HBA-ATS C.S.S.B. 890 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.S.B. 890
By: Harris
Insurance
5/7/1999
Committee Report (Substituted)



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. 

C.S.S.B. 890 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, enrollees, 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, upon violation of a
monitoring plan, 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 rulemaking
authority is expressly delegated to the commissioner of insurance in
SECTION 2 (Section 18C, Article 20A, V.T.I.C.) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 2, Article 20A, 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, enrollees, 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, is directly
accountable for compliance with those standards, and is not contractually
precluded from requesting that the network provide proof of financial
viability; that the role of the network and any entity with which it
subcontracts in contracting with the HMO is limited to performing certain
delegated functions of the HMO, using standards approved by the HMO and
which are in compliance with applicable statutes and rules 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 quarterly and on settlement, and the
percent of premiums attributable to hospital or facility costs, if hospital
or facility costs impact the network's costs, reported quarterly, and, if
there are changes in hospital or facility contracts with the HMO, the
projected impact of those changes on the premium attributable to hospital
and facility costs within 30 days of such changes. 

(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, upon violation of a monitoring plan, 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 and the HMO the
results of its review by the 60th day after the department's initial
request for documentation.   Prohibits the department from reporting to the
HMO any information regarding fee schedules, prices, cost of care, or other
information not relevant to the monitoring plan. 

(j) Requires the network to respond to the department's report and submit a
corrective plan to the department and the HMO by the 30th day after the
network receives the department's report.  Authorizes the network to
withhold information regarding fee schedules, prices, cost of care, or
other information not relevant to the monitoring plan. 

(k) Requires that reports and corrective plans required under Subsection
(i) or (j) be treated as public documents, except health care provider fee
schedules, prices, costs of care, or other irrelevant information.
Requires that any information that is considered confidential by law be
considered confidential 

(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. 

(n) Requires the commissioner of insurance (commissioner) to maintain
enrollee and provider complaints identifying complaints made about
networks. 

(n) Authorizes the commissioner to adopt rules to interpret, implement, and
enforce this section. 

(There are two subsections designated as (n) in this section.)

SECTION 3.  Amends Article 20A.11(b), V.T.I.C. (Texas Health Maintenance
Organization Act), to include restrictions or limitations related to
limited provider networks or networks within a health care plans as the
types of terms and conditions in a written description of health plans that
an HMO is required to accurately describe to a current or prospective group
contract holder and current or prospective enrollee.  Includes delineation
of limited provider networks and delegated networks as the type of
information needed in a current list of physicians and providers required
in the written  description of the health care plan provided by the HMO. 

SECTION 4.  Effective date: September 1, 1999, except that SECTION 3 takes
effect for any contract entered into or renewed on or after  January 1,
2000. 

SECTION 5.  Establishes September 2, 2001, as the expiration date for
Articles 20A.02(dd) and (ee) and 20A.18C, Insurance Code, unless continued
in existence by the legislature by that date. 

SECTION 6.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.S.B. 890 differs from the original bill in SECTION 1 by redefining the
definition of "delegated network" in proposed Section 2(ee), Article
20A.02, Insurance Code, to add performance on behalf of a health
maintenance organization (HMO) of any function regulated by the Texas
Health Maintenance Organization Act as a function of a delegated network
(network).  In addition, the substitute adds the provision in the
definition of "delegated network" that the term does not include an
individual physician or a group of employed physicians practicing medicine
under one federal tax identification number and whose total claims paid to
providers not employed by the group is less than 20 percent of the total
collected revenue of the group calculated on a calendar year basis. 

C.S.S.B. 890 differs from the original bill in SECTION 2 (proposed Section
18C(a)(1)(C), Chapter 20A, Insurance Code) by including enrollees, in
addition to physicians and providers, as persons from whom a summary of
complaints regarding delays in payments of claims or nonpayment of claims
are summarized in the monitoring plan. 

In proposed Section 18C(a)(2), the substitute differs from the original by
specifying that the delegation agreement (agreement) between an HMO and a
network cannot be terminated without cause. 

In proposed Section 18C(a)(4), the substitute differs from the original by
specifying that an HMO's responsibility that is prohibited from being
construed as limited by an agreement includes the HMO's financial
responsibility. 

The substitute redesignates proposed Section 18C(a)(5) of the original to
Section 18C(a)(6) because it adds a new Section 18C(a)(5).  In new Section
18(c)(5), the substitute includes a provision in the agreement between a
network and an HMO that  requires the network to comply with all statutory
and regulatory requirements relating to any function, duty, responsibility,
or delegation assumed by or carried out by the network. 

The substitute differs from the original by redesignating proposed Section
18C(a)(6) of the original to Section 18C(a)(7) and by including the
following conditions to the provision in the agreement between a network
and HMO that requires the network or a third party to provide a license
number and to certify that the network or third party is licensed as a
utilization review agent if the HMO delegates its utilization review
function to the network or a third party: that enrollees will receive
notification at the time of enrollment of the entity responsible for
utilization review; that the network or third party performing utilization
review is required to do so in accordance with Article 21.58A, Insurance
Code; and that utilization review decisions made by the network or third
party are required to be forwarded to the HMO on a monthly basis. 

