HBA-JRA H.B. 2315 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2315 By: Maxey Public Health 3/16/1999 Introduced BACKGROUND AND PURPOSE Texas spent nearly $5 billion on health care in fiscal 1997, including $3.8 billion in state and federal funds on Medicaid acute care, $27 million on medical workers' compensation claims for state employees, and $856 million on health insurance. The 75th Texas Legislature requested that the Comptroller of Public Accounts study the size and nature of fraud and overpayments in state health care programs. The comptroller's fraud measurement study, completed in fall 1998, examined likely overpayments and fraud in Medicaid acute care, medical workers' compensation for state employees, and health insurance for state employees during fiscal 1997. The study concluded that Texas may have overspent in these areas by more than $300 million. H.B. 2315 implements procedures to upgrade the detection and prevention of health related fraud and overpayments in state agencies. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Board of Trustees of the Employees Retirement System of Texas and the commissioner of insurance in SECTION 1.01 (Section 4F, Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code), the risk management board of the State Office of Risk Management in SECTION 4.01 (Section 412.064, Labor Code), and the Health and Human Services Commission in SECTION 5.03 (Section 531.102, Government Code) and SECTION 5.04 (Section 531.110, Government Code) of this bill. SECTION BY SECTION ANALYSIS ARTICLE 1. POWERS AND DUTIES OF THE EMPLOYEES RETIREMENT SYSTEM OF TEXAS SECTION 1.01. Amends Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, by amending Section 4B and adding Section 4D, 4E, 4F, and 4G, as follows: Sec. 4B. New title: ADJUDICATION OF CLAIMS; FRAUDULENT CLAIMS. (a) Makes no change. (b) Redesignated from existing Subsection (a 1). (c) Requires the executive director of the Employees Retirement System of Texas (executive director) to take action against a health care provider if the executive director determines that the provider has obtained fraudulent payments under any program provided under the authority of this Act. (d) Makes conforming changes. (e) Redesignated from existing Subsection (b). (f) Includes health care providers providing services under the Texas employees uniform group insurance program (program) among those to whom standing to pursue an administrative appeal under this section is limited. Redesignated from existing Subsection (c). Makes conforming changes. (g) Redesignated from existing Subsection (d). Makes conforming changes. (h) Redesignated from existing Subsection (e). (i) Redesignated from existing Subsection (f). (j) Requires the Board of Trustees of the Employees Retirement System of Texas (trustee) to maintain a toll-free telephone number for complaints of insurance fraud by participants of the program or health care providers. Requires the trustee to provide participants of the program with information regarding the telephone number during each annual enrollment period and periodically by including information with employee pay statements. (k) Requires the executive director to implement annual training classes for appropriate members of the staff of the trustee and contractors of administering firms who process medical claims under this Act to assist those persons in identifying potential misrepresentation or fraud in the operation of the program established by this Act. Authorizes the executive director to contract with the Health and Human Services Commission (HHS) or with a private entity for the operation of the training classes. (l) Requires each carrier and health care provider who participates in the program to, as a condition of participation, cooperate fully in any investigation of insurance fraud conducted by the executive director or the Texas Department of Insurance (department). Entitles the trustee to access to patient medical records for the limited purpose of this subsection, notwithstanding any other law regarding the confidentiality of patient records, and establishes that the trustee is a "governmental agency" for purposes of Section 5.08, Article 4495b (Medical Practice Act), V.T.C.S. Establishes that a medical record submitted to the trustee under this subsection is confidential and is not subject to disclosure under Chapter 552 (Public Information), Government Code. Sec. 4D. FRAUDULENT INSURANCE ACTS BY PROVIDERS. (a) Requires the executive director to investigate each complaint alleging fraud made by an annuitant, an employee, a health care provider, or a carrier regarding a health care provider participating in a health benefit plan operated under the program. (b) Requires the executive director to terminate the investigation if the executive director determines that the complaint is unfounded after initial investigation. Requires the executive director, if further action is warranted, to refer the complaint to the trustee for appropriate sanctions or administrative action and provide the department and the affected