76R12166 T By Smithee H.B. No. 3019 Substitute the following for H.B. No. 3019: By Seaman C.S.H.B. No. 3019 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the delegation of certain functions by health 1-3 maintenance organizations. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Section 2, Texas Health Maintenance Organization 1-6 Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by 1-7 adding Subsections (dd) and (ee) to read as follows: 1-8 (dd) "Delegation agreement" means an agreement by which a 1-9 health maintenance organization transfers the responsibility for a 1-10 function regulated under this Act. 1-11 (ee) "Delegated network" means an entity, other than a 1-12 health maintenance organization authorized to do business under 1-13 this Act or an insurer authorized to do business under Chapter 3, 1-14 Insurance Code, which by itself, or through one or more entities, 1-15 undertakes to arrange for or to provide medical care to an enrollee 1-16 in exchange for a predetermined payment for each enrollee on a 1-17 prospective basis. The term does not include an individual 1-18 physician or a group of employed physicians practicing medicine 1-19 under one federal tax identification number and whose total claims 1-20 paid to providers not employed by the group is less than 20 percent 1-21 of the total collected revenue of the group calculated on a 1-22 calendar year basis. 1-23 SECTION 2. The Texas Health Maintenance Organization Act 1-24 (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding 2-1 Section 18C to read as follows: 2-2 Sec. 18C. DELEGATION OF CERTAIN FUNCTIONS TO DELEGATED 2-3 NETWORKS. (a) A health maintenance organization that enters into 2-4 a delegation agreement with a delegated network shall execute a 2-5 written agreement with the delegated network. The health 2-6 maintenance organization shall file the written agreement with the 2-7 department not later than the 30th day after the date the agreement 2-8 is executed. The written agreement must contain: 2-9 (1) a monitoring plan, which includes: 2-10 (A) a description of financial practices that 2-11 will ensure that the delegated network tracks and reports 2-12 liabilities that have been incurred but not reported; 2-13 (B) a summary of the total amount paid by the 2-14 delegated network to physicians and providers on a monthly basis; 2-15 and 2-16 (C) a summary of complaints from physicians and 2-17 providers regarding delays in payments of claims or nonpayment of 2-18 claims, including the status of each complaint, on a monthly basis; 2-19 (2) a provision that the agreement cannot be 2-20 terminated by the delegated network or the health maintenance 2-21 organization without written notice provided before the 90th day 2-22 preceding the termination date; 2-23 (3) a provision that prohibits the delegated network 2-24 and the physicians and providers with whom it has contracted from 2-25 billing or attempting to collect from an enrollee under any 2-26 circumstance, including the insolvency of the health maintenance 2-27 organization or delegated network, payments for covered services 3-1 other than authorized copayments and deductibles; 3-2 (4) a provision that the delegation agreement may not 3-3 be construed to limit in any way the health maintenance 3-4 organization's authority or responsibility to comply with all 3-5 statutory and regulatory requirements; 3-6 (5) a provision that requires a delegated network or a 3-7 third party to provide a license number and to certify that the 3-8 network or third party is licensed as a third party administrator 3-9 under Article 21.07-6, Insurance Code, if the health maintenance 3-10 organization delegates its claims payment function to the delegated 3-11 network or a third party; 3-12 (6) a provision that requires a delegated network or a 3-13 third party to provide a license number and to certify that the 3-14 network or third party is licensed as a utilization review agent 3-15 under Article 21.58A, Insurance Code, if the health maintenance 3-16 organization delegates its utilization review function to the 3-17 delegated network or a third party; 3-18 (7) an acknowledgment and agreement by the delegated 3-19 network that: 3-20 (A) the health maintenance organization is: 3-21 (i) required to establish, operate, and 3-22 maintain a health care delivery system, quality assurance system, 3-23 provider credentialing system, and other systems and programs that 3-24 meet statutory and regulatory standards; and 3-25 (ii) directly accountable for compliance 3-26 with those standards; 3-27 (iii) not precluded from contractually 4-1 requesting that the delegated network provide proof of financial 4-2 viability. 