HBA-ATS S.B. 890 76(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 890
By: Harris
Insurance
5/6/1999
Engrossed



BACKGROUND AND PURPOSE 

As the health care industry has evolved and moved to managed care, the
delivery of health care now involves a myriad of organizational structures,
from health maintenance organizations (HMOs) to medical groups, independent
practice associations (IPAs), preferred provider organizations (PPOs), and
integrated delivery systems, among others. These different groups within
the industry have formed competitive networks of insurers, hospitals, and
physician organizations in an attempt to lower costs, improve efficiency,
and increase bargaining power.  Within these networks, organizations
contract with each other to supply different services, involving both
physicians and administrators.  These contracts usually involve some
sharing or delegation of management, utilization review, billing, and claim
payment services.  When one or several organizations within the network
default on their contractual obligations, as has recently occurred, or have
difficulty paying for services rendered, the delivery of medical care
suffers. Without state regulation, these networks may be unable to
adequately serve their customers. 

S.B. 890 requires a health maintenance organization (HMO) that enters into
a delegation agreement with a delegated network to execute a written
agreement with the network.  Among other requirements, the contract must
contain a monitoring plan, which includes a description of financial
practices that will ensure that the network tracks and reports liabilities
that have been incurred but not reported, a summary of the total amount
paid by the network to physicians and providers on a monthly basis, and a
summary of complaints from physicians and providers regarding delays in
payments of claims or nonpayment of claims, including the status of each
complaint, on a monthly basis.  The contract must also contain a provision
that prohibits the network and the physicians and providers with whom it
has contracted from billing or attempting to collect from an enrollee under
any circumstance, including the insolvency of the HMO or network, payments
for covered services other than authorized copayments and deductibles. 

This bill also authorizes the Texas Department of Insurance (department),
upon receiving a request for intervention from an HMO, to request financial
and operational documents from the network to further investigate
deficiencies indicated by the monitoring plan, to conduct an on-site audit
of the network if the department determines that the network is not
complying with the required monitoring standards, or, upon violation of a
monitoring plan, to suspend or revoke the third party administrator license
or utilization review agent license of the network or a third party with
which the network has contracted.  In addition, this bill authorizes the
department, if a network does not comply with the department's request for
corrective action, to order the HMO to temporarily or permanently cease
assignment of new enrollees to the network, temporarily or permanently
transfer enrollees to alternative delivery systems to receive services, or
modify or terminate its contract with the network. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the commissioner of insurance in
SECTION 2 (Section 18C, Article 20A, V.T.I.C.) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 2, Article 20A, V.T.I.C. (Texas Health
Maintenance Organization Act), by adding Subsections (dd) and (ee), to
define "delegation agreement" and "delegated network." 
 
SECTION 2.  Amends Chapter 20A, V.T.I.C. (Texas Health Maintenance
Organization Act), by adding Section 18C, as follows: 

Sec. 18C.  DELEGATION OF CERTAIN FUNCTIONS TO DELEGATED NETWORKS. (a)
Requires a health maintenance organization (HMO) that enters into a
delegation agreement with a delegated network (network) to execute a
written agreement with the network.  Requires the HMO to file the agreement
with the Texas Department of Insurance (department) by the 30th day after
the agreement is executed.  Enumerates the provisions that must be included
in the agreement, some of which are: 

 _a monitoring plan, which includes a description of financial practices
that will ensure that the network tracks and reports liabilities that have
been incurred but not reported, a summary of the total amount paid by the
network to physicians and providers on a monthly basis, and a summary of
complaints from physicians and providers regarding delays in payments of
claims or nonpayment of claims, including the status of each complaint, on
a monthly basis; 

 _a provision that prohibits the network and the physicians and providers
with whom it has contracted from billing or attempting to collect from an
enrollee under any circumstance, including the insolvency of the HMO or
network, payments for covered services other than authorized copayments and
deductibles; and 

 _an acknowledgment and agreement by the network that the HMO is required
to establish, operate, and maintain a health care delivery system, quality
assurance system, provider credentialing system, and other systems and
programs that meet statutory and regulatory standards, is directly
accountable for compliance with those standards, and is not precluded from
requesting that the network provide proof of financial viability; that the
role of the network and any entity with which it subcontracts in
contracting with the HMO is limited to performing certain delegated
functions of the HMO, using standards approved by the HMO and  which are in
compliance with applicable statutes and rules and subject to the HMO's
oversight and monitoring of the network's performance; and that if the
network fails to meet monitoring standards established to ensure that
functions delegated or assigned to the network under the delegation
contract are in full compliance with all statutory and regulatory
requirements, the HMO may cancel delegation of any management
responsibilities. 

