AN ACT
1-1 relating to the regulation of health maintenance organizations.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Section 2, Texas Health Maintenance Organization
1-4 Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by
1-5 amending Subsections (i) through (u) and adding Subsections (v) and
1-6 (w) 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:
1-20 (1) services for mental health, chemical dependency,
1-21 or mental retardation, or any combination of mental health,
1-22 chemical dependency, or mental retardation; or
1-23 (2) an organized long-term care service delivery
2-1 system that provides for diagnostic, preventive, therapeutic,
2-2 rehabilitative, and personal care services required by an
2-3 individual with a loss in functional capacity on a long-term basis.
2-4 (l) "Limited health care service plan" means a plan under
2-5 which any person undertakes to provide, arrange for, pay for, or
2-6 reimburse any part of the cost of limited health care services, if
2-7 a part of the plan consists of arranging for, or the provision of,
2-8 limited health care services, as distinguished from an
2-9 indemnification against the cost of those services, on a prepaid
2-10 basis through insurance or otherwise.
2-11 (m) "Medical care" means furnishing those services defined
2-12 as practicing medicine under Section 1.03(8), Medical Practice Act
2-13 (Article 4495b, Vernon's Texas Civil Statutes).
2-14 (n) [(l)] "Person" means any natural or artificial person,
2-15 including, but not limited to, individuals, partnerships,
2-16 associations, organizations, trusts, hospital districts, community
2-17 mental health, mental retardation, or mental health and mental
2-18 retardation centers, limited liability companies, limited liability
2-19 partnerships, or corporations.
2-20 (o) [(m)] "Physician" means:
2-21 (1) an individual licensed to practice medicine in
2-22 this state;
2-23 (2) a professional association organized under the
2-24 Texas Professional Association Act (Article 1528f, Vernon's Texas
2-25 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
4-1 agrees in writing that enrollees shall in no way be liable,
4-2 assessable, or in any way subject to payment for services except as
4-3 described in the evidence of coverage issued to the enrollee under
4-4 Section 9 of this Act. The amount due on loans in the next
4-5 calendar year will be considered uncovered expenses unless
4-6 specifically subordinated to uncovered medical and health care
4-7 expenses or unless guaranteed by the sponsoring organization.
4-8 (s) [(q)] "Uncovered liabilities" means obligations
4-9 resulting from unpaid uncovered expenses, the outstanding
4-10 indebtedness of loans that are not specifically subordinated to
4-11 uncovered medical and health care expenses or guaranteed by the
4-12 sponsoring organization, and all other monetary obligations that
4-13 are not similarly subordinated or guaranteed.
4-14 (t) [(r)] "Single health care service" means a health care
4-15 service that an enrolled population may reasonably require in order
4-16 to be maintained in good health with respect to a particular health
4-17 care need for the purpose of preventing, alleviating, curing, or
4-18 healing human illness or injury of a single specified nature and
4-19 that is to be provided by one or more persons each of whom is
4-20 licensed by the state to provide that specific health care service.
4-21 (u) [(s)] "Single health care service plan" means a plan
4-22 under which any person undertakes to provide, arrange for, pay for,
4-23 or reimburse any part of the cost of a single health care service,
4-24 provided[,] that a part of the plan consists of arranging for or
4-25 the provision of the single health care service, as distinguished
5-1 from an indemnification against the cost of that service, on a
5-2 prepaid basis through insurance or otherwise and that no part of
5-3 that plan consists of arranging for the provision of more than one
5-4 health care need of a single specified nature.
5-5 (v) [(t)] "Emergency care" means bona fide emergency
5-6 services provided after the sudden onset of a medical condition
5-7 manifesting itself by acute symptoms of sufficient severity,
5-8 including severe pain, such that the absence of immediate medical
5-9 attention could reasonably be expected to result in:
5-10 (1) placing the patient's health in serious jeopardy;
5-11 (2) serious impairment to bodily functions; or
5-12 (3) serious dysfunction of any bodily organ or part.
5-13 (w) [(u)] "Health maintenance organization delivery network"
5-14 means a health care delivery system in which a health maintenance
5-15 organization arranges for health care services directly or
5-16 indirectly through contracts and subcontracts with providers and
5-17 physicians.
