1-1 By: Madla, et al. S.B. No. 382
1-2 (In the Senate - Filed January 30, 1997; February 3, 1997,
1-3 read first time and referred to Committee on Economic Development;
1-4 March 3, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 11, Nays 0; March 3, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 382 By: Madla
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the regulation of health maintenance organizations.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Subsections (i) through (u), Section 2, Texas
1-13 Health Maintenance Organization Act (Article 20A.02, Vernon's Texas
1-14 Insurance Code), are amended to read as follows:
1-15 (i) "Health care services" means any services, including the
1-16 furnishing to any individual of pharmaceutical services, medical,
1-17 chiropractic, or dental care, or hospitalization or incident to the
1-18 furnishing of such services, care, or hospitalization, as well as
1-19 the furnishing to any person of any and all other services for the
1-20 purpose of preventing, alleviating, curing or healing human illness
1-21 or injury, a limited health care service plan, or a single health
1-22 care service plan.
1-23 (j) "Health maintenance organization" means any person who
1-24 arranges for or provides a health care plan, a limited health care
1-25 service plan, or a single health care service plan to enrollees on
1-26 a prepaid basis.
1-27 (k) "Limited health care services" means health care
1-28 services that include more than a single health care service, that
1-29 an enrolled population might reasonably require in order to be
1-30 maintained in good health with respect to the health care services
1-31 specified in the application and certificate of authority for the
1-32 health maintenance organization for the purpose of preventing,
1-33 alleviating, curing, or healing human illness or injury, and that
1-34 are to be provided by one or more persons each of whom are licensed
1-35 by the state to provide the particular health care service or
1-36 services. The commissioner, in the commissioner's sole discretion,
1-37 determines whether a health maintenance organization provides
1-38 basic, limited, or single health care services, and a finding that
1-39 the health maintenance organization provides limited health care
1-40 services shall be contained in the certificate of authority and
1-41 corresponding approval order of the commissioner.
1-42 (l) "Limited health care service plan" means a plan under
1-43 which any person undertakes to provide, arrange for, pay for, or
1-44 reimburse any part of the cost of limited health care services,
1-45 provided that a part of the plan consists of arranging for or the
1-46 provision of limited health care services, as distinguished from an
1-47 indemnification against the cost of those services, on a prepaid
1-48 basis through insurance or otherwise.
1-49 (m) "Medical care" means furnishing those services defined
1-50 as practicing medicine under Section 1.03(8), Medical Practice Act
1-51 (Article 4495b, Vernon's Texas Civil Statutes).
1-52 (n) [(l)] "Person" means any natural or artificial person,
1-53 including, but not limited to, individuals, partnerships,
1-54 associations, organizations, trusts, hospital districts, limited
1-55 liability companies, limited liability partnerships, or
1-56 corporations.
1-57 (o) [(m)] "Physician" means:
1-58 (1) an individual licensed to practice medicine in
1-59 this state;
1-60 (2) a professional association organized under the
1-61 Texas Professional Association Act (Article 1528f, Vernon's Texas
1-62 Civil Statutes) or a nonprofit health corporation certified under
1-63 Section 5.01, Medical Practice Act (Article 4495b, Vernon's Texas
1-64 Civil Statutes); or
2-1 (3) another person wholly owned by physicians.
2-2 (p) [(n)] "Provider" means:
2-3 (1) any person other than a physician, including a
2-4 licensed doctor of chiropractic, registered nurse, pharmacist,
2-5 optometrist, pharmacy, hospital, or other institution or
2-6 organization or person that is licensed or otherwise authorized to
2-7 provide a health care service in this state;
2-8 (2) a person who is wholly owned or controlled by a
2-9 provider or by a group of providers who are licensed to provide the
2-10 same health care service; or
2-11 (3) a person who is wholly owned or controlled by one
2-12 or more hospitals and physicians, including a physician-hospital
2-13 organization.
2-14 (q) [(o)] "Sponsoring organization" means a person who
2-15 guarantees the uncovered expenses of the health maintenance
2-16 organization and who is financially capable, as determined by the
2-17 commissioner, of meeting the obligations resulting from those
2-18 guarantees.
2-19 (r) [(p)] "Uncovered expenses" means the estimated
2-20 administrative expenses and the estimated cost of health care
2-21 services that are not guaranteed, insured, or assumed by a person
2-22 other than the health maintenance organization. Health care
2-23 services may be considered covered if the physician or provider
2-24 agrees in writing that enrollees shall in no way be liable,
2-25 assessable, or in any way subject to payment for services except as
2-26 described in the evidence of coverage issued to the enrollee under
2-27 Section 9 of this Act. The amount due on loans in the next
2-28 calendar year will be considered uncovered expenses unless
2-29 specifically subordinated to uncovered medical and health care
2-30 expenses or unless guaranteed by the sponsoring organization.
2-31 (s) [(q)] "Uncovered liabilities" means obligations
2-32 resulting from unpaid uncovered expenses, the outstanding
2-33 indebtedness of loans that are not specifically subordinated to
2-34 uncovered medical and health care expenses or guaranteed by the
2-35 sponsoring organization, and all other monetary obligations that
2-36 are not similarly subordinated or guaranteed.
