BILL ANALYSIS
By: Delisi
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Discount health care programs are non-insurance programs that offer consumers direct access to health care products and services at discounted rates. Discount health care programs are offered by discount health care companies directly to consumers, insurance companies to subscribers, banks to customers, and non-profit organizations to members. The Consumer Health Alliance, the national trade association of discount health care companies, states its companies serve 28 million consumers across the country, including more than 2 million in Texas.
Discount health care programs began operating 15-20 years ago, primarily to offer access at discounted rates to those ancillary health care services not typically covered by insurance plans. These services often included dental, pharmacy, vision, chiropractic, and hearing.
In recent years, the skyrocketing cost of health care has made traditional health insurance increasingly unaffordable. This instability in the market has created an opportunity for some bad actors to exploit unwitting consumers through health care schemes that promise a lot and deliver little or nothing.
As a result, beginning in 1999, states began to enact laws regulating discount health care programs. These laws, which have now been enacted by more than half of the states, have taken several forms. At the minimum, some states have adopted simple operating rules requiring programs to make clear that they are not insurance, that the providers listed as part of the program are actually under contract to provide the discount, and that the program’s advertising is not deceptive, fraudulent or misleading. Other states have adopted additional operating rules, including those governing cancellation, customer service, and marketing. Finally, a number of states have enacted a licensing or registration process for companies operating in their state. In those states that have enacted some form of registration, having a registration process in itself has helped to reduce the number of fraudulent companies taking advantage of consumers.
Texas does not have an effective law which regulates discount health care programs. The purpose of C.S.H.B. 3064 is to enact targeted and practical legislation which will reduce misleading, deceptive and fraudulent activity of discount health care companies while allowing well-operated companies to continue to give Texans access to more affordable health care products and services.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is expressly granted to the Texas Commission on Licensing and Regulation in SECTION 3 of this bill.
ANALYSIS
C.S.H.B. 3064 amends the Health & Safety Code to institute various regulations for discount health plan program operators (program operators).
The bill prohibits any advertisement, solicitation, or marketing material of a discount health program (program) from containing various false, misleading, or deceptive statements, and lists examples of those types of statements. The bill also requires such advertisements, solicitations, and marketing materials to:
The bill also prohibits a program operator from offering a “free” trial membership in a program without disclosing in a certain manner various information, including any obligation of the member or prospective member associated with accepting the offered trial membership, the number and amount of payments required and the circumstances requiring additional payments, and the conditions, limitations, and restrictions on the ability of the member or prospective member to use or cancel the offered trial membership.
C.S.H.B. 3064 requires a program operator to, at a specified time, provide each prospective or new member disclosure materials containing various information, and requires marketers to use disclosure materials that comply with this requirement. The required information includes:
C.S.H.B. 3064 specifies various duties that a program operator is required to fulfill. These duties include:
The bill specifies various requirements and prohibitions regarding marketing of a discount health program. The bill authorizes a program operator to market directly or contract with marketers for the distribution of the operator’s discount health care program. The bill requires a program operator to enter into a written contract with a marketer before the marketer begins marketing the program or other specified activities, and requires the contract to prohibit the marketer from using marketing materials or discount cards that have not been approved in advance and in writing by the program operator.
Program operators would be required to approve in writing all such marketing materials and discount cards before their use.
C.S.H.B. 3064 requires a program operator to contract, directly or indirectly, with a provider offering discounted health care services or products under the discount health care program. The bill requires the written contract to contain certain specified provisions. The bill prohibits the program operator from charging or receiving from a provider any fee or other compensation for entering into the agreement. The bill provides that if the program operator contracts with a network of providers, the program operator shall obtain certain specified written assurances from the network. The bill provides that the program operator must require the network to maintain and provide the program operator on a monthly basis with an up-to-date list of providers in the network, and also to promptly remove a provider from its network if the provider loses the authority to provide services or products. The bill requires the program operator to maintain a copy of each written agreement the program operator has with a provider or a network.
C.S.H.B. 3064 requires program operators to register with the Texas Department of Licensing and Regulation (TDLR) prior to offering a discount health care program in Texas. The bill specifies various information that an applicant for such registration must submit. The bill requires that as part of that registration, and annually thereafter, the program operator shall certify to TDLR that its programs comply with the bill’s requirements. The bill requires a discount health care program to pay TDLR an initial registration fee of $500 and an annual renewal fee not to exceed $200. These registration requirements would not apply to a program operator licensed under Title 6, Insurance Code.
C.S.H.B. 3064 provides for disciplinary action and penalties. It provides that if a program operator or marketer fails to comply with the bill’s provisions or rules adopted pursuant to the bill, and does not correct that failure within a certain time period, TDLR is authorized to suspend or revoke the certificate of registration of that operator or marketer, or the antitrust and consumer protection division of the attorney general's office may bring an action to impose civil penalties against the program operator or marketer. The bill provides that on a finding that a ground for disciplinary action exists under the bill’s provisions, the executive director of TDLR may impose an administrative sanction, including any administrative penalty, as provided by Chapter 51, Occupations Code.
The bill authorizes the executive director of TDLR or the antitrust and consumer protection division of the attorney general's office to institute an action against a program operator or marketer for injunctive relief under Section 51.352, Occupations Code, to restrain a violation or a threatened violation of the bill’s provisions or an order issued or rule adopted under the bill’s provisions, and also to institute an action for a civil penalty as provided by Section 51.352, Occupations Code. The bill prohibits the amount of any such civil penalty from exceeding $2,500 for each violation. The bill further provides that advertising, selling, or distributing a discount health care program that violates the bill’s provisions is a false, misleading, or deceptive act or practice under Business & Commerce Code Section 17.46, and the exclusive remedy for any such act or practice is an action by the Office of the Attorney General as provided by Section 17.46(a). The bill specifies applicable administrative procedures and the process for appeal.