carrier with information regarding the complaint and the action taken. (c) Sets forth possible sanctions against a health care provider. (d) Sets forth possible administrative actions against a health care provider. (e) Requires the executive director to use fraud detection software to identify suspicious provider billing patterns in the system's claims history files and to report the results to the trustee and the commissioner of insurance at least monthly. Sec. 4E. CLAIMS AUDIT. (a) Requires the executive director to conduct a quarterly audit of health care claims as provided by this section. (b) Requires the executive director to randomly select and audit claims submitted under the program to determine their validity. Requires the executive director to interview employees, annuitants, and dependents to ensure that the services were received and to include a review of contextual patient information and the patient's medical records in the audit. (c) Requires the executive director to refer the claim to the trustee and the department for further investigation if the executive director determines that a claim is fraudulent on the basis of the audit. (d) Authorizes the executive director to contract with a private entity for the operation of the audit. Sec. 4F. COOPERATION WITH INSURANCE DEPARTMENT; MEMORANDUM OF UNDERSTANDING. (a) Requires the trustee and the commissioner of insurance (commissioner), by rule, to adopt guidelines and priorities for referring cases of alleged fraudulent insurance acts by health care providers participating in the program. (b) Requires the executive director to maintain a detailed record of those cases, including the total number of cases referred to the department each fiscal year, and for each specific case, the type of fraudulent insurance act alleged, and the date of the referral to the department. (c) Requires the trustee and the department to enter into a memorandum of understanding regarding the processing of suspected fraud referrals and the payment of the costs of prosecution of fraud cases. Sec. 4G. ADMINISTRATIVE PENALTY. (a) Authorizes the trustee to impose an administrative penalty on a participant or health care provider who commits fraud under this Act. (b) Prohibits the amount of the penalty from exceeding $10,000 and establishes that each day a violation continues or occurs is a separate violation for the purposes of imposing a penalty. Requires the penalty amount to be based on the seriousness of the violation, the history of previous violations, the amount necessary to deter a future violation, efforts to correct the violation, and any other matter that justice may require. (c) Authorizes the enforcement of the penalty to be stayed while the order is under judicial review if the person pays the penalty to the clerk of the court or files a supersedeas bond with the court in the amount of the penalty. Authorizes a person who cannot afford to pay the penalty or file the bond to stay the enforcement by filing an affidavit in the manner required by the Texas Rules of Civil Procedure. (d) Authorizes the attorney general to sue to collect the penalty. (e) Requires 50 percent of an administrative penalty collected under this section to be deposited in the employees life, accident, and health insurance and benefits fund established under Section 16 of this Act and authorizes it to be spent by the trustee in investigating and prosecuting fraud committed against the program. Requires the remainder of the penalty to be remitted to the Comptroller of Public Accounts (comptroller) for deposit in the general revenue fund. (f) Establishes that a proceeding to impose the penalty is considered to be a contested case under Chapter 2001 (Administrative Procedure), Government Code. SECTION 1.02. Amends Section 815.510, Government Code, to require the annual report required of the Employees Retirement System of Texas to include a description of the activities conducted during the preceding fiscal year by the retirement system and the department to combat insurance fraud by health care providers in the operation of the state employees health benefits program. Redesignates existing Subdivisions (1)-(3) to Paragraphs (A)-(C). Deletes reference to previously repealed section. Makes conforming changes. ARTICLE 2. POWERS AND DUTIES OF TEXAS DEPARTMENT OF INSURANCE SECTION 2.01. Amends Chapter 1, Insurance Code, by adding Article 1.64, as follows: Art. 1.64. ADMINISTRATIVE ACTIONS AGAINST INSURANCE FRAUD IN GROUP INSURANCE PROGRAM FOR STATE EMPLOYEES. (a) Requires the department, through the insurance fraud division and in cooperation with the Employees Retirement System of Texas, to bring an administrative action against a health care provider who commits insurance fraud regarding the program that results in unauthorized payments. (b) Authorizes the commissioner to impose an administrative penalty of up to $10,000 plus twice the amount of the inappropriate payment if a health care provider commits insurance fraud. (c) Requires 50 percent of an administrative penalty collected under this