By Naishtat H.B. No. 3529
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
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 long term care service plan, or a single health care
1-14 service plan.
1-15 (j) "Health maintenance organization" means any person who
1-16 arranges for or provides a health care plan, a long term care
1-17 service plan, or a single health care service plan to enrollees on
1-18 a prepaid basis.
1-19 (k) "Long term care services" means health care and related
1-20 services such as personal and attendant care that include more than
1-21 a single health care service, that an enrolled population might
1-22 reasonably require in order to be maintained in good health with
2-1 respect to the health care services specified in the application
2-2 and certificate of authority for the health maintenance
2-3 organization for the purpose of preventing, alleviating, curing, or
2-4 healing human illness or injury, maintaining individuals to the
2-5 greatest degree possible in the community, and that are to be
2-6 provided by one or more persons each of whom are licensed or, in
2-7 the case of related services, authorized by the state to provide
2-8 the particular health care service or services. The commissioner,
2-9 in the commissioner's sole discretion, determines whether a health
2-10 maintenance organization provides basic, long term care, or single
2-11 health care services, and a finding that the health maintenance
2-12 organization provides long term care services shall be contained in
2-13 the certificate of authority and corresponding approval order of
2-14 the commissioner.
2-15 (l) "Long term care service plan" means a plan under which
2-16 any person undertakes to provide, arrange for, pay for, or
2-17 reimburse any part of the cost of long term care services, provided
2-18 that a part of the plan consists of arranging for or the provision
2-19 of long term care services, as distinguished from an
2-20 indemnification against the cost of those services, on a prepaid
2-21 basis through insurance or otherwise.
2-22 (m) "Medical care" means furnishing those services defined
2-23 as practicing medicine under Section 1.03(8), Medical Practice Act
2-24 (Article 4495b, Vernon's Texas Civil Statutes).
2-25 (n) [(l)] "Person" means any natural or artificial person,
2-26 including, but not limited to, individuals, partnerships,
2-27 associations, organizations, trusts, hospital districts, limited
3-1 liability companies, limited liability partnerships, or
3-2 corporations.
3-3 (o) [(m)] "Physician" means:
3-4 (1) an individual licensed to practice medicine in
3-5 this state;
3-6 (2) a professional association organized under the
3-7 Texas Professional Association Act (Article 1528f, Vernon's Texas
3-8 Civil Statutes) or a nonprofit health corporation certified under
3-9 Section 5.01, Medical Practice Act (Article 4495b, Vernon's Texas
3-10 Civil Statutes); or
3-11 (3) another person wholly owned by physicians.
3-12 (p) [(n)] "Provider" means:
3-13 (1) any person other than a physician, including a
3-14 licensed doctor of chiropractic, registered nurse, pharmacist,
3-15 optometrist, pharmacy, hospital, or other institution or
3-16 organization or person that is licensed or otherwise authorized to
3-17 provide a health care service in this state;
3-18 (2) a person who is wholly owned or controlled by a
3-19 provider or by a group of providers who are licensed to provide the
3-20 same health care service; or
3-21 (3) a person who is wholly owned or controlled by one
3-22 or more hospitals and physicians, including a physician-hospital
3-23 organization.
3-24 (q) [(o)] "Sponsoring organization" means a person who
3-25 guarantees the uncovered expenses of the health maintenance
3-26 organization and who is financially capable, as determined by the
3-27 commissioner, of meeting the obligations resulting from those
4-1 guarantees.
4-2 (r) [(p)] "Uncovered expenses" means the estimated
4-3 administrative expenses and the estimated cost of health care
4-4 services that are not guaranteed, insured, or assumed by a person
4-5 other than the health maintenance organization. Health care
4-6 services may be considered covered if the physician or provider
4-7 agrees in writing that enrollees shall in no way be liable,
4-8 assessable, or in any way subject to payment for services except as
4-9 described in the evidence of coverage issued to the enrollees under
4-10 Section 9 of this Act. The amount due on loans in the next
4-11 calendar year will be considered uncovered expenses unless
4-12 specifically subordinated to uncovered medical and health care
4-13 expenses or unless guaranteed by the sponsoring organization.
4-14 (s) [(q)] "Uncovered liabilities" means obligations
4-15 resulting from unpaid uncovered expenses, the outstanding
4-16 indebtedness of loans that are not specifically subordinated to
4-17 uncovered medical and health care expenses or guaranteed by the
4-18 sponsoring organization, and all other monetary obligations that
4-19 are not similarly subordinated or guaranteed.
4-20 (t) [(r)] "Single health care service" means a health care
4-21 service that an enrolled population may reasonably require in order
4-22 to be maintained in good health with respect to a particular health
4-23 care need for the purpose of preventing, alleviating, curing, or
4-24 healing human illness or injury of a single specified nature and
4-25 that is to be provided by one or more persons each of whom is
4-26 licensed by the state to provide that specific health care service.
4-27 (u) [(s)] "Single health care service plan" means a plan
5-1 under which any person undertakes to provide, arrange for, pay for,
5-2 or reimburse any part of the cost of a single health care service,
5-3 provided[,] that a part of the plan consists of arranging for or
5-4 the provision of the single health care service, as distinguished
5-5 from an indemnification against the cost of that service, on a
5-6 prepaid basis through insurance or otherwise and that no part of
5-7 that plan consists of arranging for the provision of more than one
5-8 health care need of a single specified nature.
