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                                  * * * * *