By: Shapiro S.B. No. 2339

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of discount health care programs by the Texas Department of Insurance; providing penalties.

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

SECTION 1. The Insurance Code is amended by adding Title 21 to read as follows:

TITLE 21. DISCOUNT HEALTH CARE PROGRAMS

CHAPTER 7001. REGISTRATION AND REGULATION OF

DISCOUNT HEALTH CARE PROGRAMS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 7001.001. DEFINITIONS. In this chapter:

(1) "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 discounts on health care services provided by health care providers. The term does not include an insurance policy, a certificate of coverage, or a self-funded or self-insured employee benefit plan.

(2) "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.

(3) "Health care services" includes physician care, inpatient care, hospital surgical services, emergency services, ambulance services, laboratory services, audiology services, dental services, vision services, mental health services, substance abuse services, chiropractic services, and podiatry services, and medical equipment and supplies.

(4) "Marketer" means a person who sells or distributes, or offers to sell or distribute, 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.

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

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

(7) "Provider" means a person who is licensed or otherwise authorized to provide health care services in this state.

Sec. 7001.002. 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. 7001.003. RULES. The commissioner shall adopt the rules necessary to implement this chapter.

[Sections 7001.004-7001.050 reserved for expansion]

SUBCHAPTER B. PROGRAM REQUIREMENTS

Sec. 7001.051. PROGRAM OPERATOR. Except as otherwise provided by this chapter, a program operator, including the operator of a freestanding discount health care program or a discount health care program marketed by an insurer or a health maintenance organization , shall comply with this chapter.

Sec. 7001.052. PROHIBITED ADVERTISEMENT, SOLICITATION, AND MARKETING. (a) Advertisements, solicitations, or marketing materials 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;

(3) knowingly misrepresent the participation of a provider in the program's network; or

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

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

(c) Advertisements, solicitations, or marketing materials 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) Advertisements, solicitations, or marketing materials of a discount health care program may not use the term "health plan," "coverage," "copay," "copayments," "deductible," "preexisting conditions," "guaranteed issue," "premium," "PPO," or "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) Advertisements, solicitations, or marketing materials of a discount health care program may not use the term "free," "no obligation," "discounted," or "reduced," or another similar term, 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 of payments and the amount of each payment that are 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. 7001.053. DISCLOSURE MATERIALS REQUIRED. (a) A program operator, before enrollment or with the written materials describing the terms and conditions of the program that are provided not later than the 15th day after the date of enrollment, shall 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 currently 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 periodic membership charges paid to the discount health care program and the amount of any one-time enrollment fee that exceeds $50;

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

(6) a statement that 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

(7) information that, if the member remains dissatisfied after completing the discount health care program's complaint system, the member may contact the department.

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

Sec. 7001.054. PROGRAM OPERATOR DUTIES. 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 currently 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 at least one membership card to serve as proof of membership in the discount health care program that must:

(A) contain a clear and conspicuous statement that the discount health care program is not insurance; and

(B) if the discount health care program includes discount prescription drug benefits, include:

(i) the name or logo of the entity administering the prescription drug benefits;

(ii) the international identification number assigned by the American National Standards Institute for the entity administering the prescription drug benefits;

(iii) the group number applicable to the member; and

(iv) a telephone number to be used to contact an appropriate person to obtain information relating to the prescription drug benefits provided under the program;

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

(5) 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 clear and conspicuous statement that the discount health care program is not insurance;

(6) 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 periodic membership charges paid by that member to the program operator and the amount of any one-time enrollment fee that exceeds $50;

(7) maintain a surety bond, payable to the department for the use and benefit of members in a manner prescribed by the department, in the principal amount of $50,000, except that a program operator that is an insurer that holds a certificate of authority under Title 6 is not required to maintain the surety bond;

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

(9) 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.

Sec. 7001.055. MARKETING OF PROGRAM. (a) A program operator may market directly or contract with marketers for the distribution of the operator's discount health care programs.

(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. 7001.056. CONTRACT REQUIREMENTS. (a) 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 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 agreed to in the written agreement with the provider; 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 each network provider that includes a discounted rate that is applicable to a program operator's discount health care program and contains all of the terms described in Subsection (a); and

(2) the network is authorized to obligate the network providers to provide services to members of the discount health care program.