5-9 (v) [(t)] "Emergency care" means bona fide emergency
5-10 services provided after the sudden onset of a medical condition
5-11 manifesting itself by acute symptoms of sufficient severity,
5-12 including severe pain, such that the absence of immediate medical
5-13 attention could reasonably be expected to result in:
5-14 (1) placing the patient's health in serious jeopardy;
5-15 (2) serious impairment to bodily functions; or
5-16 (3) serious dysfunction of any bodily organ or part.
5-17 (w) [(u)] "Health maintenance organization delivery network"
5-18 means a health care delivery system in which a health maintenance
5-19 organization arranges for health care services directly or
5-20 indirectly through contracts and subcontracts with providers and
5-21 physicians.
5-22 SECTION 2. Subsection (a), Section 4, Texas Health
5-23 Maintenance Organization Act (Article 20A.04, Vernon's Texas
5-24 Insurance Code), is amended to read as follows:
5-25 (a) Each application for a certificate of authority shall be
5-26 on a form prescribed by rule of the commissioner and shall be
5-27 verified by the applicant, an officer, or other authorized
6-1 representative of the applicant, and shall set forth or be
6-2 accompanied by the following:
6-3 (1) a copy of the basic organizational document, if
6-4 any, of the applicant, such as the articles of incorporation,
6-5 articles of association, partnership agreement, trust agreement, or
6-6 other applicable documents, and all amendments thereto;
6-7 (2) a copy of the bylaws, rules and regulations, or
6-8 similar document, if any, regulating the conduct of the internal
6-9 affairs of the applicant;
6-10 (3) a list of the names, addresses, and official
6-11 positions of the persons who are to be responsible for the conduct
6-12 of the affairs of the applicant, including all members of the board
6-13 of directors, board of trustees, executive committee, or other
6-14 governing body or committee, the principal officer in the case of a
6-15 corporation, and the partnership or members in the case of a
6-16 partnership or association;
6-17 (4) a copy of any independent or other contract made
6-18 or to be made between any provider, physician, or persons listed in
6-19 Paragraph (3) hereof and the applicant;
6-20 (5) a copy of the form of evidence of coverage to be
6-21 issued to the enrollee;
6-22 (6) a copy of the form of the group contract, if any,
6-23 which is to be issued to employers, unions, trustees, or other
6-24 organizations;
6-25 (7) a current financial statement that includes:
6-26 (A) the sources and application of funds;
6-27 (B) projected financial statements during the
7-1 initial period of operations;
7-2 (C) a balance sheet beginning as of the date of
7-3 the expected start of operations;
7-4 (D) a statement of revenue and expenses with
7-5 expected member months; and
7-6 (E) a cash flow statement that states any
7-7 capital expenditures, purchase and sale of investments, and
7-8 deposits with the state;
7-9 (8) the schedule of charges to be used during the
7-10 first 12 months of operation;
7-11 (9) a statement acknowledging that all lawful process
7-12 in any legal action or proceeding against the health maintenance
7-13 organization on a cause of action arising in this state is valid if
7-14 served in accordance with Article 1.36, Insurance Code;
7-15 (10) a statement reasonably describing the geographic
7-16 area or areas to be served;
7-17 (11) a description of the complaint procedures to be
7-18 utilized;
7-19 (12) a description of the procedures and programs to
7-20 be implemented to meet the quality of health care requirements set
7-21 forth herein; [and]
7-22 (13) for a long term care service plan, a specific
7-23 description of the services to be provided; and
7-24 (14) such other information as the commissioner may
7-25 require to make the determinations required by this Act.
7-26 SECTION 3. Section 5, Texas Health Maintenance Organization
7-27 Act (Article 20A.05, Vernon's Texas Insurance Code), is amended by
8-1 amending Subsection (b) and adding Subsection (e) to read as
8-2 follows:
8-3 (b) The commissioner shall, after notice and hearing, issue
8-4 or deny a certificate of authority to any person filing an
8-5 application pursuant to Section 4 of this Act within 75 days of the
8-6 receipt of the certification of the board; provided, however, that
8-7 the commissioner may grant a delay of final action on the
8-8 application to an applicant. Issuance of the certificate of
8-9 authority shall be granted upon payment of the application fee
8-10 prescribed in Section 32 of this Act if:
8-11 (1) the board certifies that the health maintenance
8-12 organization's proposed plan of operation meets the requirements of
8-13 Subsection (a)(2) of this section; and
8-14 (2) the commissioner is satisfied that:
8-15 (A) the person responsible for the conduct of
8-16 the affairs of the applicant is competent, trustworthy, and
8-17 possesses a good reputation;
8-18 (B) the health care plan, long term care service
8-19 plan, or single health care service plan constitutes an appropriate
8-20 mechanism whereby the health maintenance organization will
8-21 effectively provide or arrange for the provision of basic health
8-22 care services, long term care services, or single health care
8-23 service on a prepaid basis, through insurance or otherwise, except
8-24 to the extent of reasonable requirements for co-payment;
8-25 (C) the health maintenance organization is fully
8-26 responsible and may reasonably be expected to meet its obligations
8-27 to enrollees and prospective enrollees. In making this
9-1 determination, the commissioner shall consider:
9-2 (i) the financial soundness of the health
9-3 care plan's arrangement for health care services and a schedule of
9-4 charges used in connection therewith;
9-5 (ii) the adequacy of working capital;
9-6 (iii) any agreement with an insurer, group
9-7 hospital service corporation, a political subdivision of
9-8 government, or any other organization for insuring the payment of
9-9 the cost of health care services or the provision for automatic
9-10 applicability of an alternative coverage in the event of
9-11 discontinuance of plan;
9-12 (iv) any agreement which provides for the
9-13 provision of health care services; and
9-14 (v) any deposit of cash or securities
9-15 submitted in accordance with Section 13 of this Act as a guarantee
9-16 that the obligations will be duly performed;
9-17 (D) nothing in the proposed method of operation,
9-18 as shown by the information submitted pursuant to Section 4 of this
9-19 Act, or by independent investigation, is contrary to Texas law.
