1-1           By:  Sibley, Nelson, Harris, Madla, Cain         S.B. No. 385

 1-2           (In the Senate - Filed January 30, 1997; February 3, 1997,

 1-3     March 3, 1997, reported adversely, with favorable Committee

 1-4     Substitute; March 5, 1997, recommitted to Committee on Economic

 1-5     Development; read first time and referred to Committee on Economic

 1-6     Development; March 6, 1997, reported adversely, with favorable

 1-7     Committee Substitute by the following vote:  Yeas 7, Nays 0;

 1-8     March 6, 1997, sent to printer.)

 1-9     COMMITTEE SUBSTITUTE FOR S.B. No. 385                   By:  Sibley

1-10                            A BILL TO BE ENTITLED

1-11                                   AN ACT

1-12     relating to the regulation of health maintenance organizations.

1-13           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-14           SECTION 1.  Section 2, Texas Health Maintenance Organization

1-15     Act (Article 20A.02, Vernon's Texas Insurance Code), is amended to

1-16     read as follows:

1-17           Sec. 2.  DEFINITIONS.  For the purposes of this Act:

1-18           (a)  "Adverse determination" means a determination by a

1-19     health maintenance organization or a utilization review agent that

1-20     the health care services furnished to a patient or proposed to be

1-21     furnished to a patient are not medically necessary or not

1-22     appropriate in the allocation of health care resources.

1-23           (b)  "Basic health care services" means health care services

1-24     which the commissioner determines an enrolled population might

1-25     reasonably require in order to be maintained in good health,

1-26     including, at [as] a minimum, services designated as basic health

1-27     services under Section 1302, Title XIII, Public Health Service Act

1-28     (42 U.S.C. Section 300e-1(1)) [emergency care, inpatient hospital

1-29     and medical services, and outpatient medical services].

1-30           [(b)  "Board" means the Texas Board of Health.]

1-31           (c)  "Capitation" means a method of compensation to a

1-32     physician or provider based on a predetermined payment per enrollee

1-33     for a specified period of time for certain enrollees in exchange

1-34     for arranging for or providing a defined set of covered health care

1-35     services to such enrollees for a specified period of time,

1-36     regardless of the amount of services actually provided.

1-37           (d)  "Commissioner" means the commissioner of insurance.

1-38           (e)  "Complainant" means an enrollee, or a physician,

1-39     provider, or other person designated to act on behalf of an

1-40     enrollee, who files a complaint.

1-41           (f)  "Complaint" means any dissatisfaction expressed by a

1-42     complainant orally or in writing to the health maintenance

1-43     organization with any aspect of the health maintenance

1-44     organization's operation, including but not limited to

1-45     dissatisfaction with plan administration; appeal of an adverse

1-46     determination; the denial, reduction, or termination of a service;

1-47     the way a service is provided; or disenrollment decisions,

1-48     expressed by a complainant.  A complaint is not a misunderstanding

1-49     or a problem of misinformation that is resolved promptly by

1-50     clearing up the misunderstanding or supplying the appropriate

1-51     information to the satisfaction of the enrollee.

1-52           (g)  "Emergency care" means health care services provided in

1-53     a hospital emergency facility or comparable facility to evaluate

1-54     and stabilize medical conditions of a recent onset and severity,

1-55     including but not limited to severe pain, that would lead a prudent

1-56     layperson, possessing an average knowledge of medicine and health,

1-57     to believe that his or her condition, sickness, or injury is of

1-58     such a nature that failure to get immediate medical care could

1-59     result in:

1-60                 (1)  placing the patient's health in serious jeopardy;

1-61                 (2)  serious impairment to bodily functions;

1-62                 (3)  serious dysfunction of any bodily organ or part;

1-63                 (4)  serious disfigurement; or

1-64                 (5)  in the case of a pregnant woman, serious jeopardy

 2-1     to the health of the fetus.

 2-2           (h) [(d)]  "Enrollee" means an individual who is enrolled in

 2-3     a health care plan, including covered dependents.

 2-4           (i) [(e)]  "Evidence of coverage" means any certificate,

 2-5     agreement, or contract issued to an enrollee setting out the

 2-6     coverage to which the enrollee is entitled.

 2-7           (j) [(f)]  "Group hospital service corporation" means a

 2-8     nonprofit corporation organized and operating under Chapter 20 of

 2-9     the Insurance Code.

2-10           (k) [(g)]  "Health care" means prevention, maintenance,

2-11     rehabilitation, pharmaceutical, and chiropractic services provided

2-12     by qualified persons other than medical care.

2-13           (l) [(h)]  "Health care plan" means any plan whereby any

2-14     person undertakes to provide, arrange for, pay for, or reimburse

2-15     any part of the cost of any health care services; provided,

2-16     however, a part of such plan consists of arranging for or the

2-17     provision of health care services, as distinguished from

2-18     indemnification against the cost of such service, on a prepaid

2-19     basis through insurance or otherwise.

2-20           (m) [(i)]  "Health care services" means any services,

2-21     including the furnishing to any individual of pharmaceutical

2-22     services, medical, chiropractic, or dental care, or hospitalization

2-23     or incident to the furnishing of such services, care, or

2-24     hospitalization, as well as the furnishing to any person of any and

2-25     all other services for the purpose of preventing, alleviating,

2-26     curing or healing human illness or injury or a single health care

2-27     service plan.

2-28           (n) [(j)]  "Health maintenance organization" means any person

2-29     who arranges for or provides a health care plan or a single health

2-30     care service plan to enrollees on a prepaid basis.

2-31           (o)  "Life threatening" means a disease or condition for

2-32     which the likelihood of death is high unless the course of the

2-33     disease or condition is interrupted.

2-34           (p) [(k)]  "Medical care" means furnishing those services

2-35     defined as practicing medicine under Section 1.03(8), Medical

2-36     Practice Act (Article 4495b, Vernon's Texas Civil Statutes).

2-37           (q) [(l)]  "Person" means any natural or artificial person,

2-38     including, but not limited to, individuals, partnerships,

2-39     associations, organizations, trusts, hospital districts, limited

2-40     liability companies, limited liability partnerships, or

2-41     corporations.

2-42           (r) [(m)]  "Physician" means:

2-43                 (1)  an individual licensed to practice medicine in

2-44     this state;

2-45                 (2)  a professional association organized under the

2-46     Texas Professional Association Act (Article 1528f, Vernon's Texas

2-47     Civil Statutes) or a nonprofit health corporation certified under

2-48     Section 5.01, Medical Practice Act (Article 4495b, Vernon's Texas

2-49     Civil Statutes); or

2-50                 (3)  another person wholly owned by physicians.

2-51           (s)  "Prospective enrollee" means:

2-52                 (1)  in the case of an individual who is a member of a

2-53     group, an individual eligible for enrollment in a health

2-54     maintenance organization purchased through that individual's group;

2-55     or

2-56                 (2)  in the case of an individual who is not a member

2-57     of a group or whose group has not purchased or does not intend to

2-58     purchase a health maintenance organization plan, an individual who

2-59     has expressed an interest in purchasing individual health

2-60     maintenance organization coverage and who is eligible for coverage

2-61     by the health maintenance organization.

2-62           (t) [(n)]  "Provider" means:

2-63                 (1)  any person other than a physician, including a

2-64     licensed doctor of chiropractic, registered nurse, pharmacist,

2-65     optometrist, pharmacy, hospital, or other institution or

2-66     organization or person that is licensed or otherwise authorized to

2-67     provide a health care service in this state;

2-68                 (2)  a person who is wholly owned or controlled by a

2-69     provider or by a group of providers who are licensed to provide the

 3-1     same health care service; or

 3-2                 (3)  a person who is wholly owned or controlled by one

 3-3     or more hospitals and physicians, including a physician-hospital

 3-4     organization.

 3-5           (u) [(o)]  "Sponsoring organization" means a person who

 3-6     guarantees the uncovered expenses of the health maintenance

 3-7     organization and who is financially capable, as determined by the

 3-8     commissioner, of meeting the obligations resulting from those

 3-9     guarantees.

3-10           (v) [(p)]  "Uncovered expenses" means the estimated

3-11     administrative expenses and the estimated cost of health care

3-12     services that are not guaranteed, insured, or assumed by a person

3-13     other than the health maintenance organization.  Health care

3-14     services may be considered covered if the physician or provider

3-15     agrees in writing that enrollees shall in no way be liable,

3-16     assessable, or in any way subject to payment for services except as

3-17     described in the evidence of coverage issued to the enrollee under

3-18     Section 9 of this Act.  The amount due on loans in the next

3-19     calendar year will be considered uncovered expenses unless

3-20     specifically subordinated to uncovered medical and health care

3-21     expenses or unless guaranteed by the sponsoring organization.

3-22           (w) [(q)]  "Uncovered liabilities" means obligations

3-23     resulting from unpaid uncovered expenses, the outstanding

3-24     indebtedness of loans that are not specifically subordinated to

3-25     uncovered medical and health care expenses or guaranteed by the

3-26     sponsoring organization, and all other monetary obligations that

3-27     are not similarly subordinated or guaranteed.

3-28           (x) [(r)]  "Single health care service" means a health care

3-29     service that an enrolled population may reasonably require in order

3-30     to be maintained in good health with respect to a particular health

3-31     care need for the purpose of preventing, alleviating, curing, or

3-32     healing human illness or injury of a single specified nature and

3-33     that is to be provided by one or more persons each of whom is

3-34     licensed by the state to provide that specific health care service.

3-35           (y) [(s)]  "Single health care service plan" means a plan

3-36     under which any person undertakes to provide, arrange for, pay for,

3-37     or reimburse any part of the cost of a single health care service,

3-38     provided, that a part of the plan consists of arranging for or the

3-39     provision of the single health care service, as distinguished from

3-40     an indemnification against the cost of that service, on a prepaid

3-41     basis through insurance or otherwise and that no part of that plan

3-42     consists of arranging for the provision of more than one health

3-43     care need of a single specified nature.

3-44           (z) [(t)  "Emergency care" means bona fide emergency services

3-45     provided after the sudden onset of a medical condition manifesting

3-46     itself by acute symptoms of sufficient severity, including severe

3-47     pain, such that the absence of immediate medical attention could

3-48     reasonably be expected to result in:]

3-49                 [(1)  placing the patient's health in serious jeopardy;]

3-50                 [(2)  serious impairment to bodily functions; or]

3-51                 [(3)  serious dysfunction of any bodily organ or part.]

3-52           [(u)]  "Health maintenance organization delivery network"

3-53     means a health care delivery system in which a health maintenance

3-54     organization arranges for health care services directly or

3-55     indirectly through contracts and subcontracts with providers and

3-56     physicians.

3-57           SECTION 2.  Section 3, Texas Health Maintenance Organization

3-58     Act (Article 20A.03, Vernon's Texas Insurance Code), is amended by

3-59     adding Subsections (e), (f), and (g) to read as follows:

3-60           (e)  No person or provider shall directly or indirectly

3-61     perform any of the acts of a health maintenance organization, as

3-62     defined in this Act, except as provided by and in accordance with

3-63     the specific authorization of this Act.

3-64           (f)  Any person or provider who directly or indirectly

3-65     performs any of the acts of a health maintenance organization

3-66     without having first obtained a certificate of authority from the

3-67     Texas Department of Insurance shall be subject to all enforcement

3-68     processes and procedures of an authorized insurer pursuant to

3-69     Sections 3 and 3A, Article 1.14-1, Insurance Code.

 4-1           (g)  The commissioner shall have subpoena authority in

 4-2     accordance with Article 1.19-1, Insurance Code.

