $125,000 by December 31, 1993].
15-14 (l) Notwithstanding any other provision of this section, a
15-15 health maintenance organization authorized to offer only a single
15-16 health care service plan and having a surplus of less than $500,000
15-17 shall be as follows:
15-18 (1) $200,000 by December 31, 1998;
15-19 (2) $275,000 by December 31, 1999;
15-20 (3) $350,000 by December 31, 2000;
15-21 (4) $425,000 by December 31, 2001; and
15-22 (5) $500,000 by December 31, 2002.
15-23 (m) In the event of the insolvency of a health maintenance
15-24 organization and on order of the commissioner, the commissioner
15-25 shall allocate equitably the insolvent health maintenance
15-26 organization's group contracts among all health maintenance
15-27 organizations which operate within a portion of the insolvent
15-28 health maintenance organization's service area, taking into
15-29 consideration the resources of each health maintenance
15-30 organization. Each health maintenance organization to which a
16-1 group or groups are allocated shall offer such group or groups the
16-2 health maintenance organization's coverage at rates determined in
16-3 accordance with the successor health maintenance organization's
16-4 existing methodology or as adjusted by the commissioner. In
16-5 addition, the commissioner shall allocate equitably among all
16-6 health maintenance organizations which operate within a portion of
16-7 the insolvent health maintenance organization's service area the
16-8 insolvent health maintenance organization's nongroup enrollees who
16-9 are unable to obtain other coverage, taking into consideration the
16-10 resources of each such health maintenance organization. Each
16-11 health maintenance organization to which nongroup enrollees are
16-12 allocated shall offer each such nongroup enrollee that health
16-13 maintenance organization's existing coverage for individual or
16-14 conversion coverage as determined by the nongroup enrollee's type
16-15 of coverage in the insolvent health maintenance organization at
16-16 rates determined in accordance with the successor health
16-17 maintenance organization's existing rating methodology. The
16-18 successor health maintenance organizations which do not offer
16-19 direct nongroup enrollment may aggregate all of the allocated
16-20 nongroup enrollees into one group for rating and coverage purposes.
16-21 SECTION 6. Subsections (b), (c), and (h), Section 14, Texas
16-22 Health Maintenance Organization Act (Article 20A.14, Vernon's Texas
16-23 Insurance Code), are amended to read as follows:
16-24 (b) Articles 21.21, 21.21A, 21.21-2, 21.21-3, and 21.21-6,
16-25 Insurance Code, and Chapter 122, Acts of the 57th Legislature,
16-26 Regular Session, 1961 (Article 21.21-1, Vernon's Texas Insurance
16-27 Code), apply to health maintenance organizations that offer [both]
16-28 basic, limited, and single health care coverages and to basic,
16-29 limited, and single health care plans and the evidence of coverage
16-30 under those plans, except to the extent that the commissioner
17-1 determines that the nature of health maintenance organizations and
17-2 health care plans and evidence of coverage renders any provision of
17-3 those articles clearly inappropriate.
17-4 (c) An enrollee may not be canceled [cancelled] or not
17-5 renewed except for the failure to pay the charges for such
17-6 coverage, or for such other reason as may be promulgated by rule of
17-7 the commissioner.
17-8 (h) A health maintenance organization that provides coverage
17-9 for health care services or medical care through one or more
17-10 providers or physicians who are not partners or employees of the
17-11 health maintenance organization or one or more providers or
17-12 physicians that are not owned or operated by the health maintenance
17-13 organization shall provide a (20) twenty calendar day period each
17-14 calendar year during which any provider or physician in the
17-15 geographic service area may apply to participate in providing
17-16 health care services or medical care under the terms and conditions
17-17 established by the health maintenance organization for the
17-18 provision of such services and the designation of such providers
17-19 and physicians. A health maintenance organization will notify, in
17-20 writing, such provider or physician of the reason for
17-21 non-acceptance [nonacceptance] to participate in providing health
17-22 care services or medical care. This section may not be construed
17-23 to (1) require that a health maintenance organization utilize a
17-24 particular type of provider or physician in its operation;
17-25 (2) require that a health maintenance organization accept a
17-26 provider or physician of a category or type that does not meet the
17-27 practice standards and qualifications established by the health
17-28 maintenance organizations; or (3) require that a health maintenance
17-29 organization contract directly with such providers or physicians.