9-20 (e) By applying for and receiving a certificate of authority
9-21 to do business in this state, the health maintenance organization
9-22 agrees and admits that it is not subject to the United States
9-23 Bankruptcy Code and is not eligible to proceed under the United
9-24 States Bankruptcy Code.
9-25 SECTION 4. Subsection (a), Section 9, Texas Health
9-26 Maintenance Organization Act (Article 20A.09, Vernon's Texas
9-27 Insurance Code), is amended to read as follows:
10-1 (a)(1) Every enrollee residing in this state is entitled to
10-2 evidence of coverage under a health care plan. If the enrollee
10-3 obtains coverage under a health care plan through an insurance
10-4 policy or a contract issued by a group hospital service
10-5 corporation, whether by option or otherwise, the insurer or the
10-6 group hospital service corporation shall issue the evidence of
10-7 coverage. Otherwise, the health maintenance organization shall
10-8 issue the evidence of coverage.
10-9 (2) No evidence of coverage, or amendment thereto,
10-10 shall be issued or delivered to any person in this state until a
10-11 copy of the form of evidence of coverage, or amendment thereto, has
10-12 been filed with and approved by the commissioner.
10-13 (3) An evidence of coverage shall contain:
10-14 (A) no provisions or statements which are
10-15 unjust, unfair, inequitable, misleading, deceptive, which encourage
10-16 misrepresentation, or which are untrue, misleading, or deceptive as
10-17 defined in Section 14 of this Act; and
10-18 (B) a clear and complete statement, if a
10-19 contract, or a reasonably complete facsimile, if a certificate, of:
10-20 (i) the medical, health care services,
10-21 long term care services, or single health care service and the
10-22 issuance of other benefits, if any, to which the enrollee is
10-23 entitled under the health care plan, long term care service plan,
10-24 or single health care service plan;
10-25 (ii) any limitation on the services, kinds
10-26 of services, benefits, or kinds of benefits to be provided,
10-27 including any deductible or co-payment feature;
11-1 (iii) where and in what manner information
11-2 is available as to how services may be obtained; and
11-3 (iv) a clear and understandable
11-4 description of the health maintenance organization's methods for
11-5 resolving enrollee complaints. Any subsequent changes may be
11-6 evidenced in a separate document issued to the enrollee.
11-7 (4) Any form of the evidence of coverage or group
11-8 contract to be used in this state, and any amendments thereto, are
11-9 subject to the filing and approval requirements of Subsection (c)
11-10 of this section, unless it is subject to the jurisdiction of the
11-11 commissioner under the laws governing health insurance or group
11-12 hospital service corporations, in which event the filing and
11-13 approval provisions of such law shall apply. To the extent,
11-14 however, that such provisions do not apply to the requirements of
11-15 Subdivision (3)[, Subsection (a)] of this subsection [section], the
11-16 requirements of Subdivision (3) shall be applicable.
11-17 SECTION 5. Section 13, Texas Health Maintenance Organization
11-18 Act (Article 20A.13, Vernon's Texas Insurance Code), is amended to
11-19 read as follows:
11-20 Sec. 13. Protection Against Insolvency. (a) Unless
11-21 otherwise provided by this section, each health maintenance
11-22 organization shall deposit with the comptroller [State Treasurer]
11-23 cash or securities, or any combination of these or other guarantees
11-24 that are acceptable to the commissioner [State Board of Insurance],
11-25 in an amount as set forth in this section.
11-26 (b) For a health maintenance organization which has not
11-27 received a certificate of authority from the State Board of
12-1 Insurance or the commissioner prior to September 1, 1987:
12-2 (1) the amount of the initial deposit or other
12-3 guarantee shall be $100,000 for an organization offering basic
12-4 health care services, $50,000 for an organization offering long
12-5 term care services, and $50,000 for an organization offering a
12-6 single health care service plan;
12-7 (2) on or before March 15 of the year following the
12-8 year in which the health maintenance organization receives a
12-9 certificate of authority, it shall deposit with the comptroller
12-10 [State Treasurer] an amount equal to the difference between the
12-11 initial deposit and 100 percent of its estimated uncovered health
12-12 care expenses for the first 12 months of operation;
12-13 (3) on or before March 15 of each subsequent year, it
12-14 shall deposit the difference between its total uncovered health
12-15 care expenses based on its annual statement from the previous year
12-16 and the total amount previously deposited and not withdrawn from
12-17 the State Treasury; and
12-18 (4) in any year in which the amount determined in
12-19 accordance with Subdivision (3) of this subsection is zero or less
12-20 than zero, the commissioner [State Board of Insurance] may not
12-21 require the health maintenance organization to make any additional
12-22 deposit under this subsection.