2-37 (t) [(r)] "Single health care service" means a health care
2-38 service that an enrolled population may reasonably require in order
2-39 to be maintained in good health with respect to a particular health
2-40 care need for the purpose of preventing, alleviating, curing, or
2-41 healing human illness or injury of a single specified nature and
2-42 that is to be provided by one or more persons each of whom is
2-43 licensed by the state to provide that specific health care service.
2-44 (u) [(s)] "Single health care service plan" means a plan
2-45 under which any person undertakes to provide, arrange for, pay for,
2-46 or reimburse any part of the cost of a single health care service,
2-47 provided[,] that a part of the plan consists of arranging for or
2-48 the provision of the single health care service, as distinguished
2-49 from an indemnification against the cost of that service, on a
2-50 prepaid basis through insurance or otherwise and that no part of
2-51 that plan consists of arranging for the provision of more than one
2-52 health care need of a single specified nature.
2-53 (v) [(t)] "Emergency care" means bona fide emergency
2-54 services provided after the sudden onset of a medical condition
2-55 manifesting itself by acute symptoms of sufficient severity,
2-56 including severe pain, such that the absence of immediate medical
2-57 attention could reasonably be expected to result in:
2-58 (1) placing the patient's health in serious jeopardy;
2-59 (2) serious impairment to bodily functions; or
2-60 (3) serious dysfunction of any bodily organ or part.
2-61 (w) [(u)] "Health maintenance organization delivery network"
2-62 means a health care delivery system in which a health maintenance
2-63 organization arranges for health care services directly or
2-64 indirectly through contracts and subcontracts with providers and
2-65 physicians.
2-66 SECTION 2. Subsection (a), Section 4, Texas Health
2-67 Maintenance Organization Act (Article 20A.04, Vernon's Texas
2-68 Insurance Code), is amended to read as follows:
2-69 (a) Each application for a certificate of authority shall be
3-1 on a form prescribed by rule of the commissioner and shall be
3-2 verified by the applicant, an officer, or other authorized
3-3 representative of the applicant, and shall set forth or be
3-4 accompanied by the following:
3-5 (1) a copy of the basic organizational document, if
3-6 any, of the applicant, such as the articles of incorporation,
3-7 articles of association, partnership agreement, trust agreement, or
3-8 other applicable documents, and all amendments thereto;
3-9 (2) a copy of the bylaws, rules and regulations, or
3-10 similar document, if any, regulating the conduct of the internal
3-11 affairs of the applicant;
3-12 (3) a list of the names, addresses, and official
3-13 positions of the persons who are to be responsible for the conduct
3-14 of the affairs of the applicant, including all members of the board
3-15 of directors, board of trustees, executive committee, or other
3-16 governing body or committee, the principal officer in the case of a
3-17 corporation, and the partnership or members in the case of a
3-18 partnership or association;
3-19 (4) a copy of any independent or other contract made
3-20 or to be made between any provider, physician, or persons listed in
3-21 Paragraph (3) hereof and the applicant;
3-22 (5) a copy of the form of evidence of coverage to be
3-23 issued to the enrollee;
3-24 (6) a copy of the form of the group contract, if any,
3-25 which is to be issued to employers, unions, trustees, or other
3-26 organizations;
3-27 (7) a current financial statement that includes:
3-28 (A) the sources and application of funds;
3-29 (B) projected financial statements during the
3-30 initial period of operations;
3-31 (C) a balance sheet beginning as of the date of
3-32 the expected start of operations;
3-33 (D) a statement of revenue and expenses with
3-34 expected member months; and
3-35 (E) a cash flow statement that states any
3-36 capital expenditures, purchase and sale of investments, and
3-37 deposits with the state;
3-38 (8) the schedule of charges to be used during the
3-39 first 12 months of operation;
3-40 (9) a statement acknowledging that all lawful process
3-41 in any legal action or proceeding against the health maintenance
3-42 organization on a cause of action arising in this state is valid if
3-43 served in accordance with Article 1.36, Insurance Code;
3-44 (10) a statement reasonably describing the geographic
3-45 area or areas to be served;
3-46 (11) a description of the complaint procedures to be
3-47 utilized;
3-48 (12) a description of the procedures and programs to
3-49 be implemented to meet the quality of health care requirements set
3-50 forth herein; [and]
3-51 (13) for a limited health care service plan, a
3-52 specific description of the health care services to be provided;
3-53 and
3-54 (14) such other information as the commissioner may
3-55 require to make the determinations required by this Act.