17-30 SECTION 7. Subsection (a), Section 20, Texas Health
18-1 Maintenance Organization Act (Article 20A.20, Vernon's Texas
18-2 Insurance Code), is amended to read as follows:
18-3 (a) The commissioner may suspend or revoke any certificate
18-4 of authority issued to a health maintenance organization under this
18-5 Act if the commissioner finds that any of the following conditions
18-6 exist:
18-7 (1) The health maintenance organization is operating
18-8 significantly in contravention of its basic organizational
18-9 documents, or its health care plan, or in a manner contrary to that
18-10 described in and reasonably inferred from any other information
18-11 submitted under Section 4 of this Act.
18-12 (2) The health maintenance organization issues
18-13 evidence of coverage or uses a schedule of charges for health care
18-14 services which does not comply with the requirements of Section 9
18-15 of this Act.
18-16 (3) The health care plan does not provide or arrange
18-17 for basic health care services, the limited health care service
18-18 plan does not provide or arrange for its limited health care
18-19 services, or the single health care service plan does not provide
18-20 or arrange for a single health care service.
18-21 (4) The board certifies to the commissioner that:
18-22 (A) the health maintenance organization does not
18-23 meet the requirements of Section 5(a)(2) of this Act; or
18-24 (B) the health maintenance organization is
18-25 unable to fulfill its obligation to furnish health care services as
18-26 required under its health care plan, to furnish the limited health
18-27 care services as required under its limited health care service
18-28 plan, or to furnish a single health care service as required under
18-29 its single health care service plan.
18-30 (5) The health maintenance organization is no longer
19-1 financially responsible and may be reasonably expected to be unable
19-2 to meet its obligations to enrollees or prospective enrollees.
19-3 (6) The health maintenance organization has failed to
19-4 implement the complaint system required by Section 12 of this Act
19-5 in a manner to resolve reasonably valid complaints.
19-6 (7) The health maintenance organization, or any person
19-7 on its behalf, has advertised or merchandised its services in an
19-8 untrue, misrepresentative, misleading, deceptive, or unfair manner.
19-9 (8) The continued operation of the health maintenance
19-10 organization would be hazardous to its enrollees.
19-11 (9) The health maintenance organization has otherwise
19-12 failed to comply substantially with this Act, and any rule and
19-13 regulation thereunder.
19-14 SECTION 8. Subsection (f), Section 26, Texas Health
19-15 Maintenance Organization Act (Article 20A.26, Vernon's Texas
19-16 Insurance Code), is amended to read as follows:
19-17 (f)(1) This Act shall not be applicable to:
19-18 (A) any physician, so long as that physician is
19-19 engaged in the delivery of care that is within the definition of
19-20 medical care; or
19-21 (B) any provider that is engaged in the delivery
19-22 of health care services other than medical care as part of a health
19-23 maintenance organization delivery network.
19-24 (2) Except as provided by Section 6(a)(3) of this Act
19-25 or Subdivision (5) of this subsection, any physician or provider
19-26 that employs or enters into a contractual arrangement with a
19-27 provider or group of providers to furnish basic, limited, or single
19-28 health care services as defined in Section 2 of this Act is subject
19-29 to the provisions of this Act[,] and shall be required to obtain a
19-30 certificate of authority from the commissioner.