5-18 SECTION 2. Subsection (a), Section 4, Texas Health
5-19 Maintenance Organization Act (Article 20A.04, Vernon's Texas
5-20 Insurance Code), is amended to read as follows:
5-21 (a) Each application for a certificate of authority shall be
5-22 on a form prescribed by rule of the commissioner and shall be
5-23 verified by the applicant, an officer, or other authorized
5-24 representative of the applicant, and shall set forth or be
5-25 accompanied by the following:
6-1 (1) a copy of the basic organizational document, if
6-2 any, of the applicant, such as the articles of incorporation,
6-3 articles of association, partnership agreement, trust agreement, or
6-4 other applicable documents, and all amendments thereto;
6-5 (2) a copy of the bylaws, rules and regulations, or
6-6 similar document, if any, regulating the conduct of the internal
6-7 affairs of the applicant;
6-8 (3) a list of the names, addresses, and official
6-9 positions of the persons who are to be responsible for the conduct
6-10 of the affairs of the applicant, including all members of the board
6-11 of directors, board of trustees, executive committee, or other
6-12 governing body or committee, the principal officer in the case of a
6-13 corporation, and the partnership or members in the case of a
6-14 partnership or association;
6-15 (4) a copy of any independent or other contract made
6-16 or to be made between any provider, physician, or persons listed in
6-17 Paragraph (3) hereof and the applicant;
6-18 (5) a copy of the form of evidence of coverage to be
6-19 issued to the enrollee;
6-20 (6) a copy of the form of the group contract, if any,
6-21 which is to be issued to employers, unions, trustees, or other
6-22 organizations;
6-23 (7) a current financial statement that includes:
6-24 (A) the sources and application of funds;
6-25 (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 limited health care service plan, a
7-23 specific description of the health care services to be provided;
7-24 and
7-25 (14) such other information as the commissioner may
8-1 require to make the determinations required by this Act.
8-2 SECTION 3. Section 5, Texas Health Maintenance Organization
8-3 Act (Article 20A.05, Vernon's Texas Insurance Code), is amended by
8-4 amending Subsection (b) and adding Subsection (e) to read as
8-5 follows:
8-6 (b) The commissioner shall, after notice and hearing, issue
8-7 or deny a certificate of authority to any person filing an
8-8 application pursuant to Section 4 of this Act within 75 days of the
8-9 receipt of the certification of the board; provided, however, that
8-10 the commissioner may grant a delay of final action on the
8-11 application to an applicant. Issuance of the certificate of
8-12 authority shall be granted upon payment of the application fee
8-13 prescribed in Section 32 of this Act if:
8-14 (1) the board certifies that the health maintenance
8-15 organization's proposed plan of operation meets the requirements of
8-16 Subsection (a)(2) of this section; and
8-17 (2) the commissioner is satisfied that:
8-18 (A) the person responsible for the conduct of
8-19 the affairs of the applicant is competent, trustworthy, and
8-20 possesses a good reputation;
8-21 (B) the health care plan, limited health care
8-22 service plan, or single health care service plan constitutes an
8-23 appropriate mechanism whereby the health maintenance organization
8-24 will effectively provide or arrange for the provision of basic
8-25 health care services, limited health care services, or single
9-1 health care service on a prepaid basis, through insurance or
9-2 otherwise, except to the extent of reasonable requirements for
9-3 co-payment;
9-4 (C) the health maintenance organization is fully
9-5 responsible and may reasonably be expected to meet its obligations
9-6 to enrollees and prospective enrollees. In making this
9-7 determination, the commissioner shall consider:
9-8 (i) the financial soundness of the health
9-9 care plan's arrangement for health care services and a schedule of
9-10 charges used in connection therewith;
9-11 (ii) the adequacy of working capital;
9-12 (iii) any agreement with an insurer, group
9-13 hospital service corporation, a political subdivision of
9-14 government, or any other organization for insuring the payment of
9-15 the cost of health care services or the provision for automatic
9-16 applicability of an alternative coverage in the event of
9-17 discontinuance of plan;
9-18 (iv) any agreement which provides for the
9-19 provision of health care services; and
9-20 (v) any deposit of cash or securities
9-21 submitted in accordance with Section 13 of this Act as a guarantee
9-22 that the obligations will be duly performed;
9-23 (D) nothing in the proposed method of operation,
9-24 as shown by the information submitted pursuant to Section 4 of this
9-25 Act, or by independent investigation, is contrary to Texas law.
10-1 (e) By applying for and receiving a certificate of authority
10-2 to do business in this state, the health maintenance organization
10-3 agrees and admits that it is not subject to the United States
10-4 Bankruptcy Code and is not eligible to proceed under the United
10-5 States Bankruptcy Code.
10-6 SECTION 4. Subsection (a), Section 9, Texas Health
10-7 Maintenance Organization Act (Article 20A.09, Vernon's Texas
10-8 Insurance Code), is amended to read as follows:
10-9 (a)(1) Every enrollee residing in this state is entitled to
10-10 evidence of coverage under a health care plan. If the enrollee
10-11 obtains coverage under a health care plan through an insurance
10-12 policy or a contract issued by a group hospital service
10-13 corporation, whether by option or otherwise, the insurer or the
10-14 group hospital service corporation shall issue the evidence of
10-15 coverage. Otherwise, the health maintenance organization shall
10-16 issue the evidence of coverage.
10-17 (2) No evidence of coverage, or amendment thereto,
10-18 shall be issued or delivered to any person in this state until a
10-19 copy of the form of evidence of coverage, or amendment thereto, has
10-20 been filed with and approved by the commissioner.