article to be deposited in the department operating fund and authorizes the department to spend it in investigating and prosecuting insurance fraud committed against state-funded health care programs, notwithstanding Section 6 (Deposit to General Revenue Fund), Article 1.10E of this code. Requires the remainder of the administrative penalty to be remitted to the comptroller for deposit in the general revenue fund. ARTICLE 3. QUI TAM ACTION SECTION 3.01. Amends Chapter 1, Insurance Code, by adding Article 1.65, as follows: Art. 1.65. ACTION BY PRIVATE PERSON Sec. 1. ACTION BY PRIVATE PERSON AUTHORIZED. (a) Authorizes a person to bring a civil action for insurance fraud in violation of Section 4B, Article 3.50-2, Insurance Code, for the person and for the state. Requires the action to be brought in the name of the state. (b) Provides that a person who commits insurance fraud with respect to a claim under the Texas Employees Uniform Group Insurance Benefits Act is liable for the amount of loss incurred by the program or a carrier who participates in the program as a result of the loss, plus an amount equal to the amount of the administrative penalty that may be assessed under that Act. Sec. 2. INITIATION OF ACTION. (a) Requires a person bringing an action under this article to serve a copy of the petition and a written disclosure of substantially all material evidence and information the person possesses on the attorney general in compliance with the Texas Rules of Civil Procedure. (b) Requires the petition to be filed in camera and remain under seal until at least the 60th day after the petition is filed. Prohibits the petition from being served on the defendant until the court orders its service. (c) Authorizes the state to elect to intervene and proceed with the action within 60 days of the attorney general receiving the petition and the material evidence and information. (d) Authorizes the state to move the court to extend the time during which the petition remains under seal for good cause shown. Authorizes such a motion to be supported by affidavits or other submission in camera. (e) Authorizes the dismissal of an action under this article before the end of the prescribed period only if the court and the attorney general consent in writing and state their reasons for consenting. Sec. 3. ANSWER BY DEFENDANT. Provides that a defendant is not required to file an answer to a petition filed under this article until the 20th day after the petition is unsealed and served on the defendant. Sec. 4. STATE'S DECISION TO CONTINUE ACTION. Requires the state to notify the court by the last day of the prescribed period that the state either will intervene and proceed with the action or declines to intervene and proceed with the action. Sec. 5. INTERVENTION BY OTHER PARTIES PROHIBITED. Prohibits a person other than the state from intervening or bringing a related action based on the facts underlying a pending action brought under this article. Sec. 6. RIGHTS OF PARTIES IF STATE INTERVENES AND PROCEEDS WITH ACTION. (a) Establishes that the state has the primary responsibility for prosecuting the action and is not bound by an act of the person bringing the action if the state proceeds with the action. Provides that the person bringing the action has the right to continue as a party to the action subject to the limitations set forth by this section. (b) Authorizes the state to dismiss the action notwithstanding the objections of the person bringing the action if the attorney general notifies the person that the state has filed a motion to dismiss and the court provides the person with an opportunity for a hearing on the motion. (c) Authorizes the state to settle the action with the defendant notwithstanding the objections of the person bringing the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Authorizes the hearing to be held in camera on a showing of good cause. (d) Authorizes the court to limit a person's participation if the state shows that unrestricted participation during the course of the litigation by the person bringing the action would interfere with or unduly delay the state's prosecution of the case or would be repetitious, irrelevant, or for purposes of harassment. (e) Authorizes the court to limit a person's participation if the defendant shows that unrestricted participation during the course of the litigation by the person bringing the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense. Sec. 7. RIGHTS OF PARTIES IF STATE DOES NOT INTERVENE AND PROCEED WITH ACTION. Authorizes the person bringing the action to conduct the action if the state elects not to proceed with the action. Requires the parties to serve the attorney general with copies of all pleadings filed in the action and send the attorney general copies of all deposition transcripts at the state's expense if the state requests them. Authorizes the court to permit the state to intervene at a later date on a showing of good cause without limiting the status and rights of the person bringing the action. Sec. 8. STAY OF CERTAIN DISCOVERY. Provides