12-23 (c) For a health maintenance organization which has received
12-24 a certificate of authority from the State Board of Insurance prior
12-25 to September 1, 1987:
12-26 (1) on or before March 15, 1988, the organization
12-27 shall deposit an amount equal to the sum of:
13-1 (A) $100,000 for an organization offering basic
13-2 health care services or $50,000 for an organization offering a
13-3 single health care service plan; and
13-4 (B) 100 percent of the uncovered health care
13-5 expenses for the preceding 12 months of operation;
13-6 (2) on or before March 15 of each subsequent year, the
13-7 organization shall make additional deposits of the difference
13-8 between its total uncovered health care expenses based on its
13-9 annual statement from the previous year and the total amount
13-10 previously deposited and not withdrawn from the State Treasury; and
13-11 (3) in any year in which the amount determined in
13-12 accordance with Subdivision (2) of this subsection is zero or less
13-13 than zero, the commissioner [State Board of Insurance] may not
13-14 require the health maintenance organization to make any additional
13-15 deposit under this subsection.
13-16 (d) If, on application made not more than once in each
13-17 calendar year by a health maintenance organization under this
13-18 subsection, the commissioner determines that the amount previously
13-19 deposited by the organization under this section has exceeded the
13-20 amount required under this section by more than $50,000 for a
13-21 continuous 12-month period, the commissioner shall allow the
13-22 organization to withdraw the portion of the deposit that exceeds by
13-23 more than $50,000 the amount required to be on deposit for that
13-24 organization, unless the commissioner considers that the release of
13-25 a portion of the deposit could be hazardous to enrollees,
13-26 creditors, or the general public.
13-27 (e) On application made not sooner than the 24th month after
14-1 the effective date of this subsection, if the commissioner
14-2 determines that the amount previously deposited by an organization
14-3 under this section continues to exceed the amount required under
14-4 this section, the commissioner shall allow the organization to
14-5 withdraw the portion of the deposit that exceeds the amount
14-6 required to be on deposit for that organization, unless the
14-7 commissioner considers that the release of the deposit could be
14-8 hazardous to enrollees, creditors, or the general public.
14-9 (f) Upon application by a health maintenance organization
14-10 operating for more than one year under a certificate of authority
14-11 issued by the State Board of Insurance or the commissioner, the
14-12 commissioner [State Board of Insurance] may waive some or all of
14-13 the requirements of Subsection (b) or (c) of this section for any
14-14 period of time it shall deem proper whenever it finds that one or
14-15 more of the following conditions justifies such waiver:
14-16 (1) the total amount of the deposit or other guarantee
14-17 is equal to 25 percent of the health maintenance organization's
14-18 estimated uncovered expenses for the next calendar year;
14-19 (2) the health maintenance organization's net worth is
14-20 equal to at least 25 percent of its estimated uncovered expenses
14-21 for the next calendar year; or
14-22 (3) either the health maintenance organization has a
14-23 net worth of $5,000,000 or its sponsoring organization has a net
14-24 worth of at least $5,000,000 for each health maintenance
14-25 organization whose uncovered expenses it guarantees.
14-26 (g) If one or more of the requirements is waived, any amount
14-27 previously deposited shall remain on deposit until released in
15-1 whole or in part by the comptroller [State Treasurer] upon order of
15-2 the commissioner [State Board of Insurance] pursuant to Subsection
15-3 (f) of this section.
15-4 (h) A health maintenance organization that has made a
15-5 deposit with the comptroller [State Treasurer] may, at its option,
15-6 withdraw the deposit or any part thereof, first having deposited
15-7 with the comptroller [State Treasurer], in lieu thereof, a deposit
15-8 of cash or securities of equal amount and value to that withdrawn.
15-9 Any securities shall be approved by the commissioner [State Board
15-10 of Insurance] before being substituted.
15-11 (i) Subject to the phase-in provisions of Subsections (j),
15-12 (k), and (l) of this section, a [Each] health maintenance
15-13 organization offering basic health care services shall maintain a
15-14 minimum surplus of not less than $1,500,000 [$500,000], net of
15-15 accrued uncovered liabilities, a health maintenance organization
15-16 offering long term care services shall maintain a minimum surplus
15-17 of not less than $750,000 net of accrued uncovered liabilities, and
15-18 a[. Each] health maintenance organization offering only a single
15-19 care service shall maintain a minimum surplus of not less than
15-20 $500,000 [$125,000], net of accrued uncovered liabilities. The
15-21 minimum surplus shall consist only of cash, bonds of the United
15-22 States, bonds of this state, or a combination of these. If a
15-23 health maintenance organization fails to comply with the surplus
15-24 requirements [requirement of this subsection or Subsection (j)] of
15-25 this section, the commissioner is authorized to take appropriate
15-26 action to assure that the continued operation of the health
15-27 maintenance organization will not be hazardous to its enrollees.
