SRC-JEC, MSY S.B. 159 78(R)           BILL ANALYSIS


Senate Research Center   S.B. 159
78R948 AJA-DBy: Nelson
State Affairs
4/28/2003
As Filed


DIGEST AND PURPOSE 

Currently, most managed health care plans require similar information in
the terms and conditions for health care service contracts, but in
different formats. Physicians contend that this increases their
administrative burden.  As proposed, S.B. 159 establishes a standardized
managed care contract for physicians.   

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 (Article 21.52N, Subchapter E, Chapter 21, Insurance Code) of
this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter E, Chapter 21, Insurance Code, by adding
Article 21.52N, as follows: 

Art.  21.52N.  STANDARD MANAGED CARE CONTRACTS FOR PHYSICIANS

 Sec. 1.  DEFINITIONS.  Defines "managed care entity" and "managed care
plan." 

Sec. 2.  APPLICABILITY OF ARTICLE.  Makes this article applicable to a
health maintenance organization, a preferred provider organization, an
approved nonprofit health corporation that holds a certificate under
Chapter 844 of this code, and any other entity that issues a managed care
plan including: 

 (1)  an insurance company;
 (2) a group hospital service corporation operating under Chapter 842 of
this code; 
 (3) a fraternal benefit society operating under Chapter 885 of this code;
or 
(4) a stipulated premium insurance company operating under Chapter 884 of
this code. 
 
Sec.  3.  STANDARD PHYSICIAN CONTRACTS.  (a)  Requires the commissioner of
insurance (commissioner) to adopt rules that establish standard contract
forms to be used by managed care entities when entering into contracts
with physicians and that require managed care entities to use those
contracts, except as provided under Subsection (c). 

(b)  Provides that such contract forms may not waive a provision of state
or federal law and must, if such arbitration is required or allowed under
the contract form, allow the consolidation into a single arbitration
proceeding of disputes arising from contracts between the managed care
entity and two or more physicians practicing together on the request of
the physicians. 

(c)  Authorizes a managed care entity or a physician to use a contract
form other than that required under Subsection (a) provided that the form
meets certain requirements. 

(d)  Prohibits the terms of a contract form adopted under Subsection (a)
and entered into by a physician and a managed care entity from being
modified  without the mutual agreement of both parties. 

Sec.  4.  CONTRACT ADVISORY PANEL; MEMBERSHIP.  (a)  Establishes a
contract advisory panel to advise the commissioner regarding the adoption
of standard contract forms under Section 3 of this article. 

(b)  Establishes the specific composition of the panel's nine members, to
be appointed by the lieutenant governor and the speaker of the house of
representatives. 

(c)  Provides that the consumer representative on the advisory panel may
not be employed in certain activities. 

(d)  Provides that the members of the advisory panel serve without
compensation and at the will of the appointing authorities. 

Sec.  5.  CERTAIN DISCRIMINATION PROHIBITED.  Prohibits a managed care
entity from discriminating against a physician who uses a standard
contract form under this article, using certain incentives to disadvantage
a physician who chooses to use a standard contract form, or requiring a
physician to waive the use of a standard contract form. 

Sec.  6.  EFFECT OF VIOLATION.  (a)  Establishes that a violation of this
article or a rule adopted under this article by a managed care entity
constitutes an unfair or deceptive act or practice in the business of
insurance for the purposes of Article 21.21 (Unfair Competition and Unfair
Practices) of this code and a violation of Article 21.21A
(Misrepresentation of Policy Terms, Penalty) of this code. 

(b)  Authorizes the commissioner to suspend or revoke a managed care
entity's authority to engage in insurance business in this state upon
determining that the managed care entity has failed to use a contract form
as required under this article. 

(c)  Authorizes the commissioner to impose sanctions or penalties under
Chapter 82 (Sanctions) or 84 (Administrative Penalties) of this code
against a managed care entity that repeatedly violates this article. 

SECTION 2.  Requires the commissioner to adopt the rules and contract
forms required by this Act by June 1, 2004. 

SECTION 3.  Requires a managed care entity to use a standard contract form
adopted under this Act for any contract between itself and a physician
signed or renewed on or after January 1, 2005, unless an exception
applies. 

SECTION 4.  Effective date: upon passage or September 1, 2003.