10-21 (3) An evidence of coverage shall contain:
10-22 (A) no provisions or statements which are
10-23 unjust, unfair, inequitable, misleading, deceptive, which encourage
10-24 misrepresentation, or which are untrue, misleading, or deceptive as
10-25 defined in Section 14 of this Act; and
11-1 (B) a clear and complete statement, if a
11-2 contract, or a reasonably complete facsimile, if a certificate, of:
11-3 (i) the medical, health care services,
11-4 limited health care services, or single health care service and the
11-5 issuance of other benefits, if any, to which the enrollee is
11-6 entitled under the health care plan, limited health care service
11-7 plan, or single health care service plan;
11-8 (ii) any limitation on the services, kinds
11-9 of services, benefits, or kinds of benefits to be provided,
11-10 including any deductible or co-payment feature;
11-11 (iii) where and in what manner information
11-12 is available as to how services may be obtained; and
11-13 (iv) a clear and understandable
11-14 description of the health maintenance organization's methods for
11-15 resolving enrollee complaints. Any subsequent changes may be
11-16 evidenced in a separate document issued to the enrollee.
11-17 (4) Any form of the evidence of coverage or group
11-18 contract to be used in this state, and any amendments thereto, are
11-19 subject to the filing and approval requirements of Subsection (c)
11-20 of this section, unless it is subject to the jurisdiction of the
11-21 commissioner under the laws governing health insurance or group
11-22 hospital service corporations, in which event the filing and
11-23 approval provisions of such law shall apply. To the extent,
11-24 however, that such provisions do not apply to the requirements of
11-25 Subdivision (3)[, Subsection (a)] of this subsection [section], the
12-1 requirements of Subdivision (3) shall be applicable.
12-2 SECTION 5. Section 13, Texas Health Maintenance Organization
12-3 Act (Article 20A.13, Vernon's Texas Insurance Code), is amended to
12-4 read as follows:
12-5 Sec. 13. Protection Against Insolvency. (a) Unless
12-6 otherwise provided by this section, each health maintenance
12-7 organization shall deposit with the comptroller [State Treasurer]
12-8 cash or securities, or any combination of these or other guarantees
12-9 that are acceptable to the commissioner [State Board of Insurance],
12-10 in an amount as set forth in this section.
12-11 (b) For a health maintenance organization which has not
12-12 received a certificate of authority from the State Board of
12-13 Insurance or the commissioner prior to September 1, 1987:
12-14 (1) the amount of the initial deposit or other
12-15 guarantee shall be $100,000 for an organization offering basic
12-16 health care services, $75,000 for an organization offering limited
12-17 health care services, and $50,000 for an organization offering a
12-18 single health care service plan;
12-19 (2) on or before March 15 of the year following the
12-20 year in which the health maintenance organization receives a
12-21 certificate of authority, it shall deposit with the comptroller
12-22 [State Treasurer] an amount equal to the difference between the
12-23 initial deposit and 100 percent of its estimated uncovered health
12-24 care expenses for the first 12 months of operation;
12-25 (3) on or before March 15 of each subsequent year, it
13-1 shall deposit the difference between its total uncovered health
13-2 care expenses based on its annual statement from the previous year
13-3 and the total amount previously deposited and not withdrawn from
13-4 the State Treasury; and
13-5 (4) in any year in which the amount determined in
13-6 accordance with Subdivision (3) of this subsection is zero or less
13-7 than zero, the commissioner [State Board of Insurance] may not
13-8 require the health maintenance organization to make any additional
13-9 deposit under this subsection.
13-10 (c) For a health maintenance organization which has received
13-11 a certificate of authority from the State Board of Insurance prior
13-12 to September 1, 1987:
13-13 (1) on or before March 15, 1988, the organization
13-14 shall deposit an amount equal to the sum of:
13-15 (A) $100,000 for an organization offering basic
13-16 health care services or $50,000 for an organization offering a
13-17 single health care service plan; and
13-18 (B) 100 percent of the uncovered health care
13-19 expenses for the preceding 12 months of operation;
13-20 (2) on or before March 15 of each subsequent year, the
13-21 organization shall make additional deposits of the difference
13-22 between its total uncovered health care expenses based on its
13-23 annual statement from the previous year and the total amount
13-24 previously deposited and not withdrawn from the State Treasury; and
13-25 (3) in any year in which the amount determined in
14-1 accordance with Subdivision (2) of this subsection is zero or less
14-2 than zero, the commissioner [State Board of Insurance] may not
14-3 require the health maintenance organization to make any additional
14-4 deposit under this subsection.
14-5 (d) If, on application made not more than once in each
14-6 calendar year by a health maintenance organization under this
14-7 subsection, the commissioner determines that the amount previously
14-8 deposited by the organization under this section has exceeded the
14-9 amount required under this section by more than $50,000 for a
14-10 continuous 12-month period, the commissioner shall allow the
14-11 organization to withdraw the portion of the deposit that exceeds by
14-12 more than $50,000 the amount required to be on deposit for that
14-13 organization, unless the commissioner considers that the release of
14-14 a portion of the deposit could be hazardous to enrollees,
14-15 creditors, or the general public.
