80R6876 YDB-D

By: Delisi H.B. No. 3064

A BILL TO BE ENTITLED

AN ACT

relating to registration and regulation of certain discount health plans; providing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The heading to Subtitle C, Title 2, Health and Safety Code, is amended to read as follows:

SUBTITLE C. PROGRAMS PROVIDING [INDIGENT] HEALTH CARE BENEFITS AND

SERVICES

SECTION 2. Subtitle C, Title 2, Health and Safety Code, is amended by adding Chapter 76 to read as follows: CHAPTER 76. DISCOUNT HEALTH CARE PROGRAMS SUBCHAPTER A. GENERAL PROVISIONS

Sec. 76.001. DEFINITIONS. In this chapter:

(1) "Commission" means the Texas Commission of Licensing and Regulation.

(2) "Department" means the Texas Department of Licensing and Regulation.

(3) "Discount health care program" means a business arrangement or contract in which an entity, in exchange for fees, dues, charges, or other consideration, offers its members access to health care services 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.

(4) "Discount health care program operator" means a person who, in exchange for fees, dues, charges, or other consideration, operates a discount health care program and contracts with providers, provider networks, or other discount health care program operators to offer access to health care services at a discount and determines the charge to members.

(5) "Division" means the antitrust and consumer protection division of the attorney general's office.

(6) "Marketer" means a person that sells or distributes a discount health care program, including a private label entity that places its name on and markets or distributes a discount health care program, but does not operate a discount health care program.

(7) "Member" means a person who pays fees, dues, charges, or other consideration for the right to participate in a discount health care program.

(8) "Program operator" means a discount health plan program operator.

(9) "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.

Sec. 76.002. APPLICABILITY OF OTHER LAW. In addition to the requirements of this chapter, a program operator or marketer is subject to the applicable consumer protection laws under Chapter 17, Business & Commerce Code.

Sec. 76.003. RULES. The commission shall adopt the rules necessary to implement this chapter. [Sections 76.004-76.050 reserved for expansion] SUBCHAPTER B. PROGRAM REQUIREMENTS

Sec. 76.051. PROGRAM OPERATOR. Except as otherwise provided by this chapter, a program operator, including the operator of a freestanding discount health care program or 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, shall comply with this chapter.

Sec. 76.052. PROHIBITED ADVERTISEMENT, SOLICITATION, AND MARKETING. (a) Any advertisement, solicitation, or marketing material of a discount health care program may not contain false, misleading, or deceptive statements, including statements that:

(1) misrepresent the price range of discounts offered by the discount health care program;

(2) misrepresent the size or location of the program's network of providers; or

(3) suggest that a discount card offered through the program is a federally approved Medicare prescription discount card.

(b) Any advertisement, solicitation, and marketing material of a discount health care program shall clearly and conspicuously state that the discount health care program is not insurance.

(c) Any advertisement, solicitation, or marketing material of a discount health care program may not use the term "insurance", except as a disclaimer of any relationship between the discount health care program and insurance, or as a description of an insurance product connected with a discount health care program.

(d) Any advertisement, solicitation, or marketing material of a discount health care program may not use the terms "health plan," "coverage," "copay," "copayments," "deductible," "preexisting conditions," "guaranteed issue," "premium," "PPO," "preferred provider organization," or another similar term, in a manner that could reasonably mislead an individual into believing that the discount health care program is health insurance or provides similar coverage.

(e) Any advertisement, solicitation, or marketing material of a discount health care program may not use the terms "free," "no obligation," "discounted," "reduced," or other similar terms, without disclosing clearly and conspicuously, and in close proximity to the use of the term, any and all conditions, limitations, and restrictions on the ability of the member or prospective member to obtain or use the good or service to which the term applies.