3-56 SECTION 3. Section 5, Texas Health Maintenance Organization
3-57 Act (Article 20A.05, Vernon's Texas Insurance Code), is amended by
3-58 amending Subsection (b) and adding Subsection (e) to read as
3-59 follows:
3-60 (b) The commissioner shall, after notice and hearing, issue
3-61 or deny a certificate of authority to any person filing an
3-62 application pursuant to Section 4 of this Act within 75 days of the
3-63 receipt of the certification of the board; provided, however, that
3-64 the commissioner may grant a delay of final action on the
3-65 application to an applicant. Issuance of the certificate of
3-66 authority shall be granted upon payment of the application fee
3-67 prescribed in Section 32 of this Act if:
3-68 (1) the board certifies that the health maintenance
3-69 organization's proposed plan of operation meets the requirements of
4-1 Subsection (a)(2) of this section; and
4-2 (2) the commissioner is satisfied that:
4-3 (A) the person responsible for the conduct of
4-4 the affairs of the applicant is competent, trustworthy, and
4-5 possesses a good reputation;
4-6 (B) the health care plan, limited health care
4-7 service plan, or single health care service plan constitutes an
4-8 appropriate mechanism whereby the health maintenance organization
4-9 will effectively provide or arrange for the provision of basic
4-10 health care services, limited health care services, or single
4-11 health care service on a prepaid basis, through insurance or
4-12 otherwise, except to the extent of reasonable requirements for
4-13 co-payment;
4-14 (C) the health maintenance organization is fully
4-15 responsible and may reasonably be expected to meet its obligations
4-16 to enrollees and prospective enrollees. In making this
4-17 determination, the commissioner shall consider:
4-18 (i) the financial soundness of the health
4-19 care plan's arrangement for health care services and a schedule of
4-20 charges used in connection therewith;
4-21 (ii) the adequacy of working capital;
4-22 (iii) any agreement with an insurer, group
4-23 hospital service corporation, a political subdivision of
4-24 government, or any other organization for insuring the payment of
4-25 the cost of health care services or the provision for automatic
4-26 applicability of an alternative coverage in the event of
4-27 discontinuance of plan;
4-28 (iv) any agreement which provides for the
4-29 provision of health care services; and
4-30 (v) any deposit of cash or securities
4-31 submitted in accordance with Section 13 of this Act as a guarantee
4-32 that the obligations will be duly performed;
4-33 (D) nothing in the proposed method of operation,
4-34 as shown by the information submitted pursuant to Section 4 of this
4-35 Act, or by independent investigation, is contrary to Texas law.
4-36 (e) By applying for and receiving a certificate of authority
4-37 to do business in this state, the health maintenance organization
4-38 agrees and admits that it is not subject to the United States
4-39 Bankruptcy Code and is not eligible to proceed under the United
4-40 States Bankruptcy Code.
4-41 SECTION 4. Subsection (a), Section 9, Texas Health
4-42 Maintenance Organization Act (Article 20A.09, Vernon's Texas
4-43 Insurance Code), is amended to read as follows:
4-44 (a)(1) Every enrollee residing in this state is entitled to
4-45 evidence of coverage under a health care plan. If the enrollee
4-46 obtains coverage under a health care plan through an insurance
4-47 policy or a contract issued by a group hospital service
4-48 corporation, whether by option or otherwise, the insurer or the
4-49 group hospital service corporation shall issue the evidence of
4-50 coverage. Otherwise, the health maintenance organization shall
4-51 issue the evidence of coverage.
4-52 (2) No evidence of coverage, or amendment thereto,
4-53 shall be issued or delivered to any person in this state until a
4-54 copy of the form of evidence of coverage, or amendment thereto, has
4-55 been filed with and approved by the commissioner.
4-56 (3) An evidence of coverage shall contain:
4-57 (A) no provisions or statements which are
4-58 unjust, unfair, inequitable, misleading, deceptive, which encourage
4-59 misrepresentation, or which are untrue, misleading, or deceptive as
4-60 defined in Section 14 of this Act; and
4-61 (B) a clear and complete statement, if a
4-62 contract, or a reasonably complete facsimile, if a certificate, of:
4-63 (i) the medical, health care services,
4-64 limited health care services, or single health care service and the
4-65 issuance of other benefits, if any, to which the enrollee is
4-66 entitled under the health care plan, limited health care service
4-67 plan, or single health care service plan;
4-68 (ii) any limitation on the services, kinds
4-69 of services, benefits, or kinds of benefits to be provided,
5-1 including any deductible or co-payment feature;
5-2 (iii) where and in what manner information
5-3 is available as to how services may be obtained; and
5-4 (iv) a clear and understandable
5-5 description of the health maintenance organization's methods for
5-6 resolving enrollee complaints. Any subsequent changes may be
5-7 evidenced in a separate document issued to the enrollee.
5-8 (4) Any form of the evidence of coverage or group
5-9 contract to be used in this state, and any amendments thereto, are
5-10 subject to the filing and approval requirements of Subsection (c)
5-11 of this section, unless it is subject to the jurisdiction of the
5-12 commissioner under the laws governing health insurance or group
5-13 hospital service corporations, in which event the filing and
5-14 approval provisions of such law shall apply. To the extent,
5-15 however, that such provisions do not apply to the requirements of
5-16 Subdivision (3)[, Subsection (a)] of this subsection [section], the
5-17 requirements of Subdivision (3) shall be applicable.
5-18 SECTION 5. Section 13, Texas Health Maintenance Organization
5-19 Act (Article 20A.13, Vernon's Texas Insurance Code), is amended to
5-20 read as follows:
5-21 Sec. 13. Protection Against Insolvency. (a) Unless
5-22 otherwise provided by this section, each health maintenance
5-23 organization shall deposit with the comptroller [State Treasurer]
5-24 cash or securities, or any combination of these or other guarantees
5-25 that are acceptable to the commissioner [State Board of Insurance],
5-26 in an amount as set forth in this section.
