1-1 By: Harris S.B. No. 1468 1-2 (In the Senate - Filed March 12, 1999; March 15, 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 5, Nays 2; April 16, 1999, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1468 By: Sibley 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to the regulation of physician collective negotiation. 1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-12 SECTION 1. The Insurance Code is amended by adding Chapter 1-13 29 to read as follows: 1-14 CHAPTER 29. COLLECTIVE NEGOTIATIONS BY PHYSICIANS WITH 1-15 HEALTH BENEFIT PLANS 1-16 Art. 29.01. FINDING AND PURPOSES. The legislature finds 1-17 that collective negotiation by competing physicians of certain 1-18 terms and conditions of contracts with health plans will result in 1-19 procompetitive effects in the absence of any express or implied 1-20 threat of retaliatory collective action, such as a boycott or 1-21 strike, by physicians. Although the legislature finds that 1-22 collective negotiations over fee-related terms may in some 1-23 circumstances yield anticompetitive effects, it also recognizes 1-24 that there are instances in which health plans dominate the market 1-25 to such a degree that fair negotiations between physicians and the 1-26 plan are unobtainable absent any collective action on behalf of 1-27 physicians. In these instances, health plans have the ability to 1-28 virtually dictate the terms of the contracts they offer physicians. 1-29 Consequently, the legislature finds it appropriate and necessary to 1-30 authorize collective negotiations on fee-related and other issues 1-31 where it determines that such imbalances exist. 1-32 Art. 29.02. DEFINITIONS. In this chapter: 1-33 (1) "Health benefit plan" means a plan described by 1-34 Article 29.03 of this code. 1-35 (2) "Person" means an individual, association, 1-36 corporation, or any other legal entity. 1-37 (3) "Physicians' representative" means a third party 1-38 who is authorized by physicians to negotiate on their behalf with 1-39 health benefit plans over contractual terms and conditions 1-40 affecting those physicians. 1-41 Art. 29.03. SCOPE OF CHAPTER. (a) This chapter applies 1-42 only to a health benefit plan that provides benefits for medical or 1-43 surgical expenses incurred as a result of a health condition, 1-44 accident, or sickness, including an individual, group, blanket, or 1-45 franchise insurance policy or insurance agreement, a group hospital 1-46 service contract, or an individual or group evidence of coverage or 1-47 similar coverage document that is offered by: 1-48 (1) an insurance company; 1-49 (2) a group hospital service corporation operating 1-50 under Chapter 20 of this code; 1-51 (3) a fraternal benefit society operating under 1-52 Chapter 10 of this code; 1-53 (4) a stipulated premium insurance company operating 1-54 under Chapter 22 of this code; 1-55 (5) a reciprocal exchange operating under Chapter 19 1-56 of this code; 1-57 (6) a health maintenance organization operating under 1-58 the Texas Health Maintenance Organization Act (Chapter 20A, 1-59 Vernon's Texas Insurance Code); or 1-60 (7) a multiple employer welfare agreement that holds a 1-61 certificate of authority under Article 3.95-2 of this code. 1-62 (b) This chapter does not apply to: 1-63 (1) a plan that provides coverage: 1-64 (A) only for a specified disease or other 2-1 limited benefit; 2-2 (B) only for accidental death or dismemberment; 2-3 (C) for wages or payments in lieu of wages for a 2-4 period during which an employee is absent from work because of 2-5 sickness or injury; 2-6 (D) as a supplement to liability insurance; 2-7 (E) for credit insurance; 2-8 (F) only for dental or vision care; 2-9 (G) only for hospital expenses; or 2-10 (H) only for indemnity for hospital confinement; 2-11 (2) a small employer health benefit plan written under 2-12 Chapter 26 of this code; 2-13 (3) a Medicare supplemental policy as defined by 2-14 Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss), 2-15 as amended; 2-16 (4) worker's compensation insurance coverage; 2-17 (5) medical payment insurance coverage issued as part 2-18 of a motor vehicle insurance policy; or 2-19 (6) a long-term care policy, including a nursing home 2-20 fixed indemnity policy, unless the attorney general determines that 2-21 the policy provides benefit coverage so comprehensive that the 2-22 policy is a health benefit plan as described by Subsection (a) of 2-23 this article. 