HBA-ATS C.S.H.B. 1498 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1498 By: Janek Insurance 4/16/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE State law gives an insured covered by a health insurance policy the right to select a primary care physician as long as the practitioner is licensed to provide the services and benefits included in the plan. Under a health maintenance organization (HMO), choices are usually limited to the list of participating providers. C.S.H.B. 1498 permits employees under an employer's health benefit plan to choose their own primary care physician by providing that, if the only network-based coverage offered under an employee's health benefit plan (plan) is currently the only coverage offered by one or more health maintenance organizations, each providing HMO must offer an optional non-network plan to all eligible employees at the time of enrollment and at least annually, unless all providing HMOs enter into an agreement designating one or more of those HMOs to offer that coverage. The premium for the optional non-network plan is the responsibility of the employee, but the premium must be based on the actuarial value of that coverage. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 2 (Article 3.64, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter A, Chapter 26, Insurance Code, by adding Article 26.09, as follows: Art. 26.09. AVAILABILITY OF HEALTH BENEFIT COVERAGE OPTIONS. (a) Defines "non-network plan," "point-of-service plan," and "preferred provider benefit plan." (b) Provides that, if the only network-based coverage offered under an employee's health benefit plan (plan) is currently the only coverage offered by one or more health maintenance organizations (HMOs), each providing HMO must offer an optional nonnetwork plan to all eligible employees at the time of enrollment and at least annually, unless all providing HMOs enter into an agreement designating one or more of those HMOs to offer that coverage. Authorizes such coverage to be provided through a pointof-service contract, a preferred provider benefit plan, or any coverage arrangement that allows an enrollee access to services outside the HMO's delivery network. (c) Requires the premium for the required coverage to be based on the actuarial value of that coverage. Authorizes that premium to be different than the premium for the HMO coverage. (d) Authorizes the imposition of different cost-sharing provisions for the point-of-service contract. Authorizes those cost sharing provisions to be higher than cost sharing provisions for in-network HMO coverage. (e) Provides that any additional costs for the non-network plan are the responsibility of the employee who chooses the non-network plan. Authorizes the employer to impose a reasonable administrative cost for providing the non-network plan option. (f) Provides that this article does not apply to a small employer health benefit plan. SECTION 2. Amends Subchapter F, Chapter 3, Insurance Code, by adding Article 3.64, as follows: Art. 3.64. CONTRACTS BETWEEN HEALTH MAINTENANCE ORGANIZATIONS AND INSURERS. (a) Defines "blended contract," "health maintenance organization," "insurance carrier," and "point-of-service plan" for purposes of this article. (b) Authorizes an insurance carrier to contract with an HMO to provide benefits under a point-of-service plan, including optional coverage for out-of-area services or out-ofnetwork care. (c) Authorizes an insurance carrier and an HMO to offer a blended contract if indemnity benefits are combined with HMO benefits. Provides that the use of a blended contract is limited to point-of-service arrangements between an insurance carrier and an HMO. (d) Provides that a blended contract delivered, issued, or used in this state is subject to and must be filed with the Texas Department of Insurance (department) for approval as provided by Articles 3.42 (Policy Form Approval) and 20A.09(a)(5) (Evidence of Coverage and Charges). (e) Authorizes indemnity benefits and services provided under a point-of-service plan to be limited to those services as defined by the blended contract. Authorizes indemnity benefits and services provided under a point-of-service plan to be subject to different costsharing provisions. Authorizes the cost-sharing provisions for the indemnity benefits to be higher than cost sharing provisions for in-network HMO coverage. (f) Authorizes the commissioner of insurance to adopt rules to implement this article. SECTION 3. Amends Section 2, Article 20A.02, Insurance Code (Texas Health Maintenance Organization Act), by amending Subsection (i) and by adding Subsections (aa) and (bb), as follows: (i) Includes a blended contract within the definition of "evidence of coverage." (aa) Defines "blended contract." (bb) Defines "point-of-service plan." SECTION 4. Amends Section 6, Article 20A.06, Insurance Code (Texas Health Maintenance Organization Act), by amending Subsection (a) and adding Subsection (c), as follows: (a) Adds a point-of-service plan under Article 3.64 and a point-of-service rider (rider) under Subsection (c) in the list of insurance coverages an HMO is authorized to offer. (c) Authorizes an HMO to offer a rider for out-of-network coverage without a need to obtain a separate insurance carrier license if the expenses incurred under the rider do not exceed 10 percent of the total medical and hospital expenses incurred for all health products sold. Requires the HMO, if these expenses do exceed the 10 percent cap, to cease issuing new riders until the expenses fall below 10 percent or until the HMO obtains an insurance carrier license. Authorizes the limitation of indemnity benefits and services provided under a rider to those services defined in the evidence of coverage. Authorizes the imposition of different cost-sharing provisions for these benefits and services. Authorizes those cost sharing provisions to be higher than cost sharing provisions for in-network HMO coverage. Provides that an HMO that issues a rider must meet the net worth requirements promulgated by the commissioner based on the actuarial relation of the amount of insurance risk assumed through the issuance of the rider in relation to the amount of solvency and reserve requirements already required of the HMO. SECTION 5.Effective date: September 1, 1999. Makes application of this Act prospective for a health benefit plan that is delivered, issued for delivery, or renewed on or after January 1, 2000. SECTION 6.