5-27 (b) For a health maintenance organization which has not
5-28 received a certificate of authority from the State Board of
5-29 Insurance or the commissioner prior to September 1, 1987:
5-30 (1) the amount of the initial deposit or other
5-31 guarantee shall be $100,000 for an organization offering basic
5-32 health care services, $75,000 for an organization offering limited
5-33 health care services, and $50,000 for an organization offering a
5-34 single health care service plan;
5-35 (2) on or before March 15 of the year following the
5-36 year in which the health maintenance organization receives a
5-37 certificate of authority, it shall deposit with the comptroller
5-38 [State Treasurer] an amount equal to the difference between the
5-39 initial deposit and 100 percent of its estimated uncovered health
5-40 care expenses for the first 12 months of operation;
5-41 (3) on or before March 15 of each subsequent year, it
5-42 shall deposit the difference between its total uncovered health
5-43 care expenses based on its annual statement from the previous year
5-44 and the total amount previously deposited and not withdrawn from
5-45 the State Treasury; and
5-46 (4) in any year in which the amount determined in
5-47 accordance with Subdivision (3) of this subsection is zero or less
5-48 than zero, the commissioner [State Board of Insurance] may not
5-49 require the health maintenance organization to make any additional
5-50 deposit under this subsection.
5-51 (c) For a health maintenance organization which has received
5-52 a certificate of authority from the State Board of Insurance prior
5-53 to September 1, 1987:
5-54 (1) on or before March 15, 1988, the organization
5-55 shall deposit an amount equal to the sum of:
5-56 (A) $100,000 for an organization offering basic
5-57 health care services or $50,000 for an organization offering a
5-58 single health care service plan; and
5-59 (B) 100 percent of the uncovered health care
5-60 expenses for the preceding 12 months of operation;
5-61 (2) on or before March 15 of each subsequent year, the
5-62 organization shall make additional deposits of the difference
5-63 between its total uncovered health care expenses based on its
5-64 annual statement from the previous year and the total amount
5-65 previously deposited and not withdrawn from the State Treasury; and
5-66 (3) in any year in which the amount determined in
5-67 accordance with Subdivision (2) of this subsection is zero or less
5-68 than zero, the commissioner [State Board of Insurance] may not
5-69 require the health maintenance organization to make any additional
6-1 deposit under this subsection.
6-2 (d) If, on application made not more than once in each
6-3 calendar year by a health maintenance organization under this
6-4 subsection, the commissioner determines that the amount previously
6-5 deposited by the organization under this section has exceeded the
6-6 amount required under this section by more than $50,000 for a
6-7 continuous 12-month period, the commissioner shall allow the
6-8 organization to withdraw the portion of the deposit that exceeds by
6-9 more than $50,000 the amount required to be on deposit for that
6-10 organization, unless the commissioner considers that the release of
6-11 a portion of the deposit could be hazardous to enrollees,
6-12 creditors, or the general public.
6-13 (e) On application made not sooner than the 24th month after
6-14 the effective date of this subsection, if the commissioner
6-15 determines that the amount previously deposited by an organization
6-16 under this section continues to exceed the amount required under
6-17 this section, the commissioner shall allow the organization to
6-18 withdraw the portion of the deposit that exceeds the amount
6-19 required to be on deposit for that organization, unless the
6-20 commissioner considers that the release of the deposit could be
6-21 hazardous to enrollees, creditors, or the general public.
6-22 (f) Upon application by a health maintenance organization
6-23 operating for more than one year under a certificate of authority
6-24 issued by the State Board of Insurance or the commissioner, the
6-25 commissioner [State Board of Insurance] may waive some or all of
6-26 the requirements of Subsection (b) or (c) of this section for any
6-27 period of time it shall deem proper whenever it finds that one or
6-28 more of the following conditions justifies such waiver:
6-29 (1) the total amount of the deposit or other guarantee
6-30 is equal to 25 percent of the health maintenance organization's
6-31 estimated uncovered expenses for the next calendar year;
6-32 (2) the health maintenance organization's net worth is
6-33 equal to at least 25 percent of its estimated uncovered expenses
6-34 for the next calendar year; or
6-35 (3) either the health maintenance organization has a
6-36 net worth of $5,000,000 or its sponsoring organization has a net
6-37 worth of at least $5,000,000 for each health maintenance
6-38 organization whose uncovered expenses it guarantees.
6-39 (g) If one or more of the requirements is waived, any amount
6-40 previously deposited shall remain on deposit until released in
6-41 whole or in part by the comptroller [State Treasurer] upon order of
6-42 the commissioner [State Board of Insurance] pursuant to Subsection
6-43 (f) of this section.
6-44 (h) A health maintenance organization that has made a
6-45 deposit with the comptroller [State Treasurer] may, at its option,
6-46 withdraw the deposit or any part thereof, first having deposited
6-47 with the comptroller [State Treasurer], in lieu thereof, a deposit
6-48 of cash or securities of equal amount and value to that withdrawn.
6-49 Any securities shall be approved by the commissioner [State Board
6-50 of Insurance] before being substituted.
6-51 (i) Subject to the phase-in provisions of Subsections (j),
6-52 (k), and (l) of this section, a [Each] health maintenance
6-53 organization offering basic health care services shall maintain a
6-54 minimum surplus of not less than $1,500,000 [$500,000], net of
6-55 accrued uncovered liabilities, a health maintenance organization
6-56 offering limited health care services shall maintain a minimum
6-57 surplus of not less than $1,000,000, net of accrued uncovered
6-58 liabilities, and a[. Each] health maintenance organization
6-59 offering only a single care service shall maintain a minimum
6-60 surplus of not less than $500,000 [$125,000], net of accrued
6-61 uncovered liabilities. The minimum surplus shall consist only of
6-62 cash, bonds of the United States, bonds of this state, or a
6-63 combination of these. If a health maintenance organization fails
6-64 to comply with the surplus requirements [requirement of this
6-65 subsection or Subsection (j)] of this section, the commissioner is
6-66 authorized to take appropriate action to assure that the continued
6-67 operation of the health maintenance organization will not be
6-68 hazardous to its enrollees.