 4-3           SECTION 3.  Section 4, Texas Health Maintenance Organization

 4-4     Act (Article 20A.04, Vernon's Texas Insurance Code), is amended to

 4-5     read as follows:

 4-6           Sec. 4.  APPLICATION FOR CERTIFICATE OF AUTHORITY.  (a)  Each

 4-7     application for a certificate of authority shall be on a form

 4-8     prescribed by rule of the commissioner and shall be verified by the

 4-9     applicant, an officer, or other authorized representative of the

4-10     applicant, and shall set forth or be accompanied by the following:

4-11                 (1)  a copy of the basic organizational document, if

4-12     any, of the applicant, such as the articles of incorporation,

4-13     articles of association, partnership agreement, trust agreement, or

4-14     other applicable documents, and all amendments thereto;

4-15                 (2)  a copy of the bylaws, rules and regulations, or

4-16     similar document, if any, regulating the conduct of the internal

4-17     affairs of the applicant;

4-18                 (3)  a list of the names, addresses, and official

4-19     positions of the persons who are to be responsible for the conduct

4-20     of the affairs of the applicant, including all members of the board

4-21     of directors, board of trustees, executive committee, or other

4-22     governing body or committee, the principal officer in the case of a

4-23     corporation, and the partnership or members in the case of a

4-24     partnership or association;

4-25                 (4)  a copy of any independent or other contract made

4-26     or to be made between any provider, physician, or persons listed in

4-27     Paragraph (3) hereof and the applicant;

4-28                 (5)  a copy of the form of evidence of coverage to be

4-29     issued to the enrollee;

4-30                 (6)  a copy of the form of the group contract, if any,

4-31     which is to be issued to employers, unions, trustees, or other

4-32     organizations;

4-33                 (7)  a current financial statement that includes:

4-34                       (A)  the sources and application of funds;

4-35                       (B)  projected financial statements during the

4-36     initial period of operations;

4-37                       (C)  a balance sheet beginning as of the date of

4-38     the expected start of operations;

4-39                       (D)  a statement of revenue and expenses with

4-40     expected member months; and

4-41                       (E)  a cash flow statement that states any

4-42     capital expenditures, purchase and sale of investments, and

4-43     deposits with the state;

4-44                 (8)  the schedule of charges to be used during the

4-45     first 12 months of operation;

4-46                 (9)  a statement acknowledging that all lawful process

4-47     in any legal action or proceeding against the health maintenance

4-48     organization on a cause of action arising in this state is valid if

4-49     served in accordance with Article 1.36, Insurance Code;

4-50                 (10)  a statement reasonably describing the geographic

4-51     area or areas to be served;

4-52                 (11)  a description of the complaint procedures to be

4-53     utilized;

4-54                 (12)  a description of the procedures and programs to

4-55     be implemented to meet the quality of health care requirements set

4-56     forth herein; [and]

4-57                 (13)  a written description of health care plan terms

4-58     and conditions made available to any current or prospective group

4-59     contract holder or current or prospective enrollee of the health

4-60     maintenance organization pursuant to the requirements of Section 11

4-61     of this Act;

4-62                 (14)  network configuration information, including an

4-63     explanation of the adequacy of the physician and other provider

4-64     network configuration; the information provided must include the

4-65     names of physicians, specialty physicians, and other providers by

4-66     zip code or zip code map and indicate whether each physician or

4-67     other provider is accepting new patients from the health

4-68     maintenance organization;

4-69                 (15)  a written description of the types of

 5-1     compensation arrangements, such as compensation based on

 5-2     fee-for-service arrangements, risk-sharing arrangements, or

 5-3     capitated risk arrangements, made or to be made with physicians and

 5-4     providers in exchange for the provision of or an arrangement to

 5-5     provide health care services to enrollees, including any financial

 5-6     incentives for physicians and providers; such compensation

 5-7     arrangements shall be confidential and not subject to the open

 5-8     records law, Chapter 552, Government Code;

 5-9                 (16)  documentation demonstrating that the health

5-10     maintenance organization will pay for emergency care services

5-11     performed by nonnetwork physicians or providers at the negotiated

5-12     or usual and customary rate and that the health care plan contains,

5-13     without regard to whether the physician or provider furnishing the

5-14     services has a contractual or other arrangement with the entity to

5-15     provide items or services to covered individuals, the following

5-16     provisions and procedures for coverage of emergency care services:

5-17                       (A)  any medical screening examination or other

5-18     evaluation required by state or federal law that is necessary to

5-19     determine whether an emergency medical condition exists will be

5-20     provided to covered enrollees in a hospital emergency facility or

5-21     comparable facility;

5-22                       (B)  necessary emergency care services will be

5-23     provided to covered enrollees, including the treatment and

5-24     stabilization of an emergency medical condition;

5-25                       (C)  services originated in a hospital emergency

5-26     facility or comparable facility following treatment or

5-27     stabilization of an emergency medical condition will be provided to

5-28     covered enrollees as approved by the health maintenance

5-29     organization, provided that the health maintenance organization is

5-30     required to approve or deny coverage of poststabilization care as

5-31     requested by a treating physician or provider within the time

5-32     appropriate to the circumstances relating to the delivery of the

5-33     services and the condition of the patient, but in no case to exceed

5-34     one hour from the time of the request; the health maintenance

5-35     organization must respond to inquiries from the treating physician

5-36     or provider in compliance with this provision in the health

5-37     maintenance organization's plan; and

5-38                 (17)  such other information as the commissioner may

5-39     require to make the determinations required by this Act.

5-40           (b)  The commissioner [State Board of Insurance] may

5-41     promulgate such reasonable rules and regulations as the

5-42     commissioner [it] deems necessary to the proper administration of

5-43     this Act to require a health maintenance organization, subsequent

5-44     to receiving its certificate of authority, to submit the

5-45     modifications or amendments to the operations or documents

5-46     described in Subsection (a) of this section to the commissioner,

5-47     either for his approval or for information only, prior to the

5-48     effectuation of the modification or amendment or to require the

5-49     health maintenance organization to indicate the modifications to

5-50     [both the board and] the commissioner at the time of the next site

5-51     visit or examination.  As soon as reasonably possible after any

5-52     filing for approval required by this subsection is made, the

5-53     commissioner shall in writing approve or disapprove it.  Any

5-54     modification or amendment for which the commissioner's approval is

5-55     required shall be considered approved unless disapproved within 30

5-56     days; provided that the commissioner may postpone the action for

5-57     such further time, not exceeding an additional 30 days, as

5-58     necessary for proper consideration.

5-59           SECTION 4.  Section 5, Texas Health Maintenance Organization

5-60     Act (Article 20A.05, Vernon's Texas Insurance Code), is amended to

5-61     read as follows:

5-62           Sec. 5.  ISSUANCE OF CERTIFICATE OF AUTHORITY.  (a)[(1)  Upon

5-63     receipt of an application for issuance of a certificate of

5-64     authority, the commissioner shall begin consideration of the

5-65     application and forthwith transmit copies of such application and

5-66     accompanying documents to the board.]

5-67                 [(2)  The board shall determine whether the applicant

5-68     for a certificate of authority, with respect to health care

5-69     services to be furnished:]

 6-1                       [(A)  has demonstrated the willingness and

 6-2     potential ability to assure that such health care services will be

 6-3     provided in a manner to assure both availability and accessibility

 6-4     of adequate personnel and facilities, in a manner enhancing

 6-5     availability, accessibility, and continuity of services;]

 6-6                       [(B)  has arrangements, established in accordance

 6-7     with rules and regulations promulgated by the board with the

 6-8     concurrence of the commissioner, for an ongoing quality of health

 6-9     care assurance program concerning health care processes and

6-10     outcome; and]

6-11                       [(C)  has a procedure, established by rules and

6-12     regulations of the board with the concurrence of the commissioner,

6-13     to develop, compile, evaluate, and report statistics relating to

6-14     the cost of operation, the pattern of utilization of its services,

6-15     availability and accessibility of its services.]

6-16                 [(3)  Within 45 days of receipt of the application by

6-17     the board for issuance of a certificate of authority, the board

6-18     shall certify to the commissioner whether the proposed health

6-19     maintenance organization meets the requirements of this section.

6-20     If the board certifies that the health maintenance organization

6-21     does not meet such requirements, it shall specify in what respects

6-22     it is deficient.]

6-23           [(b)]  The commissioner shall, after notice and hearing,

6-24     issue or deny a certificate of authority to any person filing an

6-25     application pursuant to Section 4 of this Act, within 75 days of

6-26     the receipt of a completed application [the certification of the

6-27     board]; provided, however, that if notice and the opportunity for a

6-28     hearing is involved in a particular issuance or denial, then the

6-29     matter must be scheduled for a hearing within 75 days of the

6-30     receipt of a completed application.  In any event, the commissioner

6-31     may grant a delay of final action on the application to an

6-32     applicant.  Issuance of the certificate of authority shall be

6-33     granted upon payment of the application fee prescribed in Section

6-34     32 of this Act if the commissioner is satisfied that:

6-35                 (1)  the applicant for a certificate of authority, with

6-36     respect to health care services to be furnished:

6-37                       (A)  has demonstrated the willingness and

6-38     potential ability to assure that such health care services will be

6-39     provided in a manner to assure both availability and accessibility

6-40     of adequate personnel and facilities, in a manner enhancing

6-41     availability, accessibility, quality of care, and continuity of

6-42     services;

6-43                       (B)  has arrangements, established in accordance

6-44     with rules and regulations promulgated by the commissioner, for an

6-45     ongoing quality of health care assurance program concerning health

6-46     care processes and outcome; and

6-47                       (C)  has a procedure, established by rules and

6-48     regulations of the commissioner to develop, compile, evaluate, and

6-49     report statistics relating to the cost of operation, the pattern of

6-50     utilization of its services, and availability and accessibility of

6-51     its services; [board certifies that the health maintenance

6-52     organization's proposed plan of operation meets the requirements of

6-53     Subsection (a)(2) of this section; and]

6-54                 (2)  [the commissioner is satisfied that:]

6-55                       [(A)]  the person responsible for the conduct of

6-56     the affairs of the applicant is competent, trustworthy, and

6-57     possesses a good reputation;

6-58                 (3) [(B)]  the health care plan or single health care

6-59     service plan constitutes an appropriate mechanism whereby the

6-60     health maintenance organization will effectively provide or arrange

6-61     for the provision of basic health care services or single health

6-62     care service on a prepaid basis, through insurance or otherwise,

6-63     except to the extent of reasonable requirements for co-payment;

6-64                 (4) [(C)]  the health maintenance organization is fully

6-65     responsible and may reasonably be expected to meet its obligations

6-66     to enrollees and prospective enrollees.  In making this

6-67     determination, the commissioner shall consider:

6-68                       (A) [(i)]  the financial soundness of the health

6-69     care plan's arrangement for health care services and a schedule of

 7-1     charges used in connection therewith;

 7-2                       (B) [(ii)]  the adequacy of working capital;

 7-3                       (C) [(iii)]  any agreement with an insurer, group

 7-4     hospital service corporation, a political subdivision of

 7-5     government, or any other organization for insuring the payment of

 7-6     the cost of health care services or the provision for automatic

 7-7     applicability of an alternative coverage in the event of

 7-8     discontinuance of plan;

 7-9                       (D) [(iv)]  any agreement which provides for the

7-10     provision of health care services; and

7-11                       (E) [(v)]  any deposit of cash or securities

7-12     submitted in accordance with Section 13 of this Act as a guarantee

7-13     that the obligations will be duly performed; and

7-14                 (5) [(D)]  nothing in the proposed method of operation,

7-15     as shown by the information submitted pursuant to Section 4 of this

7-16     Act, or by independent investigation, is contrary to Texas law.

7-17           (b) [(c)]  If [the board or] the commissioner[, or both,]

7-18     shall certify that the health maintenance organization's proposed

7-19     plan of operation does not meet the requirements of this section,

7-20     the commissioner shall not issue the certificate of authority.  The

7-21     commissioner shall notify the applicant that it is deficient[,] and

7-22     shall specify in what respects it is deficient.

7-23           (c) [(d)]  A certificate of authority shall continue in force

7-24     as long as the person to whom it is issued meets the requirements

7-25     of this Act or until suspended or revoked by the commissioner or

7-26     terminated at the request of the certificate holder.  Any change in

7-27     control, as defined by Article 21.49--1 of the Insurance Code of

7-28     Texas, of the health maintenance organization, shall be subject to

7-29     the approval of the commissioner.

7-30           SECTION 5.  Section 9, Texas Health Maintenance Organization

7-31     Act (Article 20A.09, Vernon's Texas Insurance Code), as amended by

7-32     Chapters 1091 and 1096, Acts of the 70th Legislature, Regular

7-33     Session, 1987, is amended to read as follows:

7-34           Sec. 9.  EVIDENCE OF COVERAGE AND CHARGES.  (a)(1)  Every

7-35     enrollee residing in this state is entitled to evidence of coverage

7-36     under a health care plan.  If the enrollee obtains coverage under a

7-37     health care plan through an insurance policy or a contract issued

7-38     by a group hospital service corporation, whether by option or

7-39     otherwise, the insurer or the group hospital service corporation

7-40     shall issue the evidence of coverage.  Otherwise, the health

7-41     maintenance organization shall issue the evidence of coverage.

7-42                 (2)  No evidence of coverage, or amendment thereto,

7-43     shall be issued or delivered to any person in this state until a

7-44     copy of the form of evidence of coverage, or amendment thereto, has

7-45     been filed with and approved by the commissioner.