16-1 (j) Notwithstanding any other provision of this section, the
16-2 [The] minimum surplus for a health maintenance organization
16-3 authorized to provide basic health care services [operate on the
16-4 effective date of Subsection (i) of this section] and having a
16-5 surplus of less than $1,500,000 [$500,000] shall be as follows:
16-6 (1) $700,000 [$200,000] by December 31, 1998 [1987];
16-7 (2) $900,000 [$250,000] by December 31, 1999 [1988];
16-8 (3) $1,100,000 [$300,000] by December 31, 2000 [1989];
16-9 (4) $1,300,000 [$350,000] by December 31, 2001 [1990];
16-10 and
16-11 (5) $1,500,000 [$400,000] by December 31, 2002 [1991];
16-12 [(6) $450,000 by December 31, 1992; and]
16-13 [(7) $500,000 by December 31, 1993].
16-14 (k) Notwithstanding any other provision of this section
16-15 [article], unless otherwise ordered by the commissioner, a health
16-16 maintenance organization providing long term care services
16-17 [authorized to offer only a single health care service plan
16-18 authorized to operate on September 1, 1987,] and having a surplus
16-19 of less than $1,000,000 must possess a minimum surplus [$125,000
16-20 shall be] as follows:
16-21 (1) $500,000 [$50,000] by December 31, 1998 [1987];
16-22 (2) $600,000 [$62,500] by December 31, 1999 [1988];
16-23 (3) $700,000 [$75,000] by December 31, 2000 [1989];
16-24 (4) $800,000 [$87,500] by December 31, 2001 [1990];
16-25 and
16-26 (5) $900,000 [$100,000] by December 31, 2002 [1991;]
16-27 [(6) $112,500 by December 31, 1992; and]
17-1 [(7) $125,000 by December 31, 1993].
17-2 (l) Notwithstanding any other provision of this section, a
17-3 health maintenance organization authorized to offer only a single
17-4 health care service plan and having a surplus of less than $500,000
17-5 shall be as follows:
17-6 (1) $200,000 by December 31, 1998;
17-7 (2) $275,000 by December 31, 1999;
17-8 (3) $350,000 by December 31, 2000;
17-9 (4) $425,000 by December 31, 2001; and
17-10 (5) $500,000 by December 31, 2002.
17-11 (m) In the event of the insolvency of a health maintenance
17-12 organization and on order of the commissioner, the commissioner
17-13 shall allocate equitably the insolvent health maintenance
17-14 organization's group contracts among all health maintenance
17-15 organizations which operate within a portion of the insolvent
17-16 health maintenance organization's service area, taking into
17-17 consideration the resources of each health maintenance
17-18 organization. Each health maintenance organization to which a
17-19 group or groups are allocated shall offer such group or groups the
17-20 health maintenance organization's coverage at rates determined in
17-21 accordance with the successor health maintenance organization's
17-22 existing methodology or as adjusted by the commissioner. In
17-23 addition, the commissioner shall allocate equitably among all
17-24 health maintenance organizations which operate within a portion of
17-25 the insolvent health maintenance organization's service area the
17-26 insolvent health maintenance organization's nongroup enrollees who
17-27 are unable to obtain other coverage, taking into consideration the
18-1 resources of each such health maintenance organization. Each
18-2 health maintenance organization to which nongroup enrollees are
18-3 allocated shall offer each such nongroup enrollee that health
18-4 maintenance organization's existing coverage for individual or
18-5 conversion coverage as determined by the nongroup enrollee's type
18-6 of coverage in the insolvent health maintenance organization at
18-7 rates determined in accordance with the successor health
18-8 maintenance organization's existing rating methodology. The
18-9 successor health maintenance organizations which do not offer
18-10 direct nongroup enrollment may aggregate all of the allocated
18-11 nongroup enrollees into one group for rating and coverage purposes.
18-12 SECTION 6. Subsections (b), (c), and (h), Section 14, Texas
18-13 Health Maintenance Organization Act (Article 20A.14, Vernon's Texas
18-14 Insurance Code), are amended to read as follows:
18-15 (b) Articles 21.21, 21.21A, 21.21-2, 21.21-3, and 21.21-6,
18-16 Insurance Code, and Chapter 122, Acts of the 57th Legislature,
18-17 Regular Session, 1961 (Article 21.21-1, Vernon's Texas Insurance
18-18 Code), apply to health maintenance organizations that offer [both]
18-19 basic, long term care and single health care coverages and to
18-20 basic, long term care, and single health care plans and the
18-21 evidence of coverage under those plans, except to the extent that
18-22 the commissioner determines that the nature of health maintenance
18-23 organizations and health care plans and evidence of coverage
18-24 renders any provision of those articles clearly inappropriate.
18-25 (c) An enrollee may not be canceled [cancelled] or not
18-26 renewed except for the failure to pay the charges for such
18-27 coverage, or for such other reason as may be promulgated by rule of
19-1 the commissioner.