14-16 (e) On application made not sooner than the 24th month after
14-17 the effective date of this subsection, if the commissioner
14-18 determines that the amount previously deposited by an organization
14-19 under this section continues to exceed the amount required under
14-20 this section, the commissioner shall allow the organization to
14-21 withdraw the portion of the deposit that exceeds the amount
14-22 required to be on deposit for that organization, unless the
14-23 commissioner considers that the release of the deposit could be
14-24 hazardous to enrollees, creditors, or the general public.
14-25 (f) Upon application by a health maintenance organization
15-1 operating for more than one year under a certificate of authority
15-2 issued by the State Board of Insurance or the commissioner, the
15-3 commissioner [State Board of Insurance] may waive some or all of
15-4 the requirements of Subsection (b) or (c) of this section for any
15-5 period of time it shall deem proper whenever it finds that one or
15-6 more of the following conditions justifies such waiver:
15-7 (1) the total amount of the deposit or other guarantee
15-8 is equal to 25 percent of the health maintenance organization's
15-9 estimated uncovered expenses for the next calendar year;
15-10 (2) the health maintenance organization's net worth is
15-11 equal to at least 25 percent of its estimated uncovered expenses
15-12 for the next calendar year; or
15-13 (3) either the health maintenance organization has a
15-14 net worth of $5,000,000 or its sponsoring organization has a net
15-15 worth of at least $5,000,000 for each health maintenance
15-16 organization whose uncovered expenses it guarantees.
15-17 (g) If one or more of the requirements is waived, any amount
15-18 previously deposited shall remain on deposit until released in
15-19 whole or in part by the comptroller [State Treasurer] upon order of
15-20 the commissioner [State Board of Insurance] pursuant to Subsection
15-21 (f) of this section.
15-22 (h) A health maintenance organization that has made a
15-23 deposit with the comptroller [State Treasurer] may, at its option,
15-24 withdraw the deposit or any part thereof, first having deposited
15-25 with the comptroller [State Treasurer], in lieu thereof, a deposit
16-1 of cash or securities of equal amount and value to that withdrawn.
16-2 Any securities shall be approved by the commissioner [State Board
16-3 of Insurance] before being substituted.
16-4 (i) Subject to the phase-in provisions of Subsections (j),
16-5 (k), and (l) of this section, a [Each] health maintenance
16-6 organization offering basic health care services shall maintain a
16-7 minimum surplus of not less than $1,500,000 [$500,000], net of
16-8 accrued uncovered liabilities, a health maintenance organization
16-9 offering limited health care services shall maintain a minimum
16-10 surplus of not less than $1,000,000, net of accrued uncovered
16-11 liabilities, and a[. Each] health maintenance organization
16-12 offering only a single care service shall maintain a minimum
16-13 surplus of not less than $500,000 [$125,000], net of accrued
16-14 uncovered liabilities. The minimum surplus shall consist only of
16-15 cash, bonds of the United States, bonds of this state, or a
16-16 combination of these. If a health maintenance organization fails
16-17 to comply with the surplus requirements [requirement of this
16-18 subsection or Subsection (j)] of this section, the commissioner is
16-19 authorized to take appropriate action to assure that the continued
16-20 operation of the health maintenance organization will not be
16-21 hazardous to its enrollees.
16-22 (j) Notwithstanding any other provision of this section, the
16-23 [The] minimum surplus for a health maintenance organization
16-24 authorized to provide basic health care services [operate on the
16-25 effective date of Subsection (i) of this section] and having a
17-1 surplus of less than $1,500,000 [$500,000] shall be as follows:
17-2 (1) $700,000 [$200,000] by December 31, 1998 [1987];
17-3 (2) $900,000 [$250,000] by December 31, 1999 [1988];
17-4 (3) $1,100,000 [$300,000] by December 31, 2000 [1989];
17-5 (4) $1,300,000 [$350,000] by December 31, 2001 [1990];
17-6 and
17-7 (5) $1,500,000 [$400,000] by December 31, 2002 [1991;]
17-8 [(6) $450,000 by December 31, 1992; and]
17-9 [(7) $500,000 by December 31, 1993].
17-10 (k) Notwithstanding any other provision of this section
17-11 [article], a health maintenance organization providing limited
17-12 health care services [authorized to offer only a single health care
17-13 service plan authorized to operate on September 1, 1987,] and
17-14 having a surplus of less than $1,000,000 must possess a minimum
17-15 surplus [$125,000 shall be] as follows:
17-16 (1) $600,000 [$50,000] by December 31, 1998 [1987];
17-17 (2) $700,000 [$62,500] by December 31, 1999 [1988];
17-18 (3) $800,000 [$75,000] by December 31, 2000 [1989];
17-19 (4) $900,000 [$87,500] by December 31, 2001 [1990];
17-20 and
17-21 (5) $1,000,000 [$100,000] by December 31, 2002 [1991;]
17-22 [(6) $112,500 by December 31, 1992; and]
17-23 [(7) $125,000 by December 31, 1993].