that the court must stay the discovery for a period of up to 60 days if the state shows that discovery by the person bringing the action would interfere with the state's investigation or prosecution of a criminal or civil matter arising out of the same facts, regardless of whether the state proceeds with the action. Requires the court to hear such a motion to stay discovery in camera. Authorizes the court to extend the discovery period on a further showing in camera that the state has pursued the criminal or civil investigation or proceedings with reasonable diligence and that discovery in the civil action will interfere with them. Sec. 9. PURSUIT OF ALTERNATE REMEDY BY THE STATE. Authorizes the state to pursue the state's claim through any alternate remedy available to the state, including an administrative proceeding to determine an administrative penalty, notwithstanding Section 1 of this article. Sec. 10. AWARD TO PRIVATE PLAINTIFF. (a) Entitles a person bringing an action under this article to receive between 10 and 25 percent of the proceeds of the action, depending on the extent of the person's contribution, if the state proceeds with an action. (b) Authorizes the court to award up to seven percent of the proceeds of an action to a person, other than the person bringing the action, bringing information on which the action is primarily based. Requires the court to consider the significance of the information and the role of the person bringing the action in advancing the case to litigation. (c) Entitles the person bringing an action or settling a claim to receive between 25 and 30 percent of the proceeds of the action for collecting the civil penalty and damages if the state does not proceed with the action. (d) Requires a payment to a person under this section to be made from the proceeds of the action. Entitles a person receiving a payment under this section to receive reasonable necessary expenses, attorney's fees and costs. Requires expenses, fees, and costs to be awarded against the defendant. (e) Provides that in this section "proceeds of the action" includes proceeds of a settlement of the action. Sec. 11. REDUCTION OF AWARD. (a) Authorizes the court to reduce the share of the proceeds of the action a person would otherwise receive if the court finds that the person planned and initiated the violation on which the action was brought, regardless of whether the state proceeds with the action. (b) Requires the court to dismiss a person from the civil action and prohibits the person from receiving any share of the proceeds of the action if the person bringing the action is convicted of criminal conduct arising from the person's insurance fraud. Provides that a dismissal under this subsection does not prejudice the right of the state to continue the action. Sec. 12. AWARD TO DEFENDANT FOR FRIVOLOUS ACTION. Makes Chapter 10 (Sanctions for Frivolous Pleadings and Motions), Civil Practice and Remedies Code, applicable to an action under this article in which the state does not proceed with the action and the person originally bringing the action conducts the action. Makes Chapter 105 (Frivolous Claim by State Agency), Civil Practices and Remedies Code, applicable in an action under this article in which the state conducts the action. Sec. 13. CERTAIN ACTIONS BARRED. Prohibits a person from bringing an action under this article that is based on allegations or transactions that are the subject of a pending civil suit or an administrative penalty proceeding in which the state is a party. Prohibits a person from bringing an action under this article that is based on public disclosure of allegations or transactions in a criminal or civil hearing unless the person bringing the action is an original source of the information. Defines "original source" in this subsection. Sec. 14. STATE NOT LIABLE FOR CERTAIN EXPENSES. Provides that the state is not liable for expenses that a person incurs in bringing an action under this article. Sec. 15. RETALIATION BY EMPLOYER AGAINST PERSON BRINGING SUIT PROHIBITED. Entitles a person who is in any manner discriminated against in the terms of employment by the person's employer because of a lawful act taken by the person in furtherance of an action under this article to reinstatement with the same seniority status and twice the amount of back pay owed, interest on the back pay owed, and compensation for any special damages sustained as a result of the discrimination. Authorizes a person to bring an action in a district court for the relief provided in this section. ARTICLE 4. POWERS AND DUTIES OF THE STATE OFFICE OF RISK MANAGEMENT SECTION 4.01. Amends Chapter 412, Labor Code, by adding Subchapter G, as follows: SUBCHAPTER G. FRAUD INVESTIGATION AND PREVENTION REGARDING MEDICAL BENEFITS Sec. 412.061. DEFINITIONS. Defines "fraudulent act" and "program" in this subchapter. Sec. 412.062. CLAIM REVIEW BY OFFICE. Requires the State Office of Risk Management (office) to conduct periodic reviews of claims for medical benefits as necessary to determine the medical necessity and appropriateness