4-3 (B) the role of the delegated network and any 4-4 entity with which it subcontracts in contracting with the health 4-5 maintenance organization is limited to performing certain delegated 4-6 functions of the health maintenance organization, using standards 4-7 approved by the health maintenance organization and which are in 4-8 compliance with applicable statutes and rules and subject to the 4-9 health maintenance organization's oversight and monitoring of the 4-10 delegated network's performance; and 4-11 (C) if the delegated network fails to meet 4-12 monitoring standards established to ensure that functions delegated 4-13 or assigned to the network under the delegation contract are in 4-14 full compliance with all statutory and regulatory requirements, the 4-15 health maintenance organization may cancel delegation of any 4-16 management responsibilities; 4-17 (8) a provision that requires the delegated network to 4-18 make available to the health maintenance organization samples of 4-19 contracts with physicians and providers to ensure compliance with 4-20 the contractual requirements described by Subdivisions (2) and (3) 4-21 of this subsection, except that the agreement may not require that 4-22 the delegated network make available to the health maintenance 4-23 organization contractual provisions relating to financial 4-24 arrangements with the delegated network's physicians and providers; 4-25 and 4-26 (9) a provision that requires the delegated network to 4-27 provide the health maintenance organization, in a usable format 5-1 necessary for audit purposes and at most quarterly unless otherwise 5-2 specified in the agreement, the data necessary for the health 5-3 maintenance organization to comply with the department's reporting 5-4 requirements with respect to any delegated functions performed 5-5 under the delegation agreement, including: 5-6 (A) a summary: 5-7 (i) describing the methods, including 5-8 capitation, fee-for-service, or other risk arrangements, that the 5-9 delegated network used to pay its physicians and providers; and 5-10 (ii) including the percentage of 5-11 physicians and providers paid for each payment category; 5-12 (B) the period that claims and debts for medical 5-13 services owed by the delegated network have been pending and the 5-14 aggregate dollar amount of those claims and debts; 5-15 (C) information that will enable the health 5-16 maintenance organization to file claims for reinsurance, 5-17 coordination of benefits and subrogation, if required by the health 5-18 maintenance organization's contract with the delegated network; and 5-19 (D) documentation, except for information, 5-20 documents, and deliberations related to peer review that are 5-21 confidential or privileged under Section 5.06, Medical Practice Act 5-22 (Article 4495b, Vernon's Texas Civil Statutes), that relates to: 5-23 (i) a regulatory agency's inquiry or 5-24 investigation of the delegated network or of an individual 5-25 physician or provider with whom the delegated network contracts 5-26 that relates to an enrollee of the health maintenance organization; 5-27 and 6-1 (ii) the final resolution of a regulatory 6-2 agency's inquiry or investigation. 6-3 (b) A health maintenance organization shall provide to each 6-4 delegated network with which it has a delegation agreement the 6-5 following information in standard electronic format, at least 6-6 monthly unless otherwise provided in the agreement: 6-7 (1) the names and dates of birth or social security 6-8 numbers of the enrollees of the health maintenance organization who 6-9 are eligible or assigned to receive services from the delegated 6-10 network, including the enrollees added and terminated since the 6-11 previous reporting period; 6-12 (2) the age, sex, benefit plan and any riders to that 6-13 benefit plan, and employer for the enrollees of the health 6-14 maintenance organization who are eligible or assigned to receive 6-15 services from the delegated network; 6-16 (3) if the health maintenance organization pays any 6-17 claims for the delegated network, a summary of the number and 6-18 amount of claims paid by the health maintenance organization on 6-19 behalf of the delegated network during the previous reporting 6-20 period. A delegated network is not precluded from receiving, upon 6-21 request, additional information regarding such claims; 6-22 (4) if the health maintenance organization pays any 6-23 claims for the delegated network, a summary of the number and 6-24 amount of pharmacy prescriptions paid for each enrollee for which 6-25 the delegated network has taken partial risk during the previous 6-26 reporting period. A delegated network is not precluded from 6-27 receiving, upon request, additional information regarding such 7-1 claims; 7-2 (5) information that enables the delegated network to 7-3 file claims for reinsurance, coordination of benefits and 7-4 subrogation; and 7-5 (6) patient complaint data that relates to the 7-6 delegated network. 7-7 (c) In addition to the information required by Subsection 7-8 (b) of this section, a health maintenance organization shall 7-9 provide to a delegated network with which it has a delegation 7-10 agreement: 7-11 (1) detailed risk-pool data, reported quarterly and on 7-12 settlement; and 7-13 (2) the rates required by the agreement and any known 7-14 future facility contract rates for the health maintenance 7-15 organization, if hospital or facility costs impact the delegated 7-16 network's costs, reported annually or on recontract. 7-17 (d) A health maintenance organization that receives 7-18 information through the monitoring plan required by Subsection 7-19 (a)(1) of this section that indicates the delegated network is not 7-20 operating in accordance with its written agreement or is operating 7-21 in a condition that renders the continuance of its business 7-22 hazardous to the enrollees, shall, in writing: 7-23 (1) notify the delegated network of those findings; 7-24 and 7-25 (2) request a written explanation of: 7-26 (A) the delegated network's noncompliance with 7-27 the written agreement; or 8-1 (B) the existence of the condition that renders 8-2 the continuance of the delegated network's business hazardous to 8-3 the enrollees. 