7-46                 (3)  An evidence of coverage shall contain:

7-47                       (A)  no provisions or statements which are

7-48     unjust, unfair, inequitable, misleading, deceptive, which encourage

7-49     misrepresentation, or which are untrue, misleading, or deceptive as

7-50     defined in Section 14 of this Act; [and]

7-51                       (B)  a clear and complete statement, if a

7-52     contract, or a reasonably complete facsimile, if a certificate, of:

7-53                             (i)  the medical, health care services, or

7-54     single health care service and the issuance of other benefits, if

7-55     any, to which the enrollee is entitled under the health care plan

7-56     or single health care service plan;

7-57                             (ii)  any limitation on the services, kinds

7-58     of services, benefits, or kinds of benefits to be provided,

7-59     including any deductible or co-payment feature;

7-60                             (iii)  where and in what manner information

7-61     is available as to how services may be obtained; and

7-62                             (iv)  a clear and understandable

7-63     description of the health maintenance organization's methods for

7-64     resolving enrollee complaints.  Any subsequent changes may be

7-65     evidenced in a separate document issued to the enrollee;

7-66                       (C)  a provision that, if medically necessary

7-67     covered services are not available through network physicians or

7-68     providers, the health maintenance organization must, on the request

7-69     of a network physician or provider, within a reasonable time period

 8-1     allow referral to a nonnetwork physician or provider and shall

 8-2     fully reimburse the nonnetwork physician or provider at the usual

 8-3     and customary or an agreed rate; each contract must further provide

 8-4     for a review by a specialist of the same, or a similar, specialty

 8-5     as the physician or provider to whom a referral is requested before

 8-6     the health maintenance organization may deny a referral;

 8-7                       (D)  a provision to allow enrollees with chronic,

 8-8     disabling, or life-threatening illnesses to apply to the health

 8-9     maintenance organization's medical director to utilize a nonprimary

8-10     care physician specialist as a primary care physician, provided

8-11     that:

8-12                             (i)  the request includes information

8-13     specified by the health maintenance organization, including but not

8-14     limited to certification of medical need,  and is signed by the

8-15     enrollee and the nonprimary care physician specialist interested in

8-16     serving as the primary care physician;

8-17                             (ii)  the nonprimary care physician

8-18     specialist meets the health maintenance organization's requirements

8-19     for primary care physician participation; and

8-20                             (iii)  the nonprimary care physician

8-21     specialist is willing to accept the coordination of all of the

8-22     enrollee's health care needs;

8-23                       (E)  a provision that if the request for special

8-24     consideration specified in Paragraph (D) of this subdivision is

8-25     denied, an enrollee may appeal the decision through the health

8-26     maintenance organization's established complaint and appeals

8-27     process; and

8-28                       (F)  a provision that the effective date of the

8-29     new designation of a nonprimary care physician specialist as set

8-30     out in Paragraph (D) of this subdivision shall not be retroactive;

8-31     the health maintenance organization may not reduce the amount of

8-32     compensation owed to the original primary care physician prior to

8-33     the date of the new designation.

8-34                 (4)  Any form of the evidence of coverage or group

8-35     contract to be used in this state, and any amendments thereto, are

8-36     subject to the filing and approval requirements of Subsection (c)

8-37     of this section, unless it is subject to the jurisdiction of the

8-38     commissioner under the laws governing health insurance or group

8-39     hospital service corporations, in which event the filing and

8-40     approval provisions of such law shall apply.  To the extent,

8-41     however, that such provisions do not apply to the requirements of

8-42     Subdivision (3)[, Subsection (a)] of this subsection [section], the

8-43     requirements of Subdivision (3) shall be applicable.

8-44           (b)  The formula or method for calculating the schedule of

8-45     charges for enrollee coverage for medical services or health care

8-46     services must be filed with the commissioner before it is used in

8-47     conjunction with any health care plan.  The formula or method must

8-48     be established in accordance with actuarial principles for the

8-49     various categories of enrollees.  The charges resulting from the

8-50     application of the formula or method may not be altered for an

8-51     individual enrollee based on the status of that enrollee's health.

8-52     The formula or method must produce charges that are not excessive,

8-53     inadequate, or unfairly discriminatory, and benefits must be

8-54     reasonable with respect to the rates produced by the formula or

8-55     method.  A statement by a qualified actuary that certifies the

8-56     appropriateness of the formula or method must accompany the filing

8-57     together with supporting information considered adequate by the

8-58     commissioner.

8-59           (c)  The commissioner shall, within a reasonable period,

8-60     approve any form of the evidence of coverage or group contract, or

8-61     amendment thereto, if the requirements of this section are met.

8-62     After notice and opportunity for hearing, the commissioner may

8-63     withdraw previous approval of any form, if the commissioner

8-64     determines that it violates or does not comply with this Act or a

8-65     rule adopted by the commissioner [State Board of Insurance].  It

8-66     shall be unlawful to issue such form until approved.  If the

8-67     commissioner disapproves such form, the commissioner shall notify

8-68     the filer.  In the notice, the commissioner shall specify the

8-69     reason for the disapproval.  A hearing shall be granted within 30

 9-1     days after a request in writing by the person filing.  If the

 9-2     commissioner does not disapprove any form within 30 days after the

 9-3     filing of such form it shall be considered approved; provided that

 9-4     the commissioner may by written notice extend the period for

 9-5     approval or disapproval of any filing for such further time, not

 9-6     exceeding an additional 30 days, as necessary for proper

 9-7     consideration of the filing.

 9-8           (d)  The commissioner may require the submission of whatever

 9-9     relevant information he or she deems necessary in determining

9-10     whether to approve or disapprove a filing made pursuant to this

9-11     section.

9-12           (e)  Article 3.74 of the Texas Insurance Code applies to

9-13     health maintenance organizations other than those health

9-14     maintenance organizations offering only a single health care

9-15     service plan.

9-16           (f)  Article 3.51-9 of the Texas Insurance Code applies to

9-17     health maintenance organizations other than those health

9-18     maintenance organizations offering only a single health care

9-19     service plan.

9-20           (g)  Evidence of coverage does not constitute a health

9-21     insurance policy as that term is defined by the Insurance Code.

9-22           (h)  Article 3.70-1(F)(5) of the Insurance Code applies to

9-23     health maintenance organizations other than those health

9-24     maintenance organizations offering only a single health care

9-25     service plan.

9-26           (i) [(h)]  Article 3.72 of the Insurance Code applies to

9-27     health maintenance organizations to the extent that such article is

9-28     not in conflict with this Act and to the extent that the

9-29     residential treatment center or crisis stabilization unit is

9-30     located within the service area of the health maintenance

9-31     organization and subject to such inspection and review as required

9-32     by this Act or the rules hereunder.

9-33           (j) [(i)]  A health maintenance organization shall comply

9-34     with Article 21.55 of the Insurance Code with respect to prompt

9-35     payment to enrollees [this code applies to out-of-area or emergency

9-36     claims for which benefits are not assigned or payment is not made

9-37     directly to the physician or provider].  A health maintenance

9-38     organization shall make payment to a physician or provider for

9-39     covered services rendered to enrollees of the health maintenance

9-40     organization not later than the 45th day after the date a claim for

9-41     payment is received with documentation reasonably necessary for the

9-42     health maintenance organization to process the claim or within the

9-43     time period specified by written agreement between the physician or

9-44     provider and the health maintenance organization.  For purposes of

9-45     this subsection, "covered services" means health care services and

9-46     benefits to which enrollees are entitled under the terms of an

9-47     applicable evidence of coverage.

9-48           (k) [(j)]  A health maintenance organization may provide

9-49     benefits under a health care plan to a dependent grandchild of an

9-50     enrollee when the dependent grandchild is less than 21 years old

9-51     and living with and in the household of the enrollee.

9-52           (l)  A health maintenance organization that offers a basic

9-53     health care plan shall provide or arrange for the provision of

9-54     basic health care services to its enrollees as needed and without

9-55     limitations as to time and cost other than limitations prescribed

9-56     by rule of the commissioner.

9-57           (m)  Nothing in this Act shall require a health maintenance

9-58     organization, physician, or provider to recommend, offer advice

9-59     concerning, pay for, provide, assist in, perform, arrange, or

9-60     participate in providing or performing any health care service that

9-61     violates its religious convictions.  A health maintenance

9-62     organization that limits or denies health care services under this

9-63     subsection shall set forth such limitations in the evidence of

9-64     coverage as required by Section 9(a)(3) of this Act.

9-65           (n)  The commissioner may adopt minimum standards relating to

9-66     basic health care services.

9-67           SECTION 6.  Section 11, Texas Health Maintenance Organization

9-68     Act (Article 20A.11, Vernon's Texas Insurance Code), is amended to

9-69     read as follows:

 10-1          Sec. 11.  INFORMATION TO PROSPECTIVE AND CURRENT GROUP

 10-2    CONTRACT HOLDERS AND ENROLLEES.  (a)  Each plan application form

 10-3    shall prominently include a space in which the enrollee at the time

 10-4    of application or enrollment shall make a selection of a primary

 10-5    care physician or primary care provider.  An enrollee shall at all

 10-6    times have the right to select or change a primary care physician

 10-7    or primary care provider within the health maintenance organization

 10-8    network of available primary care physicians and primary care

 10-9    providers.  However, a health maintenance organization  may limit

10-10    an enrollee's request to change physicians or providers to no more

10-11    than four changes in any 12-month period.

10-12          (b)  A health maintenance organization shall provide on

10-13    request an accurate written description of health care plan terms

10-14    and conditions, as referenced in Section 4(a)(13) of this Act, to

10-15    allow any current or prospective group contract holder and current

10-16    or prospective enrollee eligible for enrollment in a health care

10-17    plan to make comparisons and informed decisions before selecting

10-18    among health care plans.  The written description must be in a

10-19    readable and understandable format as prescribed by the

10-20    commissioner and shall include a current list of physicians and

10-21    providers.  The health maintenance organization may provide its

10-22    handbook to satisfy this requirement provided the handbook's

10-23    content is substantially similar to and achieves the same level of

10-24    disclosure as the written description prescribed by the

10-25    commissioner and the current list of physicians and providers is

10-26    also provided.

10-27          (c)  A health maintenance organization shall notify a group

10-28    contract holder within 30 days of any substantive changes to the

10-29    payment arrangements between the health maintenance organization

10-30    and health care physicians or providers.

10-31          (d)  No health maintenance organization, or representative

10-32    thereof, may cause or knowingly permit the use or distribution of

10-33    prospective enrollee information which is untrue or misleading.

10-34          (e)  Every health maintenance organization shall provide to

10-35    its enrollees reasonable notice of any material adverse change in

10-36    the operation of the organization that will affect them directly.

10-37          SECTION 7.  Section 12, Texas Health Maintenance Organization

10-38    Act (Article 20A.12, Vernon's Texas Insurance Code), is amended to

10-39    read as follows:

10-40          Sec. 12.  COMPLAINT AND APPEAL SYSTEM.  (a)  Every health

10-41    maintenance organization shall establish and maintain an internal

10-42    system for the resolution of complaints, including a process for

10-43    the notice and appeal of complaints.  The commissioner may

10-44    promulgate such reasonable rules and regulations as are necessary

10-45    or proper to implement and administer this section [a complaint

10-46    system to provide reasonable procedures for the resolution of

10-47    written complaints initiated by enrollees concerning health care

10-48    services].

10-49          (b)(1)  A system for the resolution of complaints shall be

10-50    implemented and maintained by a health maintenance organization as

10-51    provided under this subsection.

10-52                (2)  If a complainant notifies the health maintenance

10-53    organization orally or in writing of a complaint, the health

10-54    maintenance organization shall, not later than the fifth business

10-55    day after the date after receipt of the complaint, send to the

10-56    complainant an acknowledgment letter and a one-page complaint form

10-57    in accordance with the following:

10-58                      (A)  the acknowledgment letter must include the

10-59    date of the health maintenance organization's receipt of the

10-60    complaint, a description of the complaint procedures and time

10-61    frames necessary for the resolution of the complaint, a statement

10-62    that the complaint form must be returned to the health maintenance

10-63    organization for prompt resolution of the complaint, and a request

10-64    for additional information needed, if applicable, for resolution of

10-65    the complaint; and

10-66                      (B)  the one-page complaint form must prominently

10-67    and clearly state that the complaint form must be returned to the

10-68    health maintenance organization for prompt resolution of the

10-69    complaint.

 11-1                (3)  The health maintenance organization shall

 11-2    investigate each oral and written complaint received in accordance

 11-3    with its own policies and in compliance with this Act.

 11-4                (4)  The total time for acknowledgment, investigation,

 11-5    and resolution of the complaint by the health maintenance

 11-6    organization shall not exceed 30 calendar days after the date the

 11-7    health maintenance organization receives the one-page complaint

 11-8    form from the complainant.  The health maintenance organization may

 11-9    extend the time for resolution of the complaint for up to an

11-10    additional 14 calendar days provided the health maintenance

11-11    organization demonstrates in writing to the complainant, within the

11-12    original 30 days, that the cause for delay is beyond the health

11-13    maintenance organization's control. The health maintenance

11-14    organization shall include a written progress report regarding the

11-15    status of the complaint.  The complainant and the health

11-16    maintenance organization may agree to a further extension in

11-17    writing.

11-18                (5)  Subdivisions (2) and (4) of this subsection do not

11-19    apply to complaints concerning emergencies or denials of continued

11-20    stays for hospitalization.  Investigation and resolution of

11-21    complaints concerning emergencies or denials of continued stays for

11-22    hospitalization shall be concluded in accordance with the medical

11-23    or dental immediacy of the case and shall not exceed 72 hours from

11-24    receipt of the complaint.