of the provided services. Requires the office to conduct a claim review on each claim that involves the receipt of psychiatric services or in which the use of prescription drugs appears inappropriate. Authorizes the office to withhold payments to be made to a health care provider who does not provide documentation requested by the office necessary to verify a medical service related to a claim in the manner prescribed by the risk management board (board). Sec. 412.063. CLAIMS AUDIT. Requires the director of the office (director) to conduct an annual audit of claims for medical benefits as provided by this section. Requires the director to randomly select and audit to determine the validity of a statistically significant sample of claims submitted under the workers' compensation program (program). Requires the director, in performing the audit, to interview the claimant to ensure that the health care services were received. Provides that the audit must include a review of the claimant's medical history and medical records. Authorizes the director to contract with a private entity for performance of the audit. Sec. 412.064. PREPAYMENT AUDIT. Requires the board, by rule, to require each person who processes claims for the office to implement a prepayment audit procedure that compares the diagnosis code submitted on the bill for health care services to the code for the injured body part and verifies the appropriateness of the diagnosis code for the health care services provided. Sec. 412.065. TOLL-FREE TELEPHONE NUMBER. Requires the office to maintain a toll-free telephone number for complaints of insurance fraud by participants of the program or health care providers. Requires the director to provide claimants with information regarding the telephone number in a manner determined appropriate by the office. Sec. 412.066. TRAINING CLASSES IN FRAUD PREVENTION. Requires the director to implement annual training classes for appropriate members of the staff of state agencies and contractors or administering firms who process workers' compensation claims submitted under the program for medical benefits to assist them in identifying potential misrepresentation or fraud in the operation of the program. Authorizes the director to contract with HHS or with a private entity for the operation of the training classes. Sec. 412.067. ACTION BY OFFICE; COOPERATION REQUIRED. (a) Requires the office to take action against the provider if the office determines that a health care provider has obtained fraudulent payments under the program. Requires the office to report any action taken in writing to the Texas Workers' Compensation Commission (commission). (b) Requires each state agency and health care provider who participates in the program, as a condition of that participation, to cooperate fully in any investigation of a fraudulent act that is conducted by the director, including providing to the director timely access to patient medical records determined by the director necessary to conduct an investigation. (c) Entitles the director to access to patient medical records for the limited purpose of this subsection, notwithstanding any other law regarding the confidentiality of patient records, and establishes that the director is a "governmental agency" for purposes of Section 5.08, Article 4495b (Medical Practice Act), V.T.C.S. Establishes that a medical record submitted to the director under this subsection is confidential and is not subject to disclosure under Chapter 552 (Public Information), Government Code. Sec. 412.068. FRAUDULENT ACTS BY PROVIDERS. (a) Requires the director to investigate each complaint alleging fraud made by a claimant, health care provider, or state agency regarding a health care provider who is participating in the program. (b) Requires the director to terminate the investigation if the director determines that the complaint is unfounded after initial investigation. Requires the director, if further action is warranted, to refer the complaint to the board for appropriate sanctions or administrative action and provide the commission with information regarding the complaint and the action taken. (c) Sets forth possible sanctions against a health care provider. Sec. 412.069. ADMINISTRATIVE PENALTY. (a) Authorizes the board to impose an administrative penalty on a health care provider or claimant who commits fraud in obtaining a payment or a medical benefit under Chapter 501 (Workers' Compensation Insurance Coverage for State Employees, including Employees under the Direction or Control of the Board of Regents of Texas Tech University), Labor Code. (b) Prohibits the amount of the penalty from exceeding $10,000 and establishes that each day a violation continues or occurs is a separate violation for the purposes of imposing a penalty. Requires the penalty amount to be based on the seriousness of the violation, the history of previous violations, the amount necessary to deter a future violation, efforts to correct the violation, and any other matter that justice may require. (c) Authorizes the enforcement