By Averitt H.B. No. 2286
77R7454 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the operation of and coverage under small employer
1-3 health benefit plans.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Article 26.02, Insurance Code, is amended to read
1-6 as follows:
1-7 Art. 26.02. DEFINITIONS. In this chapter:
1-8 (1) "Affiliation period" means a period that, under
1-9 the terms of the coverage offered by a health maintenance
1-10 organization, must expire before the coverage becomes effective.
1-11 During an affiliation period:
1-12 (A) a health maintenance organization is not
1-13 required to provide health care services or benefits to the
1-14 participant or beneficiary; and
1-15 (B) a premium may not be charged to the
1-16 participant or beneficiary.
1-17 (2) "Agent" means a person who may act as an agent for
1-18 the sale of a health benefit plan under a license issued under
1-19 [Section 15 or 15A, Texas Health Maintenance Organization Act
1-20 (Article 20A.15 or 20A.15A, Vernon's Texas Insurance Code), or
1-21 under] Subchapter A, Chapter 21, of this code.
1-22 (3) "Base premium rate" means, for each class of
1-23 business and for a specific rating period, the lowest premium rate
1-24 that is charged or that could be charged under a rating system for
2-1 that class of business by the small employer carrier to small
2-2 employers with similar case characteristics for small employer
2-3 health benefit plans with the same or similar coverage.
2-4 (4) "Board of directors" means the board of directors
2-5 of the Texas Health Reinsurance System.
2-6 (5) "Case characteristics" means, with respect to a
2-7 small employer, the geographic area in which that employer's
2-8 employees reside, the age and gender of the individual employees
2-9 and their dependents, the appropriate industry classification as
2-10 determined by the small employer carrier, the number of employees
2-11 and dependents, and other objective criteria as established by the
2-12 small employer carrier that are considered by the small employer
2-13 carrier in setting premium rates for that small employer. The term
2-14 does not include health status related factors, duration of
2-15 coverage since the date of issuance of a health benefit plan, or
2-16 whether a covered person is or may become pregnant.
2-17 (6) "Class of business" means all small employers or a
2-18 separate grouping of small employers established under this
2-19 chapter.
2-20 (7) "Creditable coverage" means coverage described by
2-21 Article 26.035 of this code.
2-22 (8) "Dependent" means:
2-23 (A) a spouse;
2-24 (B) a newborn child;
2-25 (C) a child under the age of 19 years;
2-26 (D) a child who is a full-time student under the
2-27 age of 23 years and who is financially dependent on the parent;
3-1 (E) a child of any age who is medically
3-2 certified as disabled and dependent on the parent;
3-3 (F) any person who must be covered under:
3-4 (i) Section 3D or 3E, Article 3.51-6, of
3-5 this code; or
3-6 (ii) Section 2(L), Chapter 397, Acts of
3-7 the 54th Legislature, Regular Session, 1955 (Article 3.70-2,
3-8 Vernon's Texas Insurance Code); and
3-9 (G) any other child included as an eligible
3-10 dependent under an employer's benefit plan.
3-11 (9) "Eligible employee" means an employee who works on
3-12 a full-time basis and who usually works at least 30 hours a week.
3-13 The term also includes a sole proprietor, a partner, and an
3-14 independent contractor, if the sole proprietor, partner, or
3-15 independent contractor is included as an employee under a health
3-16 benefit plan of a small or large employer. The term does not
3-17 include:
3-18 (A) an employee who works on a part-time,
3-19 temporary, seasonal, or substitute basis; or
3-20 (B) an employee who is covered under:
3-21 (i) another health benefit plan;
3-22 (ii) a self-funded or self-insured
3-23 employee welfare benefit plan that provides health benefits and
3-24 that is established in accordance with the Employee Retirement
3-25 Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.);
3-26 (iii) the Medicaid program if the employee
3-27 elects not to be covered;
4-1 (iv) another federal program, including
4-2 the CHAMPUS program or Medicare program, if the employee elects not
4-3 to be covered; or
4-4 (v) a benefit plan established in another
4-5 country if the employee elects not to be covered.
4-6 (10) "Employee" means an individual employed by an
4-7 employer.