17-24 (l) Notwithstanding any other provision of this section, a
17-25 health maintenance organization authorized to offer only a single
18-1 health care service plan and having a surplus of less than $500,000
18-2 must possess a minimum surplus as follows:
18-3 (1) $200,000 by December 31, 1998;
18-4 (2) $275,000 by December 31, 1999;
18-5 (3) $350,000 by December 31, 2000;
18-6 (4) $425,000 by December 31, 2001; and
18-7 (5) $500,000 by December 31, 2002.
18-8 (m) In the event of the insolvency of a health maintenance
18-9 organization and on order of the commissioner, the commissioner
18-10 shall allocate equitably the insolvent health maintenance
18-11 organization's group contracts among all health maintenance
18-12 organizations that operate within a portion of the insolvent health
18-13 maintenance organization's service area, taking into consideration
18-14 the resources of each health maintenance organization. Each health
18-15 maintenance organization to which a group or groups are allocated
18-16 shall offer such group or groups the health maintenance
18-17 organization's coverage at rates determined in accordance with the
18-18 successor health maintenance organization's existing methodology or
18-19 as adjusted by the commissioner. In addition, the commissioner
18-20 shall allocate equitably among all health maintenance organizations
18-21 that operate within a portion of the insolvent health maintenance
18-22 organization's service area the insolvent health maintenance
18-23 organization's nongroup enrollees, taking into consideration the
18-24 resources of each such health maintenance organization. Each
18-25 health maintenance organization to which nongroup enrollees are
19-1 allocated shall offer each such nongroup enrollee that health
19-2 maintenance organization's existing coverage for individual or
19-3 conversion coverage as determined by the nongroup enrollee's type
19-4 of coverage in the insolvent health maintenance organization at
19-5 rates determined in accordance with the successor health
19-6 maintenance organization's existing rating methodology or as
19-7 adjusted by the commissioner. The successor health maintenance
19-8 organizations that do not offer direct nongroup enrollment shall
19-9 provide coverage at rates that reflect the average group rate of
19-10 the successor health maintenance organization.
19-11 SECTION 6. Subsections (b), (c), and (h), Section 14, Texas
19-12 Health Maintenance Organization Act (Article 20A.14, Vernon's Texas
19-13 Insurance Code), are amended to read as follows:
19-14 (b) Articles 21.21, 21.21A, 21.21-2, 21.21-3, and 21.21-6,
19-15 Insurance Code, and Chapter 122, Acts of the 57th Legislature,
19-16 Regular Session, 1961 (Article 21.21-1, Vernon's Texas Insurance
19-17 Code), apply to health maintenance organizations that offer [both]
19-18 basic, limited, and single health care coverages and to basic,
19-19 limited, and single health care plans and the evidence of coverage
19-20 under those plans, except to the extent that the commissioner
19-21 determines that the nature of health maintenance organizations and
19-22 health care plans and evidence of coverage renders any provision of
19-23 those articles clearly inappropriate.
19-24 (c) An enrollee may not be canceled [cancelled] or not
19-25 renewed except for the failure to pay the charges for such
20-1 coverage, or for such other reason as may be promulgated by rule of
20-2 the commissioner.
20-3 (h) A health maintenance organization that provides coverage
20-4 for health care services or medical care through one or more
20-5 providers or physicians who are not partners or employees of the
20-6 health maintenance organization or one or more providers or
20-7 physicians that are not owned or operated by the health maintenance
20-8 organization shall provide a (20) twenty calendar day period each
20-9 calendar year during which any provider or physician in the
20-10 geographic service area may apply to participate in providing
20-11 health care services or medical care under the terms and conditions
20-12 established by the health maintenance organization for the
20-13 provision of such services and the designation of such providers
20-14 and physicians. A health maintenance organization will notify, in
20-15 writing, such provider or physician of the reason for
20-16 non-acceptance [nonacceptance] to participate in providing health
20-17 care services or medical care. This section may not be construed
20-18 to (1) require that a health maintenance organization utilize a
20-19 particular type of provider or physician in its operation;
20-20 (2) require that a health maintenance organization accept a
20-21 provider or physician of a category or type that does not meet the
20-22 practice standards and qualifications established by the health
20-23 maintenance organizations; or (3) require that a health maintenance
20-24 organization contract directly with such providers or physicians.
20-25 SECTION 7. Subsection (a), Section 20, Texas Health
21-1 Maintenance Organization Act (Article 20A.20, Vernon's Texas
21-2 Insurance Code), is amended to read as follows:
21-3 (a) The commissioner may suspend or revoke any certificate
21-4 of authority issued to a health maintenance organization under this
21-5 Act if the commissioner finds that any of the following conditions
21-6 exist:
21-7 (1) The health maintenance organization is operating
21-8 significantly in contravention of its basic organizational
21-9 documents, or its health care plan, or in a manner contrary to that
21-10 described in and reasonably inferred from any other information
21-11 submitted under Section 4 of this Act.
