HBA-ATS H.B. 3019 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3019 By: Smithee Insurance 3/29/1999 Introduced BACKGROUND AND PURPOSE As the health care industry has evolved and moved to managed care, the delivery of health care now involves a myriad of organizational structures, from health maintenance organizations (HMOs) to medical groups, independent practice associations (IPAs), preferred provider organizations (PPOs), and integrated delivery systems, among others. These different groups within the industry have formed competitive networks of insurers, hospitals, and physician organizations in an attempt to lower costs, improve efficiency, and increase bargaining power. Within these networks, organizations contract with each other to supply different services, involving both physicians and administrators. These contracts usually involve some sharing or delegation of management, utilization review, billing, and claim payment services. When one or several organizations within the network default on their contractual obligations, as has recently occurred, or have difficulty paying for services rendered, the delivery of medical care suffers. Without state regulation, these networks may be unable to adequately serve their customers. H.B. 3019 requires a health maintenance organization (HMO) that enters into a delegation agreement with a delegated network to execute a written agreement with the network. Among other requirements, the contract must contain a monitoring plan, which includes a description of financial practices that will ensure that the network tracks and reports liabilities that have been incurred but not reported, a summary of the total amount paid by the network to physicians and providers on a monthly basis, and a summary of complaints from physicians and providers regarding delays in payments of claims or nonpayment of claims, including the status of each complaint, on a monthly basis. The contract must also contain a provision that prohibits the network and the physicians and providers with whom it has contracted from billing or attempting to collect from an enrollee under any circumstance, including the insolvency of the HMO or network, payments for covered services other than authorized copayments and deductibles. This bill also authorizes the Texas Department of Insurance (department), upon receiving a request for intervention from an HMO, to request financial and operational documents from the network to further investigate deficiencies indicated by the monitoring plan, to conduct an on-site audit of the network if the department determines that the network is not complying with the required monitoring standards, or to suspend or revoke the third party administrator license or utilization review agent license of the network or a third party with which the network has contracted. In addition, this bill authorizes the department, if a network does not comply with the department's request for corrective action, to order the HMO to temporarily or permanently cease assignment of new enrollees to the network, temporarily or permanently transfer enrollees to alternative delivery systems to receive services, or modify or terminate its contract with the network. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 2, Article 20A.02, V.T.I.C. (Texas Health Maintenance Organization Act), by adding Subsections (dd) and (ee), to define "delegation agreement" and "delegated network." SECTION 2. Amends Chapter 20A, V.T.I.C. (Texas Health Maintenance Organization Act), by adding Section 18C, as follows: Sec. 18C. DELEGATION OF CERTAIN FUNCTIONS TO DELEGATED NETWORKS. (a) Requires a health maintenance organization (HMO) that enters into a delegation agreement with a delegated network (network) to execute a written agreement with the network. Requires the HMO to file the agreement with the Texas Department of Insurance (department) by the 30th day after the agreement is executed. Enumerates the provisions that must be included in the agreement, some of which are: _a monitoring plan, which includes a description of financial practices that will ensure that the network tracks and reports liabilities that have been incurred but not reported, a summary of the total amount paid by the network to physicians and providers on a monthly basis, and a summary of complaints from physicians and providers regarding delays in payments of claims or nonpayment of claims, including the status of each complaint, on a monthly basis; _a provision that prohibits the network and the physicians and providers with whom it has contracted from billing or attempting to collect from an enrollee under any circumstance, including the insolvency of the HMO or network, payments for covered services other than authorized copayments and deductibles; and _an acknowledgment and agreement by the network that the HMO is required to establish, operate, and maintain a health care delivery system, quality assurance system, provider credentialing system, and other systems and programs that meet statutory and regulatory standards and is directly accountable for compliance with those standards, that the role of the network in contracting with the HMO is limited to performing certain delegated functions of the HMO, using standards approved by the HMO and subject to the HMO's oversight and monitoring of the network's performance, and that if the network fails to meet monitoring standards established to ensure that functions delegated or assigned to the network under the delegation contract are in full compliance with all statutory and regulatory requirements, the HMO may cancel delegation of any management responsibilities. (b) Requires an HMO to provide to each network with which it has a delegation agreement certain information in standard electronic format, at least monthly unless otherwise provided in the agreement. Specifies the information that must be provided. (c) Requires an HMO to provide to a network with which it has a delegation agreement risk-pool data, reported annually or on settlement, and the rates required by the agreement and any known future facility contract rates for the HMO, if hospital or facility costs impact the network's costs, reported annually or on recontract. (d) Requires an HMO that receives information through the monitoring plan required under Subsection (a) that indicates the network is not operating in accordance with its written agreement or is operating in a condition that renders the continuance of its business hazardous to the enrollees, in writing, to notify the network of those findings, and request a written explanation of the network's noncompliance with the written agreement or the existence of the condition that renders the continuance of the network's business hazardous to the enrollees. (e) Requires a network to respond to a request from an HMO under Subsection (d) in writing by the 30th day after the request is received. (f) Requires the HMO to cooperate with the network to correct any failure by the network to comply with the regulatory requirements of the department relating to any matters delegated to the network by the HMO or necessary for the HMO to ensure compliance with statutory or regulatory requirements. (g) Requires an HMO to notify the department and request intervention if the HMO does not receive a timely response from the network or the HMO receives a timely response from the network, but the HMO and network are unable to reach an agreement as to whether the network is complying with the written agreement or has corrected any problem regarding a practice that is hazardous to an HMO enrollee. (h) Authorizes the department, upon receiving a request for intervention, to request financial and operational documents from the network to further investigate deficiencies indicated by the monitoring plan, to conduct an on-site audit of the network if the department determines that the network is not complying with the monitoring standards required under Subsection (a), or to suspend or revoke the third party administrator license or utilization review agent license of the network or a third party with which the network has contracted. (i) Requires the department to report to the network the results of its review by the 60th day after the department's initial request for documentation. (j) Requires the network to respond to the department's report and submit a corrective plan by the 30th day after the network receives the department's report. (k) Provides that the information required under Subsection (h), (i), or (j) is confidential and is not subject to the open records law, Chapter 552 (Public Information), Government Code. Provides that the information is not subject to court or department subpoena, except as required by the constitution of this state or the United States or as necessary for the commissioner of insurance to enforce this section. (l) Authorizes the department to request that a network take corrective action to comply with the department's statutory and regulatory requirements that relate to any matters delegated by the HMO to the network or are necessary to ensure the HMO's compliance with statutory and regulatory requirements. (m) Authorizes the department, if a network does not comply with the department's request for corrective action, to order the HMO to temporarily or permanently cease assignment of new enrollees to the network, temporarily or permanently transfer enrollees to alternative delivery systems to receive services, or modify or terminate its contract with the network. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause.