1-1 By: Harris S.B. No. 890 1-2 (In the Senate - Filed March 4, 1999; March 8, 1999, read 1-3 first time and referred to Committee on Economic Development; 1-4 April 16, 1999, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 6, Nays 0; April 16, 1999, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 890 By: Carona 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to the delegation of certain functions by health 1-11 maintenance organizations. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Section 2, Texas Health Maintenance Organization 1-14 Act (Article 20A.02, Vernon's Texas Insurance Code), is amended by 1-15 adding Subsections (dd) and (ee) to read as follows: 1-16 (dd) "Delegation agreement" means an agreement by which a 1-17 health maintenance organization transfers the responsibility for a 1-18 function regulated under this Act. 1-19 (ee) "Delegated network" means an entity, other than a 1-20 health maintenance organization authorized to do business under 1-21 this Act or an insurer authorized to do business under Chapter 3, 1-22 Insurance Code, which by itself, or through one or more entities, 1-23 undertakes to arrange for or to provide medical care to an enrollee 1-24 in exchange for a predetermined payment for each enrollee on a 1-25 prospective basis. The term does not include an individual 1-26 physician or a group of employed physicians practicing medicine 1-27 under one federal tax identification number and whose total claims 1-28 paid to providers not employed by the group is less than 20 percent 1-29 of the total collected revenue of the group calculated on a 1-30 calendar year basis. 1-31 SECTION 2. The Texas Health Maintenance Organization Act 1-32 (Chapter 20A, Vernon's Texas Insurance Code) is amended by adding 1-33 Section 18C to read as follows: 1-34 Sec. 18C. DELEGATION OF CERTAIN FUNCTIONS TO DELEGATED 1-35 NETWORKS. (a) A health maintenance organization that enters into 1-36 a delegation agreement with a delegated network shall execute a 1-37 written agreement with the delegated network. The health 1-38 maintenance organization shall file the written agreement with the 1-39 department not later than the 30th day after the date the agreement 1-40 is executed. The written agreement must contain: 1-41 (1) a monitoring plan, which includes: 1-42 (A) a description of financial practices that 1-43 will ensure that the delegated network tracks and reports 1-44 liabilities that have been incurred but not reported; 1-45 (B) a summary of the total amount paid by the 1-46 delegated network to physicians and providers on a monthly basis; 1-47 and 1-48 (C) a summary of complaints from physicians and 1-49 providers regarding delays in payments of claims or nonpayment of 1-50 claims, including the status of each complaint, on a monthly basis; 1-51 (2) a provision that the agreement cannot be 1-52 terminated by the delegated network or the health maintenance 1-53 organization without written notice provided before the 90th day 1-54 preceding the termination date; 1-55 (3) a provision that prohibits the delegated network 1-56 and the physicians and providers with whom it has contracted from 1-57 billing or attempting to collect from an enrollee under any 1-58 circumstance, including the insolvency of the health maintenance 1-59 organization or delegated network, payments for covered services 1-60 other than authorized copayments and deductibles; 1-61 (4) a provision that the delegation agreement may not 1-62 be construed to limit in any way the health maintenance 1-63 organization's authority or responsibility to comply with all 1-64 statutory and regulatory requirements; 2-1 (5) a provision that requires a delegated network or a 2-2 third party to provide a license number and to certify that the 2-3 network or third party is licensed as a third party administrator 2-4 under Article 21.07-6, Insurance Code, if the health maintenance 2-5 organization delegates its claims payment function to the delegated 2-6 network or a third party; 2-7 (6) a provision that requires a delegated network or a 2-8 third party to provide a license number and to certify that the 2-9 network or third party is licensed as a utilization review agent 2-10 under Article 21.58A, Insurance Code, if the health maintenance 2-11 organization delegates its utilization review function to the 2-12 delegated network or a third party; 2-13 (7) an acknowledgement and agreement by the delegated 2-14 network that: 2-15 (A) the health maintenance organization is: 2-16 (i) required to establish, operate, and 2-17 maintain a health care delivery system, quality assurance system, 2-18 provider credentialing system, and other systems and programs that 2-19 meet statutory and regulatory standards; 2-20 (ii) directly accountable for compliance 2-21 with those standards; and 2-22 (iii) not precluded from requesting that 2-23 the delegated network provide proof of financial viability; 2-24 (B) the role of the delegated network and any 2-25 entity with which it subcontracts in contracting with the health 2-26 maintenance organization is limited to performing certain delegated 2-27 functions of the health maintenance organization, using standards 2-28 approved by the health maintenance organization which are in 2-29 compliance with applicable statutes and rules and subject to the 2-30 health maintenance organization's oversight and monitoring of the 2-31 delegated network's performance; and 2-32 (C) if the delegated