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1498 modifies the original bill in SECTION 1 by amending Subchapter A, Chapter 26, Insurance Code, rather than Subchapter E, Chapter 21, Insurance Code, to add Article 26.09, rather than Article 21.74. The substitute modifies Article 21.74(1) by redesignating it as Article 26.09. In proposed Subsection (a), the substitute redefines "non-network plan" by deleting the provision that authorizes a nonnetwork plan to include but is not limited to a point-of-service plan or a preferred provider plan. The substitute also makes nonsubstantive changes in proposed Subsection (a). The substitute modifies proposed Article 21.74(2)(a) by redesignating it as Article 26.09(b) and by providing the exception that if all health maintenance organizations (HMOs) enter into an agreement designating one or more of those HMOs to offer an optional non-network plan to all eligible employees under an employer's health benefit plan at the time of enrollment and at least annually, then the HMOs do not have to offer a non-network plan if the HMO's own network-based coverage is currently the only coverage offered. The substitute also authorizes such coverage to be provided through a point-of-service contract, rather than through a point of service plan, a preferred provider benefit plan, or any coverage arrangement that allows the enrollee access to services outside the HMO's delivery network. The substitute makes nonsubstantive changes. The substitute modifies proposed Article 21.74(2)(b) by redesignating it as Article 26.09(c) and by making nonsubstantive changes. The substitute modifies proposed Article 21.74(2)(c) by redesignating it as Article 26.09(d) and by authorizing the imposition of different cost-sharing provisions for the point-of-service contract, rather than the point of service option. The substitute also makes nonsubstantive changes. The substitute modifies proposed Article 21.74(2)(d) by redesignating it as Article 26.09(e). The substitute modifies proposed Article 21.74(2)(e) by redesignating it as Article 26.09(f) and by providing that this article does not apply to a small employer health benefit plan, rather than an employer who employed an average of at least two but not more than 50 eligible employees on business days during the preceding calendar year and who employs at least two eligible employees on the first day of the plan year. C.S.H.B. 1498 modifies the original bill by redesignating SECTION 3 of the original as SECTION 2. The original bill had no SECTION 2. In proposed Article 3.64(a), the substitute specifies that a "point-of-service plan" means either of the two arrangements, through the use of the conjunction "or." The substitute also makes nonsubstantive changes by rearranging the definitions in alphabetical order. In proposed Article 3.64(b), the substitute specifies that the benefits are provided under a point-of-service plan. In proposed Article 3.64(c), the substitute makes a nonsubstantive change. In proposed Article 3.64(e), the substitute makes nonsubstantive changes. C.S.H.B. 1498 modifies the original bill by redesignating SECTION 4 of the original to SECTION 3. In proposed Subsection (bb), the substitute makes a nonsusbtantive change to the definition of "point-of-service plan" and specifies that a "point-of-service plan" means either of the two arrangements, through the use of the conjunction "or." In new SECTION 4, the substitute amends Section 6, Article 20A.06, Insurance Code (Texas Health Maintenance Organization Act), by amending Subsection (a) and adding Subsection (c). In Article 20A.06(a), the substitute adds a point-of-service plan under Article 3.64 and a point-of-service rider under proposed Article 20A.06(c) in the list of insurance coverages an HMO is authorized to offer. In proposed Article 20A.06(c), the substitute authorizes an HMO to offer a rider for out-of-network coverage without a need to obtain a separate insurance carrier license if the expenses incurred under the rider do not exceed 10 percent of the total medical and hospital expenses incurred for all health products sold. The substitute requires the HMO, if these expenses do exceed the 10 percent cap, to cease issuing new riders until the expenses fall below 10 percent or until the HMO obtains an insurance carrier license. The substitute authorizes the limitation of indemnity benefits and services provided under a rider to those services defined in the evidence of coverage. The substitute authorizes the imposition of different cost-sharing provisions for these benefits and services. The substitute authorizes those cost sharing provisions to be higher than cost sharing provisions for innetwork HMO coverage. The substitute provides that an HMO that issues a rider must meet the net worth requirements promulgated by the commissioner based on the actuarial relation of the amount of insurance risk assumed through the issuance of the rider in relation to the amount of solvency and reserve requirements already required of the HMO.