11-25                (6)  After the health maintenance organization has

11-26    investigated the complaint, the health maintenance organization

11-27    shall issue a response letter to the complainant explaining the

11-28    health maintenance organization's resolution of the complaint

11-29    within the time frames set forth in Subdivision (4) of this

11-30    subsection.  The letter shall include a statement of the specific

11-31    medical and contractual reasons for the resolution and the

11-32    specialization of any physician or other provider consulted.  If

11-33    the resolution is to deny services based on an adverse

11-34    determination of medical necessity, the clinical basis used to

11-35    reach that decision shall be enclosed.  The response letter shall

11-36    contain a full description of the process for appeal, including the

11-37    time frames for the appeals process and the time frames for the

11-38    final decision on the appeal and shall prominently and clearly

11-39    explain the procedure for making a complaint to the department in a

11-40    manner prescribed by the commissioner.

11-41          (c)(1)  In the event the complaint is not resolved to the

11-42    satisfaction of the complainant, the health maintenance

11-43    organization shall provide an appeals process which shall include

11-44    the right of the complainant either to appear in person before a

11-45    complaint appeal panel within the enrollee's county of residence or

11-46    the county where the enrollee normally receives health care

11-47    services, unless another site is agreed to by the complainant, or

11-48    to address a written appeal to the complaint appeal panel.  The

11-49    health maintenance organization shall make a good faith effort to

11-50    meet the enrollee's needs in selecting the site and shall complete

11-51    the appeals process under this section within 30 calendar days

11-52    after the date of the receipt of the request for appeal.

11-53                (2)  The health maintenance organization shall send to

11-54    the complainant within five working days after the date of receipt

11-55    of the request for appeal an acknowledgment letter which includes:

11-56                      (A)  the date of the health maintenance

11-57    organization's receipt of the oral or written request for appeal;

11-58                      (B)  the date and location of the hearing before

11-59    the complaint appeal panel;

11-60                      (C)  the right of the complainant to appear in

11-61    person, or through a representative if the enrollee is a minor or

11-62    disabled, before the complaint appeal panel; the complainant shall

11-63    be allowed to bring any person to the complaint appeal panel

11-64    meeting; however, the ability of those persons to directly question

11-65    the participants in the meeting may be limited by the health

11-66    maintenance organization's policy; the term "in person" means a

11-67    face-to-face meeting with all the members of the complaint appeal

11-68    panel unless otherwise agreed to by the complainant; and

11-69                      (D)  the right of the complainant to present

 12-1    written or oral information and alternative expert testimony and to

 12-2    question the persons responsible for making the prior determination

 12-3    which resulted in the appeal.

 12-4                (3)  The health maintenance organization shall appoint

 12-5    members to the complaint appeal panel which shall advise the health

 12-6    maintenance organization on the resolution of the dispute.  The

 12-7    complaint appeal panel shall be composed of equal numbers of health

 12-8    maintenance organization staff, physicians or other providers, and

 12-9    enrollees.  No member of the complaint appeal panel shall have been

12-10    previously involved in the disputed decision.  The physicians or

12-11    other providers shall have experience in the area of care that is

12-12    in dispute and must be independent of any physician or provider who

12-13    made the prior determinations.  If specialty care is in dispute,

12-14    the appeal panel must include an additional person who is a

12-15    specialist in the field of care to which the appeal relates.  The

12-16    enrollees shall not be employees of the health maintenance

12-17    organization.

12-18                (4)  Not less than five working days before the meeting

12-19    of the panel, unless the complainant agrees otherwise, the health

12-20    maintenance organization shall provide to the complainant or the

12-21    complainant's designated representative any documentation to be

12-22    presented to the panel by the health maintenance organization

12-23    staff, the specialization of any physicians or providers consulted

12-24    during the investigation, and the name and affiliation of all

12-25    health maintenance organization representatives on the panel.  The

12-26    complainant or designated representative may respond to the

12-27    documentation provided either in person or in writing and the

12-28    complaint appeal panel must consider the response in its

12-29    deliberations if received prior to or during the hearing.

12-30                (5)  The complainant or the designated representative,

12-31    as provided by Subdivision (2)(C) of this subsection, shall have

12-32    the right to appear in person before the complaint appeal panel, to

12-33    present alternative expert testimony, and to request the presence

12-34    of and question any person responsible for making the prior

12-35    determination which resulted in the appeal.

12-36                (6)  Notice of the final decision of the health

12-37    maintenance organization on the appeal shall include a written

12-38    statement of the specific medical determination, clinical basis,

12-39    and contractual criteria used to reach the final decision.  The

12-40    notice shall also prominently and clearly state the procedure for

12-41    making a complaint to the department in a manner prescribed by the

12-42    commissioner.

12-43                (7)  Investigation and resolution of appeals relating

12-44    to poststabilization care following an emergency condition or

12-45    denials of continued stays for hospitalization shall be concluded

12-46    in accordance with the medical or dental immediacy of the case but

12-47    in no event to exceed 72 hours from the complainant's request for

12-48    appeal.  At the request of the complainant or designated

12-49    representative, the health maintenance organization shall provide,

12-50    in lieu of a complaint appeal panel, a review by a physician or

12-51    provider who has not previously reviewed the case and is of the

12-52    same or similar specialty as typically manages the medical

12-53    condition, procedure, or treatment under discussion for review of

12-54    the appeal.  The physician or provider reviewing the appeal may

12-55    interview the complainant or the complainant's designated

12-56    representative and shall render a final decision on the appeal.

12-57    Initial notice of the decision may be delivered orally if followed

12-58    by written notice of the determination within three days.

12-59          (d)  The health maintenance organization shall maintain a

12-60    record of any complaint or appeal, any complaint or appeal

12-61    proceeding, and any actions taken on a complaint or appeal for a

12-62    period of three years from the date of the receipt of the complaint

12-63    or appeal.

12-64          (e)  The commissioner [or board] may examine the [such]

12-65    complaint system and documentation maintained under Subsection (d)

12-66    of this section for compliance with this Act and may require the

12-67    health maintenance organization to make corrections deemed

12-68    necessary by the commissioner.

12-69          (f)  If any provision of Article 21.58A, Insurance Code,

 13-1    conflicts with any provision of this section, the provisions of

 13-2    this section shall prevail.

 13-3          SECTION 8.  The Texas Health Maintenance Organization Act

 13-4    (Article 20A.01 et seq., Vernon's Texas Insurance Code), is amended

 13-5    by adding Section 12A to read as follows:

 13-6          Sec. 12A.  FILING COMPLAINTS WITH THE TEXAS DEPARTMENT OF

 13-7    INSURANCE.  (a)  Any person, including persons who have attempted

 13-8    to resolve complaints through the health maintenance organization's

 13-9    complaint system process who are dissatisfied with the resolution,

13-10    may report an alleged violation of this Act to the Texas Department

13-11    of Insurance.

13-12          (b)  The commissioner shall investigate a complaint against a

13-13    health maintenance organization to determine compliance with this

13-14    Act within 60 days after the Texas Department of Insurance's

13-15    receipt of the complaint and all information necessary for the

13-16    department to determine compliance.  The commissioner may extend

13-17    the time necessary to complete an investigation in the event any of

13-18    the following circumstances occur:

13-19                (1)  additional information is needed;

13-20                (2)  an on-site review is necessary;

13-21                (3)  the health maintenance organization, the physician

13-22    or provider, or the complainant does not provide all documentation

13-23    necessary to complete the investigation; or

13-24                (4)  other circumstances beyond the control of the

13-25    department occur.

13-26          SECTION 9.  Subsections (a), (b), (c), (f), (g), and (h),

13-27    Section 13, Texas Health Maintenance Organization Act (Article

13-28    20A.13, Vernon's Texas Insurance Code), are amended to read as

13-29    follows:

13-30          (a)  Unless otherwise provided by this section, each health

13-31    maintenance organization shall deposit with the comptroller [State

13-32    Treasurer] cash or securities, or any combination of these or other

13-33    guarantees that are acceptable to the commissioner [State Board of

13-34    Insurance], in an amount as set forth in this section.

13-35          (b)  For a health maintenance organization which has not

13-36    received a certificate of authority from the State Board of

13-37    Insurance or the commissioner prior to September 1, 1987:

13-38                (1)  the amount of the initial deposit or other

13-39    guarantee shall be $100,000 for an organization offering basic

13-40    health care services and $50,000 for an organization offering a

13-41    single health care service plan;

13-42                (2)  on or before March 15 of the year following the

13-43    year in which the health maintenance organization receives a

13-44    certificate of authority, it shall deposit with the comptroller

13-45    [State Treasurer] an amount equal to the difference between the

13-46    initial deposit and 100 percent of its estimated uncovered health

13-47    care expenses for the first 12 months of operation;

13-48                (3)  on or before March 15 of each subsequent year, it

13-49    shall deposit the difference between its total uncovered health

13-50    care expenses based on its annual statement from the previous year

13-51    and the total amount previously deposited and not withdrawn from

13-52    the State Treasury; and

13-53                (4)  in any year in which the amount determined in

13-54    accordance with Subdivision (3) of this subsection is zero or less

13-55    than zero, the commissioner [State Board of Insurance] may not

13-56    require the health maintenance organization to make any additional

13-57    deposit under this subsection.

13-58          (c)  For a health maintenance organization which has received

13-59    a certificate of authority from the State Board of Insurance prior

13-60    to September 1, 1987:

13-61                (1)  on or before March 15, 1988, the organization

13-62    shall deposit an amount equal to the sum of:

13-63                      (A)  $100,000 for an organization offering basic

13-64    health care services or $50,000 for an organization offering a

13-65    single health care service plan; and

13-66                      (B)  100 percent of the uncovered health care

13-67    expenses for the preceding 12 months of operation;

13-68                (2)  on or before March 15 of each subsequent year, the

13-69    organization shall make additional deposits of the difference

 14-1    between its total uncovered health care expenses based on its

 14-2    annual statement from the previous year and the total amount

 14-3    previously deposited and not withdrawn from the State Treasury; and

 14-4                (3)  in any year in which the amount determined in

 14-5    accordance with Subdivision (2) of this subsection is zero or less

 14-6    than zero, the commissioner [State Board of Insurance] may not

 14-7    require the health maintenance organization to make any additional

 14-8    deposit under this subsection.

 14-9          (f)  Upon application by a health maintenance organization

14-10    operating for more than one year under a certificate of authority

14-11    issued by the State Board of Insurance or the commissioner, the

14-12    commissioner [State Board of Insurance] may waive some or all of

14-13    the requirements of Subsection (b) or (c) of this section for any

14-14    period of time it shall deem proper whenever it finds that one or

14-15    more of the following conditions justifies such waiver:

14-16                (1)  the total amount of the deposit or other guarantee

14-17    is equal to 25 percent of the health maintenance organization's

14-18    estimated uncovered expenses for the next calendar year;

14-19                (2)  the health maintenance organization's net worth is

14-20    equal to at least 25 percent of its estimated uncovered expenses

14-21    for the next calendar year; or

14-22                (3)  either the health maintenance organization has a

14-23    net worth of $5,000,000 or its sponsoring organization has a net

14-24    worth of at least $5,000,000 for each health maintenance

14-25    organization whose uncovered expenses it guarantees.

14-26          (g)  If one or more of the requirements is waived, any amount

14-27    previously deposited shall remain on deposit until released in

14-28    whole or in part by the comptroller [State Treasurer] upon order of

14-29    the commissioner [State Board of Insurance] pursuant to Subsection

14-30    (f) of this section.

14-31          (h)  A health maintenance organization that has made a

14-32    deposit with the comptroller [State Treasurer] may, at its option,

14-33    withdraw the deposit or any part thereof, first having deposited

14-34    with the comptroller [State Treasurer], in lieu thereof, a deposit

14-35    of cash or securities of equal amount and value to that withdrawn.

14-36    Any securities shall be approved by the commissioner [State Board

14-37    of Insurance] before being substituted.

14-38          SECTION 10.  Section 14, Texas Health Maintenance

14-39    Organization Act (Article 20A.14, Vernon's Texas Insurance Code),

14-40    is amended by adding Subsections (i) through (l) to read as

14-41    follows:

14-42          (i)(1)  A health maintenance organization shall not, as a

14-43    condition of a contract with a physician or provider or in any

14-44    other manner, prohibit, attempt to prohibit, or discourage a

14-45    physician or provider from:

14-46                      (A)  discussing with or communicating to a

14-47    current, prospective, or former patient, or a party designated by a

14-48    patient, information or opinions regarding the patient's health

14-49    care, including but not limited to the patient's medical condition

14-50    or treatment options; or

14-51                      (B)  discussing with or communicating in good

14-52    faith to a current, prospective, or former patient, or a party

14-53    designated by a patient, information or opinions regarding the

14-54    provisions, terms, requirements, or services of the health care

14-55    plan as they relate to the medical needs of the patient.

14-56                (2)  A health maintenance organization shall not in any

14-57    way penalize, terminate, or refuse to compensate, for covered

14-58    services, a physician or provider for discussing or communicating

14-59    with a current, prospective, or former patient, or a party

14-60    designated by a patient, pursuant to this section.

14-61          (j)  A health maintenance organization shall not engage in

14-62    any retaliatory action, including refusal to renew or cancellation

14-63    of coverage, against a group contract holder or enrollee because

14-64    the group, enrollee, or person acting on behalf of the group or

14-65    enrollee has filed a complaint against the health maintenance

14-66    organization or appealed a decision of the health maintenance

14-67    organization.