4-8 (11) "Health benefit plan" means a group, blanket, or
4-9 franchise insurance policy, a certificate issued under a group
4-10 policy, a group hospital service contract, or a group subscriber
4-11 contract or evidence of coverage issued by a health maintenance
4-12 organization that provides benefits for health care services. The
4-13 term does not include:
4-14 (A) accident-only or disability income insurance
4-15 or a combination of accident-only and disability income insurance;
4-16 (B) credit-only insurance;
4-17 (C) disability insurance coverage;
4-18 (D) coverage for a specified disease or illness;
4-19 (E) Medicare services under a federal contract;
4-20 (F) Medicare supplement and Medicare Select
4-21 policies regulated in accordance with federal law;
4-22 (G) long-term care coverage or benefits, nursing
4-23 home care coverage or benefits, home health care coverage or
4-24 benefits, community-based care coverage or benefits, or any
4-25 combination of those coverages or benefits;
4-26 (H) coverage that provides limited-scope dental
4-27 or vision benefits;
5-1 (I) coverage provided by a single service health
5-2 maintenance organization;
5-3 (J) coverage issued as a supplement to liability
5-4 insurance;
5-5 (K) workers' compensation or similar insurance;
5-6 (L) automobile medical payment insurance
5-7 coverage;
5-8 (M) jointly managed trusts authorized under 29
5-9 U.S.C. Section 141 et seq. that contain a plan of benefits for
5-10 employees that is negotiated in a collective bargaining agreement
5-11 governing wages, hours, and working conditions of the employees
5-12 that is authorized under 29 U.S.C. Section 157;
5-13 (N) hospital indemnity or other fixed indemnity
5-14 insurance;
5-15 (O) reinsurance contracts issued on a stop-loss,
5-16 quota-share, or similar basis;
5-17 (P) short-term major medical contracts;
5-18 (Q) liability insurance, including general
5-19 liability insurance and automobile liability insurance;
5-20 (R) other coverage that is:
5-21 (i) similar to the coverage described by
5-22 this subdivision under which benefits for medical care are
5-23 secondary or incidental to other insurance benefits; and
5-24 (ii) specified in federal regulations;
5-25 (S) coverage for on-site medical clinics; or
5-26 (T) coverage that provides other limited
5-27 benefits specified by federal regulations.
6-1 (12) [(11)] "Health carrier" means any entity
6-2 authorized under this code or another insurance law of this state
6-3 that provides health insurance or health benefits in this state,
6-4 including an insurance company, a group hospital service
6-5 corporation under Chapter 20 of this code, a health maintenance
6-6 organization under the Texas Health Maintenance Organization Act
6-7 (Chapter 20A, Vernon's Texas Insurance Code), and a stipulated
6-8 premium company under Chapter 22 of this code.
6-9 (13) [(12)] "Health status related factor" means:
6-10 (A) health status;
6-11 (B) medical condition, including both physical
6-12 and mental illness;
6-13 (C) claims experience;
6-14 (D) receipt of health care;
6-15 (E) medical history;
6-16 (F) genetic information;
6-17 (G) evidence of insurability, including
6-18 conditions arising out of acts of family violence; and
6-19 (H) disability.
6-20 (14) [(13)] "Index rate" means, for each class of
6-21 business as to a rating period for small employers with similar
6-22 case characteristics, the arithmetic average of the applicable base
6-23 premium rate and corresponding highest premium rate.
6-24 (15) [(14)] "Large employer" means an employer who
6-25 employed an average of at least 51 eligible employees on business
6-26 days during the preceding calendar year and who employs at least
6-27 two [eligible] employees on the first day of the plan year. For
7-1 purposes of this definition, a partnership is the employer of a
7-2 partner. A large employer includes a governmental entity subject
7-3 to Section 1, Chapter 123, Acts of the 60th Legislature, Regular
7-4 Session, 1967 (Article 3.51-3, Vernon's Texas Insurance Code), or
7-5 Article 3.51-1, 3.51-2, 3.51-4, 3.51-5, or 3.51-5A of this code
7-6 that otherwise meets the requirements of this section [and elects
7-7 to be treated as a large employer].
7-8 (16) [(15)] "Large employer carrier" means a health
7-9 carrier, to the extent that carrier is offering, delivering,
7-10 issuing for delivery, or renewing health benefit plans subject to
7-11 Subchapter H of this chapter.
7-12 (17) [(16)] "Large employer health benefit plan" means
7-13 a health benefit plan offered to a large employer.
