By: Shapleigh S.B. No. 207

A BILL TO BE ENTITLED

AN ACT

relating to prohibition of certain business practices related to rescission of coverage under health benefit plans.

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

SECTION 1. Subtitle C, Title 6, Insurance Code, is amended by adding Chapter 848 to read as follows:

CHAPTER 848. PROHIBITED PRACTICES RELATED TO RESCISSION

Sec. 848.001. APPLICABILITY. (a) This chapter applies to a health benefit plan that provides benefits in this state for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or similar coverage document that is offered by:

(1) an insurance company;

(2) a group hospital service corporation operating under Chapter 842;

(3) a fraternal benefit society operating under Chapter 885;

(4) a stipulated premium company operating under Chapter 884;

(5) a reciprocal exchange operating under Chapter 942;

(6) a health maintenance organization operating under Chapter 843;

(7) a multiple employer welfare arrangement that holds a certificate of authority under Chapter 846; or

(8) an approved nonprofit health corporation that holds a certificate of authority under Chapter 844.

(b) This chapter does not apply to:

(1) a health benefit plan that provides coverage only:

(A) for a specified disease or diseases or under an individual limited benefit policy;

(B) for accidental death or dismemberment;

(C) as a supplement to a liability insurance policy; or

(D) for dental or vision care;

(2) disability income insurance coverage or a combination of accident-only and disability income insurance coverage;

(3) credit insurance coverage;

(4) a hospital confinement indemnity policy;

(5) a Medicare supplemental policy as defined by Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss);

(6) a workers' compensation insurance policy;

(7) medical payment insurance coverage provided under a motor vehicle insurance policy; or

(8) a long-term care insurance policy, including a nursing home fixed indemnity policy, unless the commissioner determines that the policy provides benefits so comprehensive that the policy is a health benefit plan and should not be subject to the exemption provided under this section.

Sec. 848.002. BAD FAITH RESCISSION. (a) It is an unfair method of competition or an unfair or deceptive act or practice for purposes of Chapter 541 for a health benefit plan issuer to:

(1) set rescission goals, quotas, or targets;

(2) pay compensation of any kind, including a bonus or award, that varies according to the number of rescissions;

(3) set, as a condition of employment, a number or volume of rescissions to be achieved; or

(4) set a performance standard, for employees or by contract with another entity, based on the number or volume of rescissions.

(b) For purposes of this chapter, "rescission" means the termination of an insurance agreement, contract, evidence of coverage, insurance policy, or other similar coverage document in which the health benefit plan issuer refunds premium payments or, if applicable, demands the restitution of any benefit paid under the plan, on the ground the issuer is entitled to restoration of the issuer's precontractual position.

SECTION 2. This Act takes effect September 1, 2009.