network fails to meet 2-33 monitoring standards established to ensure that functions delegated 2-34 or assigned to the network under the delegation contract are in 2-35 full compliance with all statutory and regulatory requirements, the 2-36 health maintenance organization may cancel delegation of any 2-37 management responsibilities; 2-38 (8) a provision that requires the delegated network to 2-39 make available to the health maintenance organization samples of 2-40 contracts with physicians and providers to ensure compliance with 2-41 the contractual requirements described by Subdivisions (2) and (3) 2-42 of this subsection, except that the agreement may not require that 2-43 the delegated network make available to the health maintenance 2-44 organization contractual provisions relating to financial 2-45 arrangements with the delegated network's physicians and providers; 2-46 and 2-47 (9) a provision that requires the delegated network to 2-48 provide the health maintenance organization, in a usable format 2-49 necessary for audit purposes and at most quarterly unless otherwise 2-50 specified in the agreement, the data necessary for the health 2-51 maintenance organization to comply with the department's reporting 2-52 requirements with respect to any delegated functions performed 2-53 under the delegation agreement, including: 2-54 (A) a summary: 2-55 (i) describing the methods, including 2-56 capitation, fee-for-service, or other risk arrangements, that the 2-57 delegated network used to pay its physicians and providers; and 2-58 (ii) including the percentage of 2-59 physicians and providers paid for each payment category; 2-60 (B) the period that claims and debts owed by the 2-61 delegated network have been pending and the dollar amount of those 2-62 claims and debts; 2-63 (C) information that will enable the health 2-64 maintenance organization to file claims for reinsurance, 2-65 coordination of benefits, and subrogation, if required by the 2-66 health maintenance organization's contract with the delegated 2-67 network; and 2-68 (D) documentation, except for information, 2-69 documents, and deliberations related to peer review that are 3-1 confidential or privileged, including those under Section 5.06, 3-2 Medical Practice Act (Article 4495b, Vernon's Texas Civil 3-3 Statutes), that relates to: 3-4 (i) a regulatory agency's inquiry or 3-5 investigation of the delegated network or of an individual 3-6 physician or provider with whom the delegated network contracts 3-7 that relates to an enrollee of the health maintenance organization; 3-8 and 3-9 (ii) the final resolution of a regulatory 3-10 agency's inquiry or investigation. 3-11 (b) A health maintenance organization shall provide to each 3-12 delegated network with which it has a delegation agreement the 3-13 following information in standard electronic format, at least 3-14 monthly unless otherwise provided in the agreement: 3-15 (1) the names and dates of birth or social security 3-16 numbers of the enrollees of the health maintenance organization who 3-17 are eligible or assigned to receive services from the delegated 3-18 network, including the number of enrollees added and terminated 3-19 since the previous reporting period; 3-20 (2) the age, sex, benefit plan and any riders to the 3-21 benefit plan, and employer for the enrollees of the health 3-22 maintenance organization who are eligible or assigned to receive 3-23 services from the delegated network; 3-24 (3) if the health maintenance organization pays any 3-25 claims for the delegated network, a summary of the number and 3-26 amount of claims paid by the health maintenance organization on 3-27 behalf of the delegated network during the previous reporting 3-28 period. A delegated network is not precluded from receiving, upon 3-29 request, additional information regarding such claims; 3-30 (4) if the health maintenance organization pays any 3-31 claims for the delegated network, a summary of the number and 3-32 amount of pharmacy prescriptions paid for each enrollee for which 3-33 the delegated network has taken partial risk during the previous 3-34 reporting period. A delegated network is not precluded from 3-35 receiving, upon request, additional information regarding such 3-36 claims; 3-37 (5) information that enables the delegated network to 3-38 file claims for reinsurance, coordination of benefits, and 3-39 subrogation; and 3-40 (6) patient complaint data that relates to the 3-41 delegated network. 3-42 (c) In addition to the information required by Subsection 3-43 (b) of this section, a health maintenance organization shall 3-44 provide to a delegated network with which it has a delegation 3-45 agreement: 3-46 (1) detailed risk-pool data, reported quarterly and on 3-47 settlement; and 3-48 (2) the rates required by the agreement and any known 3-49 future facility contract rates for the health maintenance 3-50 organization, if hospital or facility costs impact the delegated 3-51 network's costs, reported annually or on recontract. 3-52 (d) A health maintenance organization that receives 3-53 information through the monitoring plan required by Subsection 3-54 (a)(1) of this section that indicates the delegated network is not 3-55 operating in accordance with its written agreement or is operating 3-56 in a condition that renders the continuance of its business 3-57 hazardous to the enrollees, shall, in writing: 3-58 (1) notify the delegated network of those findings; 3-59 and 3-60 (2) request a written explanation of: 3-61 (A) the delegated network's noncompliance with 3-62 the written agreement; or 3-63 (B) the existence of the condition that renders 3-64 the continuance of the delegated network's business hazardous to 3-65 the enrollees. 