19-2 (h) A health maintenance organization that provides coverage
19-3 for health care services or medical care through one or more
19-4 providers or physicians who are not partners or employees of the
19-5 health maintenance organization or one or more providers or
19-6 physicians that are not owned or operated by the health maintenance
19-7 organization shall provide a (20) twenty calendar day period each
19-8 calendar year during which any provider or physician in the
19-9 geographic service area may apply to participate in providing
19-10 health care services or medical care under the terms and conditions
19-11 established by the health maintenance organization for the
19-12 provision of such services and the designation of such providers
19-13 and physicians. A health maintenance organization will notify, in
19-14 writing, such provider or physician of the reason for
19-15 non-acceptance [nonacceptance] to participate in providing health
19-16 care services or medical care. This section may not be construed
19-17 to (1) require that a health maintenance organization utilize a
19-18 particular type of provider or physician in its operation;
19-19 (2) require that a health maintenance organization accept a
19-20 provider or physician of a category or type that does not meet the
19-21 practice standards and qualifications established by the health
19-22 maintenance organizations; or (3) require that a health maintenance
19-23 organization contract directly with such providers or physicians.
19-24 SECTION 7. Subsection (a), Section 20, Texas Health
19-25 Maintenance Organization Act (Article 20A.20, Vernon's Texas
19-26 Insurance Code), is amended to read as follows:
19-27 (a) The commissioner may suspend or revoke any certificate
20-1 of authority issued to a health maintenance organization under this
20-2 Act if the commissioner finds that any of the following conditions
20-3 exist:
20-4 (1) The health maintenance organization is operating
20-5 significantly in contravention of its basic organizational
20-6 documents, or its health care plan, or in a manner contrary to that
20-7 described in and reasonably inferred from any other information
20-8 submitted under Section 4 of this Act.
20-9 (2) The health maintenance organization issues
20-10 evidence of coverage or uses a schedule of charges for health care
20-11 services which does not comply with the requirements of Section 9
20-12 of this Act.
20-13 (3) The health care plan does not provide or arrange
20-14 for basic health care services, the long term care service plan
20-15 does not provide or arrange for its long term care services, or the
20-16 single health care service plan does not provide or arrange for a
20-17 single health care service.
20-18 (4) The board certifies to the commissioner that:
20-19 (A) the health maintenance organization does not
20-20 meet the requirements of Section 5(a)(2) of this Act; or
20-21 (B) the health maintenance organization is
20-22 unable to fulfill its obligation to furnish health care services as
20-23 required under its health care plan, to furnish the long term care
20-24 services as required under its long term care service plan, or to
20-25 furnish a single health care service as required under its single
20-26 health care service plan.
20-27 (5) The health maintenance organization is no longer
21-1 financially responsible and may be reasonably expected to be unable
21-2 to meet its obligations to enrollees or prospective enrollees.
21-3 (6) The health maintenance organization has failed to
21-4 implement the complaint system required by Section 12 of this Act
21-5 in a manner to resolve reasonably valid complaints.
21-6 (7) The health maintenance organization, or any person
21-7 on its behalf, has advertised or merchandised its services in an
21-8 untrue, misrepresentative, misleading, deceptive, or unfair manner.
21-9 (8) The continued operation of the health maintenance
21-10 organization would be hazardous to its enrollees.
21-11 (9) The health maintenance organization has otherwise
21-12 failed to comply substantially with this Act, and any rule and
21-13 regulation thereunder.
21-14 SECTION 8. Subsection (f), Section 26, Texas Health
21-15 Maintenance Organization Act (Article 20A.26, Vernon's Texas
21-16 Insurance Code), is amended to read as follows:
21-17 (f)(1) This Act shall not be applicable to:
21-18 (A) any physician, so long as that physician is
21-19 engaged in the delivery of care that is within the definition of
21-20 medical care; or
21-21 (B) any provider that is engaged in the delivery
21-22 of health care services other than medical care as part of a health
21-23 maintenance organization delivery network.
21-24 (2) Except as provided by Section 6(a)(3) of this Act
21-25 or Subdivision (5) of this subsection, any physician or provider
21-26 that employs or enters into a contractual arrangement with a
21-27 provider or group of providers to furnish basic, long term care, or
22-1 single health care services as defined in Section 2 of this Act is
22-2 subject to the provisions of this Act[,] and shall be required to
22-3 obtain a certificate of authority from the commissioner.
22-4 (3) Notwithstanding any other law, any physician who
22-5 conducts activities permitted by law but which do not require a
22-6 certificate of authority under this Act, and in the process
22-7 contracts with one or more physicians, shall not, by virtue of such
22-8 contract or arrangement, be deemed to have entered into a
22-9 conspiracy in restraint of trade in violation of Sections 15.01
22-10 through 15.34 of the Business & Commerce Code.
22-11 (4) Except for Articles 21.07-6 and 21.58A, Insurance
22-12 Code, the insurance laws, including the group hospital service
22-13 corporation law, do not apply to physicians and providers; provided
22-14 that Article 21.58A shall not apply to utilization review
22-15 undertaken by a physician or provider in the ordinary course of
22-16 treatment of patients by a physician or provider pursuant to a
22-17 joint or delegated review agreement or agreements with a health
22-18 maintenance organization on services rendered by the physician or
22-19 provider.
22-20 (5) This Act and the Insurance Code may not be
22-21 construed to prohibit a physician or provider who is participating
22-22 in a health maintenance organization delivery network, whether
22-23 contracting with a health maintenance organization under Section
22-24 6(a)(3) of this Act or subcontracting with a physician or provider
22-25 in the health maintenance organization delivery network, from
22-26 entering into a contractual arrangement within a health maintenance
22-27 organization delivery network described under Subdivisions (6)-(9)
23-1 of this subsection.