20-1 (3) Notwithstanding any other law, any physician who
20-2 conducts activities permitted by law but which do not require a
20-3 certificate of authority under this Act, and in the process
20-4 contracts with one or more physicians, shall not, by virtue of such
20-5 contract or arrangement, be deemed to have entered into a
20-6 conspiracy in restraint of trade in violation of Sections 15.01
20-7 through 15.34 of the Business & Commerce Code.
20-8 (4) Except for Articles 21.07-6 and 21.58A, Insurance
20-9 Code, the insurance laws, including the group hospital service
20-10 corporation law, do not apply to physicians and providers; provided
20-11 that Article 21.58A shall not apply to utilization review
20-12 undertaken by a physician or provider in the ordinary course of
20-13 treatment of patients by a physician or provider pursuant to a
20-14 joint or delegated review agreement or agreements with a health
20-15 maintenance organization on services rendered by the physician or
20-16 provider.
20-17 (5) This Act and the Insurance Code may not be
20-18 construed to prohibit a physician or provider who is participating
20-19 in a health maintenance organization delivery network, whether
20-20 contracting with a health maintenance organization under Section
20-21 6(a)(3) of this Act or subcontracting with a physician or provider
20-22 in the health maintenance organization delivery network, from
20-23 entering into a contractual arrangement within a health maintenance
20-24 organization delivery network described under Subdivisions (6)-(9)
20-25 of this subsection.
20-26 (6) A physician may contract to provide medical care
20-27 or arrange to provide medical care through subcontracts with other
20-28 physicians. A physician may contract to provide through other
20-29 providers any services that are ancillary to the practice of
20-30 medicine, other than hospital or other institutional or inpatient
21-1 provider services.
21-2 (7) A provider may contract to provide, or arrange to
21-3 provide through subcontracts with similarly licensed providers, any
21-4 health care services that those providers are licensed to provide,
21-5 other than medical care.
21-6 (8) A provider may contract to provide, or arrange to
21-7 provide through subcontracts with other providers, a health care
21-8 service that the provider is not licensed to provide, other than
21-9 medical care, if the contracted or subcontracted services
21-10 constitute less than 15 percent of the total amount of services to
21-11 be provided by that provider or arranged to be provided for by that
21-12 provider.
21-13 (9) A contract or subcontract authorized under
21-14 Subdivision (6), (7), or (8) of this subsection may provide for
21-15 compensation based on a fee-for-service arrangement, a risk-sharing
21-16 arrangement, or a capitated risk arrangement under which a fixed
21-17 predetermined payment is made in exchange for the provision of, or
21-18 the arrangement to provide and the guaranty of the provision of, a
21-19 defined set of covered services to the covered persons for a
21-20 specified period, regardless of the amount of services actually
21-21 provided.
21-22 SECTION 9. Section 31, Texas Health Maintenance Organization
21-23 Act (Article 20A.31, Vernon's Texas Insurance Code), is amended to
21-24 read as follows:
21-25 Sec. 31. JURISDICTION FOR INJUNCTIONS AND RECEIVERSHIP AND
21-26 DELINQUENCY PROCEEDINGS. (a) When it appears to the commissioner
21-27 that a health maintenance organization or other person is violating
21-28 or has violated this Act or any rule or regulation issued pursuant
21-29 to this Act, the commissioner may bring suit in a district court of
21-30 Travis County to enjoin the violation and for such other relief as
22-1 the court may deem appropriate.
22-2 (b) In addition to all other remedies available by law, when
22-3 it appears to the commissioner that a health maintenance
22-4 organization or other person is insolvent or does not possess the
22-5 surplus required by Section 13 of this Act, the commissioner may
22-6 bring suit in a district court of Travis County to be named
22-7 receiver in accordance with Section 21 of this Act and Article
22-8 21.28, Insurance Code.
22-9 (c) A court of competent jurisdiction may find that a
22-10 receiver should take charge of the assets of a health maintenance
22-11 organization and name the commissioner as the receiver of the
22-12 health maintenance organization in accordance with Section 21 of
22-13 this Act and Article 21.28, Insurance Code.