21-12 (2) The health maintenance organization issues
21-13 evidence of coverage or uses a schedule of charges for health care
21-14 services which does not comply with the requirements of Section 9
21-15 of this Act.
21-16 (3) The health care plan does not provide or arrange
21-17 for basic health care services, the limited health care service
21-18 plan does not provide or arrange for its limited health care
21-19 services, or the single health care service plan does not provide
21-20 or arrange for a single health care service.
21-21 (4) The board certifies to the commissioner that:
21-22 (A) the health maintenance organization does not
21-23 meet the requirements of Section 5(a)(2) of this Act; or
21-24 (B) the health maintenance organization is
21-25 unable to fulfill its obligation to furnish health care services as
22-1 required under its health care plan, to furnish the limited health
22-2 care services as required under its limited health care service
22-3 plan, or to furnish a single health care service as required under
22-4 its single health care service plan.
22-5 (5) The health maintenance organization is no longer
22-6 financially responsible and may be reasonably expected to be unable
22-7 to meet its obligations to enrollees or prospective enrollees.
22-8 (6) The health maintenance organization has failed to
22-9 implement the complaint system required by Section 12 of this Act
22-10 in a manner to resolve reasonably valid complaints.
22-11 (7) The health maintenance organization, or any person
22-12 on its behalf, has advertised or merchandised its services in an
22-13 untrue, misrepresentative, misleading, deceptive, or unfair manner.
22-14 (8) The continued operation of the health maintenance
22-15 organization would be hazardous to its enrollees.
22-16 (9) The health maintenance organization has otherwise
22-17 failed to comply substantially with this Act, and any rule and
22-18 regulation thereunder.
22-19 SECTION 8. Subsection (f), Section 26, Texas Health
22-20 Maintenance Organization Act (Article 20A.26, Vernon's Texas
22-21 Insurance Code), is amended to read as follows:
22-22 (f)(1) This Act shall not be applicable to:
22-23 (A) any physician, so long as that physician is
22-24 engaged in the delivery of care that is within the definition of
22-25 medical care; or
23-1 (B) any provider that is engaged in the delivery
23-2 of health care services other than medical care as part of a health
23-3 maintenance organization delivery network.
23-4 (2) Except as provided by Section 6(a)(3) of this Act
23-5 or Subdivision (5) of this subsection, any physician or provider
23-6 that employs or enters into a contractual arrangement with a
23-7 provider or group of providers to furnish basic, limited, or single
23-8 health care services as defined in Section 2 of this Act is subject
23-9 to the provisions of this Act[,] and shall be required to obtain a
23-10 certificate of authority from the commissioner.
23-11 (3) Notwithstanding any other law, any physician who
23-12 conducts activities permitted by law but which do not require a
23-13 certificate of authority under this Act, and in the process
23-14 contracts with one or more physicians, shall not, by virtue of such
23-15 contract or arrangement, be deemed to have entered into a
23-16 conspiracy in restraint of trade in violation of Sections 15.01
23-17 through 15.34 of the Business & Commerce Code.
23-18 (4) Except for Articles 21.07-6 and 21.58A, Insurance
23-19 Code, the insurance laws, including the group hospital service
23-20 corporation law, do not apply to physicians and providers; provided
23-21 that Article 21.58A shall not apply to utilization review
23-22 undertaken by a physician or provider in the ordinary course of
23-23 treatment of patients by a physician or provider pursuant to a
23-24 joint or delegated review agreement or agreements with a health
23-25 maintenance organization on services rendered by the physician or
24-1 provider.
24-2 (5) This Act and the Insurance Code may not be
24-3 construed to prohibit a physician or provider who is participating
24-4 in a health maintenance organization delivery network, whether
24-5 contracting with a health maintenance organization under Section
24-6 6(a)(3) of this Act or subcontracting with a physician or provider
24-7 in the health maintenance organization delivery network, from
24-8 entering into a contractual arrangement within a health maintenance
24-9 organization delivery network described under Subdivisions (6)-(9)
24-10 of this subsection.
24-11 (6) A physician may contract to provide medical care
24-12 or arrange to provide medical care through subcontracts with other
24-13 physicians. A physician may contract to provide through other
24-14 providers any services that are ancillary to the practice of
24-15 medicine, other than hospital or other institutional or inpatient
24-16 provider services.
24-17 (7) A provider may contract to provide, or arrange to
24-18 provide through subcontracts with similarly licensed providers, any
24-19 health care services that those providers are licensed to provide,
24-20 other than medical care.
24-21 (8) A provider may contract to provide, or arrange to
24-22 provide through subcontracts with other providers, a health care
24-23 service that the provider is not licensed to provide, other than
24-24 medical care, if the contracted or subcontracted services
24-25 constitute less than 15 percent of the total amount of services to
25-1 be provided by that provider or arranged to be provided for by that
25-2 provider.