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

(1) maintain and provide the program operator on a monthly basis an up-to-date list of providers in 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 for at least two years following termination of the agreement.

[Sections 7001.057-7001.100 reserved for expansion]

SUBCHAPTER C. REGISTRATION

Sec. 7001.101. REGISTRATION REQUIRED; FEES. (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 or an applicant for renewal of registration under this chapter whose information has changed must submit:

(1) a registration form indicating the program operator's name, physical address, mailing 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 its discount health care programs;

(4) a list of the marketers authorized to sell or distribute the program operator's programs under the program operator's name and a list of the marketing entities authorized to private label the program operator's programs; and

(5) 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) After the initial registration, if the form of a contract described by Subsection (b)(5) changes, the program operator must file the modified contract form with the department before it may be used.

(d) 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.

(e) A discount health care program operator shall pay the department an initial registration fee of $1,000 and an annual renewal fee not to exceed $500.

(f) The department may conduct a criminal background check on the individuals responsible for conducting the program operator's affairs, each member of the board of directors, board of trustees, executive committee, or other governing board or committee, the officers of the program operator, any contracted management company personnel, and any person owning or having the right to acquire 10 percent or more of the voting securities of the program operator.

(g) This section does not apply to a program operator that is an insurer that holds a certificate of authority under Title 6.

[Sections 7001.102-7001.150 reserved for expansion]

SUBCHAPTER D. ENFORCEMENT

Sec. 7001.151. INVESTIGATION. If the commissioner reasonably believes that a program operator or marketer is not operating in compliance with this chapter, the program operator or marketer must submit to the commissioner any advertising, solicitations, marketing materials, disclosure materials, discount cards, agreements, or other documents requested by the commissioner.

Sec. 7001.152. CIVIL PENALTY. (a) The attorney general may bring an action for a civil penalty against a person who violates this chapter or a rule adopted under this chapter.

(b) A civil penalty assessed under this section may not be less than $2,500 for each violation.

(c) A civil penalty authorized by this section is in addition to any other civil, administrative, or criminal action provided by law.

Sec. 7001.152. CRIMINAL PENALTIES. (a) A person who willfully operates as, or aids and abets another operating as, a discount health care program operator in violation of Section 7001.101 commits insurance fraud and is subject to Chapter 35, Penal Code, as if the unregistered discount health care program operator were an unauthorized insurer, and the fees, dues, charges, or other consideration collected from the members by the unregistered discount health care program operator or marketer were insurance premiums.

(b) A person that collects fees for purported membership in a discount health care program, but purposefully fails to provide the promised benefits commits an offense of theft and is subject to Chapter 31, Penal Code. On conviction, the court shall order the person to pay restitution to persons aggrieved by the violation of this chapter. The restitution is in addition to a fine or imprisonment.

Sec. 7001.153. INJUNCTIONS. (a) In addition to the penalties and other enforcement provisions of this chapter, the commissioner may seek both temporary and permanent injunctive relief if:

(1) a discount health care program is being operated by a person or entity that is not registered under this chapter; or

(2) a person, entity, or program operator has engaged in any activity prohibited by this chapter or a rule adopted under this chapter.

(b) An action for injunctive relief must be brought in a Travis County district court.

(b) The commissioner's authority to seek injunctive relief is not conditioned on having conducted any proceeding required under Chapter 2001, Government Code.

SECTION 2. Chapter 76, Health & Safety Code, is repealed.

SECTION 3. Not later than January 1, 2010, the Commissioner of Insurance shall adopt the rules and procedures necessary to implement Chapter 7001, Insurance Code, as added by this Act.

SECTION 4. (a) Notwithstanding Section 7001.101, Insurance Code, as added by this Act, a person is not required to register under that section before April 1, 2010, except as provided by Subsection (b).

(b) A program operator that is registered with the Department of Licensing and Regulation on January 1, 2010, as required by Chapter 76, Health and Safety Code, shall file an application for renewal of registration with the Texas Department of Insurance under Chapter 7001, Insurance Code, not later than April 1, 2010.

SECTION 5. (a) Except as provided by Subsections (b) and (c), this Act takes effect September 1, 2009.

(b) Section 2 of this Act takes effect April 1, 2010.

(c) Subchapter D, Chapter 7001, Insurance Code, takes effect April 1, 2010.