1-1     By:  Smithee (Senate Sponsor - Sibley)                H.B. No. 3023
 1-2           (In the Senate - Received from the House April 23, 1999;
 1-3     April 26, 1999, read first time and referred to Committee on
 1-4     Economic Development; May 6, 1999, reported favorably by the
 1-5     following vote:  Yeas 5, Nays 0; May 6, 1999, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to a minimum net worth requirement for health maintenance
 1-9     organizations.
1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11           SECTION 1.  Section 2, Texas Health Maintenance Organization
1-12     Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by
1-13     adding Subsection (aa) to read as follows:
1-14           (aa)  "Net worth" means the excess of total admitted assets
1-15     over total liabilities, excluding liability for subordinated debt
1-16     issued in compliance with Article 1.39, Insurance Code.
1-17           SECTION 2.  The Texas Health Maintenance Organization Act
1-18     (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding
1-19     Sections 13A, 13B, and 13C to read as follows:
1-20           Sec. 13A.  MINIMUM NET WORTH.  (a)  A health maintenance
1-21     organization authorized to provide basic health care services shall
1-22     maintain a minimum net worth of $1.5 million.
1-23           (b)  A health maintenance organization authorized to provide
1-24     limited health care services shall maintain a minimum net worth of
1-25     $1 million.
1-26           (c)  A health maintenance organization authorized to offer
1-27     only a single health care service plan shall maintain a minimum net
1-28     worth of $500,000.
1-29           (d)  The minimum net worth required by this section shall
1-30     consist only of the following:
1-31                 (1)  lawful money of the United States of America;
1-32                 (2)  bonds of this state;
1-33                 (3)  bonds or other evidences of indebtedness of the
1-34     United States of America or any of its agencies when such
1-35     obligations are guaranteed as to principal and interest by the
1-36     United States of America; or
1-37                 (4)  bonds or other interest-bearing evidences of
1-38     indebtedness of any counties or municipalities of this state.
1-39           Sec. 13B.  PHASE-IN PERIOD FOR MINIMUM NET WORTH.  (a)  A
1-40     health maintenance organization authorized to provide basic health
1-41     care services that was licensed before September 1, 1999, shall
1-42     achieve and maintain a minimum net worth of:
1-43                 (1)  $500,000 not later than December 31, 2000;
1-44                 (2)  $1 million not later than December 31, 2001; and
1-45                 (3)  $1.5 million not later than December 31, 2002.
1-46           (b)  A health maintenance organization authorized to provide
1-47     limited health care services that was licensed before September 1,
1-48     1999, shall achieve and maintain a minimum net worth of:
1-49                 (1)  $300,000 not later than December 31, 2000;
1-50                 (2)  $600,000 not later than December 31, 2001; and
1-51                 (3)  $1 million not later than December 31, 2002.
1-52           (c)  A health maintenance organization authorized to offer
1-53     only a single health care service plan that was licensed before
1-54     September 1, 1999, shall achieve and maintain a minimum net worth
1-55     of:
1-56                 (1)  $150,000 not later than December 31, 2000;
1-57                 (2)  $300,000 not later than December 31, 2001; and
1-58                 (3)  $500,000 not later than December 31, 2002.
1-59           (d)  This section expires January 1, 2003.
1-60           Sec. 13C.  PROTECTION AGAINST INSOLVENCY: NET WORTH.
1-61     (a)  The commissioner may adopt rules or by rule establish
1-62     guidelines requiring any health maintenance organization that holds
1-63     a certificate of authority under this Act to maintain a specified
1-64     net worth based on:
 2-1                 (1)  the nature and type of risks the health
 2-2     maintenance organization underwrites or reinsures;
 2-3                 (2)  the premium volume of risks the health maintenance
 2-4     organization underwrites or reinsures;
 2-5                 (3)  the composition, quality, duration, or liquidity
 2-6     of the health maintenance organization's investment portfolio;
 2-7                 (4)  fluctuations in the market value of securities the
 2-8     health maintenance organization holds;
 2-9                 (5)  the adequacy of the health maintenance
2-10     organization's reserves;
2-11                 (6)  the number of individuals enrolled by the health
2-12     maintenance organization; or
2-13                 (7)  other business risks.
2-14           (b)  Rules adopted or guidelines established under Subsection
2-15     (a) of this section must be designed to ensure the financial
2-16     solvency of health maintenance organizations for the protection of
2-17     enrollees.  The rules and guidelines may provide for a health
2-18     maintenance organization to comply with a risk-based net worth
2-19     requirement established under Subsection (a) of this section in
2-20     stages over a two-year period.
2-21           SECTION 3.  Sections 13(i), (j), (k), and (l), Texas Health
2-22     Maintenance Organization Act (Article 20A.13, Vernon's Texas
2-23     Insurance Code), are repealed.
2-24           SECTION 4.  This Act takes effect September 1, 1999.
2-25           SECTION 5.  The importance of this legislation and the
2-26     crowded condition of the calendars in both houses create an
2-27     emergency and an imperative public necessity that the
2-28     constitutional rule requiring bills to be read on three several
2-29     days in each house be suspended, and this rule is hereby suspended.
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