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                                  * * * * *