The substitute differs from the original by redesignating proposed Section
18C(a)(7) of the original to Section 18C(a)(8) and by specifying that the
HMO is not precluded from contractually requesting, rather than requesting,
that the network provide proof of financial viability.  The substitute also
makes a nonsubstantive change. 

The substitute differs from the original by redesignating proposed Section
18C(a)(8) of the original to Section 18C(a)(9). 

The substitute differs from the original by redesignating proposed Section
18C(a)(9) of the original  to Section 18C(a)(10) and by specifying in
proposed Section 18C(a)(10)(B) that debts and claims are for medical
services owed and that the dollar amount of these debts and claims is an
aggregate amount.  The substitute also makes a nonsubstantive change in
redesignated Section 18C(a)(10)(C). In redesignated Section 18C(a)(10)(D),
the substitute provides that the summary of documentation does not include
information that is confidential or privileged under Section 5.06, Article
4495b, V.T.C.S., rather than information that is confidential or
privileged, including that under Section 5.06, Article 4495b, V.T.C.S. 

The substitute differs from the original by redesignating proposed Section
18C(a)(10) of the original to Section 18C(a)(11) and by including a
provision relating to enrollee complaints in the agreement between the HMO
and network that requires the network to ensure that upon receipt of a
complaint the network is required to report the complaint to the HMO,
rather than requires the network to report a complaint to the HMO. 

In proposed Section 18C(b)(1), the substitute differs from the original by
providing that information about the enrollees, rather than the number of
enrollees, added and terminated since the previous reporting period is
information that is required to be provided by the HMO to each network with
which it has an agreement.  In proposed Section 18C(b)(2), the substitute
makes a nonsubstantive change.  In proposed Sections18C(b)(3), the
substitute differs from the original by specifying that the additional
information a network is not precluded from receiving is nonproprietary
information, rather than information, regarding certain claims.  In
proposed Sections18C(b)(4), the substitute makes a conforming change. 

In proposed Section 18C(c)(2), the substitute differs from the original by
providing that an HMO is required to give quarterly to the network the
percent of premiums attributable to hospital or facility costs, if hospital
or facility costs impact the network's costs, and, required to give within
30 days to the network, if there are changes in hospital or facility
contracts with the HMO, the projected impact of those changes on the
premium attributable to hospital and facility costs.  Under the original
bill, the HMO was required to give to a network 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. 

In proposed Section 18C(i) the substitute differs from the original by
including fee schedules among the types of information the department is
prohibited from reporting to the HMO.  The substitute also makes
nonsubstantive change. 

In proposed Section 18C(j) the substitute differs from the original by
including fee schedules among the types of information the network is
authorized to withhold. 

In proposed Section 18C(k), the substitute differs from the original by
requiring that reports and corrective plans required under proposed
Subsection (i) or (j) be treated as public documents, except health care
provider fee schedules, prices, costs of care, or other irrelevant
information, rather than information about prices, costs of care, or
irrelevant information, and by requiring that any information that is
considered confidential by law be considered confidential, rather than any
information that is confidential by other law included in those reports and
corrective plans be considered confidential. 

The substitute differs from the original bill by removing proposed Section
18C(o), which would have required the commissioner of insurance
(commissioner) to adopt rules requiring networks to establish a process to
allow enrollees to access physicians or health care providers who are not
in the network  but who are in the HMO for enrollees who have a prior
relationship with a provider who is in the HMO delivery network but not in
the network, and for enrollees who are past the 24th week of pregnancy or
who have life threatening, serious, chronic, acute, or disabling
conditions, diseases, or illnesses. 

The substitute differs from the original bill by redesignating Section
18C(p) of the original to Section 18C(n). 

In Section 18C(n) of the original, which remains Section 18C(n) in the
substitute despite the  redesignation of Section 18C(p) of the original to
Section 18C(n), the substitute differs from the original by removing the
augmentations of Section 18C as provisions that the commissioner is
authorized to adopt rules for their interpretation, implementation, and
enforcement. 

C.S.S.B. 890 differs from the original bill by redesignating SECTIONS 3
(effective date) and 4 (emergency clause) of the original to SECTIONS 4 and
6. 

In new SECTION 3, the substitute amends Article 20A.11(b), V.A.T.S.,
Insurance Code (Texas Health Maintenance Organization Act), to include
restrictions or limitations related to limited provider networks or
networks within a health care plans as the types of terms and conditions in
a written description of health plans that an HMO is required to accurately
describe to a current or prospective group contract holder and current or
prospective enrollee, and to include delineation of limited provider
networks and delegated networks as the type of information needed in a
current list of physicians and providers required in the written
description of the health care plan provided by the HMO. 

In redesignated SECTION 4, C.S.S.B. 890 differs from the original bill by
including the provision that SECTION 3 of the substitute takes effect for
any contract entered into or renewed on or after January 1, 2000, as an
exception to September 1, 1999, as the effective date of this Act. 

In new SECTION 5, the substitute establishes September 2, 2001, as the
expiration date for Articles 20A.02(dd) and (ee) and 20A.18C, Insurance
Code, unless continued in existence by the legislature by that date.