HBA-TYH C.S.H.B. 3039 76(R)BILL ANALYSIS
Office of House Bill AnalysisC.S.H.B. 3039
By: Smithee
Insurance
4/16/1999
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Under existing provisions of antitrust law, physicians wishing to meet and
discuss contracts may be subject to an antitrust action. This permits
health plans to refuse to negotiate with physicians regarding contract
provisions. These contracts contain requirements that can have direct
impact on patients. When physicians attempt to form networks that are
large enough to oppose certain contract provisions, the health plans can
threaten them with antitrust action. C.S.H.B. 3039 allows physicians to
join together to be represented by knowledgeable individuals to negotiate
on their behalf.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the attorney general in SECTION 1
(Articles 29.11 and 29.13, Insurance Code) and the commissioner of
insurance in SECTION 1 (Article 29.11, Insurance Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends the Insurance Code by adding Chapter 29, as follows:
CHAPTER 29. COLLECTIVE NEGOTIATIONS BY PHYSICIANS WITH HEALTH BENEFIT PLANS
Art. 29.01. FINDING AND PURPOSES. Provides legislative findings regarding
physician collective negotiation and sets forth the purposes of this
chapter.
Art. 29.02. DEFINITIONS. Defines "health benefit plan," "person," and
"physicians' representative."
Art. 29.03. SCOPE OF CHAPTER. (a) Specifies that Chapter 29 applies only
to a health benefit plan (plan) that provides benefits for medical or
surgical expenses incurred because of a health condition, accident, or
sickness. These types of plans include an individual, group, blanket, or
franchise insurance policy or insurance agreement, a group hospital service
contract, and individual or group coverage. Specifies that these plans are
offered by an insurance company; a group hospital service corporation; a
fraternal benefit society; a stipulated premium insurance company; a
reciprocal exchange; a health maintenance organization; and a multiple
employer welfare arrangement.
(b) Provides that Chapter 29 does not apply to a plan that provides
coverage only for a specific disease or other limited benefit; only for
accidental death or dismemberment; for wages or payments for a period
during which an employee is absent from work because of sickness or injury;
as a supplement to liability insurance; for credit insurance; only for
dental or vision care; only for hospital expenses; or only for indemnity
for hospital confinement. Also excluded is a small employer health benefit
plan; a Medicare supplemental policy; workers' compensation insurance
coverage; medical payment insurance coverage issued as part of a motor
vehicle insurance policy; or a long-term care policy.
Art. 29.04. COLLECTIVE NEGOTIATION AUTHORIZED. Authorizes competing
physicians within the service area of a health plan to meet and communicate
for the purpose of collectively negotiating the enumerated terms and
conditions of contracts with the health plan.
Art. 29.05. LIMITATIONS ON COLLECTIVE NEGOTIATION. Prohibits competing
physicians from meeting and communicating for the purposes of collectively
negotiating the enumerated terms and conditions of contracts with health
plans.
Art. 29.06. There is no Article 29.06.
Art. 29.07. COLLECTIVE NEGOTIATION REQUIREMENTS. Requires competing
health care physicians' exercise of collective negotiation rights granted
by Article 29.04 of this chapter to conform to the enumerated criteria.
Art. 29.08. REQUIREMENTS FOR PHYSICIANS' REPRESENTATIVE. Requires any
person or organization proposing to act or acting as a representative of
physicians for the purpose of exercising authority granted under this
chapter to furnish for the attorney's general approval a report. Sets
forth the requirements of the report. Requires the representative, after
the parties identified in the initial filing have reached an agreement, to
furnish for the attorney general's approval, a copy of the proposed
contract and plan of action. Requires the report to be sent to the
attorney general. Requires the applicant be permitted, if negotiations
resume within 60 days of such notification to the attorney general, to
renew the previously filed report without submitting a new report for
approval.
Art. 29.09. APPROVAL PROCESS BY ATTORNEY GENERAL. Requires the attorney
general to either approve or disapprove an initial filing, supplemental
filing, and a proposed contract within 30 days of each filing. Requires the
attorney general, if disapproved, to furnish a written explanation of any
deficiencies along with a statement of specific remedial measures as to how
such deficiencies could be corrected. Provides that a representative who
fails to obtain the attorney's general approval is deemed to act outside
the authority granted. Requires the attorney general to approve a request
to enter into collective negotiations if the advantages outweigh the
disadvantages. Requires the approval to be effective for all subsequent
negotiations. Grants an applicant the right to petition a district court
for a mandamus order requiring the attorney general to issue a written
approval or rejection of a filing.
Art. 29.10. CERTAIN COLLECTIVE ACTION PROHIBITED. Requires that nothing
contained in this chapter be construed to enable physicians to collectively
coordinate any cessation of health care services. Requires the
representative of the physicians to advise physicians of the provisions of
this section and to warn physicians of the potential for legal action
against physicians who violate state or federal antitrust laws by exceeding
the authority granted under this section.