(f) A program operator may not offer a "free" trial membership in a discount health care program without disclosing clearly and conspicuously, and in close proximity to the offer:

(1) any obligation of the member or prospective member associated with accepting the offered trial membership, including:

(A) an obligation to purchase other goods and services;

(B) an obligation to cancel membership or take other affirmative action to avoid incurring payment obligations; and

(C) the manner in which a cancellation request may be submitted;

(2) the number and amount of each payment that is or may be required and the circumstances under which additional payments may be required; and

(3) the conditions, limitations, and restrictions on the ability of the member or prospective member to use or cancel the offered trial membership.

Sec. 76.053. DISCLOSURE MATERIALS REQUIRED. (a) A program operator shall, before enrollment or with the written materials describing the terms and conditions of the program that are provided after enrollment, provide each prospective or new member disclosure materials containing the following information:

(1) a general description of the services and products offered through the discount health care program and the types of providers available;

(2) a toll-free telephone number and an Internet website address through which a person may:

(A) obtain information about the discount health care program; and

(B) confirm or find a provider participating in that program;

(3) a clear and conspicuous statement that:

(A) the discount health care program is not insurance, with the word "not" capitalized; and

(B) the member is required to pay the entire amount of the discounted rate;

(4) a statement that a member who cancels the membership not later than the 30th day after the date the member joins the discount health care program is entitled to a refund of all membership fees paid to the discount health care program other than money paid as a nominal one-time enrollment fee or money paid by the member to a provider for health care services or products received;

(5) a statement that the discount health care program does not guarantee the quality of the services or products offered by individual providers; and

(6) a statement that:

(A) a member may file a complaint under the discount health care program's complaint resolution procedure regarding the availability of contracted discounts or services or other matters relating to the contractual obligations of the program to its members; and

(B) for complaints regarding quality of services or products, the program operator shall provide the member on request with the name, telephone number, and address of the department for filing the complaint.

(b) A marketer shall use disclosure materials that comply with Subsection (a).

Sec. 76.054. PROGRAM OPERATOR DUTIES. (a) A program operator shall:

(1) provide a toll-free telephone number and Internet website for members to obtain information about the discount health care program and confirm or find providers participating in the program;

(2) remove a provider from the discount health care program not later than the 30th day after the date the operator learns that the provider has lost the authority to provide services or products, including the suspension or revocation of the provider's license;

(3) issue:

(A) at least one membership card, which must contain a statement that the discount health care program is not insurance, to serve as proof of membership in the discount health care program; and

(B) at least one set of disclosure materials to each household in which a person is a member;

(4) ensure that an application form or other membership agreement:

(A) clearly and conspicuously discloses the duration of membership and the amount of payments the member is obligated to make for the membership; and

(B) contains a statement that the discount health care program is not insurance;

(5) allow any member who cancels a membership in the discount health care program not later than the 30th day after the date the person becomes a member to receive a refund, not later than the 30th day after the date the operator receives a valid cancellation notice and returned membership card, of all membership fees paid by that member to the program operator other than an amount paid as a one-time enrollment fee or amount paid by the member to a provider for health care services or products received;

(6) maintain a surety bond in the principal amount of at least $20,000, except that an insurer licensed under Title 6, Insurance Code, is not required to maintain the surety bond;

(7) maintain an agent for service of process in this state; and

(8) establish and operate a fair and efficient procedure for resolution of complaints regarding the availability of contracted discounts or services or other matters relating to the contractual obligations of the discount health care program to its members.

(b) For a complaint about quality of services or products, the discount health care program shall provide the member on request with the name, telephone number, and address of the department.

Sec. 76.055. MARKETING OF PROGRAM. (a) A program operator may market directly or contract with marketers for the distribution of the operator's discount health care program.

(b) A program operator shall enter into a written contract with a marketer before the marketer begins marketing, promoting, selling, or distributing the program operator's discount health care program. The contract must prohibit the marketer from using advertising, solicitations, or other marketing materials, or discount cards that have not been approved in advance and in writing by the program operator.

(c) A program operator must approve in writing all advertisements, solicitations, or other marketing materials, and discount cards used by marketers to market, promote, sell, or distribute the discount health care program before their use.