8-4 (e) A delegated network shall respond to a request from a 8-5 health maintenance organization under Subsection (d) of this 8-6 section in writing not later than the 30th day after the date the 8-7 request is received. 8-8 (f) The health maintenance organization shall cooperate with 8-9 the delegated network to correct any failure by the delegated 8-10 network to comply with the regulatory requirements of the 8-11 department relating to any matters: 8-12 (1) delegated to the delegated network by the health 8-13 maintenance organization; or 8-14 (2) necessary for the health maintenance organization 8-15 to ensure compliance with statutory or regulatory requirements. 8-16 (g) The health maintenance organization shall notify the 8-17 department and request intervention if: 8-18 (1) the health maintenance organization does not 8-19 receive a timely response from the delegated network as required by 8-20 Subsection (e) of this section; or 8-21 (2) the health maintenance organization receives a 8-22 timely response from the delegated network as required by 8-23 Subsection (e) of this section, but the health maintenance 8-24 organization and the delegated network are unable to reach an 8-25 agreement as to whether the delegated network: 8-26 (A) is complying with the written agreement; or 8-27 (B) has corrected any problem regarding a 9-1 practice that is hazardous to an enrollee of the health maintenance 9-2 organization. 9-3 (h) On receipt of a request for intervention under 9-4 Subsection (g) of this section, the department may: 9-5 (1) request financial and operational documents from 9-6 the delegated network to further investigate deficiencies indicated 9-7 by the monitoring plan; 9-8 (2) conduct an on-site audit of the delegated network 9-9 if the department determines that the delegated network is not 9-10 complying with the monitoring standards required under Subsection 9-11 (a)(1) of this section; or 9-12 (3) notwithstanding any other provisions, upon 9-13 violation of a monitoring plan, suspend or revoke the third party 9-14 administrator license or utilization review agent license of: 9-15 (A) the delegated network; or 9-16 (B) a third party with which the delegated 9-17 network has contracted. 9-18 (i) The department shall report to the delegated network and 9-19 the health maintenance organization the results of its review not 9-20 later than the 60th day after the date of the department's initial 9-21 request for documentation; provided, however, the department shall 9-22 not report to the health maintenance organization any information 9-23 regarding prices, cost of care, or other information not relevant 9-24 to the monitoring plan. 9-25 (j) The delegated network shall respond to the department's 9-26 report and submit a corrective plan to the department and to the 9-27 health maintenance organization not later than the 30th day after 10-1 the date the delegated network receives the department's report. 10-2 The delegated network may withhold information regarding prices, 10-3 cost of care, or other information not relevant to the monitoring 10-4 plan. 10-5 (k) Information required under Subsections (h), (i), or (j) 10-6 of this section is confidential and is not subject to the open 10-7 records law, Chapter 552, Government Code. The information is not 10-8 subject to court or department subpoena, except: 10-9 (1) as required by the constitution of this state or 10-10 the United States; or 10-11 (2) as necessary for the commissioner to enforce this 10-12 section. 10-13 (l) The department may request that a delegated network take 10-14 corrective action to comply with the department's statutory and 10-15 regulatory requirements that: 10-16 (1) relate to any matters delegated by the health 10-17 maintenance organization to the delegated network; or 10-18 (2) are necessary to ensure the health maintenance 10-19 organization's compliance with statutory and regulatory 10-20 requirements. 10-21 (m) If a delegated network does not comply with the 10-22 department's request for corrective action, the department may 10-23 order the health maintenance organization to: 10-24 (1) temporarily or permanently cease assignment of new 10-25 enrollees to the delegated network; 10-26 (2) temporarily or permanently transfer enrollees to 10-27 alternative delivery systems to receive services; or 11-1 (3) modify or terminate its contract with the 11-2 delegated network. 11-3 SECTION 3. This Act takes effect September 1, 1999. 11-4 SECTION 4. Articles 20A.02 (dd) and (ee) and 20A.18C, 11-5 Insurance Code, as added by this Act, expire September 2, 2003 11-6 unless continued in existence by the Legislature by that date. 11-7 SECTION 5. The Legislature shall conduct a bicameral interim 11-8 study to evaluate and make recommendations, if any, concerning the 11-9 regulation of delegated networks, including financial standards for 11-10 such networks and financial incentive arrangements between health 11-11 maintenance organizations and delegated networks. The interim 11-12 study shall be conducted by a Committee that shall consist of 11-13 members from both the House and the Senate. The committee shall 11-14 report back to the Lieutenant Governor, the Speaker of the House 11-15 and the Governor's Office no later than December 31, 2000. 11-16 SECTION 6. The importance of this legislation and the 11-17 crowded condition of the calendars in both houses create an 11-18 emergency and an imperative public necessity that the 11-19 constitutional rule requiring bills to be read on three several 11-20 days in each house be suspended, and this rule is hereby suspended.