Art. 29.11. RULEMAKING AUTHORITY. Grants the attorney general and the
commissioner of insurance the authority to promulgate rules necessary to
implement the provisions of this chapter.
Art. 29.12. CONSTRUCTION. Prohibits the construction of this chapter from
prohibiting physicians from negotiating the terms and conditions of
contracts as permitted by other state or federal law.
Art. 29.13. FEES. Requires each person who acts as the representative of
negotiating parties to pay to the Texas Department of Insurance a fee to
act as representative. Requires the attorney general, by rule, to set
reasonable and necessary fees to cover the costs incurred by the state in
administering this chapter. Requires the fees to be deposited in the state
treasury to the credit of the operating fund from which the expense was
incurred.
SECTION 2. Effective date: September 1, 1999.
SECTION 3. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
C.S.H.B. 3039 modifies the original bill in SECTION 1 by amending the
Insurance Code to add Chapter 29, titled "Collective Negotiations by
Physicians with Health Benefit Plans," rather than to add Chapter 27. Each
article in the substitute is given a title.
The substitute modifies proposed Article 27.01 by redesignating it as
Article 29.01 and by deleting some of the legislative findings and
purposes.
The substitute adds Article 29.02 to define "health benefit plan,"
"person," and "physicians' representative."
The substitute adds Article 29.03(a) to specify that proposed Chapter 29
applies only to a health benefit plan (plan) that provides benefits for
medical or surgical expenses incurred because of a health condition,
accident, or sickness. The substitute provides that these types of plans
include an individual, group, blanket, or franchise insurance policy or
insurance agreement, a group hospital service contract, and individual or
group coverage. The substitute specifies that these plans are offered by
an insurance company; a group hospital service corporation; a fraternal
benefit society; a stipulated premium insurance company; a reciprocal
exchange; a health maintenance organization; a multiple employer welfare
arrangement; and an approved nonprofit health corporation.
The substitute adds Article 29.03(b) to provide that Chapter 29 does not
apply to a plan that provides coverage: only for a specific disease or
other limited benefit; only for accidental death or dismemberment; for
wages or payments for a period during which an employee is absent from work
because of sickness or injury; as a supplement to liability insurance; for
credit insurance; only for dental or vision care; only for hospital
expenses; or only for indemnity for hospital confinement. The substitute
also excludes a small employer health benefit plan; a Medicare supplemental
policy; workers' compensation insurance coverage; medical payment insurance
coverage issued as part of a motor vehicle insurance policy; or a long-term
care policy.
The substitute modifies proposed Article 27.02 by redesignating it as
Article 29.04 and by deleting
some of the enumerated terms and conditions that may be collectively
negotiated in contracts with the health plan. Those deleted terms and
conditions are: administrative procedures including methods and timing of
physician payment for services; formulation and application of
reimbursement methodology; and health plan physician selection and
termination criteria. The substitute also deletes the provision that
requires nothing in proposed Article 27.02 to be construed to allow a
boycott. Additionally, the substitute makes a nonsubstantive change.
The substitute modifies proposed Article 27.03 by redesignating it as
Article 29.05 and by deleting the exception found in proposed Article 27.04
to the prohibition against competing physicians, from meeting and
communicating for the purposes of collectively negotiating the enumerated
terms and conditions of contracts with health plans. The substitute also
deletes one of the terms that was prohibited from being negotiated, that
being: the inclusion or alteration of terms and conditions to the extent
they are the subject of government regulation prohibiting or requiring the
particular term or condition in question, except that such a restriction
does not limit physician rights to collectively petition government for a
change in such regulation.
The substitute deletes proposed Article 27.04, which would have authorized
competing physicians within the service area of a health plan to
collectively negotiate the terms and conditions specified in proposed
Article 27.03 where the health plans have substantial market power.
Proposed Article 27.04 would have also provided that substantial market
power will be found where the health plan's market share exceeds 15
percent, as measured by the number of covered lives as reported by the
commissioner of insurance (commissioner), or the actual number of consumers
of prepaid comprehensive health services. Proposed Article 27.04 would
have also provided that substantial market power also exists where a
health plan's market share exceeds 15 percent within a particular market
segment, broken down into the following market segments: Medicare,
Medicaid, commercial, managed care and HMO.
The substitute modifies proposed Article 27.05 by redesignating it as
Article 29.07 and by deleting
one of the enumerated criteria to which competing health care physicians'
exercise of collective negotiation rights granted by Article 29.04, rather
than Articles 2 and 4, of this chapter are required to conform. That
deleted criterion is: the physicians' representative is prohibited from
representing more than 30% of the market of practicing physicians for the
provision of services or a particular physician type or specialty in the
service area or proposed service area of a health plan with less than 5% of
the market, as measured by a) number of covered lives as reported by the
commissioner of insurance, or b) the actual number of consumers of prepaid
comprehensive health services. The substitute makes conforming changes.