6-69 (j) Notwithstanding any other provision of this section, the
7-1 [The] minimum surplus for a health maintenance organization
7-2 authorized to provide basic health care services [operate on the
7-3 effective date of Subsection (i) of this section] and having a
7-4 surplus of less than $1,500,000 [$500,000] shall be as follows:
7-5 (1) $700,000 [$200,000] by December 31, 1998 [1987];
7-6 (2) $900,000 [$250,000] by December 31, 1999 [1988];
7-7 (3) $1,100,000 [$300,000] by December 31, 2000 [1989];
7-8 (4) $1,300,000 [$350,000] by December 31, 2001 [1990];
7-9 and
7-10 (5) $1,500,000 [$400,000] by December 31, 2002 [1991];
7-11 [(6) $450,000 by December 31, 1992; and]
7-12 [(7) $500,000 by December 31, 1993].
7-13 (k) Notwithstanding any other provision of this section
7-14 [article], a health maintenance organization providing limited
7-15 health care services [authorized to offer only a single health care
7-16 service plan authorized to operate on September 1, 1987,] and
7-17 having a surplus of less than $1,000,000 must possess a minimum
7-18 surplus [$125,000 shall be] as follows:
7-19 (1) $600,000 [$50,000] by December 31, 1998 [1987];
7-20 (2) $700,000 [$62,500] by December 31, 1999 [1988];
7-21 (3) $800,000 [$75,000] by December 31, 2000 [1989];
7-22 (4) $900,000 [$87,500] by December 31, 2001 [1990];
7-23 and
7-24 (5) $1,000,000 [$100,000] by December 31, 2002 [1991;]
7-25 [(6) $112,500 by December 31, 1992; and]
7-26 [(7) $125,000 by December 31, 1993].
7-27 (l) Notwithstanding any other provision of this section, a
7-28 health maintenance organization authorized to offer only a single
7-29 health care service plan and having a surplus of less than $500,000
7-30 shall be as follows:
7-31 (1) $200,000 by December 31, 1998;
7-32 (2) $275,000 by December 31, 1999;
7-33 (3) $350,000 by December 31, 2000;
7-34 (4) $425,000 by December 31, 2001; and
7-35 (5) $500,000 by December 31, 2002.
7-36 (m) In the event of the insolvency of a health maintenance
7-37 organization and on order of the commissioner, the commissioner
7-38 shall allocate equitably the insolvent health maintenance
7-39 organization's group contracts among all health maintenance
7-40 organizations which operate within a portion of the insolvent
7-41 health maintenance organization's service area, taking into
7-42 consideration the resources of each health maintenance
7-43 organization. Each health maintenance organization to which a
7-44 group or groups are allocated shall offer such group or groups the
7-45 health maintenance organization's coverage at rates determined in
7-46 accordance with the successor health maintenance organization's
7-47 existing methodology or as adjusted by the commissioner. In
7-48 addition, the commissioner shall allocate equitably among all
7-49 health maintenance organizations which operate within a portion of
7-50 the insolvent health maintenance organization's service area the
7-51 insolvent health maintenance organization's nongroup enrollees,
7-52 taking into consideration the resources of each such health
7-53 maintenance organization. Each health maintenance organization to
7-54 which nongroup enrollees are allocated shall offer each such
7-55 nongroup enrollee that health maintenance organization's existing
7-56 coverage for individual or conversion coverage as determined by the
7-57 nongroup enrollee's type of coverage in the insolvent health
7-58 maintenance organization at rates determined in accordance with the
7-59 successor health maintenance organization's existing rating
7-60 methodology or as adjusted by the commissioner. The successor
7-61 health maintenance organizations which do not offer direct nongroup
7-62 enrollment shall provide coverage at rates that reflect the average
7-63 group rate of the successor health maintenance organization.
7-64 SECTION 6. Subsections (b), (c), and (h), Section 14, Texas
7-65 Health Maintenance Organization Act (Article 20A.14, Vernon's Texas
7-66 Insurance Code), are amended to read as follows:
7-67 (b) Articles 21.21, 21.21A, 21.21-2, 21.21-3, and 21.21-6,
7-68 Insurance Code, and Chapter 122, Acts of the 57th Legislature,
7-69 Regular Session, 1961 (Article 21.21-1, Vernon's Texas Insurance
8-1 Code), apply to health maintenance organizations that offer [both]
8-2 basic, limited, and single health care coverages and to basic,
8-3 limited, and single health care plans and the evidence of coverage
8-4 under those plans, except to the extent that the commissioner
8-5 determines that the nature of health maintenance organizations and
8-6 health care plans and evidence of coverage renders any provision of
8-7 those articles clearly inappropriate.
8-8 (c) An enrollee may not be canceled [cancelled] or not
8-9 renewed except for the failure to pay the charges for such
8-10 coverage, or for such other reason as may be promulgated by rule of
8-11 the commissioner.