22-14 (d) The operations and business of a health maintenance
22-15 organization represent the business of insurance for purposes of
22-16 Section 21 of this Act and Articles 21.28 and 21.28-A, Insurance
22-17 Code.
22-18 (e) Exclusive venue of receivership and delinquency
22-19 proceedings for a health maintenance organization shall be in
22-20 Travis County.
22-21 SECTION 10. Subsection (d), Section 33, Texas Health
22-22 Maintenance Organization Act (Article 20A.33, Vernon's Texas
22-23 Insurance Code), is amended to read as follows:
22-24 (d) The commissioner shall annually determine the rate of
22-25 assessment of a per capita maintenance tax to be paid on an annual
22-26 or semiannual basis, on the correctly reported gross revenues for
22-27 the issuance of health maintenance certificates or contracts
22-28 collected by all authorized health maintenance organizations
22-29 issuing such coverages in this state. The rate of assessment may
22-30 not exceed $2 for each enrollee. The rate of assessment may differ
23-1 between basic health care plans, limited health care service plans,
23-2 and single health care service plans and shall equitably reflect
23-3 any differences in regulatory resources attributable to each type
23-4 of plan. The comptroller shall collect the maintenance tax.
23-5 SECTION 11. Subsections (a), (b), (c), (e), and (g), Section
23-6 36, Texas Health Maintenance Organization Act (Article 20A.36,
23-7 Vernon's Texas Insurance Code), are amended to read as follows:
23-8 (a) The Health Maintenance Organization Solvency
23-9 Surveillance Committee is created under the direction of the
23-10 commissioner. The committee shall perform its functions under a
23-11 plan of operation approved by the commissioner [State Board of
23-12 Insurance]. The committee is composed of nine members appointed by
23-13 the commissioner of insurance. No two members may be employees or
23-14 officers of the same health maintenance organization or holding
23-15 company system. The qualifications for membership, terms of
23-16 office, and reimbursement of expenses shall be as provided by the
23-17 plan of operation approved by the commissioner [State Board of
23-18 Insurance]. A "member" is a Texas licensed health maintenance
23-19 organization as defined in Section 2(j) of this Act or a public
23-20 representative. The commissioner of insurance shall appoint the
23-21 member along with the officer or employee of the member who shall
23-22 serve on the committee if the member is a representative of a Texas
23-23 licensed health maintenance organization or its holding company
23-24 system. Five of the members shall represent health maintenance
23-25 organizations or their holding company system. Of the health
23-26 maintenance organization members, one shall be a limited health
23-27 care service plan as defined in Section 2(l) of this Act, if one
23-28 exists at the time of appointment, and one shall be a single health
23-29 care service plan as defined in Section 2(u) [2(s)] of this Act.
23-30 The remaining health maintenance organization members shall be
24-1 selected by the commissioner of insurance with due consideration of
24-2 factors deemed appropriate including, but not limited to, the
24-3 varying categories of premium income and geographical location.
24-4 A public representative may not be:
24-5 (1) an officer, director, or employee of a health
24-6 maintenance organization, a health maintenance organization agent,
24-7 or any other business entity regulated by the commissioner [State
24-8 Board of Insurance];
24-9 (2) a person required to register with the secretary
24-10 of state under Chapter 305, Government Code; or
24-11 (3) related to a person described by Subdivision (1)
24-12 or (2) of this subsection within the second degree of affinity or
24-13 consanguinity.
24-14 (b)(1) The committee shall assist and advise the
24-15 commissioner relating to the detection and prevention of insolvency
24-16 problems regarding health maintenance organizations. The committee
24-17 shall also assist and advise the commissioner regarding any health
24-18 maintenance organization placed in rehabilitation, liquidation,
24-19 supervision, or conservation. The method of providing this
24-20 assistance and advice shall be as contained in the plan of
24-21 operation approved by the commissioner [State Board of Insurance].