14-68          (k)  A health maintenance organization shall not engage in

14-69    any retaliatory action, including termination of or refusal to

 15-1    renew a contract, against a physician or provider because the

 15-2    physician or provider has, on behalf of an enrollee, reasonably

 15-3    filed a complaint against the health maintenance organization or

 15-4    has appealed a decision of the health maintenance organization.

 15-5          (l)  A health maintenance organization may not use any

 15-6    financial incentive or make any payment to a physician or provider

 15-7    which acts directly or indirectly as an inducement to limit

 15-8    medically necessary services.

 15-9          SECTION 11.  Section 15, Texas Health Maintenance

15-10    Organization Act (Article 20A.15, Vernon's Texas Insurance Code),

15-11    is amended to read as follows:

15-12          Sec. 15.  REGULATION OF AGENTS [AGENT FOR SINGLE HEALTH CARE

15-13    SERVICE PLANS].  (a)  A health maintenance organization agent is

15-14    anyone who represents any health maintenance organization in the

15-15    solicitation, negotiation, procurement, or effectuation of health

15-16    maintenance organization membership or holds himself or herself out

15-17    as such.  No person or other legal entity may perform the acts of a

15-18    health maintenance organization agent within this state unless such

15-19    person or legal entity has a valid health maintenance organization

15-20    agent's license issued pursuant to this Act.  The term "health

15-21    maintenance organization agent" shall not include:

15-22                (1)  any regular salaried officer or employee of a

15-23    health maintenance organization or of a licensed health maintenance

15-24    organization agent, who devotes substantially all of his or her

15-25    time to activities other than the solicitation of applications for

15-26    health maintenance organization membership and receives no

15-27    commission or other compensation directly dependent upon the

15-28    business obtained and who does not solicit or accept from the

15-29    public applications for health maintenance organization membership;

15-30                (2)  employers or their officers or employees or the

15-31    trustees of any employee benefit plan to the extent that such

15-32    employers, officers, employees, or trustees are engaged in the

15-33    administration or operation of any program of employee benefits

15-34    involving the use of membership in a health maintenance

15-35    organization; provided that such employers, officers, employees, or

15-36    trustees are not in any manner compensated directly or indirectly

15-37    by the health maintenance organization issuing such health

15-38    maintenance organization membership;

15-39                (3)  banks or their officers and employees to the

15-40    extent that such banks, officers, and employees collect and remit

15-41    charges by charging same against accounts of depositors on the

15-42    orders of such depositors; or

15-43                (4)  any person or the employee of any person who has

15-44    contracted to provide administrative, management, or health care

15-45    services to a health maintenance organization and who is

15-46    compensated for those services by the payment of an amount

15-47    calculated as a percentage of the revenues, net income, or profit

15-48    of the health maintenance organization, if that method of

15-49    compensation is the sole basis for subjecting that person or the

15-50    employee of the person to this section.

15-51          (b)  The commissioner [Commissioner of Insurance] shall

15-52    collect in advance from health maintenance organization agent

15-53    applicants a nonrefundable license fee in an amount not to exceed

15-54    $50 as determined by the commissioner [board].  Unless the

15-55    commissioner [State Board of Insurance] accepts a qualifying

15-56    examination administered by a testing service, as provided under

15-57    Article 21.01-1, Insurance Code, as amended, the commissioner

15-58    [Commissioner of Insurance] shall also collect from such applicants

15-59    an examination fee in an amount not to exceed $20 as determined by

15-60    the commissioner [board].  A new examination fee shall be paid for

15-61    each examination.  The examination fee shall not be returned under

15-62    any circumstances other than for failure to appear and take the

15-63    examination after the applicant has given at least 24 hours notice

15-64    of an emergency situation to the commissioner [Commissioner of

15-65    Insurance] and received the commissioner's approval.

15-66          (c)  Except as may be provided by a staggered renewal system

15-67    adopted under Article 21.01-2, Insurance Code, and its subsequent

15-68    amendments, each license issued to a health maintenance

15-69    organization agent shall expire two years following the date of

 16-1    issue, unless prior thereto it is suspended or revoked by the

 16-2    commissioner or the authority of the agent to act for the health

 16-3    maintenance organization is terminated.

 16-4          (d)  Licenses which have not expired or been suspended or

 16-5    revoked may be renewed by filing with the commissioner [State Board

 16-6    of Insurance] a completed renewal application and by paying a

 16-7    nonrefundable renewal fee in an amount not to exceed $50 as

 16-8    determined by the commissioner [board] on or before the expiration

 16-9    of the license.

16-10          (e)  Any agent licensed under this section may represent and

16-11    act as an agent for more than one health maintenance organization

16-12    at any time while the agent's license is in force.  Any such agent

16-13    and the health maintenance organization involved must give notice

16-14    to the commissioner [State Board of Insurance] of any additional

16-15    appointment or appointments authorizing the agent to act as agent

16-16    for an additional health maintenance organization or health

16-17    maintenance organizations.  Such notice must be accompanied by a

16-18    certificate from each health maintenance organization to be named

16-19    in each additional appointment that said health maintenance

16-20    organization desires to appoint the applicant as its agent.  This

16-21    notice shall contain such other information as the commissioner

16-22    [State Board of Insurance] may require.  The agent shall be

16-23    required to pay a nonrefundable fee in an amount not to exceed $16

16-24    as determined by the commissioner [board] for each additional

16-25    appointment applied for, which fee shall accompany the notice.  If

16-26    approval of the additional appointment is not received from the

16-27    commissioner [State Board of Insurance] before the eighth day after

16-28    the date on which the completed notice and fee were received by the

16-29    commissioner [board], the agent and the health maintenance

16-30    organization, in the absence of notice of disapproval, may assume

16-31    that the board approves the application, and the agent may act for

16-32    the health maintenance organization.  The commissioner [State Board

16-33    of Insurance] shall suspend the license of an agent during any

16-34    period in which the agent does not have an outstanding valid

16-35    appointment to represent a health maintenance organization.  The

16-36    suspension shall be lifted on receipt by the commissioner [board]

16-37    of acceptable notice of valid appointment.

16-38          (f)  It shall be the duty of the commissioner to collect from

16-39    every agent of any health maintenance organization in the State of

16-40    Texas under the provisions of this section a licensing fee and an

16-41    initial appointment fee for each appointment by a health

16-42    maintenance organization.  All fees collected under this section

16-43    shall be used by the commissioner [State Board of Insurance] to

16-44    administer the provisions of this [the Texas Health Maintenance

16-45    Organization] Act and all laws of this state governing and

16-46    regulating agents for such health maintenance organizations.  All

16-47    of such funds shall be paid into the State Treasury to the credit

16-48    of the Texas Department [State Board] of Insurance operating fund

16-49    and shall be paid out for salaries, traveling expenses, office

16-50    expenses, and other incidental expenses incurred and approved by

16-51    the commissioner [State Board of Insurance].

16-52          (g)  The commissioner [State Board of Insurance] may, after

16-53    notice and hearings, promulgate such reasonable rules and

16-54    regulations as are necessary to provide for the licensing of

16-55    agents.

16-56          (h) [(m)  Duplicate License; Fee.]  The commissioner

16-57    [Commissioner of Insurance] shall collect in advance from agents

16-58    requesting duplicate licenses a fee not to exceed $20.  The

16-59    commissioner [State Board of Insurance] shall determine the amount

16-60    of the fee.

16-61          (i) [(n)]  The commissioner [State Board of Insurance] shall

16-62    issue a license to a corporation if it finds that:

16-63                (1)  the corporation is organized or existing under the

16-64    Texas Business Corporation Act, has its principal place of business

16-65    in this state, and has as one of its purposes the authority to act

16-66    as an agent under this section; and

16-67                (2)  each officer, director, and shareholder of the

16-68    corporation is individually licensed under this section.

16-69          (j) [(o)]  This section may not be construed to permit any

 17-1    employee, agent, or corporation to perform any act of an agent

 17-2    under this section without obtaining a license.

 17-3          (k) [(p)]  If, at any time, a corporation that holds an

 17-4    agent's license does not maintain the qualifications necessary to

 17-5    obtain a license, the commissioner [State Board of Insurance] shall

 17-6    cancel or revoke the license of that corporation to act as an

 17-7    agent.  If a person who is not a licensed agent under this section

 17-8    acquires shares in such a corporation by devise or descent, that

 17-9    person must either obtain a license or dispose of the shares to a

17-10    person licensed under this section not later than the 90th day

17-11    after the date on which the person acquires the shares.

17-12          (l) [(q)]  If an unlicensed person acquires shares in a

17-13    corporation and does not dispose of the shares within the 90-day

17-14    period, the shares must be purchased by the corporation for the

17-15    value of the shares as reflected by the regular books and records

17-16    of the corporation as of the date of the acquisition of the shares

17-17    by the unlicensed person.  If the corporation fails or refuses to

17-18    purchase the shares, the commissioner [State Board of Insurance]

17-19    shall cancel its license.

17-20          (m) [(r)]  A corporation may redeem the shares of any

17-21    shareholder or the shares of a deceased shareholder on terms agreed

17-22    to by the board of directors and the shareholder or the

17-23    shareholder's personal representative or at a price and on terms

17-24    provided in the articles of incorporation, the bylaws of the

17-25    corporation, or an existing contract entered into by the

17-26    shareholders of the corporation.

17-27          (n) [(s)]  With the application for a license or a license

17-28    renewal, each corporation licensed as an agent under this section

17-29    must file a sworn statement listing the names and addresses of all

17-30    of its officers, directors, and shareholders.

17-31          (o) [(t)]  Each corporation shall notify the commissioner

17-32    [State Board of Insurance] of any change in its officers,

17-33    directors, or shareholders not later than the 30th day after the

17-34    date on which the change takes effect.

17-35          (p) [(u)]  Another corporation may not own an interest in a

17-36    corporation licensed under this section.  Each owner of an interest

17-37    in a corporation licensed under this section must be a natural

17-38    person who holds a valid license issued under this section.

17-39          SECTION 12.  Section 15A, Texas Health Maintenance

17-40    Organization Act (Article 20A.15A, Vernon's Texas Insurance Code),

17-41    is amended to read as follows:

17-42          Sec. 15A.  AGENTS FOR SINGLE HEALTH CARE SERVICE PLANS.

17-43    (a)  A person acting as an agent for a health maintenance

17-44    organization offering only a single health care service plan who is

17-45    licensed by examination under Article 21.07, Insurance Code, or

17-46    Chapter 213, Acts of the 54th Legislature, Regular Session, 1955

17-47    (Article 21.07-1, Vernon's Texas Insurance Code), is subject to the

17-48    licensing requirements provided by this section, and except as

17-49    specifically provided by this Act or some other law, no other agent

17-50    licensing requirements apply.

17-51          (b)  The commissioner shall collect in advance from

17-52    applicants for licensure as health maintenance organization agents

17-53    under this section a nonrefundable license fee in an amount not to

17-54    exceed $70 as determined by the commissioner [State Board of

17-55    Insurance].

17-56          (c)  Except as may be provided by a staggered renewal system

17-57    adopted under Article 21.01-2, Insurance Code, and its subsequent

17-58    amendments, each license issued to a health maintenance

17-59    organization agent under this section shall expire two years

17-60    following the date of issuance, unless before that time the license

17-61    is suspended or revoked by the commissioner or the authority of the

17-62    agent to act for the health maintenance organization is terminated.

17-63          (d)  Licenses issued under this section that have not expired

17-64    or been suspended or revoked may be renewed by filing a completed

17-65    application and paying to the commissioner [board] the required

17-66    nonrefundable renewal fee in an amount not to exceed $50 as

17-67    determined by the commissioner [board].

17-68          (e)  An agent licensed under this section may represent and

17-69    act as an agent for more than one health maintenance organization

 18-1    offering only a single health care service plan at any time while

 18-2    that agent's license is in force.  The agent and the health

 18-3    maintenance organization offering only a single health care service

 18-4    plan involved must give notice to the commissioner [State Board of

 18-5    Insurance] of any additional appointment authorizing the agent to

 18-6    act as agent for an additional health maintenance organization

 18-7    offering only a single health care service plan.  The notice must

 18-8    be accompanied by a certificate from each health maintenance

 18-9    organization to be named in each additional appointment stating

18-10    that the health maintenance organization offers only a single

18-11    health care service plan and desires to appoint the applicant as

18-12    its agent.  The notice must include other information required by

18-13    the commissioner [State Board of Insurance].  The agent shall pay a

18-14    nonrefundable fee in an amount not to exceed $70 as determined by

18-15    the commissioner [State Board of Insurance] for each additional

18-16    appointment applied for.  The fee must accompany the notice.  If

18-17    approval of the additional appointment is not received from the

18-18    commissioner [State Board of Insurance] before the eighth day after

18-19    the date on which the completed notice and fee were received by the

18-20    commissioner [board], the agent and the health maintenance

18-21    organization, in the absence of notice of disapproval, may assume

18-22    that the commissioner [board] approves the application, and the

18-23    agent may act for the health maintenance organization offering a

18-24    single health care service plan.  The commissioner [State Board of

18-25    Insurance] shall suspend the license of an agent during any period

18-26    in which the agent does not have an outstanding valid appointment

18-27    to represent a health maintenance organization offering a single

18-28    health care service plan.  The suspension shall be lifted on

18-29    receipt by the commissioner [board] of acceptable notice of valid

18-30    appointment.

