AN ACT 1-1 relating to the delegation of certain functions by health 1-2 maintenance organizations. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Section 2, Texas Health Maintenance Organization 1-5 Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by 1-6 adding Subsections (dd) and (ee) to read as follows: 1-7 (dd) "Delegation agreement" means an agreement by which a 1-8 health maintenance organization assigns the responsibility for a 1-9 function regulated under this Act. 1-10 (ee) "Delegated network" means an entity, other than a 1-11 health maintenance organization authorized to do business under 1-12 this Act or an insurer authorized to do business under Chapter 3, 1-13 Insurance Code, which: (i) by itself, or through one or more 1-14 entities, undertakes to arrange for or to provide medical care to 1-15 an enrollee in exchange for a predetermined payment on a 1-16 prospective basis; and (ii) performs on behalf of the health 1-17 maintenance organization, any function regulated by this Act. The 1-18 term does not include an individual physician or a group of 1-19 employed physicians practicing medicine under one federal tax 1-20 identification number and whose total claims paid to providers not 1-21 employed by the group is less than 20 percent of the total 1-22 collected revenue of the group calculated on a 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, 2-17 enrollees, and providers regarding delays in payments of claims or 2-18 nonpayment of claims, including the status of each complaint, on a 2-19 monthly basis; 2-20 (2) a provision that the agreement cannot be 2-21 terminated without cause by the delegated network or the health 2-22 maintenance organization without written notice provided before the 2-23 90th day preceding the termination date; 2-24 (3) a provision that prohibits the delegated network 2-25 and the physicians and providers with whom it has contracted from 2-26 billing or attempting to collect from an enrollee under any 3-1 circumstance, including the insolvency of the health maintenance 3-2 organization or delegated network, payments for covered services 3-3 other than authorized copayments and deductibles; 3-4 (4) a provision that the delegation agreement may not 3-5 be construed to limit in any way the health maintenance 3-6 organization's authority or responsibility, including financial 3-7 responsibility, to comply with all statutory and regulatory 3-8 requirements; 3-9 (5) a provision that requires the delegated network to 3-10 comply with all statutory and regulatory requirements relating to 3-11 any function, duty, responsibility, or delegation assumed by or 3-12 carried out by the delegated network; 3-13 (6) a provision that requires a delegated network or a 3-14 third party to provide a license number and to certify that the 3-15 network or third party is licensed as a third party administrator 3-16 under Article 21.07-6, Insurance Code, if the health maintenance 3-17 organization delegates its claims payment function to the delegated 3-18 network or a third party; 3-19 (7) a provision that requires a delegated network or a 3-20 third party to provide a license number and to certify that the 3-21 network or third party is licensed as a utilization review agent 3-22 under Article 21.58A, Insurance Code, if the health maintenance 3-23 organization delegates its utilization review function to the 3-24 delegated network or a third party, and that: 3-25 (A) enrollees will receive notification at the 3-26 time of enrollment which entity has responsibility for performing 4-1 utilization review; and 4-2 (B) the delegated network or third party 4-3 performing utilization review shall do so in accordance with 4-4 Art. 21.58A, Insurance Code; and 4-5 (C) utilization review decisions made by the 4-6 delegated network or a third party shall be forwarded to the health 4-7 maintenance organization on a monthly basis; 4-8 (8) an acknowledgment and agreement by the delegated 4-9 network that: 4-10 (A) the health maintenance organization is: 4-11 (i) required to establish, operate, and 4-12 maintain a health care delivery system, quality assurance system, 4-13 provider credentialing system, and other systems and programs that 4-14 meet statutory and regulatory standards; 4-15 (ii) directly accountable for compliance 4-16 with those standards; and 4-17 (iii) not precluded from contractually 4-18 requesting that the delegated network provide proof of financial 4-19 viability; 4-20 (B) the role of the delegated network and any 4-21 entity with which it subcontracts in contracting with the health 4-22 maintenance organization is limited to performing certain delegated 4-23 functions of the health maintenance organization, using standards 4-24 approved by the health maintenance