of the penalty to be stayed while the order is under judicial review if the person pays the penalty to the clerk of the court or files a supersedeas bond with the court in the amount of the penalty. Authorizes a person who cannot afford to pay the penalty or file the bond to stay the enforcement by filing an affidavit in the manner required by the Texas Rules of Civil Procedure. (d) Authorizes the attorney general to sue to collect the penalty. (e) Requires an administrative penalty collected under this section to be transferred by the office to the comptroller for deposit in the general revenue fund. Requires the comptroller to deposit up to $200,000 per state fiscal biennium in the state workers' compensation account in the general revenue fund to be used for the detection and prosecution of fraud under this subchapter. (f) Establishes that a proceeding to impose the penalty is considered to be a contested case under Chapter 2001 (Administrative Procedure), Government Code. ARTICLE 5. POWERS AND DUTIES OF THE TEXAS DEPARTMENT OF HUMAN SERVICES AND THE HEALTH AND HUMAN SERVICES COMMISSION SECTION 5.01. Amends Subchapter B, Chapter 32, Human Resources Code, by adding Sections 32.0242 and 32.0243, as follows: Sec. 32.0242. VERIFICATION OF CERTAIN INFORMATION. Requires the Health and Human Services Commission (HHS) to verify an applicant's physical residential address on determination that the applicant is eligible for medical assistance. Sec. 32.0243. PERIODIC REVIEW OF ELIGIBILITY FOR CERTAIN RECIPIENTS. Requires HHS, in cooperation with the United States Social Security Administration, to periodically review the eligibility of a recipient of medical assistance who is eligible on the basis of the recipient's eligibility for Supplemental Security Income (SSI) benefits. Requires HHS, in reviewing the eligibility of a recipient, to ensure that only recipients who reside in this state and who continue to be eligible for SSI benefits remain eligible for medical assistance. SECTION 5.02. Amends Section 403.026(a), Government Code, as added by Chapter 1153, Acts of the 75th Legislature, Regular Session, 1997, to require the comptroller to conduct a study each biennium to determine the need for changes to the eligibility system used under the state Medicaid program. Redesignates existing Subdivisions (1)-(3) to Paragraphs (A)-(C). SECTION 5.03. Amends Section 531.102, Government Code, by adding Subsections (e) and (f), as follows: (e) Requires HHS to assign the highest priority for investigation of potential fraud to claims submitted for reimbursement for outpatient hospital, ancillary, emergency room, and home health care services. (f) Requires HHS, by rule, to set specific claims criteria that, when met, require the office to begin an investigation. Provides that the claims criteria must be based on a total dollar amount or a total number of claims submitted for services to a particular recipient during a specified amount of time that indicates a high potential for fraud. SECTION 5.04. Amends Subchapter C, Chapter 531, Government Code, by adding Section 531.109, 531.110, and 531.111, as follows: Sec. 531.109. SELECTION AND REVIEW OF CLAIMS. Requires HHS to randomly select and review a statistically significant sample of claims for reimbursement under the state Medicaid program, including the vendor drug program, for potential cases of fraud, waste or abuse on an annual basis. Requires HHS, in performing the review, to directly contact the recipient to verify that the services for which a claim for reimbursement was submitted were received. Requires HHS to determine the types of claims at which HHS resources for fraud and abuse detection should be primarily directed based on the results of the annual review. Sec. 531.110. ELECTRONIC DATA MATCHING PROGRAM. (a) Requires HHS to conduct electronic data matches for a recipient of assistance under the state Medicaid program at least quarterly to verify the identity, income, employment status, and other factors that affect the eligibility of the recipient. (b) Provides that the electronic data matching must match information provided by the recipient with information contained in certain databases in order to verify eligibility. (c) Requires the Texas Department of Human Services to cooperate with HHS by providing data or any other assistance necessary to conduct the required electronic data matches. (d) Authorizes HHS to contract with a public or private entity to conduct the electronic data matches. (e) Requires HHS, by rule, to establish procedures to verify the electronic data matches. Requires the Texas Department of Human Services to remove from eligibility a recipient who is determined ineligible by the 20th day after the electronic data match is verified. (f) Requires HHS to report biennially to the legislature the results of the electronic data matching program. Provides that the report must include a summary of the number of applicants who were removed from eligibility as a result of an electronic data match conducted under this section. Sec. 531.111. FRAUD DETECTION