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


Office of House Bill AnalysisH.B. 3023
By: Smithee
Insurance
3/28/1999
Introduced




BACKGROUND AND PURPOSE 

Texas law does not currently provide protection to pay the claims of an HMO
that goes into receivership.  HMOs are not subject to a net worth
requirement under current Texas law.  This allows a Texas HMO to legally
operate in a state of insolvency and increases 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 would be given until the year
2002 to achieve full compliance. 

Additionally, current Texas law does 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.