3-66 (e) A delegated network shall respond to a request from a 3-67 health maintenance organization under Subsection (d) of this 3-68 section in writing not later than the 30th day after the date the 3-69 request is received. 4-1 (f) The health maintenance organization shall cooperate with 4-2 the delegated network to correct any failure by the delegated 4-3 network to comply with the regulatory requirements of the 4-4 department relating to any matters: 4-5 (1) delegated to the delegated network by the health 4-6 maintenance organization; or 4-7 (2) necessary for the health maintenance organization 4-8 to ensure compliance with statutory or regulatory requirements. 4-9 (g) The health maintenance organization shall notify the 4-10 department and request intervention if: 4-11 (1) the health maintenance organization does not 4-12 receive a timely response from the delegated network as required by 4-13 Subsection (e) of this section; or 4-14 (2) the health maintenance organization receives a 4-15 timely response from the delegated network as required by 4-16 Subsection (e) of this section, but the health maintenance 4-17 organization and the delegated network are unable to reach an 4-18 agreement as to whether the delegated network: 4-19 (A) is complying with the written agreement; or 4-20 (B) has corrected any problem regarding a 4-21 practice that is hazardous to an enrollee of the health maintenance 4-22 organization. 4-23 (h) On receipt of a request for intervention under 4-24 Subsection (g) of this section, the department may: 4-25 (1) request financial and operational documents from 4-26 the delegated network to further investigate deficiencies indicated 4-27 by the monitoring plan; 4-28 (2) conduct an on-site audit of the delegated network 4-29 if the department determines that the delegated network is not 4-30 complying with the monitoring standards required under Subsection 4-31 (a)(1) of this section; or 4-32 (3) notwithstanding any other provisions, upon 4-33 violation of a monitoring plan, suspend or revoke the third-party 4-34 administrator license or utilization review agent license of: 4-35 (A) the delegated network; or 4-36 (B) a third party with which the delegated 4-37 network has contracted. 4-38 (i) The department shall report to the delegated network and 4-39 the health maintenance organization the results of its review not 4-40 later than the 60th day after the date of the department's initial 4-41 request for documentation; provided, however, that the department 4-42 shall not report to the health maintenance organization any 4-43 information regarding prices, cost of care, or other information 4-44 not relevant to the monitoring plan. 4-45 (j) The delegated network shall respond to the department's 4-46 report and submit a corrective plan to the department and to the 4-47 health maintenance organization not later than the 30th day after 4-48 the date the delegated network receives the department's report. 4-49 The delegated network may withhold information regarding prices, 4-50 cost of care, or other information not relevant to the monitoring 4-51 plan. 4-52 (k) Information required under Subsections (h), (i), or (j) 4-53 of this section is confidential and is not subject to the open 4-54 records law, Chapter 552, Government Code. The information is not 4-55 subject to court or department subpoena, except: 4-56 (1) as required by the constitution of this state or 4-57 the United States; or 4-58 (2) as necessary for the commissioner to enforce this 4-59 section. 4-60 (l) The department may request that a delegated network take 4-61 corrective action to comply with the department's statutory and 4-62 regulatory requirements that: 4-63 (1) relate to any matters delegated by the health 4-64 maintenance organization to the delegated network; or 4-65 (2) are necessary to ensure the health maintenance 4-66 organization's compliance with statutory and regulatory 4-67 requirements. 4-68 (m) If a delegated network does not comply with the 4-69 department's request for corrective action, the department may 5-1 order the health maintenance organization to: 5-2 (1) temporarily or permanently cease assignment of new 5-3 enrollees to the delegated network; 5-4 (2) temporarily or permanently transfer enrollees to 5-5 alternative delivery systems to receive services; or 5-6 (3) modify or terminate its contract with the 5-7 delegated network. 5-8 SECTION 3. This Act takes effect September 1, 1999. 5-9 SECTION 4. Subsections (dd) and (ee), Section 2, Texas 5-10 Health Maintenance Organization Act (Article 20A.02, Vernon's Texas 5-11 Insurance Code), and Section 18C, Texas Health Maintenance 5-12 Organization Act (Article 20A.18C, Vernon's Texas Insurance Code), 5-13 as added by this Act, expires September 2, 2003, unless continued 5-14 in existence by the legislature before that date. 5-15 SECTION 5. The importance of this legislation and the 5-16 crowded condition of the calendars in both houses create an 5-17 emergency and an imperative public necessity that the 5-18 constitutional rule requiring bills to be read on three several 5-19 days in each house be suspended, and this rule is hereby suspended. 5-20 * * * * *