(b) Requires an HMO to provide to each network with which it has a
delegation agreement certain information in standard electronic format, at
least monthly unless otherwise provided in the agreement.  Specifies the
information that must be provided. 

(c)  Requires an HMO to provide to a network with which it has a delegation
agreement risk-pool data, reported quarterly and on settlement, and the
rates required by the agreement and any known future facility contract
rates for the HMO, if hospital or facility costs impact the network's
costs, reported annually or on recontract. 

(d) Requires an HMO that receives information through the monitoring plan
required under Subsection (a) that indicates the network is not operating
in accordance with its written agreement or is operating in a condition
that renders the continuance of its business hazardous to the enrollees, in
writing, to notify the network of those findings, and request a written
explanation of the network's noncompliance with the written agreement or
the existence of the condition that renders the continuance of the
network's business hazardous to the enrollees. 

(e) Requires a network to respond to a request from an HMO under Subsection
(d) in writing by the 30th day after the request is received. 

(f) Requires the HMO to cooperate with the network to correct any failure
by the network to comply with the regulatory requirements of the department
relating to any matters  delegated to the network by the HMO or necessary
for the HMO to ensure compliance with statutory or regulatory requirements. 

(g) Requires an HMO to notify the department and request intervention if
the HMO does not receive a timely response from the network or the HMO
receives a timely response from the network, but the HMO and network are
unable to reach an agreement as to whether the network is complying with
the written agreement or has corrected any problem regarding a practice
that is hazardous to an HMO enrollee. 

(h) Authorizes the department, upon receiving a request for intervention,
to request financial and operational documents from the network to further
investigate deficiencies indicated by the monitoring plan, to conduct an
on-site audit of the network if the department determines that the network
is not complying with the monitoring standards required under Subsection
(a), or, upon violation of a monitoring plan, to suspend or revoke the
third party administrator license or utilization review agent license of
the network or a third party with which the network has contracted. 

(i) Requires the department to report to the network and the HMO the
results of its review by the 60th day after the department's initial
request for documentation.   Prohibits the department from reporting to the
HMO any information regarding prices, cost of care, or other information
not relevant to the monitoring plan. 

(j) Requires the network to respond to the department's report and submit a
corrective plan to the department and the HMO by the 30th day after the
network receives the department's report.  Authorizes the network to
withhold information regarding prices, cost of care, or other information
not relevant to the monitoring plan. 

(k) Requires that reports and corrective plans required under Subsection
(i) or (j) be treated as public documents, except information about prices,
costs of care, or irrelevant information.  Requires that any information
that is confidential by law included in those reports and corrective plans
be considered confidential. 

(l)  Authorizes the department to request that a network take corrective
action to comply with the department's statutory and regulatory
requirements that relate to any matters delegated by the HMO to the network
or are necessary to ensure the HMO's compliance with statutory and
regulatory requirements. 

(m) Authorizes the department, if a network does not comply with the
department's request for corrective action, to order the HMO to temporarily
or permanently cease assignment of new enrollees to the network,
temporarily or permanently transfer enrollees to alternative delivery
systems to receive services, or modify or terminate its contract with the
network. 

(n) Authorizes the commissioner of insurance (commissioner) to adopt rules
to interpret, implement, and enforce this section and its augmentations. 

(o) Requires the commissioner to adopt rules requiring networks to
establish a process to allow enrollees to access physicians or health care
providers who are not in the network but who are in the HMO for enrollees
who have a prior relationship with a provider who is in the HMO delivery
network but not in the network, and for enrollees who are past the 24th
week of pregnancy or who have life threatening, serious, chronic, acute, or
disabling conditions, diseases, or illnesses. 

(p) Requires the commissioner to maintain enrollee and provider complaints
identifying complaints made about networks. 

SECTION 3.  Effective date: September 1, 1999.

SECTION 4.  Emergency clause.