organization and which are in 4-25 compliance with applicable statutes and rules and subject to the 4-26 health maintenance organization's oversight and monitoring of the 5-1 delegated network's performance; and 5-2 (C) if the delegated network fails to meet 5-3 monitoring standards established to ensure that functions delegated 5-4 or assigned to the network under the delegation contract are in 5-5 full compliance with all statutory and regulatory requirements, the 5-6 health maintenance organization may cancel delegation of any or all 5-7 delegated functions; 5-8 (9) a provision that requires the delegated network to 5-9 make available to the health maintenance organization samples of 5-10 contracts with physicians and providers to ensure compliance with 5-11 the contractual requirements described by Subdivisions (2) and (3) 5-12 of this subsection, except that the agreement may not require that 5-13 the delegated network make available to the health maintenance 5-14 organization contractual provisions relating to financial 5-15 arrangements with the delegated network's physicians and providers; 5-16 (10) a provision that requires the delegated network 5-17 to provide the health maintenance organization, in a usable format 5-18 necessary for audit purposes and at most quarterly unless otherwise 5-19 specified in the agreement, the data necessary for the health 5-20 maintenance organization to comply with the department's reporting 5-21 requirements with respect to any delegated functions performed 5-22 under the delegation agreement, including: 5-23 (A) a summary: 5-24 (i) describing the methods, including 5-25 capitation, fee-for-service, or other risk arrangements, that the 5-26 delegated network used to pay its physicians and providers; and 6-1 (ii) including the percentage of 6-2 physicians and providers paid for each payment category; 6-3 (B) the period that claims and debts for medical 6-4 services owed by the delegated network have been pending and the 6-5 aggregate dollar amount of those claims and debts; 6-6 (C) information that will enable the health 6-7 maintenance organization to file claims for reinsurance, 6-8 coordination of benefits, and subrogation, if required by the 6-9 health maintenance organization's contract with the delegated 6-10 network; and 6-11 (D) documentation, except for information, 6-12 documents, and deliberations related to peer review that are 6-13 confidential or privileged under Section 5.06, Medical Practice Act 6-14 (Article 4495b, Vernon's Texas Civil Statutes), that relates to: 6-15 (i) a regulatory agency's inquiry or 6-16 investigation of the delegated network or of an individual 6-17 physician or provider with whom the delegated network contracts 6-18 that relates to an enrollee of the health maintenance organization; 6-19 and 6-20 (ii) the final resolution of a regulatory 6-21 agency's inquiry or investigation; and 6-22 (11) a provision relating to enrollee complaints that 6-23 requires the delegated network to ensure that upon receipt of a 6-24 complaint, as defined by this Act, the delegated network shall 6-25 report the complaint to the health maintenance organization within 6-26 two business days, except in the case of a complaint involving 7-1 emergency care as defined in this Act. In the case of a complaint 7-2 involving emergency care, the delegated network shall forward the 7-3 complaint immediately to the health maintenance organization. 7-4 Nothing herein shall prohibit the delegated network from attempting 7-5 to resolve a complaint. 7-6 (b) A health maintenance organization shall provide to each 7-7 delegated network with which it has a delegation agreement the 7-8 following information in standard electronic format, at least 7-9 monthly unless otherwise provided in the agreement: 7-10 (1) the names and dates of birth or social security 7-11 numbers of the enrollees of the health maintenance organization who 7-12 are eligible or assigned to receive services from the delegated 7-13 network, including the enrollees added and terminated since the 7-14 previous reporting period; 7-15 (2) the age, sex, benefit plan and any riders to that 7-16 benefit plan, and employer for the enrollees of the health 7-17 maintenance organization who are eligible or assigned to receive 7-18 services from the delegated network; 7-19 (3) if the health maintenance organization pays any 7-20 claims for the delegated network, a summary of the number and 7-21 amount of claims paid by the health maintenance organization on 7-22 behalf of the delegated network during the previous reporting 7-23 period. A delegated network is not precluded from receiving, upon 7-24 request, additional nonproprietary information regarding such 7-25 claims; 7-26 (4) if the health maintenance organization pays any 8-1 claims for the delegated network, a summary of the number and 8-2 amount of pharmacy prescriptions paid for each enrollee for which 8-3 the delegated network has taken partial risk during the previous 8-4 reporting period. A delegated network is not precluded from 8-5 receiving, upon request, additional nonproprietary information 8-6 regarding such claims; 8-7 (5) information that enables the delegated network to 8-8 file claims for reinsurance, coordination of benefits, and 8-9 subrogation; and 8-10 (6) patient complaint data that relates to the 8-11 delegated network. 