24-22 (2) Reports regarding the financial condition of Texas
24-23 licensed health maintenance organizations and regarding the
24-24 financial condition, administration, and status of health
24-25 maintenance organizations in rehabilitation, liquidation,
24-26 supervision, or conservation shall be provided to the committee
24-27 members at meetings. Committee members shall not reveal the
24-28 condition of nor any information secured in the course of any
24-29 meeting of the Solvency Surveillance Committee with regard to any
24-30 corporation, form or person examined by the committee. Committee
25-1 proceedings shall be filed with the commissioner [and reported to
25-2 the members of the State Board of Insurance].
25-3 (c) To provide funds for the administrative expenses of the
25-4 commissioner [State Board of Insurance] regarding rehabilitation,
25-5 liquidation, supervision, or conservation of an impaired health
25-6 maintenance organization in this state, the committee, at the
25-7 commissioner's direction, shall assess each health maintenance
25-8 organization licensed in this state in the proportion that the
25-9 gross premiums of that health maintenance organization written in
25-10 this state during the preceding calendar year bear to the aggregate
25-11 gross premiums written in this state by all health maintenance
25-12 organizations, as furnished to the committee by the commissioner
25-13 after review of annual statements and other reports the
25-14 commissioner considers necessary. Assessments to supplement or pay
25-15 for administrative expenses of rehabilitation, liquidation,
25-16 supervision, or conservation may be made only after the
25-17 commissioner determines that adequate assets of the health
25-18 maintenance organization are not immediately available for those
25-19 purposes or that use of those assets could be detrimental to
25-20 rehabilitation, liquidation, supervision, or conservation. The
25-21 commissioner may abate or defer the assessments, either in whole or
25-22 in part, if, in the opinion of the commissioner, payment of the
25-23 assessment would endanger the ability of a health maintenance
25-24 organization to fulfill its contractual obligations. If an
25-25 assessment is abated or deferred, either in whole or in part, the
25-26 amount by which the assessment is abated or deferred may be
25-27 assessed against the remaining licensed health maintenance
25-28 organizations in a manner consistent with the basis for assessments
25-29 provided by the plan of operation approved by the commissioner
25-30 [State Board of Insurance]. The total of all assessments on a
26-1 health maintenance organization may not exceed one-quarter of one
26-2 percent of the health maintenance organization's gross premiums in
26-3 any one calendar year.
26-4 (e) Not later than the 180th day after the date on which the
26-5 final member of the committee is appointed, the committee shall
26-6 submit to the commissioner [State Board of Insurance] a plan of
26-7 operation. The plan of operation takes effect on approval in
26-8 writing by the commissioner [State Board of Insurance]. If the
26-9 committee fails to submit a suitable plan of operation within the
26-10 period set by this subsection, or if, after the adoption of a plan,
26-11 the committee fails to submit suitable amendments to the plan, the
26-12 commissioner [State Board of Insurance] may, after notice and
26-13 hearing, adopt rules as necessary to implement this Act. Those
26-14 rules continue in effect until modified by the commissioner [State
26-15 Board of Insurance] or superseded by a plan submitted by the
26-16 committee and approved by the commissioner [State Board of
26-17 Insurance].
26-18 (g) A licensed health maintenance organization or its agents
26-19 or employees, the committee or its agents, employees, or members,
26-20 or the [State Board of Insurance, the] commissioner[,] or the
26-21 commissioner's [their] representatives are not liable in a civil
26-22 action for any act taken or not taken in good faith in the
26-23 performance of powers and duties under this section.
26-24 SECTION 12. This Act takes effect September 1, 1997.
26-25 SECTION 13. The importance of this legislation and the
26-26 crowded condition of the calendars in both houses create an
26-27 emergency and an imperative public necessity that the
26-28 constitutional rule requiring bills to be read on three several
26-29 days in each house be suspended, and this rule is hereby suspended.