Sec. 76.056. CONTRACT REQUIREMENTS. (a) A program operator shall contract with a provider offering discounted health care services or products under the discount health care program. The written contract must contain all of the following provisions:

(1) a description of the discounts to be provided to a member;

(2) a provision prohibiting the provider from charging a member more than the discounted rate; and

(3) a provision requiring the provider to promptly notify the program operator if the provider loses the authority to provide services or products, including by suspension or revocation of the provider's license.

(b) The program operator may not charge or receive from a provider any fee or other compensation for entering into the agreement.

(c) If the program operator contracts with a network of providers, the program operator shall obtain written assurance from the network that:

(1) the network has a written agreement with network providers containing all of the terms described in Subsection (a); and

(2) the network is authorized to contract with the program operator for the network providers.

(d) The program operator shall require the network to:

(1) maintain and provide the program operator with a list of providers in the network and each quarter to revise the list to indicate whether a provider has been added to, or deleted from, the network; and

(2) promptly remove a provider from its network if the provider loses the authority to provide services or products.

(e) The program operator shall maintain a copy of each written agreement the program operator has with a provider or a network. [Sections 76.057-76.100 reserved for expansion] SUBCHAPTER C. REGISTRATION

Sec. 76.101. REGISTRATION REQUIRED. (a) A program operator may not offer a discount health care program in this state unless the operator is registered with the department.

(b) An applicant for registration under this chapter must submit:

(1) a registration form indicating the program operator's name and address and its agent for service of process;

(2) a list of names, addresses, official positions, and biographical information of:

(A) the individuals responsible for conducting the program operator's affairs, including:

(i) each member of the board of directors, board of trustees, executive committee, or other governing board or committee;

(ii) the officers of the program operator; and

(iii) any contracted management company personnel; and

(B) any person owning or having the right to acquire 10 percent or more of the voting securities of the program operator;

(3) a statement generally describing the applicant, its facilities and personnel, and the health care services or products for which a discount will be made available under the discount health care program; and

(4) a copy of the form of all contracts 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.

(c) As part of the registration required under Subsection (b), and annually thereafter, the program operator shall certify to the department that its programs comply with the requirements of this chapter.

(d) A discount health care program shall pay the department an initial registration fee not to exceed $200.

(e) This section does not apply to a program operator licensed under Title 6, Insurance Code. [Sections 76.102-76.150 reserved for expansion] SUBCHAPTER D. DISCIPLINARY ACTION; PENALTIES.

Sec. 76.151. DISCIPLINARY ACTION. (a) If a program operator or marketer fails to comply with this chapter or the rules adopted under this chapter and does not correct the failure before the 30th day following the day the person receives notification of the failure by the department, the department may suspend or revoke the certificate of registration of the program operator or marketer or the division may bring an action to impose civil penalties against the program operator or marketer under this subchapter.

(b) On a finding that a ground for disciplinary action exists under this chapter, the executive director of the department may impose an administrative sanction, including any administrative penalty, as provided by Chapter 51, Occupations Code.

Sec. 76.152. INJUNCTIVE RELIEF; CIVIL PENALTY. (a) The executive director of the department or the division may 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 this chapter or an order issued or rule adopted under this chapter.

(b) In addition to the injunctive relief provided by Subsection (a), the executive director of the department or the division may institute an action for a civil penalty as provided by Section 51.352, Occupations Code.

(c) The amount of any civil penalty assessed under this section may not exceed $2,500 for each violation.

Sec. 76.153. ADMINISTRATIVE PROCEDURE. Sections 51.310, 51.353, and 51.354, Occupations Code, apply to a disciplinary action taken under this chapter.

Sec. 76.154. APPEAL. A person affected by a ruling, order, decision, or other action of the executive director of the department or the department may appeal by filing a petition in a district court in Travis County.