7-14 (18) [(17)] "Late enrollee" means any employee or
7-15 dependent eligible for enrollment who requests enrollment in a
7-16 small or large employer's health benefit plan after the expiration
7-17 of the initial enrollment period established under the terms of the
7-18 first plan for which that employee or dependent was eligible
7-19 through the small or large employer or after the expiration of an
7-20 open enrollment period under Article 26.21(h) or 26.83 of this
7-21 code. An employee or dependent eligible for enrollment is not a
7-22 late enrollee if:
7-23 (A) the individual:
7-24 (i) was covered under another health
7-25 benefit plan or self-funded employer health benefit plan at the
7-26 time the individual was eligible to enroll;
7-27 (ii) declines in writing, at the time of
8-1 the initial eligibility, stating that coverage under another health
8-2 benefit plan or self-funded employer health benefit plan was the
8-3 reason for declining enrollment;
8-4 (iii) has lost coverage under another
8-5 health benefit plan or self-funded employer health benefit plan as
8-6 a result of:
8-7 (a) the termination of employment;
8-8 (b) the reduction in the number of
8-9 hours of employment;
8-10 (c) the termination of the other
8-11 plan's coverage;
8-12 (d) the termination of contributions
8-13 toward the premium made by the employer; or
8-14 (e) the death of a spouse or
8-15 divorce; and
8-16 (iv) requests enrollment not later than
8-17 the 31st day after the date on which coverage under the other
8-18 health benefit plan or self-funded employer health benefit plan
8-19 terminates;
8-20 (B) the individual is employed by an employer
8-21 who offers multiple health benefit plans and the individual elects
8-22 a different health benefit plan during an open enrollment period;
8-23 (C) a court has ordered coverage to be provided
8-24 for a spouse under a covered employee's plan and request for
8-25 enrollment is made not later than the 31st day after the date on
8-26 which the court order is issued; [or]
8-27 (D) a court has ordered coverage to be provided
9-1 for a child under a covered employee's plan and the request for
9-2 enrollment is made not later than the 31st day after the date on
9-3 which the employer receives the court order; or
9-4 (E) the individual is a child of a covered
9-5 employee who has lost coverage under Title XIX of the Social
9-6 Security Act (42 U.S.C. Section 1396 et seq.), other than coverage
9-7 consisting solely of benefits under Section 1928 of that Act (42
9-8 U.S.C. Section 1396s), or under Chapter 62, Health and Safety Code,
9-9 and the request for enrollment is made not later than the 31st day
9-10 after the date on which the child loses coverage.
9-11 (19) [(18)] "New business premium rate" means, for
9-12 each class of business as to a rating period, the lowest premium
9-13 rate that is charged or offered or that could be charged or offered
9-14 by the small employer carrier to small employers with similar case
9-15 characteristics for newly issued small employer health benefit
9-16 plans that provide the same or similar coverage.
9-17 (20) [(19)] "Participation criteria" means any
9-18 criteria or rules established by a large employer to determine the
9-19 employees who are eligible for enrollment, including continued
9-20 enrollment, under the terms of a health benefit plan. Such
9-21 criteria or rules may not be based on health status related
9-22 factors.
9-23 (21) [(20)] "Person" means an individual, corporation,
9-24 partnership, or other legal entity.
9-25 (22) [(21)] "Plan of operation" means the plan of
9-26 operation of the system established under Article 26.55 of this
9-27 code.
10-1 (23) [(22)] "Point-of-service contract" means a
10-2 benefit plan offered through a health maintenance organization
10-3 that:
10-4 (A) includes corresponding indemnity benefits in
10-5 addition to benefits relating to out-of-area or emergency services
10-6 provided through insurers or group hospital service corporations;
10-7 and
10-8 (B) permits the insured to obtain coverage under
10-9 either the health maintenance organization conventional plan or the
10-10 indemnity plan as determined in accordance with the terms of the
10-11 contract.
10-12 (24) [(23)] "Preexisting condition provision" means a
10-13 provision that denies, excludes, or limits coverage as to a disease
10-14 or condition for a specified period after the effective date of
10-15 coverage.
10-16 (25) [(24)] "Premium" means all amounts paid by a
10-17 small or large employer and eligible employees as a condition of
10-18 receiving coverage from a small or large employer carrier,
10-19 including any fees or other contributions associated with a health
10-20 benefit plan.
10-21 (26) [(25)] "Rating period" means a calendar period
10-22 for which premium rates established by a small employer carrier are
10-23 assumed to be in effect.
10-24 (27) [(26)] "Reinsured carrier" means a small employer
10-25 carrier participating in the system.