25-3 (9) A contract or subcontract authorized under
25-4 Subdivision (6), (7), or (8) of this subsection may provide for
25-5 compensation based on a fee-for-service arrangement, a risk-sharing
25-6 arrangement, or a capitated risk arrangement under which a fixed
25-7 predetermined payment is made in exchange for the provision of, or
25-8 the arrangement to provide and the guaranty of the provision of, a
25-9 defined set of covered services to the covered persons for a
25-10 specified period, regardless of the amount of services actually
25-11 provided.
25-12 SECTION 9. Section 31, Texas Health Maintenance Organization
25-13 Act (Article 20A.31, Vernon's Texas Insurance Code), is amended to
25-14 read as follows:
25-15 Sec. 31. JURISDICTION FOR INJUNCTIONS AND RECEIVERSHIP AND
25-16 DELINQUENCY PROCEEDINGS. (a) When it appears to the commissioner
25-17 that a health maintenance organization or other person is violating
25-18 or has violated this Act or any rule or regulation issued pursuant
25-19 to this Act, the commissioner may bring suit in a district court of
25-20 Travis County to enjoin the violation and for such other relief as
25-21 the court may deem appropriate.
25-22 (b) In addition to all other remedies available by law, when
25-23 it appears to the commissioner that a health maintenance
25-24 organization or other person is insolvent or does not possess the
25-25 surplus required by Section 13 of this Act, the commissioner may
26-1 bring suit in a district court of Travis County to be named
26-2 receiver in accordance with Section 21 of this Act and Article
26-3 21.28, Insurance Code.
26-4 (c) A court of competent jurisdiction may find that a
26-5 receiver should take charge of the assets of a health maintenance
26-6 organization and name the commissioner as the receiver of the
26-7 health maintenance organization in accordance with Section 21 of
26-8 this Act and Article 21.28, Insurance Code.
26-9 (d) The operations and business of a health maintenance
26-10 organization represent the business of insurance for purposes of
26-11 Section 21 of this Act and Articles 21.28 and 21.28-A, Insurance
26-12 Code.
26-13 (e) Exclusive venue of receivership and delinquency
26-14 proceedings for a health maintenance organization shall be in
26-15 Travis County.
26-16 SECTION 10. Subsection (d), Section 33, Texas Health
26-17 Maintenance Organization Act (Article 20A.33, Vernon's Texas
26-18 Insurance Code), is amended to read as follows:
26-19 (d) The commissioner shall annually determine the rate of
26-20 assessment of a per capita maintenance tax to be paid on an annual
26-21 or semiannual basis, on the correctly reported gross revenues for
26-22 the issuance of health maintenance certificates or contracts
26-23 collected by all authorized health maintenance organizations
26-24 issuing such coverages in this state. The rate of assessment may
26-25 not exceed $2 for each enrollee. The rate of assessment may differ
27-1 between basic health care plans, limited health care service plans,
27-2 and single health care service plans and shall equitably reflect
27-3 any differences in regulatory resources attributable to each type
27-4 of plan. The comptroller shall collect the maintenance tax.
27-5 SECTION 11. Subsections (a), (b), (c), (e), and (g), Section
27-6 36, Texas Health Maintenance Organization Act (Article 20A.36,
27-7 Vernon's Texas Insurance Code), are amended to read as follows:
27-8 (a) The Health Maintenance Organization Solvency
27-9 Surveillance Committee is created under the direction of the
27-10 commissioner. The committee shall perform its functions under a
27-11 plan of operation approved by the commissioner [State Board of
27-12 Insurance]. The committee is composed of nine members appointed by
27-13 the commissioner of insurance. No two members may be employees or
27-14 officers of the same health maintenance organization or holding
27-15 company system. The qualifications for membership, terms of
27-16 office, and reimbursement of expenses shall be as provided by the
27-17 plan of operation approved by the commissioner [State Board of
27-18 Insurance]. A "member" is a Texas licensed health maintenance
27-19 organization as defined in Section 2(j) of this Act or a public
27-20 representative. The commissioner of insurance shall appoint the
27-21 member along with the officer or employee of the member who shall
27-22 serve on the committee if the member is a representative of a Texas
27-23 licensed health maintenance organization or its holding company
27-24 system. Five of the members shall represent health maintenance
27-25 organizations or their holding company system. Of the health
28-1 maintenance organization members, one shall be a limited health
28-2 care service plan as defined in Section 2(l) of this Act, if one
28-3 exists at the time of appointment, and one shall be a single health
28-4 care service plan as defined in Section 2(u) [2(s)] of this Act.
28-5 The remaining health maintenance organization members shall be
28-6 selected by the commissioner of insurance with due consideration of
28-7 factors deemed appropriate including, but not limited to, the
28-8 varying categories of premium income and geographical location.
28-9 A public representative may not be:
28-10 (1) an officer, director, or employee of a health
28-11 maintenance organization, a health maintenance organization agent,
28-12 or any other business entity regulated by the commissioner [State
28-13 Board of Insurance];
28-14 (2) a person required to register as a lobbyist [with
28-15 the secretary of state] under Chapter 305, Government Code; or
28-16 (3) related to a person described by Subdivision (1)
28-17 or (2) of this subsection within the second degree of affinity or
28-18 consanguinity.