18-31          (f)  The commissioner shall collect from each agent for any

18-32    health maintenance organization offering only a single health care

18-33    service plan a license fee and an appointment fee for each

18-34    additional appointment.

18-35          (g)  Fees collected under this section shall be used by the

18-36    commissioner [State Board of Insurance] to administer this Act and

18-37    laws governing and regulating agents for health maintenance

18-38    organizations.  The funds shall be deposited in the state treasury

18-39    to the credit of the Texas Department [State Board] of Insurance

18-40    operating fund and shall be paid out for salaries, traveling

18-41    expenses, office expenses, and other incidental expenses incurred

18-42    and approved by the commissioner [State Board of Insurance].

18-43          (h)  The commissioner [State Board of Insurance] may, after

18-44    notice and hearing, adopt reasonable rules that are necessary to

18-45    provide for the licensing of agents under this section.

18-46          (i)  A licensee may renew an unexpired license issued under

18-47    this section by filing the required renewal application and paying

18-48    a nonrefundable fee with the commissioner [State Board of

18-49    Insurance] on or before the expiration date of the license.

18-50          (j) [(l)]  A health maintenance organization offering only a

18-51    single health care service plan that desires to appoint an agent

18-52    under this section shall provide to its prospective agents a

18-53    written manual, a copy of which shall be filed with the

18-54    commissioner [State Board of Insurance], outlining and describing

18-55    the single health care service offered by the health maintenance

18-56    organization, outlining this Act, and the rules of the [State Board

18-57    of Insurance and] commissioner adopted under this Act.  The health

18-58    maintenance organization shall certify to the commissioner [State

18-59    Board of Insurance] that it has provided the written manual

18-60    required by this subsection to its prospective agents and has

18-61    provided, under the supervision of a licensed health maintenance

18-62    organization agent, a minimum of four hours of training in its

18-63    single health care service, this Act, and the rules of the [State

18-64    Board of Insurance and the] commissioner adopted under this Act.

18-65          (k) [(n)]  Any regular salaried officer or employee of a

18-66    health maintenance organization offering only a single health care

18-67    service plan who solicits applications on behalf of that health

18-68    maintenance organization must be licensed as a health maintenance

18-69    organization agent under this section and must take any examination

 19-1    and pay any fee provided by Subsection [Subsections] (b) [and (j)]

 19-2    of Section 15 of this Act.

 19-3          (l) [(o)]  The commissioner shall collect in advance from

 19-4    agents requesting duplicate licenses a fee not to exceed $20.  The

 19-5    commissioner [State Board of Insurance] shall determine the amount

 19-6    of the fee.

 19-7          SECTION 13.  Section 17, Texas Health Maintenance

 19-8    Organization Act (Article 20A.17, Vernon's Texas Insurance Code),

 19-9    is amended to read as follows:

19-10          Sec. 17.  EXAMINATIONS.  (a)  The commissioner may make an

19-11    examination concerning the quality of health care services and of

19-12    the affairs of any applicant for a certificate of authority or any

19-13    health maintenance organization as often as the commissioner deems

19-14    [it is deemed] necessary, but not less frequently than once every

19-15    three years.

19-16          (b)  [The board may make an examination concerning the

19-17    quality of health care services of any health maintenance

19-18    organization as often as it deems it necessary, but not less

19-19    frequently than once every three years.]

19-20          [(c)] (1)  Every health maintenance organization shall make

19-21    its books and records relating to its operation available for such

19-22    examinations and in every way facilitate the examinations.  Every

19-23    physician and provider with whom a health maintenance organization

19-24    has a contract, agreement, or other arrangement need only make

19-25    available for examination that portion of its books and records

19-26    relevant to its relationship with the health maintenance

19-27    organization.

19-28                (2)  A copy of any contract, agreement, or other

19-29    arrangement between a health maintenance organization and a

19-30    physician or provider shall be provided to the commissioner by the

19-31    health maintenance organization on the request of the commissioner.

19-32    Such documentation provided to the commissioner under this

19-33    subsection shall be deemed confidential and not subject to the open

19-34    records law, Chapter 552, Government Code.

19-35                (3)  Medical, hospital, and health records of enrollees

19-36    and records of physicians and providers providing service under

19-37    independent contract with a health maintenance organization shall

19-38    only be subject to such examination as is necessary for an ongoing

19-39    quality of health assurance program concerning health care

19-40    procedures and outcome in accordance with an approved plan as

19-41    provided for in this Act.  Said plan shall provide for adequate

19-42    protection of confidentiality of medical information and shall only

19-43    be disclosed in accordance with applicable law and this Act and

19-44    shall only be subject to subpoena upon a showing of good cause.

19-45                (4) [(3)]  For the purpose of examinations, the

19-46    commissioner [and board] may administer oaths to and examine the

19-47    officers and agents of the health maintenance organization and the

19-48    principals of such physicians and providers concerning their

19-49    business.

19-50          (c) [(d)]  Articles 1.04A, 1.15, 1.16, and 1.19, as amended,

19-51    of the Insurance Code shall be construed to apply to health

19-52    maintenance organizations, except to the extent that the

19-53    commissioner determines that the nature of the examination of a

19-54    health maintenance organization renders such clearly inappropriate.

19-55          (d) [(e)]  Articles 1.12, 1.24, and 1.30, and Section 7 of

19-56    Article 1.10, Insurance Code, apply to health maintenance

19-57    organizations.

19-58          SECTION 14.  Subsections (d) and (f), Section 18, Texas

19-59    Health Maintenance Organization Act (Article 20A.18, Vernon's Texas

19-60    Insurance Code), are amended to read as follows:

19-61          (d)  Except as otherwise provided by this subsection, the

19-62    bond required under Subsection (c) of this section must be issued

19-63    by an insurance company that holds a certificate of authority in

19-64    this state.  If, after notice and hearing, the commissioner [State

19-65    Board of Insurance] determines that the fidelity bond required by

19-66    this section is not available from an insurance company that holds

19-67    a certificate of authority in this state, a fidelity bond procured

19-68    by a licensed Texas surplus lines agent resident in this state in

19-69    compliance with Article 1.14-2, Insurance Code, satisfies the

 20-1    requirements of this section.

 20-2          (f)  Instead of a bond, the management contractor may deposit

 20-3    with the comptroller [State Treasurer] cash or securities

 20-4    acceptable to the commissioner [State Board of Insurance].  Such a

 20-5    deposit must be maintained in the amount and subject to the same

 20-6    conditions as required for a bond under this section.

 20-7          SECTION 15.  The Texas Health Maintenance Organization Act

 20-8    (Article 20A.01 et seq., Vernon's Texas Insurance Code), is amended

 20-9    by adding Section 18A to read as follows:

20-10          Sec. 18A.  PHYSICIAN AND PROVIDER CONTRACTS.  (a)  A health

20-11    maintenance organization shall, on request, make available and

20-12    disclose to physicians and providers written application procedures

20-13    and qualification requirements for contracting with the health

20-14    maintenance organization.  Each physician and provider who

20-15    initially applies to contract with a health maintenance

20-16    organization  for the provision of health care services on behalf

20-17    of the health maintenance organization  and who is denied a

20-18    contract with the health maintenance organization  must be provided

20-19    written notice of the reasons the initial application was denied.

20-20    Unless otherwise limited by Article 21.52B, Insurance Code, this

20-21    subsection does not prohibit a health maintenance organization plan

20-22    from rejecting an application from a physician or provider based on

20-23    the determination that the plan has sufficient qualified physicians

20-24    or providers.

20-25          (b)  Before terminating a contract with a physician or

20-26    provider, the health maintenance organization shall provide a

20-27    written explanation to the physician or provider of the reasons for

20-28    termination.  On request and before the effective date of the

20-29    termination, a physician or provider shall be entitled to a review

20-30    of the health maintenance organization's proposed termination by an

20-31    advisory review panel, except in cases in which there is imminent

20-32    harm to patient health or an action by a state medical or dental or

20-33    other medical or dental licensing board, or other licensing board

20-34    or other government agency, that effectively impairs the

20-35    physician's or provider's ability to practice medicine, dentistry,

20-36    or other profession, or in cases of fraud or malfeasance.  The

20-37    advisory review panel shall be composed of physicians and

20-38    providers, including at least one representative in the physician's

20-39    or provider's specialty or a similar specialty, if available,

20-40    appointed to serve on the standing quality assurance committee or

20-41    utilization review committee of the health maintenance

20-42    organization.  The decision of the advisory review panel must be

20-43    considered but is not binding on the health maintenance

20-44    organization.  The health maintenance organization shall provide to

20-45    the affected physician or provider, on request, a copy of the

20-46    recommendation of the advisory review panel and the health

20-47    maintenance organization's determination.

20-48          (c)  Each contract between a health maintenance organization

20-49    and a physician or provider of health care services must provide

20-50    that reasonable advance notice be given to an enrollee of the

20-51    impending termination from the plan of a physician or provider who

20-52    is currently treating the enrollee.  Each contract must also

20-53    provide that the termination of the physician or provider contract,

20-54    except for reason of medical competence or professional behavior,

20-55    does not release the health maintenance organization from the

20-56    obligation to reimburse the physician or provider who is treating

20-57    an enrollee of special circumstance, such as a person who has a

20-58    disability, acute condition, or life-threatening illness or is past

20-59    the twenty-fourth week of pregnancy, at no less than the contract

20-60    rate for that enrollee's care in exchange for continuity of ongoing

20-61    treatment of an enrollee then receiving medically necessary

20-62    treatment in accordance with the dictates of medical prudence.  For

20-63    purposes of this subsection, "special circumstance" means a

20-64    condition such that the treating physician or provider reasonably

20-65    believes that discontinuing care by the treating physician or

20-66    provider could cause harm to the patient.  The special circumstance

20-67    shall be identified by the treating physician or provider, who must

20-68    request that the enrollee be permitted to continue treatment under

20-69    the physician's or provider's care and agree not to seek payment

 21-1    from the patient of any amounts for which the enrollee would not be

 21-2    responsible if the physician or provider were still on the health

 21-3    maintenance organization network.  Contracts between a health

 21-4    maintenance organization and physicians or providers shall provide

 21-5    procedures for resolving disputes regarding the necessity for

 21-6    continued treatment by a physician or provider.  This section does

 21-7    not extend the obligation of the health maintenance organization to

 21-8    reimburse the terminated physician or provider for ongoing

 21-9    treatment of an enrollee beyond the 90th day after the effective

21-10    date of the termination.  However, the obligation of the health

21-11    maintenance organization to reimburse the terminated physician or

21-12    provider or, if applicable, the enrollee for services to an

21-13    enrollee who at the time of the termination is past the 24th week

21-14    of pregnancy, extends through delivery of the child, immediate

21-15    postpartum care, and the follow-up checkup within the first six

21-16    weeks of delivery.

21-17          (d)  A physician or provider who is terminated or deselected

21-18    shall be entitled to an expedited review process by the health

21-19    maintenance organization on request by the physician or provider.

21-20    If the physician or provider is deselected for reasons other than

21-21    at the physician's or provider's request, the health maintenance

21-22    organization may not notify patients of the physician's or

21-23    provider's deselection until the effective date of the termination

21-24    or the time a review panel makes a formal recommendation.  If a

21-25    physician or provider is deselected for reasons related to imminent

21-26    harm, the health maintenance organization may notify patients

21-27    immediately.

21-28          (e)  The following applies to any health maintenance

21-29    organization that to any extent uses capitation as a method of

21-30    compensation:

21-31                (1)  The health maintenance organization shall begin

21-32    payment of capitated amounts to the enrollee's primary care

21-33    physician or primary care provider, calculated from the date of

21-34    enrollment, no later than the 90th day following the date an

21-35    enrollee has selected or has been assigned a primary care physician

21-36    or primary care provider.  If selection or assignment does not

21-37    occur at the time of enrollment, capitation which would otherwise

21-38    have been paid to a selected primary care physician or primary care

21-39    provider had a selection been made shall be reserved as a

21-40    capitation payable until such time as an enrollee makes a selection

21-41    or the plan assigns a primary care physician or primary care

21-42    provider.

21-43                (2)  If an enrollee does not select a primary care

21-44    physician or primary care provider at the time of application or

21-45    enrollment, a health maintenance organization may assign an

21-46    enrollee to a primary care physician or primary care provider.  If

21-47    a health maintenance organization elects to assign an enrollee to a

21-48    primary care physician or primary care provider, the assignment

21-49    shall be made to a primary care physician or primary care provider

21-50    located within the zip code nearest the enrollee's residence or

21-51    place of employment and, to the extent practicable given the zip

21-52    code limitation, shall be done in a manner that results in a fair

21-53    and equal distribution of enrollees among the plan's primary care

21-54    physicians or primary care providers.  An enrollee shall have the

21-55    right at any time to reject the physician or provider assigned and

21-56    to select another physician or provider from the list of primary

21-57    care physicians or primary care providers for the health

21-58    maintenance organization network.  An election by an enrollee to

21-59    reject an assigned physician or provider shall not be counted as a

21-60    change in providers for purposes of the limitation described in

21-61    Section 11(a) of this Act.

