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.