SECTION 3. Section 17.46(b), Business & Commerce Code, is amended to read as follows:

(b) Except as provided in Subsection (d) of this section, the term "false, misleading, or deceptive acts or practices" includes, but is not limited to, the following acts:

(1) passing off goods or services as those of another;

(2) causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services;

(3) causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another;

(4) using deceptive representations or designations of geographic origin in connection with goods or services;

(5) representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not;

(6) representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, or secondhand;

(7) representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another;

(8) disparaging the goods, services, or business of another by false or misleading representation of facts;

(9) advertising goods or services with intent not to sell them as advertised;

(10) advertising goods or services with intent not to supply a reasonable expectable public demand, unless the advertisements disclosed a limitation of quantity;

(11) making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions;

(12) representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law;

(13) knowingly making false or misleading statements of fact concerning the need for parts, replacement, or repair service;

(14) misrepresenting the authority of a salesman, representative or agent to negotiate the final terms of a consumer transaction;

(15) basing a charge for the repair of any item in whole or in part on a guaranty or warranty instead of on the value of the actual repairs made or work to be performed on the item without stating separately the charges for the work and the charge for the warranty or guaranty, if any;

(16) disconnecting, turning back, or resetting the odometer of any motor vehicle so as to reduce the number of miles indicated on the odometer gauge;

(17) advertising of any sale by fraudulently representing that a person is going out of business;

(18) advertising, selling, or distributing a discount health plan that violates Chapter 76, Health and Safety Code [card which purports to be a prescription drug identification card issued under Section 4151.152, Insurance Code, in accordance with rules adopted by the commissioner of insurance, which offers a discount on the purchase of health care goods or services from a third party provider, and which is not evidence of insurance coverage, unless:

[(A) the discount is authorized under an agreement between the seller of the card and the provider of those goods and services or the discount or card is offered to members of the seller;

[(B) the seller does not represent that the card provides insurance coverage of any kind; and

[(C) the discount is not false, misleading, or deceptive];

(19) using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller's promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;

(20) representing that a guarantee or warranty confers or involves rights or remedies which it does not have or involve, provided, however, that nothing in this subchapter shall be construed to expand the implied warranty of merchantability as defined in Sections 2.314 through 2.318 and Sections 2A.212 through 2A.216 to involve obligations in excess of those which are appropriate to the goods;

(21) promoting a pyramid promotional scheme, as defined by Section 17.461;

(22) representing that work or services have been performed on, or parts replaced in, goods when the work or services were not performed or the parts replaced;

(23) filing suit founded upon a written contractual obligation of and signed by the defendant to pay money arising out of or based on a consumer transaction for goods, services, loans, or extensions of credit intended primarily for personal, family, household, or agricultural use in any county other than in the county in which the defendant resides at the time of the commencement of the action or in the county in which the defendant in fact signed the contract; provided, however, that a violation of this subsection shall not occur where it is shown by the person filing such suit he neither knew or had reason to know that the county in which such suit was filed was neither the county in which the defendant resides at the commencement of the suit nor the county in which the defendant in fact signed the contract;

(24) failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed;

(25) using the term "corporation," "incorporated," or an abbreviation of either of those terms in the name of a business entity that is not incorporated under the laws of this state or another jurisdiction;

(26) selling, offering to sell, or illegally promoting an annuity contract under Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's Texas Civil Statutes), with the intent that the annuity contract will be the subject of a salary reduction agreement, as defined by that Act, if the annuity contract is not an eligible qualified investment under that Act; or

(27) taking advantage of a disaster declared by the governor under Chapter 418, Government Code, by:

(A) selling or leasing fuel, food, medicine, or another necessity at an exorbitant or excessive price; or

(B) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, or another necessity.

SECTION 4. Not later than December 1, 2007, the Texas Commission on Licensing and Regulation shall adopt the rules and procedures necessary to implement Chapter 76, Health and Safety Code, as added by this Act.

SECTION 5. Notwithstanding Section 76.101, Health and Safety Code, a person is not required to register under that section before January 1, 2008.

SECTION 6. Section 17.46(b), Business & Commerce Code, as amended by this Act, applies only to a cause of action that accrues on or after January 1, 2008. A cause of action that accrues before January 1, 2008, is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 7. This Act takes effect September 1, 2007.