28-19 (b)(1) The committee shall assist and advise the
28-20 commissioner relating to the detection and prevention of insolvency
28-21 problems regarding health maintenance organizations. The committee
28-22 shall also assist and advise the commissioner regarding any health
28-23 maintenance organization placed in rehabilitation, liquidation,
28-24 supervision, or conservation. The method of providing this
28-25 assistance and advice shall be as contained in the plan of
29-1 operation approved by the commissioner [State Board of Insurance].
29-2 (2) Reports regarding the financial condition of Texas
29-3 licensed health maintenance organizations and regarding the
29-4 financial condition, administration, and status of health
29-5 maintenance organizations in rehabilitation, liquidation,
29-6 supervision, or conservation shall be provided to the committee
29-7 members at meetings. Committee members shall not reveal the
29-8 condition of nor any information secured in the course of any
29-9 meeting of the Solvency Surveillance Committee with regard to any
29-10 corporation, form or person examined by the committee. Committee
29-11 proceedings shall be filed with the commissioner [and reported to
29-12 the members of the State Board of Insurance].
29-13 (c) To provide funds for the administrative expenses of the
29-14 commissioner [State Board of Insurance] regarding rehabilitation,
29-15 liquidation, supervision, or conservation of an impaired health
29-16 maintenance organization in this state, the committee, at the
29-17 commissioner's direction, shall assess each health maintenance
29-18 organization licensed in this state in the proportion that the
29-19 gross premiums of that health maintenance organization written in
29-20 this state during the preceding calendar year bear to the aggregate
29-21 gross premiums written in this state by all health maintenance
29-22 organizations, as furnished to the committee by the commissioner
29-23 after review of annual statements and other reports the
29-24 commissioner considers necessary. Assessments to supplement or pay
29-25 for administrative expenses of rehabilitation, liquidation,
30-1 supervision, or conservation may be made only after the
30-2 commissioner determines that adequate assets of the health
30-3 maintenance organization are not immediately available for those
30-4 purposes or that use of those assets could be detrimental to
30-5 rehabilitation, liquidation, supervision, or conservation. The
30-6 commissioner may abate or defer the assessments, either in whole or
30-7 in part, if, in the opinion of the commissioner, payment of the
30-8 assessment would endanger the ability of a health maintenance
30-9 organization to fulfill its contractual obligations. If an
30-10 assessment is abated or deferred, either in whole or in part, the
30-11 amount by which the assessment is abated or deferred may be
30-12 assessed against the remaining licensed health maintenance
30-13 organizations in a manner consistent with the basis for assessments
30-14 provided by the plan of operation approved by the commissioner
30-15 [State Board of Insurance]. The total of all assessments on a
30-16 health maintenance organization may not exceed one-quarter of one
30-17 percent of the health maintenance organization's gross premiums in
30-18 any one calendar year.
30-19 (e) Not later than the 180th day after the date on which the
30-20 final member of the committee is appointed, the committee shall
30-21 submit to the commissioner [State Board of Insurance] a plan of
30-22 operation. The plan of operation takes effect on approval in
30-23 writing by the commissioner [State Board of Insurance]. If the
30-24 committee fails to submit a suitable plan of operation within the
30-25 period set by this subsection, or if, after the adoption of a plan,
31-1 the committee fails to submit suitable amendments to the plan, the
31-2 commissioner [State Board of Insurance] may, after notice and
31-3 hearing, adopt rules as necessary to implement this Act. Those
31-4 rules continue in effect until modified by the commissioner [State
31-5 Board of Insurance] or superseded by a plan submitted by the
31-6 committee and approved by the commissioner [State Board of
31-7 Insurance].
31-8 (g) A licensed health maintenance organization or its agents
31-9 or employees, the committee or its agents, employees, or members,
31-10 or the [State Board of Insurance, the] commissioner[,] or the
31-11 commissioner's [their] representatives are not liable in a civil
31-12 action for any act taken or not taken in good faith in the
31-13 performance of powers and duties under this section.
31-14 SECTION 12. This Act takes effect September 1, 1997.
31-15 SECTION 13. The importance of this legislation and the
31-16 crowded condition of the calendars in both houses create an
31-17 emergency and an imperative public necessity that the
31-18 constitutional rule requiring bills to be read on three several
31-19 days in each house be suspended, and this rule is hereby suspended.
S.B. No. 382
________________________________ ________________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 382 passed the Senate on
March 6, 1997, by a viva-voce vote; May 29, 1997, Senate refused to
concur in House amendments and requested appointment of Conference
Committee; May 30, 1997, House granted request of the Senate;
June 1, 1997, Senate adopted Conference Committee Report by a
viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 382 passed the House, with
amendments, on May 25, 1997, by a non-record vote; May 30, 1997,
House granted request of the Senate for appointment of Conference
Committee; June 1, 1997, House adopted Conference Committee Report
by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
________________________________
Date
________________________________
Governor