10-26 (28) [(27)] "Risk-assuming carrier" means a small
10-27 employer carrier that elects not to participate in the system.
11-1 (29) [(28)] "Small employer" means an employer who
11-2 employed an average of at least two but not more than 50 eligible
11-3 employees on business days during the preceding calendar year and
11-4 who employs at least two [eligible] employees on the first day of
11-5 the plan year. For purposes of this definition, a partnership is
11-6 the employer of a partner. A small employer includes a
11-7 governmental entity subject to Section 1, Chapter 123, Acts of the
11-8 60th Legislature, Regular Session, 1967 (Article 3.51-3, Vernon's
11-9 Texas Insurance Code), or Article 3.51-1, 3.51-2, 3.51-4, 3.51-5,
11-10 or 3.51-5A of this code that otherwise meets the requirements of
11-11 this section [and elects to be treated as a small employer].
11-12 (30) [(29)] "Small employer carrier" means a health
11-13 carrier, to the extent that that carrier is offering, delivering,
11-14 issuing for delivery, or renewing health benefit plans subject to
11-15 Subchapters C-G of this chapter under Article 26.06(a) of this
11-16 code.
11-17 (31) [(30)] "Small employer health benefit plan" means
11-18 a plan developed by the commissioner under Subchapter E of this
11-19 chapter or any other health benefit plan offered to a small
11-20 employer in accordance with Article 26.42(c) or 26.48 of this code.
11-21 (32) [(31)] "System" means the Texas Health
11-22 Reinsurance System established under Subchapter F of this chapter.
11-23 (33) [(32)] "Waiting period" means a period
11-24 established by an employer that must pass before an individual who
11-25 is a potential enrollee in a health benefit plan is eligible to be
11-26 covered for benefits.
11-27 SECTION 2. Article 26.035(a), Insurance Code, is amended to
12-1 read as follows:
12-2 (a) An individual's coverage is creditable for purposes of
12-3 this chapter if the coverage is provided under:
12-4 (1) a self-funded or self-insured employee welfare
12-5 benefit plan that provides health benefits and that is established
12-6 in accordance with the Employee Retirement Income Security Act of
12-7 1974 (29 U.S.C. Section 1001 et seq.);
12-8 (2) a group health benefit plan provided by a health
12-9 insurance carrier or health maintenance organization;
12-10 (3) an individual health insurance policy or evidence
12-11 of coverage;
12-12 (4) Part A or Part B of Title XVIII of the Social
12-13 Security Act (42 U.S.C. Section 1395c et seq.);
12-14 (5) Title XIX of the Social Security Act (42 U.S.C.
12-15 Section 1396 et seq.), other than coverage consisting solely of
12-16 benefits under Section 1928 of that Act (42 U.S.C. Section 1396s);
12-17 (6) Chapter 55, Title 10, United States Code (10
12-18 U.S.C. Section 1071 et seq.);
12-19 (7) a medical care program of the Indian Health
12-20 Service or of a tribal organization;
12-21 (8) a state or political subdivision health benefits
12-22 risk pool;
12-23 (9) a health plan offered under Chapter 89, Title 5,
12-24 United States Code (5 U.S.C. Section 8901 et seq.);
12-25 (10) a public health plan as defined by federal
12-26 regulations; [or]
12-27 (11) a health benefit plan under Section 5(e), Peace
13-1 Corps Act (22 U.S.C. Section 2504(e)); or
13-2 (12) a short-term limited duration coverage plan.
13-3 SECTION 3. Articles 26.06(a) and (b), Insurance Code, are
13-4 amended to read as follows:
13-5 (a) An individual or group health benefit plan is subject to
13-6 Subchapters C-G of this chapter if it provides health care benefits
13-7 covering two or more eligible employees of a small employer and if:
13-8 (1) a portion of the premium or benefits is paid by a
13-9 small employer; [or]
13-10 (2) the health benefit plan is treated by the employer
13-11 or by a covered individual as part of a plan or program for the
13-12 purposes of Section 106 or 162, Internal Revenue Code of 1986 (26
13-13 U.S.C. Section 106 or 162); or
13-14 (3) the health benefit plan is an employee welfare
13-15 benefit plan under 29 C.F.R. Section 2510.3-1(j).
13-16 (b) For an employer who was not in existence throughout the
13-17 calendar year preceding the year in which the determination of
13-18 whether the employer is a small employer is made, the determination
13-19 is based on the average number of employees and eligible employees
13-20 the employer reasonably expects to employ on business days in the
13-21 calendar year in which the determination is made.
