HBA-TYH H.B. 3023 76(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 3023
By: Smithee
Insurance
6/1/1999
Enrolled




BACKGROUND AND PURPOSE 

Prior to the 76th Legislature, Texas law did not provide protection to pay
the claims of an HMO that goes into receivership.  HMOs were not subject to
a net worth requirement under Texas law at the time.  This allowed a Texas
HMO to legally operate in a state of insolvency and increased the risk that
an HMO will be placed into receivership.  H.B. 3023 establishes a net worth
requirement for HMOs that includes all liabilities.  HMOs are given until
December 31, 2002, to achieve full compliance. 

Additionally, prior Texas law did not index the solvency standards for an
HMO in accordance with the risks assumed by that HMO, such as the number of
its customers.  H.B. 3023 authorizes the commissioner of insurance to adopt
rules requiring higher net worth requirements based on the different risks
assumed by HMOs. 

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 20A.13C, V.T.I.C.) in this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Article 20A.02, V.T.I.C. (Texas Health Maintenance
Organization Act), by adding Subsection (aa) to define "net worth." 

SECTION 2.  Amends Chapter 20A, V.T.I.C. (Texas Health Maintenance
Organization Act), by adding Sections 13A, 13B, and 13C, as follows: 

Sec. 13A.  MINIMUM NET WORTH.  Requires a health maintenance organization
(HMO) authorized to provide basic health care services to maintain a
minimum net worth of $1.5 million.  Requires an HMO authorized to provide
limited health care services to maintain a minimum net worth of $1 million.
Requires an HMO authorized to offer only a single health care service plan
to maintain a minimum net worth of $500,000.  Requires the minimum net
worth to consist only of the enumerated items. 
 
Sec. 13B.  PHASE-IN PERIOD FOR MINIMUM NET WORTH.  Requires an HMO
authorized to provide basic health care services that was licensed before
September 1, 1999, to achieve and maintain a minimum net worth of the
enumerated amounts by the specified dates.  Requires an HMO authorized to
provide limited health care services that was licensed before September 1,
1999, to achieve and maintain a minimum net worth of the enumerated amounts
by the specified dates.  Requires an HMO authorized to offer only a single
health care service plan that was licensed before September 1, 1999, to
achieve and maintain a minimum net worth of the enumerated amounts by the
specified dates.  Provides that this section expires January 1, 2003.  
 
Sec. 13C.  PROTECTION AGAINST INSOLVENCY: NET WORTH.  Authorizes the
commissioner of insurance to adopt rules or by rule establish guidelines
requiring any HMO that holds a certificate of authority under this Act to
maintain a specified net worth based on  the enumerated items.  Provides
that rules adopted or guidelines established must be designed to ensure the
financial solvency of HMOs for the protection of enrollees. Authorizes the
rules and guidelines to provide for an HMO to comply with a risk-based net
worth requirement established in stages over a two-year period.  

SECTION 3.  Repealer: Sections 13(i), (j), (k), and (l), Article 20A.13,
V.T.I.C. (Texas Health Maintenance Organization Act).  These sections
relate to minimum net worth requirements for HMOs. 

SECTION 4.  Effective date: September 1, 1999.

SECTION 5.  Emergency clause.