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. 2-30 * * * * *