13-22 SECTION 4. Articles 26.22(b) and (e), Insurance Code, are
13-23 amended to read as follows:
13-24 (b) A small employer carrier that refuses to issue a small
13-25 employer health benefit plan in a geographic service area may not
13-26 offer a health benefit plan to a small employer [group of not more
13-27 than 50 individuals] in the affected service area before the fifth
14-1 anniversary of the date of the refusal.
14-2 (e) If the commissioner determines that requiring the
14-3 acceptance of small employers under this subchapter would place a
14-4 small employer carrier in a financially impaired condition and that
14-5 the small employer carrier is acting uniformly without regard to
14-6 the claims experience of the small employer or any health status
14-7 related factors of eligible employees or dependents or new
14-8 employees or dependents who may become eligible for the coverage,
14-9 the small employer carrier shall not offer coverage to small
14-10 employers until the later of:
14-11 (1) the 180th day after the date the commissioner
14-12 makes the determination; or
14-13 (2) the date the commissioner determines that
14-14 accepting small employers would not place the small employer
14-15 carrier in a financially impaired condition.
14-16 SECTION 5. Articles 26.23(b) and (c), Insurance Code, are
14-17 amended to read as follows:
14-18 (b) A small employer carrier may refuse to renew the
14-19 coverage of a covered [an eligible] employee or dependent for fraud
14-20 or intentional misrepresentation of a material fact by that
14-21 individual.
14-22 (c) A small employer carrier may not cancel a small employer
14-23 health benefit plan except for the reasons specified for refusal to
14-24 renew under Subsection (a) of this article. A small employer
14-25 carrier may not cancel the coverage of a covered [an eligible]
14-26 employee or dependent except for the reasons specified for refusal
14-27 to renew under Subsection (b) of this article.
15-1 SECTION 6. Article 26.81(a), Insurance Code, is amended to
15-2 read as follows:
15-3 (a) An individual or group health benefit plan is subject to
15-4 this subchapter if the plan provides health care benefits to
15-5 eligible employees of a large employer and if:
15-6 (1) a portion of the premium or benefits is paid by a
15-7 large employer; [or]
15-8 (2) the health benefit plan is treated by the employer
15-9 or by a covered individual as part of a plan or program for the
15-10 purposes of Section 106 or 162, Internal Revenue Code of 1986 (26
15-11 U.S.C. Section 106 or 162); or
15-12 (3) the health benefit plan is an employee welfare
15-13 benefit plan under 29 C.F.R. Section 2510.3-1(j).
15-14 SECTION 7. Section 3(b), Article 21.53F, Insurance Code, as
15-15 added by Chapter 832, Acts of the 75th Legislature, Regular
15-16 Session, 1997, is amended to read as follows:
15-17 (b) This article does not apply to:
15-18 (1) a plan that provides coverage:
15-19 (A) only for a specified disease or other
15-20 limited benefit;
15-21 (B) only for accidental death or dismemberment;
15-22 (C) for wages or payments in lieu of wages for a
15-23 period during which an employee is absent from work because of
15-24 sickness or injury;
15-25 (D) as a supplement to liability insurance;
15-26 (E) for credit insurance;
15-27 (F) only for dental or vision care; or
16-1 (G) only for indemnity for hospital confinement;
16-2 (2) [a small employer health benefit plan written
16-3 under Chapter 26 of this code;]
16-4 [(3)] a Medicare supplemental policy as defined by
16-5 Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss);
16-6 (3) [(4)] workers' compensation insurance coverage;
16-7 (4) [(5)] medical payment insurance issued as part of
16-8 a motor vehicle insurance policy; or
16-9 (5) [(6)] a long-term care policy, including a nursing
16-10 home fixed indemnity policy, unless the commissioner determines
16-11 that the policy provides benefit coverage so comprehensive that the
16-12 policy is a health benefit plan as described by Subsection (a) of
16-13 this section.
16-14 SECTION 8. This Act takes effect September 1, 2001, and
16-15 applies to a health benefit plan that is delivered, issued for
16-16 delivery, or renewed on or after January 1, 2002. A plan that is
16-17 delivered, issued for delivery, or renewed before January 1, 2002,
16-18 is governed by the law as it existed immediately before the
16-19 effective date of this Act, and that law is continued in effect for
16-20 that purpose.