8-12 (c) In addition to the information required by Subsection 8-13 (b) of this section, a health maintenance organization shall 8-14 provide to a delegated network with which it has a delegation 8-15 agreement: 8-16 (1) detailed risk-pool data, reported quarterly and on 8-17 settlement; and 8-18 (2) the percent of premium attributable to hospital or 8-19 facility costs, if hospital or facility costs impact the delegated 8-20 network's costs, reported quarterly, and, if there are changes in 8-21 hospital or facility contracts with the health maintenance 8-22 organization, the projected impact of those changes on the percent 8-23 of premium attributable to hospital and facility costs within 30 8-24 days of such changes. 8-25 (d) A health maintenance organization that receives 8-26 information through the monitoring plan required by Subsection 9-1 (a)(1) of this section that indicates the delegated network is not 9-2 operating in accordance with its written agreement or is operating 9-3 in a condition that renders the continuance of its business 9-4 hazardous to the enrollees, shall, in writing: 9-5 (1) notify the delegated network of those findings; 9-6 and 9-7 (2) request a written explanation of: 9-8 (A) the delegated network's noncompliance with 9-9 the written agreement; or 9-10 (B) the existence of the condition that renders 9-11 the continuance of the delegated network's business hazardous to 9-12 the enrollees. 9-13 (e) A delegated network shall respond to a request from a 9-14 health maintenance organization under Subsection (d) of this 9-15 section in writing not later than the 30th day after the date the 9-16 request is received. 9-17 (f) The health maintenance organization shall cooperate with 9-18 the delegated network to correct any failure by the delegated 9-19 network to comply with the regulatory requirements of the 9-20 department relating to any matters: 9-21 (1) delegated to the delegated network by the health 9-22 maintenance organization; or 9-23 (2) necessary for the health maintenance organization 9-24 to ensure compliance with statutory or regulatory requirements. 9-25 (g) The health maintenance organization shall notify the 9-26 department and request intervention if: 10-1 (1) the health maintenance organization does not 10-2 receive a timely response from the delegated network as required by 10-3 Subsection (e) of this section; or 10-4 (2) the health maintenance organization receives a 10-5 timely response from the delegated network as required by 10-6 Subsection (e) of this section, but the health maintenance 10-7 organization and the delegated network are unable to reach an 10-8 agreement as to whether the delegated network: 10-9 (A) is complying with the written agreement; or 10-10 (B) has corrected any problem regarding a 10-11 practice that is hazardous to an enrollee of the health maintenance 10-12 organization. 10-13 (h) On receipt of a request for intervention under 10-14 Subsection (g) of this section, the department may: 10-15 (1) request financial and operational documents from 10-16 the delegated network to further investigate deficiencies indicated 10-17 by the monitoring plan; 10-18 (2) conduct an on-site audit of the delegated network 10-19 if the department determines that the delegated network is not 10-20 complying with the monitoring standards required under Subsection 10-21 (a)(1) of this section; or 10-22 (3) notwithstanding any other provisions, upon 10-23 violation of a monitoring plan, suspend or revoke the third party 10-24 administrator license or utilization review agent license of: 10-25 (A) the delegated network; or 10-26 (B) a third party with which the delegated 11-1 network has contracted. 11-2 (i) The department shall report to the delegated network and 11-3 the health maintenance organization the results of its review not 11-4 later than the 60th day after the date of the department's initial 11-5 request for documentation; provided, however, the department shall 11-6 not report to the health maintenance organization any information 11-7 regarding fee schedules, prices, cost of care, or other information 11-8 not relevant to the monitoring plan. 11-9 (j) The delegated network shall respond to the department's 11-10 report and submit a corrective plan to the department and to the 11-11 health maintenance organization not later than the 30th day after 11-12 the date the delegated network receives the department's report. 