The bill requires the Texas Commission of Licensing and Regulation to adopt rules to implement the bill’s provisions and specifies the date by which they must be adopted.
The bill provides that a person is not required to register under the bill’s provisions before January 1st, 2008.
EFFECTIVE DATE
September 1, 2007.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The committee substitute amends the definition of “discount health care program” in the original bill to mean an entity that offers its members discounts on health care services. The substitute adds language providing that a discount health care program does not include an insurance policy, certificate of coverage, or other product regulated by the Texas Department of Insurance. The substitute deletes language in the original bill providing that a discount health care program offers members discounts at rates that are discounted from the usual and customary rates charged by health care providers to a private paying person without insurance or other third party reimbursement.
The committee substitute amends the definition of “provider” in the original bill to mean a person who is licensed or otherwise authorized to provide health care services in the state of Texas. The substitute deletes language in the original bill stating that “provider” means a person with whom a discount health care program has contracted, directly or indirectly, to provide health care services directly to program members.
The committee substitute adds language providing that the operator of a discount health care program marketed by an insurer or a health maintenance organization is required to comply with new Chapter 76, Health and Safety Code. The substitute deletes language in the original bill providing that the operator of a program marketed through or in connection with a health insurance policy, a health care plan, a health benefit plan, or a life or disability insurance policy is required to comply with new Chapter 76, Health and Safety Code.
The committee substitute adds language providing that any advertisement, solicitation, or marketing material of a discount health care program may not contain statements that knowingly misrepresent the price range of discounts offered by the discount health care program; knowingly misrepresent the size or location of the program’s network of providers; or knowingly misrepresent the participation of a provider in the program’s network.
The committee substitute adds language providing that a program operator is required to provide each prospective or new member disclosure materials containing a toll-free telephone number and an internet website through which a person may confirm or find a provider currently participating in that program. The original bill did not require that the provider be currently participating.
The committee substitute strikes the language in the original bill that required a program operator to provide each prospective or new member a statement that, for complaints regarding quality of services or products, the program operator was required to provide the number on request with the name, telephone number, and address of the department for filing the complaint.
The committee substitute adds language providing that a program operator is required to issue at least one membership card, which must contain a clear and conspicuous statement that the discount health care program is not insurance, to serve as proof of membership in the discount health care program, and which, if the discount health care program includes discount prescription drug benefits, must contain the name or logo of the entity administering the prescription drug benefits, the international identification number assigned by the American National Standards Institute for the entity administering the prescription drug benefits, the group number applicable to the member, and a telephone number to be used to contact an appropriate person to obtain information relating to the prescription drug benefits provided under the program.
The committee substitute adds language requiring a program operator to ensure that an application form or other membership agreement contains a clear and conspicuous statement that the discount health care program is not insurance. The original bill did not require the statement to be clear and conspicuous.
The committee substitute requires a program operator to maintain a surety bond in the principal amount of at least $50,000, except that an insurer licensed under Title 6, Insurance Code, is not required to maintain the surety bond. The original bill required the surety bond to be in a principal amount of at least $20,000.
The committee substitute strikes the language in the original bill that provided that, for a complaint about quality of service or products, the discount health care program was required to provide the member on request with the name, telephone number, and address of the Texas Department of Licensing and Regulation.
The committee substitute adds language providing that a program operator shall contract, directly or indirectly, with a provider offering discounted health care services or products under the discount health care program. The substitute also adds language providing that the written contract must contain a provision prohibiting the provider from charging a member more than the discounted rate agreed to in the written agreement with the provider.
The committee substitute adds language providing that if the program operator contracts with a network of providers, the program operator shall obtain written assurance from the network that the network has a written agreement with each network provider that includes a discounted rate that is applicable to a program operator’s discount health care program, and also that the network is authorized to obligate the network providers to provide services to members of the discount health care program.
The committee substitute adds language providing that the program operator shall require the network to maintain and provide the program operator on a monthly basis with an up-to-date list of providers in the network. The substitute deletes language in the original requiring the network each quarter to revise the list to indicate whether a provider has been added to, or deleted from, the network.
The committee substitute adds language providing that an applicant for registration under Chapter 76, Health and Safety Code is required to submit a list of the marketers authorized to sell or distribute the program operator’s program.
The committee substitute adds language requiring a modified contract form to be filed with the Texas Department of Licensing and Regulation before it may be used when a contract made or to be made between the program operator and any providers or provider networks regarding the provision of health care services or products to members changes after the initial registration.
The committee substitute adds language providing that a discount health care program shall pay the Texas Department of Licensing and Regulation an initial registration fee of $500 and an annual renewal fee not to exceed $200. The original bill only required an initial registration fee not to exceed $200 and did not require any annual renewal fee.
The committee substitute adds the term “damages” to the title of new Section 76.152, Health and Safety Code.
The committee substitute adds language providing that advertising, selling, or distributing a discount health care program that violates new Chapter 76, Health and Safety Code is a false, misleading, or deceptive act or practice for the purposes of Business & Commerce Code Section 17.46, and the exclusive remedy for any such violation is an action by the office of the attorney general as provided by Section 17.46(a).
The committee substitute strikes SECTION 3 of the original bill and renumbers subsequent sections accordingly.
The committee substitute strikes SECTION 6 of the original bill and renumbers subsequent sections accordingly.