2-24 Art. 29.04. COLLECTIVE NEGOTIATION AUTHORIZED. Competing 2-25 physicians within the service area of a health benefit plan may 2-26 meet and communicate for the purpose of collectively negotiating 2-27 the following terms and conditions of contracts with the health 2-28 benefit plan: 2-29 (1) clinical practice guidelines and coverage 2-30 criteria; 2-31 (2) administrative procedures including methods and 2-32 timing of physician payment for services; 2-33 (3) dispute resolution procedures relating to disputes 2-34 between health benefit plans and physicians; 2-35 (4) patient referral procedures; 2-36 (5) formulation and application of physician 2-37 reimbursement methodology; 2-38 (6) quality assurance programs; 2-39 (7) health service utilization review procedures; 2-40 (8) health benefit plan physician selection and 2-41 termination criteria; and 2-42 (9) the inclusion or alteration of terms and 2-43 conditions to the extent they are the subject of government 2-44 regulation prohibiting or requiring the particular term or 2-45 condition in question; provided, however, that such restriction 2-46 does not limit physician rights to collectively petition government 2-47 for a change in such regulation. 2-48 Art. 29.05. LIMITATIONS ON COLLECTIVE NEGOTIATION. Except 2-49 as provided in Article 29.06 of this code, competing physicians 2-50 shall not meet and communicate for the purposes of collectively 2-51 negotiating the following terms and conditions of contracts with 2-52 health benefit plans: 2-53 (1) the fees or prices for services, including those 2-54 arrived at by applying any reimbursement methodology procedures; 2-55 (2) the conversion factors in a resource-based 2-56 relative value scale reimbursement methodology or similar 2-57 methodologies; 2-58 (3) the amount of any discount on the price of 2-59 services to be rendered by physicians; and 2-60 (4) the dollar amount of capitation or fixed payment 2-61 for health services rendered by physicians to health benefit plan 2-62 enrollees. 2-63 Art. 29.06. EXCEPTION TO LIMITATIONS ON COLLECTIVE 2-64 NEGOTIATION. (a) Competing physicians within the service area of 2-65 a health benefit plan may collectively negotiate the terms and 2-66 conditions specified in Article 29.05 of this code where the health 2-67 benefit plan has substantial market power. Substantial market 2-68 power shall be based upon the health benefit plan's and any of its 2-69 affiliated entities' number of covered lives in a defined 3-1 geographic area as determined by the commissioner. 3-2 (b) the department shall have the authority to collect and 3-3 investigate information necessary to determine on an annual basis 3-4 the average number of covered lives per month per county by every 3-5 health care entity in the state. 3-6 Art. 29.07. COLLECTIVE NEGOTIATION REQUIREMENTS. Competing 3-7 health care physicians' exercise of collective negotiation rights 3-8 granted by Articles 29.04 and 29.06 of this code shall conform to 3-9 the following criteria: 3-10 (1) physicians may communicate with each other with 3-11 respect to the contractual terms and conditions to be negotiated 3-12 with a health benefit plan; 3-13 (2) physicians may communicate with the third party 3-14 who is authorized to negotiate on their behalf with health benefit 3-15 plans over these contractual terms and conditions; 3-16 (3) the third party is the sole party authorized to 3-17 negotiate with health benefit plans on behalf of the physicians as 3-18 a group; 3-19 (4) physicians are bound by the terms and conditions 3-20 negotiated by the third party authorized to represent their 3-21 interests; 3-22 (5) health benefit plans communicating or negotiating 3-23 with the physicians' representative shall remain free to contract 3-24 with or offer different contract terms and conditions to individual 3-25 competing physicians; and 3-26 (6) the physicians' representative shall comply with 3-27 the provision of Article 29.08 of this code. 3-28 Art. 29.08. REQUIREMENTS FOR PHYSICIANS' REPRESENTATIVE. 3-29 Any person or organization proposing to act or acting as a 3-30 representative of physicians for the purpose of exercising 3-31 authority granted under this chapter shall comply with the 3-32 following requirements: 3-33 (1) before engaging in any collective negotiations 3-34 with health benefit plans on behalf of physicians, the 3-35 representative shall furnish, for the attorney general's approval, 3-36 a report identifying: 3-37 (A) the representative's name and business 3-38 address; 3-39 (B) the names and addresses of the physicians 3-40 who will be represented by the identified representative; 3-41 (C) the relationship of the physicians 3-42 requesting collective representation to the total population of 3-43 physicians in a geographic service area; 3-44 (D) the health benefit plans