The substitute modifies proposed Article 27.06 by redesignating it as
Article 29.08 and by requiring, in proposed Article 29.08(a), any person or
organization proposing to act or acting as a representative of physicians
for the purpose of exercising authority granted under this chapter to
furnish for the attorney general's approval a report, rather than to comply
with certain enumerated requirements. Under the substitute, the report must
contain information identifying the representative, the physicians the
representative represents, the relationship of the represented physicians
to the total population of physicians in a geographic service area, the
health plans to be negotiated, the subject matter of the negotiations, the
representative plan to comply with this section, the impact of the
negotiations on patient care, and the benefits of a negotiated contract.
In proposed Article 29.08(b), the substitute requires the representative,
after the parties identified in the initial filing have reached an
agreement, to furnish for the attorney general's approval, a copy of the
proposed contract and plan of action. The substitute redesignates proposed
Article 27.06(3) as Article 29.08(c) and amends it to require the report to
be sent to the attorney general rather than the commissioner of insurance.
The substitute also adds the provision requiring the applicant be
permitted, if negotiations resume within 60 days of such notification to
the attorney general, to renew the previously filed report without
submitting a new report for approval.
Under the original bill, proposed Article 27.06 required any person or
organization proposing to act or acting as a representative of physicians
for the purpose of exercising authority granted under this chapter to
comply with the following requirements:
_before engaging in any collective negotiation with health plans on behalf
of competing physicians, the representative shall file with the
commissioner of insurance information identifying the representative, the
representative's plan of operation, and the representative's procedures to
ensure compliance with this section;
_before engaging in any collective negotiations with health plans on behalf
of physicians, the representative shall furnish for the commissioner's
approval, a brief report identifying the proposed subject matter of the
negotiations or discussions with health plans and the efficiencies or
benefits expected to be achieved thereby. Approval shall be withheld by the
commissioner of insurance if the proposed negotiations would exceed the
authority granted under this chapter. The representative shall supplement
the report to the commissioner of insurance as new information becomes
available that indicates that the subject matter of the negotiations with
the health plan has or will change;
_within 14 days of a health plan decision declining negotiation,
terminating negotiation, or failing to respond to a request for negotiation
the representative shall report to the commissioner of insurance the end of
negotiations; and
_before reporting the results of negotiations with a health plan and before
giving physicians an evaluation of any offer made by a health carrier, the
representative shall furnish for the commissioner approval prior to
dissemination to physicians, a copy of all communications to be made to
physicians related to negotiations, discussions, and health plan offers.
The substitute modifies proposed Article 27.07 by redesignating it as
Article 29.09 and by requiring the attorney general, rather than the
commissioner of insurance to either approve or disapprove an initial
filing, supplemental filing and a proposed contract, rather than the
activity as identified in the report, within 30 days of each filing. The
substitute requires the attorney general, rather than the commissioner, if
disapproved, to furnish a written explanation of any deficiencies along
with a statement of specific remedial measures as to how such deficiencies
could be corrected. The substitute provides that a representative who
fails to obtain the attorney general's, rather than the commissioner's,
approval is deemed to act outside the authority granted. The substitute
makes a conforming and nonsubstantive change. In addition, the substitute
adds proposed Articles 29.09(b), (c), and (d) to require the attorney
general to approve a request to enter into collective negotiations if the
advantages outweigh the disadvantages, to require the approval to be
effective for all subsequent negotiations, and to grant an applicant the
right to petition a district court for a mandamus order requiring the
attorney general to issue a written approval or rejection of a filing,
respectively.
The substitute modifies proposed Article 27.08 by redesignating it as
Article 29.10 and by requiring, rather than providing, that nothing
contained in this chapter be construed, rather than is intended, to enable
physicians to collectively coordinate any cessation of health care
services, rather than to authorize competing physicians to act in concert
in response to a report issued by the physicians' representative related to
the representative's discussions or negotiations with health plans.
The substitute adds Article 29.11 to grant the attorney general and the
commissioner of insurance the authority to promulgate rules necessary to
implement the provisions of this chapter.
The substitute adds Article 29.12 to prohibit the construction of this
chapter from prohibiting physicians from negotiating the terms and
conditions of contracts as permitted by other state or federal law.
The substitute replaces proposed Article 27.09 with Article 29.13.
Proposed Article 27.09 required the costs and expenses of administering
this chapter to be paid by the persons or organizations proposing to act or
acting as the representatives of the negotiating parties in such amount as
the commission of insurance is required to certify to be just and
reasonable, and required all sums collected by the commission to be
deposited in the state treasury to the credit of the Texas Department of
Insurance for the administration of the chapter as established by
appropriation by the legislature. Under the substitute, Article 29.13
requires each person who acts as the representative of negotiating parties
to pay to the Texas Department of Insurance a fee to act as representative.
The substitute requires the attorney general, by rule, to set reasonable
and necessary fees to cover the costs incurred by the state in
administering this chapter. The substitute requires the fees to be
deposited in the state treasury to the credit of the operating fund from
which the expense was incurred.