By Smithee H.B. No. 3023
76R5966 AJA-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to a minimum net worth requirement for health maintenance
1-3 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 Subsection (aa) to read as follows:
1-8 (aa) "Net worth" means the excess of total admitted assets
1-9 over total liabilities, excluding liability for subordinated debt
1-10 issued in compliance with Article 1.39, Insurance Code.
1-11 SECTION 2. The Texas Health Maintenance Organization Act
1-12 (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding
1-13 Sections 13A, 13B, and 13C to read as follows:
1-14 Sec. 13A. MINIMUM NET WORTH. (a) A health maintenance
1-15 organization authorized to provide basic health care services shall
1-16 maintain a minimum net worth of $1.5 million.
1-17 (b) A health maintenance organization authorized to provide
1-18 limited health care services shall maintain a minimum net worth of
1-19 $1 million.
1-20 (c) A health maintenance organization authorized to offer
1-21 only a single health care service plan shall maintain a minimum net
1-22 worth of $500,000.
1-23 (d) The minimum net worth required by this section shall
1-24 consist only of the following:
2-1 (1) lawful money of the United States of America;
2-2 (2) bonds of this state;
2-3 (3) bonds or other evidences of indebtedness of the
2-4 United States of America or any of its agencies when such
2-5 obligations are guaranteed as to principal and interest by the
2-6 United States of America; or
2-7 (4) bonds or other interest-bearing evidences of
2-8 indebtedness of any counties or municipalities of this state.
2-9 Sec. 13B. PHASE-IN PERIOD FOR MINIMUM NET WORTH. (a) A
2-10 health maintenance organization authorized to provide basic health
2-11 care services that was licensed before September 1, 1999, shall
2-12 achieve and maintain a minimum net worth of:
2-13 (1) $500,000 not later than December 31, 2000;
2-14 (2) $1 million not later than December 31, 2001; and
2-15 (3) $1.5 million not later than December 31, 2002.
2-16 (b) A health maintenance organization authorized to provide
2-17 limited health care services that was licensed before September 1,
2-18 1999, shall achieve and maintain a minimum net worth of:
2-19 (1) $300,000 not later than December 31, 2000;
2-20 (2) $600,000 not later than December 31, 2001; and
2-21 (3) $1 million not later than December 31, 2002.
2-22 (c) A health maintenance organization authorized to offer
2-23 only a single health care service plan that was licensed before
2-24 September 1, 1999, shall achieve and maintain a minimum net worth
2-25 of:
2-26 (1) $150,000 not later than December 31, 2000;
2-27 (2) $300,000 not later than December 31, 2001; and
3-1 (3) $500,000 not later than December 31, 2002.
3-2 (d) This section expires January 1, 2003.
3-3 Sec. 13C. PROTECTION AGAINST INSOLVENCY: NET WORTH.
3-4 (a) The commissioner may adopt rules or by rule establish
3-5 guidelines requiring any health maintenance organization that holds
3-6 a certificate of authority under this Act to maintain a specified
3-7 net worth based on:
3-8 (1) the nature and type of risks the health
3-9 maintenance organization underwrites or reinsures;
3-10 (2) the premium volume of risks the health maintenance
3-11 organization underwrites or reinsures;
3-12 (3) the composition, quality, duration, or liquidity
3-13 of the health maintenance organization's investment portfolio;
3-14 (4) fluctuations in the market value of securities the
3-15 health maintenance organization holds;
3-16 (5) the adequacy of the health maintenance
3-17 organization's reserves;
3-18 (6) the number of individuals enrolled by the health
3-19 maintenance organization; or
3-20 (7) other business risks.
3-21 (b) Rules adopted or guidelines established under Subsection
3-22 (a) of this section must be designed to ensure the financial
3-23 solvency of health maintenance organizations for the protection of
3-24 enrollees. The rules and guidelines may provide for a health
3-25 maintenance organization to comply with a risk-based net worth
3-26 requirement established under Subsection (a) of this section in
3-27 stages over a two-year period.
4-1 SECTION 3. Sections 13(i), (j), (k), and (l), Texas Health
4-2 Maintenance Organization Act (Article 20A.13, Vernon's Texas
4-3 Insurance Code), are repealed.
4-4 SECTION 4. This Act takes effect September 1, 1999.
4-5 SECTION 5. The importance of this legislation and the
4-6 crowded condition of the calendars in both houses create an
4-7 emergency and an imperative public necessity that the
4-8 constitutional rule requiring bills to be read on three several
4-9 days in each house be suspended, and this rule is hereby suspended.