with which the 3-45 representative intends to negotiate on behalf of the identified 3-46 physicians; 3-47 (E) the proposed subject matter of the 3-48 negotiations or discussions with the identified health benefit 3-49 plans; 3-50 (F) the representative's plan of operation and 3-51 procedures to ensure compliance with this section; 3-52 (G) the expected impact of the negotiations on 3-53 the quality of patient care; and 3-54 (H) The benefits of a contract between the 3-55 identified health benefit plan and physicians; 3-56 (2) after the parties identified in the initial filing 3-57 have reached an agreement, the representative shall furnish, for 3-58 the attorney general's approval, a copy of the proposed contract 3-59 and plan of action; and 3-60 (3) within 14 days of a health benefit plan decision 3-61 declining negotiation, terminating negotiation, or failing to 3-62 respond to a request for negotiation the representative shall 3-63 report to the attorney general the end of negotiations. If 3-64 negotiations resume within 60 days of such notification to the 3-65 attorney general, the applicant shall be permitted to renew the 3-66 previously filed report without submitting a new report for 3-67 approval. 3-68 Art. 29.09. APPROVAL PROCESS BY ATTORNEY GENERAL. (a) The 3-69 attorney general shall either approve or disapprove an initial 4-1 filing, supplemental filing, or a proposed contract within 30 days 4-2 of each filing. If disapproved, the attorney general shall furnish 4-3 a written explanation of any deficiencies along with a statement of 4-4 specific remedial measures as to how such deficiencies could be 4-5 corrected. A representative who fails to obtain the attorney 4-6 general's approval is deemed to act outside the authority granted 4-7 under this article. 4-8 (b) The attorney general shall approve a request to enter 4-9 into collective negotiations or a proposed contract if the attorney 4-10 general determines that the applicants have demonstrated that the 4-11 likely benefits resulting from the collective negotiation or 4-12 proposed contract outweigh the disadvantages attributable to a 4-13 reduction in competition that may result from the collective 4-14 negotiation or proposed contract. 4-15 (c) An approval of the initial filing by the attorney 4-16 general shall be effective for all subsequent negotiations between 4-17 the parties specified in the initial filing. 4-18 (d) If the attorney general does not issue a written 4-19 approval or rejection of an initial filing, supplemental filing, or 4-20 proposed contract within the specified time period, the applicant 4-21 shall have the right to petition a district court for a mandamus 4-22 order requiring the attorney general to approve or disapprove the 4-23 contents of the filing forthwith. The petition shall be filed in a 4-24 district court in Travis County. 4-25 Art. 29.10. CERTAIN COLLECTIVE ACTION PROHIBITED. Nothing 4-26 contained in this chapter shall be construed to enable physicians 4-27 to collectively coordinate any cessation of health care service. 4-28 The representative of the physicians shall advise physicians of the 4-29 provisions of this article and shall warn physicians of the 4-30 potential for legal action against physicians who violate state or 4-31 federal antitrust laws when acting outside the authority of this 4-32 chapter. 4-33 Art. 29.11. RULEMAKING AUTHORITY. The attorney general and 4-34 the commissioner shall have the authority to promulgate rules 4-35 necessary to implement the provisions of this chapter. 4-36 Art. 29.12. CONSTRUCTION. This chapter shall not be 4-37 construed to prohibit physicians from negotiating the terms and 4-38 conditions of contracts as permitted by other state or federal law. 4-39 Art. 29.13. FEES. Each person who acts as the 4-40 representative of negotiating parties under this chapter shall pay 4-41 to the department a fee to act as a representative. The attorney 4-42 general, by rule, shall set fees in amounts reasonable and 4-43 necessary to cover the costs incurred by the state in administering 4-44 this chapter. A fee collected under this article shall be 4-45 deposited in the state treasury to the credit of the operating fund 4-46 from which the expense was incurred. 4-47 SECTION 2. This Act takes effect September 1, 1999. 4-48 SECTION 3. The importance of this legislation and the 4-49 crowded condition of the calendars in both houses create an 4-50 emergency and an imperative public necessity that the 4-51 constitutional rule requiring bills to be read on three several 4-52 days in each house be suspended, and this rule is hereby suspended. 4-53 * * * * *