23-2 (6) A physician may contract to provide medical care
23-3 or arrange to provide medical care through subcontracts with other
23-4 physicians. A physician may contract to provide through other
23-5 providers any services that are ancillary to the practice of
23-6 medicine, other than hospital or other institutional or inpatient
23-7 provider services.
23-8 (7) A provider may contract to provide, or arrange to
23-9 provide through subcontracts with similarly licensed providers, any
23-10 health care services that those providers are licensed to provide,
23-11 other than medical care.
23-12 (8) A provider may contract to provide, or arrange to
23-13 provide through subcontracts with other providers, a health care
23-14 service that the provider is not licensed to provide, other than
23-15 medical care, if the contracted or subcontracted services
23-16 constitute less than 15 percent of the total amount of services to
23-17 be provided by that provider or arranged to be provided for by that
23-18 provider.
23-19 (9) A contract or subcontract authorized under
23-20 Subdivision (6), (7), or (8) of this subsection may provide for
23-21 compensation based on a fee-for-service arrangement, a risk-sharing
23-22 arrangement, or a capitated risk arrangement under which a fixed
23-23 predetermined payment is made in exchange for the provision of, or
23-24 the arrangement to provide and the guaranty of the provision of, a
23-25 defined set of covered services to the covered persons for a
23-26 specified period, regardless of the amount of services actually
23-27 provided.
24-1 SECTION 9. Section 31, Texas Health Maintenance
24-2 Organization Act (Article 20A.31, Vernon's Texas Insurance Code),
24-3 is amended to read as follows:
24-4 Sec. 31. JURISDICTION FOR INJUNCTIONS AND RECEIVERSHIP AND
24-5 DELINQUENCY PROCEEDINGS. (a) When it appears to the commissioner
24-6 that a health maintenance organization or other person is violating
24-7 or has violated this Act or any rule or regulation issued pursuant
24-8 to this Act, the commissioner may bring suit in a district court of
24-9 Travis County to enjoin the violation and for such other relief as
24-10 the court may deem appropriate.
24-11 (b) In addition to all other remedies available by law, when
24-12 it appears to the commissioner that a health maintenance
24-13 organization or other person is insolvent or does not possess the
24-14 surplus required by Section 13 of this Act, the commissioner may
24-15 bring suit in a district court of Travis County to be named
24-16 receiver in accordance with Section 21 of this Act and Article
24-17 21.28, Insurance Code.
24-18 (c) A court of competent jurisdiction may find that a
24-19 receiver should take charge of the assets of a health maintenance
24-20 organization and name the commissioner as the receiver of the
24-21 health maintenance organization in accordance with Section 21 of
24-22 this Act and Article 21.28, Insurance Code.
24-23 (d) The operations and business of a health maintenance
24-24 organization represent the business of insurance for purposes of
24-25 Section 21 of this Act and Articles 21.28 and 21.28-A, Insurance
24-26 Code.
24-27 (e) Exclusive venue of receivership and delinquency
25-1 proceedings for a health maintenance organization shall be in
25-2 Travis County.
25-3 SECTION 10. Subsection (d), Section 33, Texas Health
25-4 Maintenance Organization Act (Article 20A.33, Vernon's Texas
25-5 Insurance Code), is amended to read as follows:
25-6 (d) The commissioner shall annually determine the rate of
25-7 assessment of a per capita maintenance tax to be paid on an annual
25-8 or semiannual basis, on the correctly reported gross revenues for
25-9 the issuance of health maintenance certificates or contracts
25-10 collected by all authorized health maintenance organizations
25-11 issuing such coverages in this state. The rate of assessment may
25-12 not exceed $2 for each enrollee. The rate of assessment may differ
25-13 between basic health care plans, long term care service plans, and
25-14 single health care service plans and shall equitably reflect any
25-15 differences in regulatory resources attributable to each type of
25-16 plan. The comptroller shall collect the maintenance tax.
25-17 SECTION 11. Subsections (a), (b), (c), (e), and (g),
25-18 Section 36, Texas Health Maintenance Organization Act (Article
25-19 20A.36, Vernon's Texas Insurance Code), are amended to read as
25-20 follows:
25-21 (a) The Health Maintenance Organization Solvency
25-22 Surveillance Committee is created under the direction of the
25-23 commissioner. The committee shall perform its functions under a
25-24 plan of operation approved by the commissioner [State Board of
25-25 Insurance]. The committee is composed of nine members appointed by
25-26 the commissioner of insurance. No two members may be employees or
25-27 officers of the same health maintenance organization or holding
26-1 company system. The qualifications for membership, terms of
26-2 office, and reimbursement of expenses shall be as provided by the
26-3 plan of operation approved by the commissioner [State Board of
26-4 Insurance]. A "member" is a Texas licensed health maintenance
26-5 organization as defined in Section 2(j) of this Act or a public
26-6 representative. The commissioner of insurance shall appoint the
26-7 member along with the officer or employee of the member who shall
26-8 serve on the committee if the member is a representative of a Texas
26-9 licensed health maintenance organization or its holding company
26-10 system. Five of the members shall represent health maintenance
26-11 organizations or their holding company system. Of the health
26-12 maintenance organization members, one shall be a long term care
26-13 service plan as defined in Section 2(l) of this Act, if one exists
26-14 at the time of appointment, and one shall be a single health care
26-15 service plan as defined in Section 2(u) [2(s)] of this Act. The
26-16 remaining health maintenance organization members shall be selected
26-17 by the commissioner of insurance with due consideration of factors
26-18 deemed appropriate including, but not limited to, the varying
26-19 categories of premium income and geographical location.