8-12 (h) A health maintenance organization that provides coverage
8-13 for health care services or medical care through one or more
8-14 providers or physicians who are not partners or employees of the
8-15 health maintenance organization or one or more providers or
8-16 physicians that are not owned or operated by the health maintenance
8-17 organization shall provide a (20) twenty calendar day period each
8-18 calendar year during which any provider or physician in the
8-19 geographic service area may apply to participate in providing
8-20 health care services or medical care under the terms and conditions
8-21 established by the health maintenance organization for the
8-22 provision of such services and the designation of such providers
8-23 and physicians. A health maintenance organization will notify, in
8-24 writing, such provider or physician of the reason for
8-25 non-acceptance [nonacceptance] to participate in providing health
8-26 care services or medical care. This section may not be construed
8-27 to (1) require that a health maintenance organization utilize a
8-28 particular type of provider or physician in its operation;
8-29 (2) require that a health maintenance organization accept a
8-30 provider or physician of a category or type that does not meet the
8-31 practice standards and qualifications established by the health
8-32 maintenance organizations; or (3) require that a health maintenance
8-33 organization contract directly with such providers or physicians.
8-34 SECTION 7. Subsection (a), Section 20, Texas Health
8-35 Maintenance Organization Act (Article 20A.20, Vernon's Texas
8-36 Insurance Code), is amended to read as follows:
8-37 (a) The commissioner may suspend or revoke any certificate
8-38 of authority issued to a health maintenance organization under this
8-39 Act if the commissioner finds that any of the following conditions
8-40 exist:
8-41 (1) The health maintenance organization is operating
8-42 significantly in contravention of its basic organizational
8-43 documents, or its health care plan, or in a manner contrary to that
8-44 described in and reasonably inferred from any other information
8-45 submitted under Section 4 of this Act.
8-46 (2) The health maintenance organization issues
8-47 evidence of coverage or uses a schedule of charges for health care
8-48 services which does not comply with the requirements of Section 9
8-49 of this Act.
8-50 (3) The health care plan does not provide or arrange
8-51 for basic health care services, the limited health care service
8-52 plan does not provide or arrange for its limited health care
8-53 services, or the single health care service plan does not provide
8-54 or arrange for a single health care service.
8-55 (4) The board certifies to the commissioner that:
8-56 (A) the health maintenance organization does not
8-57 meet the requirements of Section 5(a)(2) of this Act; or
8-58 (B) the health maintenance organization is
8-59 unable to fulfill its obligation to furnish health care services as
8-60 required under its health care plan, to furnish the limited health
8-61 care services as required under its limited health care service
8-62 plan, or to furnish a single health care service as required under
8-63 its single health care service plan.
8-64 (5) The health maintenance organization is no longer
8-65 financially responsible and may be reasonably expected to be unable
8-66 to meet its obligations to enrollees or prospective enrollees.
8-67 (6) The health maintenance organization has failed to
8-68 implement the complaint system required by Section 12 of this Act
8-69 in a manner to resolve reasonably valid complaints.
9-1 (7) The health maintenance organization, or any person
9-2 on its behalf, has advertised or merchandised its services in an
9-3 untrue, misrepresentative, misleading, deceptive, or unfair manner.
9-4 (8) The continued operation of the health maintenance
9-5 organization would be hazardous to its enrollees.
9-6 (9) The health maintenance organization has otherwise
9-7 failed to comply substantially with this Act, and any rule and
9-8 regulation thereunder.
9-9 SECTION 8. Subsection (f), Section 26, Texas Health
9-10 Maintenance Organization Act (Article 20A.26, Vernon's Texas
9-11 Insurance Code), is amended to read as follows:
9-12 (f)(1) This Act shall not be applicable to:
9-13 (A) any physician, so long as that physician is
9-14 engaged in the delivery of care that is within the definition of
9-15 medical care; or
9-16 (B) any provider that is engaged in the delivery
9-17 of health care services other than medical care as part of a health
9-18 maintenance organization delivery network.
9-19 (2) Except as provided by Section 6(a)(3) of this Act
9-20 or Subdivision (5) of this subsection, any physician or provider
9-21 that employs or enters into a contractual arrangement with a
9-22 provider or group of providers to furnish basic, limited, or single
9-23 health care services as defined in Section 2 of this Act is subject
9-24 to the provisions of this Act[,] and shall be required to obtain a
9-25 certificate of authority from the commissioner.
9-26 (3) Notwithstanding any other law, any physician who
9-27 conducts activities permitted by law but which do not require a
9-28 certificate of authority under this Act, and in the process
9-29 contracts with one or more physicians, shall not, by virtue of such
9-30 contract or arrangement, be deemed to have entered into a
9-31 conspiracy in restraint of trade in violation of Sections 15.01
9-32 through 15.34 of the Business & Commerce Code.
9-33 (4) Except for Articles 21.07-6 and 21.58A, Insurance
9-34 Code, the insurance laws, including the group hospital service
9-35 corporation law, do not apply to physicians and providers; provided
9-36 that Article 21.58A shall not apply to utilization review
9-37 undertaken by a physician or provider in the ordinary course of
9-38 treatment of patients by a physician or provider pursuant to a
9-39 joint or delegated review agreement or agreements with a health
9-40 maintenance organization on services rendered by the physician or
9-41 provider.