TECHNOLOGY. Authorizes HHS to contract with a contractor who specializes in developing technology capable of identifying patterns of fraud exhibited by Medicaid recipients to develop and implement the fraud detection technology and determine if a pattern of fraud by Medicaid recipients is present in the recipients' eligibility files maintained by the Texas Department of Human Services. ARTICLE 6. TRANSITION SECTION 6.01. Requires the Employees Retirement System of Texas (retirement system) to implement the toll-free telephone number required under Section 4B(j), Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, as added by this Act, by January 1, 2000. SECTION 6.02. Requires the retirement system to implement the training classes required under Section 4B(k), Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, as added by this Act, by January 1, 2000. SECTION 6.03. (a) Requires the executive director of the retirement system to use fraud detection software as required under Section 4D(e), Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, as added by this Act, by January 1, 2000. (b) Requires the retirement system to analyze the fraud detection program used by HHS under Chapter 22 (General Functions of Department of Human Services), Human Resources Code, for the detection of fraud in the Medicaid program. Requires the retirement system to enter into a memorandum of understanding with HHS regarding participation in their fraud detection program by July 1, 2000, and pay a proportionate share of the operation of the fraud detection program if it determines that HHS's fraud detection program results in compliance with the requirement adopted under Section 4D(e), Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, as added by this Act, with greater efficiency and less cost than implementation of an independent program. SECTION 6.04. Requires the retirement system and the Texas Department of Insurance to enter into the memorandum of understanding required under Section 4F, Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, as added by this Act, by January 1, 2000. SECTION 6.05. Requires the State Office of Risk Management (office) to implement the toll-free telephone number required under Section 412.065, Labor Code, as added by this Act, by January 1, 2000. SECTION 6.06. Requires the office to implement the training classes required under Section 412.066, Labor Code, as added by this Act, by January 1, 2000. SECTION 6.07. Requires the risk management board of the office (board) to conduct a study regarding the use of fraud detection software, which may include an analysis of the fraud detection software used by HHS for the detection of fraud in the Medicaid program. Requires the board to report the results of its study to the 77th Legislature by February 1, 2001. SECTION 6.08. Requires HHS, in cooperation with the office of inspector general of the Texas Department of Human Services, to study and consider for implementation fraud detection technology. SECTION 6.09. Requires the Texas Department of Health (TDH) to contract with a contractor who specializes in Medicaid claims payment systems by December 31, 1999, to perform tests on a Medicaid claims payment system considered for implementation by TDH to ensure the smooth and timely payment of claims, ensure accuracy of claims payments, and reveal inconsistencies in the payment system. Provides that the contract must require the contractor to perform tests before initial implementation and before implementation of any change to the operation of the system. SECTION 6.10. (a) Requires the Texas Department of Human Services (department) to develop a Medicaid eligibility confirmation letter that is not easily duplicated by January 1, 2000, and to begin using that confirmation letter in place of the letter used on the effective date of this Act. Provides that the new confirmation letter must be used until a permanent system for eligibility confirmation is implemented as required by this Act. (b) Requires the department to identify and consider for implementation alternative methods for a recipient to prove eligibility under the state Medicaid program to a provider on the effective date of this Act. Requires the department to consider the methods used by other states. (c) Requires the department to implement a permanent system for a recipient to prove eligibility under the state Medicaid program to a provider that is designed to reduce the potential for fraudulent claims of eligibility by September 1, 2000. SECTION 6.11. Requires a state agency affected by any provision of this Act, if the agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, to request the waiver or authorization and authorizes that agency to delay implementation until the waiver or authorization is granted. SECTION 6.12. Makes application of this Act prospective regarding an administrative penalty. SECTION 6.13. Makes application of Article 1.65, Insurance Code, prospective. ARTICLE 7. EFFECTIVE DATE; EMERGENCY SECTION 7.01. Effective date: September 1, 1999. SECTION 7.02. Emergency clause.