26-20 A public representative may not be:
26-21 (1) an officer, director, or employee of a health
26-22 maintenance organization, a health maintenance organization agent,
26-23 or any other business entity regulated by the commissioner [State
26-24 Board of Insurance];
26-25 (2) a person required to register with the secretary
26-26 of state under Chapter 305, Government Code; or
26-27 (3) related to a person described by Subdivision (1)
27-1 or (2) of this subsection within the second degree of affinity or
27-2 consanguinity.
27-3 (b)(1) The committee shall assist and advise the
27-4 commissioner relating to the detection and prevention of insolvency
27-5 problems regarding health maintenance organizations. The committee
27-6 shall also assist and advise the commissioner regarding any health
27-7 maintenance organization placed in rehabilitation, liquidation,
27-8 supervision, or conservation. The method of providing this
27-9 assistance and advice shall be as contained in the plan of
27-10 operation approved by the commissioner [State Board of Insurance].
27-11 (2) Reports regarding the financial condition of Texas
27-12 licensed health maintenance organizations and regarding the
27-13 financial condition, administration, and status of health
27-14 maintenance organizations in rehabilitation, liquidation,
27-15 supervision, or conservation shall be provided to the committee
27-16 members at meetings. Committee members shall not reveal the
27-17 condition of nor any information secured in the course of any
27-18 meeting of the Solvency Surveillance Committee with regard to any
27-19 corporation, form or person examined by the committee. Committee
27-20 proceedings shall be filed with the commissioner [and reported to
27-21 the members of the State Board of Insurance].
27-22 (c) To provide funds for the administrative expenses of the
27-23 commissioner [State Board of Insurance] regarding rehabilitation,
27-24 liquidation, supervision, or conservation of an impaired health
27-25 maintenance organization in this state, the committee, at the
27-26 commissioner's direction, shall assess each health maintenance
27-27 organization licensed in this state in the proportion that the
28-1 gross premiums of that health maintenance organization written in
28-2 this state during the preceding calendar year bear to the aggregate
28-3 gross premiums written in this state by all health maintenance
28-4 organizations, as furnished to the committee by the commissioner
28-5 after review of annual statements and other reports the
28-6 commissioner considers necessary. Assessments to supplement or pay
28-7 for administrative expenses of rehabilitation, liquidation,
28-8 supervision, or conservation may be made only after the
28-9 commissioner determines that adequate assets of the health
28-10 maintenance organization are not immediately available for those
28-11 purposes or that use of those assets could be detrimental to
28-12 rehabilitation, liquidation, supervision, or conservation. The
28-13 commissioner may abate or defer the assessments, either in whole or
28-14 in part, if, in the opinion of the commissioner, payment of the
28-15 assessment would endanger the ability of a health maintenance
28-16 organization to fulfill its contractual obligations. If an
28-17 assessment is abated or deferred, either in whole or in part, the
28-18 amount by which the assessment is abated or deferred may be
28-19 assessed against the remaining licensed health maintenance
28-20 organizations in a manner consistent with the basis for assessments
28-21 provided by the plan of operation approved by the commissioner
28-22 [State Board of Insurance]. The total of all assessments on a
28-23 health maintenance organization may not exceed one-quarter of one
28-24 percent of the health maintenance organization's gross premiums in
28-25 any one calendar year.
28-26 (e) Not later than the 180th day after the date on which the
28-27 final member of the committee is appointed, the committee shall
29-1 submit to the commissioner [State Board of Insurance] a plan of
29-2 operation. The plan of operation takes effect on approval in
29-3 writing by the commissioner [State Board of Insurance]. If the
29-4 committee fails to submit a suitable plan of operation within the
29-5 period set by this subsection, or if, after the adoption of a plan,
29-6 the committee fails to submit suitable amendments to the plan, the
29-7 commissioner [State Board of Insurance] may, after notice and
29-8 hearing, adopt rules as necessary to implement this Act. Those
29-9 rules continue in effect until modified by the commissioner [State
29-10 Board of Insurance] or superseded by a plan submitted by the
29-11 committee and approved by the commissioner [State Board of
29-12 Insurance].
29-13 (g) A licensed health maintenance organization or its agents
29-14 or employees, the committee or its agents, employees, or members,
29-15 or the [State Board of Insurance, the] commissioner[,] or the
29-16 commissioner's [their] representatives are not liable in a civil
29-17 action for any act taken or not taken in good faith in the
29-18 performance of powers and duties under this section.
29-19 SECTION 12. This Act takes effect September 1, 1997.
29-20 SECTION 13. The importance of this legislation and the
29-21 crowded condition of the calendars in both houses create an
29-22 emergency and an imperative public necessity that the
29-23 constitutional rule requiring bills to be read on three several
29-24 days in each house be suspended, and this rule is hereby suspended.