9-42 (5) This Act and the Insurance Code may not be
9-43 construed to prohibit a physician or provider who is participating
9-44 in a health maintenance organization delivery network, whether
9-45 contracting with a health maintenance organization under Section
9-46 6(a)(3) of this Act or subcontracting with a physician or provider
9-47 in the health maintenance organization delivery network, from
9-48 entering into a contractual arrangement within a health maintenance
9-49 organization delivery network described under Subdivisions (6)-(9)
9-50 of this subsection.
9-51 (6) A physician may contract to provide medical care
9-52 or arrange to provide medical care through subcontracts with other
9-53 physicians. A physician may contract to provide through other
9-54 providers any services that are ancillary to the practice of
9-55 medicine, other than hospital or other institutional or inpatient
9-56 provider services.
9-57 (7) A provider may contract to provide, or arrange to
9-58 provide through subcontracts with similarly licensed providers, any
9-59 health care services that those providers are licensed to provide,
9-60 other than medical care.
9-61 (8) A provider may contract to provide, or arrange to
9-62 provide through subcontracts with other providers, a health care
9-63 service that the provider is not licensed to provide, other than
9-64 medical care, if the contracted or subcontracted services
9-65 constitute less than 15 percent of the total amount of services to
9-66 be provided by that provider or arranged to be provided for by that
9-67 provider.
9-68 (9) A contract or subcontract authorized under
9-69 Subdivision (6), (7), or (8) of this subsection may provide for
10-1 compensation based on a fee-for-service arrangement, a risk-sharing
10-2 arrangement, or a capitated risk arrangement under which a fixed
10-3 predetermined payment is made in exchange for the provision of, or
10-4 the arrangement to provide and the guaranty of the provision of, a
10-5 defined set of covered services to the covered persons for a
10-6 specified period, regardless of the amount of services actually
10-7 provided.
10-8 SECTION 9. Section 31, Texas Health Maintenance Organization
10-9 Act (Article 20A.31, Vernon's Texas Insurance Code), is amended to
10-10 read as follows:
10-11 Sec. 31. JURISDICTION FOR INJUNCTIONS AND RECEIVERSHIP AND
10-12 DELINQUENCY PROCEEDINGS. (a) When it appears to the commissioner
10-13 that a health maintenance organization or other person is violating
10-14 or has violated this Act or any rule or regulation issued pursuant
10-15 to this Act, the commissioner may bring suit in a district court of
10-16 Travis County to enjoin the violation and for such other relief as
10-17 the court may deem appropriate.
10-18 (b) In addition to all other remedies available by law, when
10-19 it appears to the commissioner that a health maintenance
10-20 organization or other person is insolvent or does not possess the
10-21 surplus required by Section 13 of this Act, the commissioner may
10-22 bring suit in a district court of Travis County to be named
10-23 receiver in accordance with Section 21 of this Act and Article
10-24 21.28, Insurance Code.
10-25 (c) A court of competent jurisdiction may find that a
10-26 receiver should take charge of the assets of a health maintenance
10-27 organization and name the commissioner as the receiver of the
10-28 health maintenance organization in accordance with Section 21 of
10-29 this Act and Article 21.28, Insurance Code.
10-30 (d) The operations and business of a health maintenance
10-31 organization represent the business of insurance for purposes of
10-32 Section 21 of this Act and Articles 21.28 and 21.28-A, Insurance
10-33 Code.
10-34 (e) Exclusive venue of receivership and delinquency
10-35 proceedings for a health maintenance organization shall be in
10-36 Travis County.
10-37 SECTION 10. Subsection (d), Section 33, Texas Health
10-38 Maintenance Organization Act (Article 20A.33, Vernon's Texas
10-39 Insurance Code), is amended to read as follows:
10-40 (d) The commissioner shall annually determine the rate of
10-41 assessment of a per capita maintenance tax to be paid on an annual
10-42 or semiannual basis, on the correctly reported gross revenues for
10-43 the issuance of health maintenance certificates or contracts
10-44 collected by all authorized health maintenance organizations
10-45 issuing such coverages in this state. The rate of assessment may
10-46 not exceed $2 for each enrollee. The rate of assessment may differ
10-47 between basic health care plans, limited health care service plans,
10-48 and single health care service plans and shall equitably reflect
10-49 any differences in regulatory resources attributable to each type
10-50 of plan. The comptroller shall collect the maintenance tax.
10-51 SECTION 11. Subsections (a), (b), (c), (e), and (g), Section
10-52 36, Texas Health Maintenance Organization Act (Article 20A.36,
10-53 Vernon's Texas Insurance Code), are amended to read as follows:
10-54 (a) The Health Maintenance Organization Solvency
10-55 Surveillance Committee is created under the direction of the
10-56 commissioner. The committee shall perform its functions under a
10-57 plan of operation approved by the commissioner [State Board of
10-58 Insurance]. The committee is composed of nine members appointed by
10-59 the commissioner of insurance. No two members may be employees or
10-60 officers of the same health maintenance organization or holding
10-61 company system. The qualifications for membership, terms of
10-62 office, and reimbursement of expenses shall be as provided by the
10-63 plan of operation approved by the commissioner [State Board of
10-64 Insurance]. A "member" is a Texas licensed health maintenance
10-65 organization as defined in Section 2(j) of this Act or a public
10-66 representative. The commissioner of insurance shall appoint the
10-67 member along with the officer or employee of the member who shall
10-68 serve on the committee if the member is a representative of a Texas
10-69 licensed health maintenance organization or its holding company
11-1 system. Five of the members shall represent health maintenance
11-2 organizations or their holding company system. Of the health
11-3 maintenance organization members, one shall be a limited health
11-4 care service plan as defined in Section 2(l) of this Act, if one
11-5 exists at the time of appointment, and one shall be a single health
11-6 care service plan as defined in Section 2(u) [2(s)] of this Act.