21-62                (3)  A health maintenance organization shall notify a

21-63    physician or provider of the selection of the physician or provider

21-64    as a primary care physician or primary care provider by an enrollee

21-65    within 30 working days of the selection or assignment of an

21-66    enrollee to that physician or provider by the health maintenance

21-67    organization.

21-68                (4)  As an alternative to the provisions of

21-69    Subdivisions (1), (2), and (3) of this subsection, a health

 22-1    maintenance organization may seek approval from the Texas

 22-2    Department of Insurance of a different capitation payment scheme

 22-3    that assures:

 22-4                      (A)  immediate availability and accessibility of

 22-5    a primary care physician or primary care provider; and

 22-6                      (B)  payment to the primary care physician or

 22-7    primary care provider of a capitation amount certified by a

 22-8    qualified actuary to be actuarially sufficient to compensate the

 22-9    primary care physician or primary care provider for the risk being

22-10    assumed.

22-11          (f)  A contract between a health maintenance organization and

22-12    a physician or provider may not contain any clause purporting to

22-13    indemnify the health maintenance organization for any tort

22-14    liability resulting from acts or omissions of the health

22-15    maintenance organization.

22-16          (g)  All contracts or other agreements between a health

22-17    maintenance organization and a physician or provider shall specify

22-18    that the physician or provider will hold an enrollee harmless for

22-19    payment of the cost of covered health care services in the event

22-20    the health maintenance organization fails to pay the provider for

22-21    health care services.

22-22          (h)  A health maintenance organization that conducts or uses

22-23    economic profiling of physicians or providers within the health

22-24    maintenance organization shall make available to a network

22-25    physician or provider on request the economic profile of that

22-26    physician or provider, including the standards by which the

22-27    physician or provider is measured.  The use of an economic profile

22-28    must recognize the characteristics of a physician's or provider's

22-29    practice that may account for variations from expected costs.

22-30          (i)  A contract between a health maintenance organization and

22-31    a physician or a provider must require the physician or provider to

22-32    post, in the office of the physician or provider, a notice to

22-33    enrollees on the process for resolving complaints with the health

22-34    maintenance organization.  The notice must include the Texas

22-35    Department of Insurance's toll-free telephone number for filing

22-36    complaints.

22-37          SECTION 16.  Section 19, Texas Health Maintenance

22-38    Organization Act (Article 20A.19, Vernon's Texas Insurance Code),

22-39    is amended to read as follows:

22-40          Sec. 19.  HAZARDOUS FINANCIAL CONDITION.  (a)  Whenever the

22-41    financial condition of any health maintenance organization

22-42    indicates a condition such that the continued operation of the

22-43    health maintenance organization might be hazardous to its

22-44    enrollees, creditors, or the general public, then the commissioner

22-45    [of insurance] may, after notice and opportunity for hearing, order

22-46    the health maintenance organization to take such action as may be

22-47    reasonably necessary to rectify the existing condition, including

22-48    but not necessarily limited to one or more of the following steps:

22-49                (1)  to reduce the total amount of present and

22-50    potential liability for benefits by reinsurance;

22-51                (2)  to reduce the volume of new business being

22-52    accepted;

22-53                (3)  to reduce expenses by specified methods;

22-54                (4)  to suspend or limit the writing of new business

22-55    for a period of time;

22-56                (5)  to increase the health maintenance organization's

22-57    capital and surplus by contribution; or

22-58                (6)  to suspend or revoke the certificate of authority.

22-59          (b)  The commissioner [State Board of Insurance] is

22-60    authorized, by rules and regulations, to fix uniform standards and

22-61    criteria for early warning that the continued operation of any

22-62    health maintenance organization might be hazardous to its

22-63    enrollees, creditors, or the general public, and to fix standards

22-64    for evaluating the financial condition of any health maintenance

22-65    organization, which standards shall be consistent with the purposes

22-66    expressed in Subsection (a) of this section.

22-67          SECTION 17.  Subsection (a), Section 20, Texas Health

22-68    Maintenance Organization Act (Article 20A.20, Vernon's Texas

22-69    Insurance Code), is amended to read as follows:

 23-1          (a)  The commissioner may after notice and opportunity for

 23-2    hearing (i) suspend or revoke any certificate of authority issued

 23-3    to a health maintenance organization under this Act; (ii) impose

 23-4    sanctions under Section 7, Article 1.10, Insurance Code;

 23-5    (iii) impose administrative penalties under Article 1.10E,

 23-6    Insurance Code; or (iv)  issue a cease and desist order under

 23-7    Article 1.10A, Insurance Code, if the commissioner finds that any

 23-8    of the following conditions exist:

 23-9                (1)  The health maintenance organization is operating

23-10    significantly in contravention of its basic organizational

23-11    documents, or its health care plan, or in a manner contrary to that

23-12    described in and reasonably inferred from any other information

23-13    submitted under Section 4 of this Act.

23-14                (2)  The health maintenance organization issues

23-15    evidence of coverage or uses a schedule of charges for health care

23-16    services which does not comply with the requirements of Section 9

23-17    of this Act.

23-18                (3)  The health care plan does not provide or arrange

23-19    for basic health care services or the single health care service

23-20    plan does not provide or arrange for a single health care service.

23-21                (4)  The [board certifies to the commissioner that:]

23-22                      [(A)  the] health maintenance organization does

23-23    not meet the requirements of Section 5(a)(1) [5(a)(2)] of this

23-24    Act.[; or]

23-25                (5)  The [(B)  the] health maintenance organization is

23-26    unable to fulfill its obligation to furnish health care services as

23-27    required under its health care plan or to furnish a single health

23-28    care service as required under its single health care service plan.

23-29                (6) [(5)]  The health maintenance organization is no

23-30    longer financially responsible and may be reasonably expected to be

23-31    unable to meet its obligations to enrollees or prospective

23-32    enrollees.

23-33                (7) [(6)]  The health maintenance organization has

23-34    failed to implement the complaint system required by Section 12 of

23-35    this Act in a manner to resolve reasonably valid complaints.

23-36                (8) [(7)]  The health maintenance organization, or any

23-37    person on its behalf, has advertised or merchandised its services

23-38    in an untrue, misrepresentative, misleading, deceptive, or unfair

23-39    manner.

23-40                (9) [(8)]  The continued operation of the health

23-41    maintenance organization would be hazardous to its enrollees.

23-42                (10) [(9)]  The health maintenance organization has

23-43    otherwise failed to comply substantially with this Act, and any

23-44    rule and regulation thereunder.

23-45                (11)  The health maintenance organization has failed to

23-46    carry out corrective action the commissioner considers necessary to

23-47    correct a failure to comply with this Act, any applicable provision

23-48    of the Insurance Code, or any applicable rule or order of the

23-49    commissioner within 30 days after the date of notice of a

23-50    deficiency or within any longer period of time that the

23-51    commissioner determines to be reasonable and specifies in the

23-52    notice.

23-53          SECTION 18.  Section 22, Texas Health Maintenance

23-54    Organization Act (Article 20A.22, Vernon's Texas Insurance Code),

23-55    is amended to read as follows:

23-56          Sec. 22.  RULES AND REGULATIONS.  (a)  The commissioner

23-57    [State Board of Insurance] may promulgate such reasonable rules and

23-58    regulations as are necessary and proper to carry out the provisions

23-59    of this Act.

23-60          (b)  The commissioner [State Board of Insurance] is

23-61    specifically authorized to promulgate rules to prescribe

23-62    [prescribing] authorized investments for health maintenance

23-63    organizations for all investments for which provision is not

23-64    otherwise made in this Act; to ensure that enrollees have adequate

23-65    access to health care services; and to establish minimum

23-66    physician/patient ratios, mileage requirements for primary and

23-67    specialty care, maximum travel time, and maximum waiting times for

23-68    obtaining appointments.  The rulemaking authority provided by this

23-69    subsection does not limit in any manner the rulemaking authority

 24-1    granted to the commissioner [State Board of Insurance] under

 24-2    Subsection (a) of this section.

 24-3          (c)  The commissioner may promulgate such reasonable rules

 24-4    and regulations as are necessary and proper to meet the

 24-5    requirements of federal law and regulations.

 24-6          SECTION 19.  Section 23, Texas Health Maintenance

 24-7    Organization Act (Article 20A.23, Vernon's Texas Insurance Code),

 24-8    is amended to read as follows:

 24-9          Sec. 23.  APPEALS.  (a)  Any person who is affected by any

24-10    rule, ruling, or decision of the Texas Department of Insurance or

24-11    the commissioner [or board] shall have the right to have such rule,

24-12    ruling, or decision reviewed by the commissioner [State Board of

24-13    Insurance] by making an application to the commissioner [State

24-14    Board of Insurance].  Such application shall state the identities

24-15    of the person, the rule, ruling, or decision complained of, the

24-16    interest of the person in such rule, ruling, or decision, the

24-17    grounds of such objection, the action sought of the commissioner

24-18    [State Board of Insurance], and the reasons and grounds for such

24-19    action by the commissioner [State Board of Insurance].  The

24-20    original shall be filed with the chief clerk of the Texas

24-21    Department [State Board] of Insurance together with a certification

24-22    that a true and correct copy of such application has been filed

24-23    with the commissioner.  Within 30 days after the application is

24-24    filed, and after 10 days' written notice to all parties of record,

24-25    the commissioner [State Board of Insurance] shall review the action

24-26    complained of in a public hearing and render its decision at the

24-27    earliest possible date thereafter.  The commissioner [State Board

24-28    of Insurance] shall make such other rules and regulations with

24-29    respect to such applications and their consideration as it

24-30    considers to be advisable, not inconsistent with this Act.  Said

24-31    application shall have precedence over all other business of a

24-32    different nature pending before said commissioner [State Board of

24-33    Insurance].

24-34          (b)  In the public hearing, any and all evidence and matters

24-35    pertinent to the appeal may be submitted to the commissioner [State

24-36    Board of Insurance] whether included in the application or not.

24-37          (c)  If any person who is affected by any rule, ruling, or

24-38    decision of the commissioner [State Board of Insurance] be

24-39    dissatisfied with any rule, ruling, or decision adopted by the

24-40    commissioner, [board, or State Board of Insurance,] that person,

24-41    after failing to get relief from the commissioner [State Board of

24-42    Insurance], may file a petition seeking review of the rule, ruling,

24-43    or decision and setting forth the particular objection to such

24-44    rule, ruling, or decision, or either or all of them, in a district

24-45    court of Travis County, Texas, and not elsewhere, against the

24-46    commissioner [State Board of Insurance] as defendant.  The action

24-47    shall have precedence over all other causes on the docket of a

24-48    different nature.  The proceedings on appeal shall be tried and

24-49    determined as provided by Article 1.04, Insurance Code.  Either

24-50    party to the action may appeal to the apellate court having

24-51    jurisdiction of the cause and the appeal shall at once be

24-52    returnable to the apellate court having jurisdiction of the cause

24-53    and the action so appealed shall have precedence in the appellate

24-54    court over all causes of a different character therein pending.

24-55    The commissioner [State Board of Insurance] is not required to give

24-56    any appeal bond in any cause arising hereunder.

24-57          SECTION 20.  Subdivision (4), Subsection (f), Section 26,

24-58    Texas Health Maintenance Organization Act (Article 20A.26, Vernon's

24-59    Texas Insurance Code), is amended to read as follows:

24-60                (4)  Except for Articles 21.07-6 and 21.58A, Insurance

24-61    Code, the insurance laws, including the group hospital service

24-62    corporation law, do not apply to physicians and providers; however,

24-63    [provided that Article 21.58A shall not apply to utilization review

24-64    undertaken by] a physician or provider who conducts utilization

24-65    review during [in] the ordinary course of treatment of patients [by

24-66    a physician or provider] pursuant to a joint or delegated review

24-67    agreement or agreements with a health maintenance organization on

24-68    services rendered by the physician or provider shall not be

24-69    required to obtain certification under Section 3, Article 21.58A,

 25-1    Insurance Code.

 25-2          SECTION 21.  Section 28, Texas Health Maintenance

 25-3    Organization Act (Article 20A.28, Vernon's Texas Insurance Code),

 25-4    is amended to read as follows:

 25-5          Sec. 28.  AUTHORITY TO CONTRACT.  The commissioner [or

 25-6    board], in carrying out the commissioner's [their] obligations

 25-7    under this Act, may contract with other state agencies or, after

 25-8    notice and opportunity for hearing, with other qualified persons to

 25-9    make recommendations concerning the determinations to be made by

25-10    the commissioner [or board].