11-13 The delegated network may withhold information regarding fee 11-14 schedules, prices, cost of care, or other information not relevant 11-15 to the monitoring plan. 11-16 (k) Reports and corrective plans required under Subsection 11-17 (i) or (j) of this section shall be treated as public documents, 11-18 except that health care provider fee schedules, prices, costs of 11-19 care, or other information not relevant to the monitoring plan and 11-20 any other information that is considered confidential by law shall 11-21 be considered confidential. 11-22 (l) The department may request that a delegated network take 11-23 corrective action to comply with the department's statutory and 11-24 regulatory requirements that: 11-25 (1) relate to any matters delegated by the health 11-26 maintenance organization to the delegated network; or 12-1 (2) are necessary to ensure the health maintenance 12-2 organization's compliance with statutory and regulatory 12-3 requirements. 12-4 (m) If a delegated network does not comply with the 12-5 department's request for corrective action, the department may 12-6 order the health maintenance organization to: 12-7 (1) temporarily or permanently cease assignment of new 12-8 enrollees to the delegated network; 12-9 (2) temporarily or permanently transfer enrollees to 12-10 alternative delivery systems to receive services; or 12-11 (3) modify or terminate its contract with the 12-12 delegated network. 12-13 (n) The commissioner shall maintain enrollee and provider 12-14 complaints in a manner that identifies complaints made about 12-15 delegated networks. 12-16 (o) The commissioner may adopt rules as necessary to 12-17 interpret, implement, and enforce this section. 12-18 SECTION 3. Subsection (b), Section 11, Texas Health 12-19 Maintenance Organization Act (Article 20A.11, Vernon's Texas 12-20 Insurance Code), is amended to read as follows: 12-21 (b) A health maintenance organization shall provide an 12-22 accurate written description of health care plan terms and 12-23 conditions, including restrictions or limitations related to 12-24 limited provider networks or delegated networks within a health 12-25 care plan, to allow any current or prospective group contract 12-26 holder and current or prospective enrollee eligible for enrollment 13-1 in a health care plan to make comparisons and informed decisions 13-2 before selecting among health care plans. The written description 13-3 must be in a readable and understandable format as prescribed by 13-4 the commissioner and shall include a current list of physicians and 13-5 providers, including delineation of limited provider networks and 13-6 delegated networks. The health maintenance organization may 13-7 provide its handbook to satisfy this requirement provided the 13-8 handbook's content is substantially similar to and achieves the 13-9 same level of disclosure as the written description prescribed by 13-10 the commissioner and the current list of physicians and providers 13-11 is also provided. 13-12 SECTION 4. This Act takes effect September 1, 1999, except 13-13 that Section 3 takes effect for any contract entered into or 13-14 renewed on or after January 1, 2000. 13-15 SECTION 5. Subsections (dd) and (ee), Section 2, Texas 13-16 Health Maintenance Organization Act (Article 20A.02, Vernon's Texas 13-17 Insurance Code), and Section 18C, Texas Health Maintenance 13-18 Organization Act (Chapter 20A, Vernon's Texas Insurance Code), as 13-19 added by this Act, expire September 2, 2001, unless continued in 13-20 existence by the legislature by that date. 13-21 SECTION 6. The importance of this legislation and the 13-22 crowded condition of the calendars in both houses create an 13-23 emergency and an imperative public necessity that the 13-24 constitutional rule requiring bills to be read on three several 13-25 days in each house be suspended, and this rule is hereby suspended. _______________________________ _______________________________ President of the Senate Speaker of the House I hereby certify that S.B. No. 890 passed the Senate on April 26, 1999, by a viva-voce vote; and that the Senate concurred in House amendment on May 18, 1999, by a viva-voce vote. _______________________________ Secretary of the Senate I hereby certify that S.B. No. 890 passed the House, with amendment, on May 12, 1999, by a non-record vote. _______________________________ Chief Clerk of the House Approved: _______________________________ Date _______________________________ Governor