11-7 The remaining health maintenance organization members shall be
11-8 selected by the commissioner of insurance with due consideration of
11-9 factors deemed appropriate including, but not limited to, the
11-10 varying categories of premium income and geographical location.
11-11 A public representative may not be:
11-12 (1) an officer, director, or employee of a health
11-13 maintenance organization, a health maintenance organization agent,
11-14 or any other business entity regulated by the commissioner [State
11-15 Board of Insurance];
11-16 (2) a person required to register as a lobbyist [with
11-17 the secretary of state] under Chapter 305, Government Code; or
11-18 (3) related to a person described by Subdivision (1)
11-19 or (2) of this subsection within the second degree of affinity or
11-20 consanguinity.
11-21 (b)(1) The committee shall assist and advise the
11-22 commissioner relating to the detection and prevention of insolvency
11-23 problems regarding health maintenance organizations. The committee
11-24 shall also assist and advise the commissioner regarding any health
11-25 maintenance organization placed in rehabilitation, liquidation,
11-26 supervision, or conservation. The method of providing this
11-27 assistance and advice shall be as contained in the plan of
11-28 operation approved by the commissioner [State Board of Insurance].
11-29 (2) Reports regarding the financial condition of Texas
11-30 licensed health maintenance organizations and regarding the
11-31 financial condition, administration, and status of health
11-32 maintenance organizations in rehabilitation, liquidation,
11-33 supervision, or conservation shall be provided to the committee
11-34 members at meetings. Committee members shall not reveal the
11-35 condition of nor any information secured in the course of any
11-36 meeting of the Solvency Surveillance Committee with regard to any
11-37 corporation, form or person examined by the committee. Committee
11-38 proceedings shall be filed with the commissioner [and reported to
11-39 the members of the State Board of Insurance].
11-40 (c) To provide funds for the administrative expenses of the
11-41 commissioner [State Board of Insurance] regarding rehabilitation,
11-42 liquidation, supervision, or conservation of an impaired health
11-43 maintenance organization in this state, the committee, at the
11-44 commissioner's direction, shall assess each health maintenance
11-45 organization licensed in this state in the proportion that the
11-46 gross premiums of that health maintenance organization written in
11-47 this state during the preceding calendar year bear to the aggregate
11-48 gross premiums written in this state by all health maintenance
11-49 organizations, as furnished to the committee by the commissioner
11-50 after review of annual statements and other reports the
11-51 commissioner considers necessary. Assessments to supplement or pay
11-52 for administrative expenses of rehabilitation, liquidation,
11-53 supervision, or conservation may be made only after the
11-54 commissioner determines that adequate assets of the health
11-55 maintenance organization are not immediately available for those
11-56 purposes or that use of those assets could be detrimental to
11-57 rehabilitation, liquidation, supervision, or conservation. The
11-58 commissioner may abate or defer the assessments, either in whole or
11-59 in part, if, in the opinion of the commissioner, payment of the
11-60 assessment would endanger the ability of a health maintenance
11-61 organization to fulfill its contractual obligations. If an
11-62 assessment is abated or deferred, either in whole or in part, the
11-63 amount by which the assessment is abated or deferred may be
11-64 assessed against the remaining licensed health maintenance
11-65 organizations in a manner consistent with the basis for assessments
11-66 provided by the plan of operation approved by the commissioner
11-67 [State Board of Insurance]. The total of all assessments on a
11-68 health maintenance organization may not exceed one-quarter of one
11-69 percent of the health maintenance organization's gross premiums in
12-1 any one calendar year.
12-2 (e) Not later than the 180th day after the date on which the
12-3 final member of the committee is appointed, the committee shall
12-4 submit to the commissioner [State Board of Insurance] a plan of
12-5 operation. The plan of operation takes effect on approval in
12-6 writing by the commissioner [State Board of Insurance]. If the
12-7 committee fails to submit a suitable plan of operation within the
12-8 period set by this subsection, or if, after the adoption of a plan,
12-9 the committee fails to submit suitable amendments to the plan, the
12-10 commissioner [State Board of Insurance] may, after notice and
12-11 hearing, adopt rules as necessary to implement this Act. Those
12-12 rules continue in effect until modified by the commissioner [State
12-13 Board of Insurance] or superseded by a plan submitted by the
12-14 committee and approved by the commissioner [State Board of
12-15 Insurance].
12-16 (g) A licensed health maintenance organization or its agents
12-17 or employees, the committee or its agents, employees, or members,
12-18 or the [State Board of Insurance, the] commissioner[,] or the
12-19 commissioner's [their] representatives are not liable in a civil
12-20 action for any act taken or not taken in good faith in the
12-21 performance of powers and duties under this section.
12-22 SECTION 12. This Act takes effect September 1, 1997.
12-23 SECTION 13. The importance of this legislation and the
12-24 crowded condition of the calendars in both houses create an
12-25 emergency and an imperative public necessity that the
12-26 constitutional rule requiring bills to be read on three several
12-27 days in each house be suspended, and this rule is hereby suspended.
12-28 * * * * *