25-11          SECTION 22.  Section 32, Texas Health Maintenance

25-12    Organization Act (Article 20A.32, Vernon's Texas Insurance Code),

25-13    is amended to read as follows:

25-14          Sec. 32.  FEES.  (a)(1)  Every organization subject to this

25-15    chapter shall pay to the commissioner the following fees:

25-16                      (A)  for filing and review of its original

25-17    application for a certificate of authority, a fee in an amount not

25-18    to exceed $18,000 [$15,000] as determined by the commissioner

25-19    [State Board of Insurance];

25-20                      (B)  for filing each annual report pursuant to

25-21    Section 10 of this Act, a fee in an amount not to exceed $500 as

25-22    determined by the commissioner [State Board of Insurance];

25-23                      (C)  the expenses of all examinations of health

25-24    maintenance organizations made on behalf of the State of Texas by

25-25    the commissioner [State Board of Insurance] or under the

25-26    commissioner's [its] authority in such amounts as the commissioner

25-27    shall certify to be just and reasonable;

25-28                      (D)  the expenses of an examination under Section

25-29    17(a) of this Act incurred by the commissioner or under the

25-30    commissioner's authority, provided that:

25-31                            (i)  examination expenses are the expenses

25-32    attributable directly to a specific examination including the

25-33    actual salaries and expenses of the examiners directly attributable

25-34    to that examination as determined under rules adopted by the

25-35    commissioner; and

25-36                            (ii)  the expenses shall be assessed by the

25-37    commissioner and paid in accordance with rules adopted by the

25-38    commissioner;

25-39                      (E)  the licensing, appointment, and examination

25-40    fees pursuant to Section 15 of this[, Texas Health Maintenance

25-41    Organization] Act [(Article 20A.15, Vernon's Texas Insurance

25-42    Code)];

25-43                      (F) [(E)]  for filing an evidence of coverage

25-44    which requires approval, a fee not to exceed $200 as determined by

25-45    the commissioner [State Board of Insurance]; and

25-46                      (G) [(F)]  for filings required by rule but which

25-47    do not require approval, a fee not to exceed $100 as determined by

25-48    the commissioner [State Board of Insurance].

25-49                (2)  The commissioner [State Board of Insurance] shall,

25-50    within the limits fixed by this subsection, prescribe the fees to

25-51    be charged under this subsection.

25-52                (3)  Fees collected under this subsection must be

25-53    deposited in the State Treasury to the credit of the Texas

25-54    Department [State Board] of Insurance operating fund.

25-55                (4)  Notwithstanding Subdivision (1) of this

25-56    subsection, the comptroller shall collect the annual report filing

25-57    fee prescribed by Subdivision (1)(B) of this subsection.

25-58          (b)[(1)  Every organization subject to this chapter shall pay

25-59    to the board the following fees:]

25-60                      [(A)  for review of its original application for

25-61    a certificate of authority, a fee in an amount not to exceed $3,000

25-62    as determined by the board and paid pursuant to rules adopted by

25-63    the board; and]

25-64                      [(B)  the expenses of an examination under

25-65    Section 17(b) of this Act incurred by the board or under its

25-66    authority.]

25-67                [(2)  Examination expenses are the expenses

25-68    attributable directly to a specific examination including the

25-69    actual salaries and expenses of the examiners plus the cost of

 26-1    administrative departmental expenses directly attributable to that

 26-2    examination as determined under rules adopted by the board.  The

 26-3    expenses shall be assessed by the board and paid in accordance with

 26-4    rules adopted by the board.]

 26-5                [(3)  Except as provided by Subdivision (4) of this

 26-6    subsection, the amount paid by a health maintenance organization in

 26-7    each taxable year under Subdivision (1)(B) of this subsection shall

 26-8    be allowed as a credit on the amount of premium taxes to be paid by

 26-9    the health maintenance organization for that taxable year.]

26-10                [(4)]  The amount directly attributable to an

26-11    examination of the books, records, accounts, or principal offices

26-12    of a health maintenance organization located outside this state may

26-13    not be allowed as a credit against the amount of premium taxes to

26-14    be paid by the health maintenance organization.

26-15                [(5)  The funds received by the board shall be

26-16    deposited in the state treasury to the credit of the Texas

26-17    Department of Health health maintenance organization fund, and

26-18    those funds shall be appropriated to the Texas Department of Health

26-19    to carry out the statutory duties of the board under this chapter.]

26-20          SECTION 23.  Subsections (a), (b), (c), (e), and (g), Section

26-21    36, Texas Health Maintenance Organization Act (Article 20A.36,

26-22    Vernon's Texas Insurance Code), are amended to read as follows:

26-23          (a)  The Health Maintenance Organization Solvency

26-24    Surveillance Committee is created under the direction of the

26-25    commissioner.  The committee shall perform its functions under a

26-26    plan of operation approved by the commissioner [State Board of

26-27    Insurance].  The committee is composed of nine members appointed by

26-28    the commissioner [of insurance].  No two members may be employees

26-29    or officers of the same health maintenance organization or holding

26-30    company system.  The qualifications for membership, terms of

26-31    office, and reimbursement of expenses shall be as provided by the

26-32    plan of operation approved by the commissioner [State Board of

26-33    Insurance].  A "member" is a Texas licensed health maintenance

26-34    organization as defined in Section 2(n) [2(j)] of this Act or a

26-35    public representative.  The commissioner of insurance shall appoint

26-36    the member along with the officer or employee of the member who

26-37    shall serve on the committee if the member is a representative of a

26-38    Texas licensed health maintenance organization or its holding

26-39    company system.  Five of the members shall represent health

26-40    maintenance organizations or their holding company system.  Of the

26-41    health maintenance organization members, one shall be a single

26-42    health care service plan as defined in Section 2(y) [2(s)] of this

26-43    Act.  The remaining health maintenance organization members shall

26-44    be selected by the commissioner [of insurance] with due

26-45    consideration of factors deemed appropriate including, but not

26-46    limited to, the varying categories of premium income and

26-47    geographical location.

26-48          A public representative may not be:

26-49                (1)  an officer, director, or employee of a health

26-50    maintenance organization, a health maintenance organization agent,

26-51    or any other business entity regulated by the commissioner [State

26-52    Board of Insurance];

26-53                (2)  a person required to register with the Texas

26-54    Ethics Commission [secretary of state] under Chapter 305,

26-55    Government Code; or

26-56                (3)  related to a person described by Subdivision (1)

26-57    or (2) of this subsection within the second degree of affinity or

26-58    consanguinity.

26-59          (b)(1)  The committee shall assist and advise the

26-60    commissioner relating to the detection and prevention of insolvency

26-61    problems regarding health maintenance organizations.  The committee

26-62    shall also assist and advise the commissioner regarding any health

26-63    maintenance organization placed in rehabilitation, liquidation,

26-64    supervision, or conservation.  The method of providing this

26-65    assistance and advice shall be as contained in the plan of

26-66    operation approved by the commissioner [State Board of Insurance].

26-67                (2)  Reports regarding the financial condition of Texas

26-68    licensed health maintenance organizations and regarding the

26-69    financial condition, administration, and status of health

 27-1    maintenance organizations in rehabilitation, liquidation,

 27-2    supervision, or conservation shall be provided to the committee

 27-3    members at meetings.  Committee members shall not reveal the

 27-4    condition of nor any information secured in the course of any

 27-5    meeting of the Solvency Surveillance Committee with regard to any

 27-6    corporation, form or person examined by the committee.  Committee

 27-7    proceedings shall be filed with the commissioner [and reported to

 27-8    the members of the State Board of Insurance].

 27-9          (c)  To provide funds for the administrative expenses of the

27-10    commissioner [State Board of Insurance] regarding rehabilitation,

27-11    liquidation, supervision, or conservation of an impaired health

27-12    maintenance organization in this state, the committee, at the

27-13    commissioner's direction, shall assess each health maintenance

27-14    organization licensed in this state in the proportion that the

27-15    gross premiums of that health maintenance organization written in

27-16    this state during the preceding calendar year bear to the aggregate

27-17    gross premiums written in this state by all health maintenance

27-18    organizations, as furnished to the committee by the commissioner

27-19    after review of annual statements and other reports the

27-20    commissioner considers necessary.  Assessments to supplement or pay

27-21    for administrative expenses of rehabilitation, liquidation,

27-22    supervision, or conservation may be made only after the

27-23    commissioner determines that adequate assets of the health

27-24    maintenance organization are not immediately available for those

27-25    purposes or that use of those assets could be detrimental to

27-26    rehabilitation, liquidation, supervision, or conservation.  The

27-27    commissioner may abate or defer the assessments, either in whole or

27-28    in part, if, in the opinion of the commissioner, payment of the

27-29    assessment would endanger the ability of a health maintenance

27-30    organization to fulfill its contractual obligations.  If an

27-31    assessment is abated or deferred, either in whole or in part, the

27-32    amount by which the assessment is abated or deferred may be

27-33    assessed against the remaining licensed health maintenance

27-34    organizations in a manner consistent with the basis for assessments

27-35    provided by the plan of operation approved by the commissioner

27-36    [State Board of Insurance].  The total of all assessments on a

27-37    health maintenance organization may not exceed one-quarter of one

27-38    percent of the health maintenance organization's gross premiums in

27-39    any one calendar year.

27-40          (e)  Not later than the 180th day after the date on which the

27-41    final member of the committee is appointed, the committee shall

27-42    submit to the commissioner [State Board of Insurance] a plan of

27-43    operation.  The plan of operation takes effect on approval in

27-44    writing by the commissioner [State Board of Insurance].  If the

27-45    committee fails to submit a suitable plan of operation within the

27-46    period set by this subsection, or if, after the adoption of a plan,

27-47    the committee fails to submit suitable amendments to the plan, the

27-48    commissioner [State Board of Insurance] may, after notice and

27-49    hearing, adopt rules as necessary to implement this Act.  Those

27-50    rules continue in effect until modified by the commissioner [State

27-51    Board of Insurance] or superseded by a plan submitted by the

27-52    committee and approved by the commissioner [State Board of

27-53    Insurance].

27-54          (g)  A licensed health maintenance organization or its agents

27-55    or employees, the committee or its agents, employees, or members,

27-56    or the [State Board of Insurance, the] commissioner[,] or the

27-57    commissioner's [their] representatives are not liable in a civil

27-58    action for any act taken or not taken in good faith in the

27-59    performance of powers and duties under this section.

27-60          SECTION 24.  The Texas Health Maintenance Organization Act

27-61    (Article 20A.01 et seq., Vernon's Texas Insurance Code), is amended

27-62    by adding Section 37 to read as follows:

27-63          Sec. 37.  HEALTH MAINTENANCE ORGANIZATION QUALITY ASSURANCE.

27-64    (a)  A health maintenance organization shall establish procedures

27-65    to assure that the health care services provided to enrollees shall

27-66    be rendered under reasonable standards of quality of care

27-67    consistent with prevailing professionally recognized standards of

27-68    medical practice.  Such procedures shall include mechanisms to

27-69    assure availability, accessibility, quality, and continuity of

 28-1    care.

 28-2          (b)  A health maintenance organization shall have an ongoing

 28-3    internal quality assurance program to monitor and evaluate its

 28-4    health care services, including primary and specialist physician

 28-5    services, and ancillary and preventive health care services, in all

 28-6    institutional and noninstitutional contexts.  The commissioner by

 28-7    rule may establish minimum standards and requirements for ongoing

 28-8    internal quality assurance programs for health maintenance

 28-9    organizations, including but not limited to standards for assuring

28-10    availability, accessibility, quality, and continuity of care.

28-11          (c)  A health maintenance organization shall record formal

28-12    proceedings of quality assurance program activities and maintain

28-13    documentation in a confidential manner.  Quality assurance program

28-14    minutes shall be available to the commissioner.

28-15          (d)  A health maintenance organization shall establish and

28-16    maintain a physician review panel to assist in reviewing medical

28-17    guidelines or criteria and to assist in determining the

28-18    prescription drugs to be covered by the health maintenance

28-19    organization, if the health maintenance organization offers a

28-20    prescription drug benefit.

28-21          (e)  A health maintenance organization shall ensure the use

28-22    and maintenance of an adequate patient record system that will

28-23    facilitate documentation and retrieval of clinical information for

28-24    the purpose of the health maintenance organization's evaluation of

28-25    continuity and coordination of patient care and assessment of the

28-26    quality of health and medical care provided to enrollees.

28-27          (f)  Enrollees' clinical records shall be available to the

28-28    commissioner for examination and review to determine compliance.

28-29    Such records shall be confidential and not subject to the open

28-30    records law, Chapter 552, Government Code.

28-31          (g)  A health maintenance organization shall establish a

28-32    mechanism for the periodic reporting of quality assurance program

28-33    activities to the governing body, providers, and appropriate

28-34    organization staff.

28-35          SECTION 25.  This Act takes effect September 1, 1997.

28-36          SECTION 26.  The importance of this legislation and the

28-37    crowded condition of the calendars in both houses create an

28-38    emergency and an imperative public necessity that the

28-39    constitutional rule requiring bills to be read on three several

28-40    days in each house be suspended, and this rule is hereby suspended.

28-41                                 * * * * *