HBA-DMH H.B. 2828 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2828
By: Smithee
Insurance
8/9/2001
Enrolled



BACKGROUND AND PURPOSE 

The 76th Legislature set standards for health maintenance organizations
(HMO) delegating certain responsibilities to physician networks.  During
the interim, representatives of health plans, consumers, and physician
networks met to develop modifications to the statute.  It was determined
that confusion still remains among consumers about the excess requirements
for limited provider networks.  Additionally, HMO network failures prompted
the establishment of requirements and enforcement provisions to ensure
compliance with the statute.  House Bill 2828 modifies provisions relating
to the complaint and reporting requirements of a written agreement between
a delegated entity and an HMO and provides penalties for not complying with
the agreement. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that  rulemaking
authority expressly delegated to the commissioner of insurance in SECTION 4
(Section 18C, Article 20A, Insurance Code) of this bill. 

ANALYSIS

House Bill 2828 amends the Insurance Code to further clarify the
relationship between a health maintenance organization (HMO) and a
delegated entity.  The bill provides that each contract between an HMO and
a limited provider network or delegated entity must require that each
contract between the network or entity and a physician or provider contain
provisions for continuity of care  for certain enrollees. The bill sets
forth provision related to identifying special circumstances that
necessitate continued treatment by a physician or provider and related time
limits (Sec. 18E, Art. 20A).  The bill provides that each contract between
an HMO and a limited provider network or delegated entity must provide for
out of network services under certain conditions.  The bill establishes a
procedure for referral, approval, and denial of out of network services.  A
denial is subject to appeal (Sec. 18F, Art. 20A).  The bill requires a
delegated network to establish and maintain financial reserves that are
adequate for the liabilities and risks assumed by the delegated network,
and sets forth conditions for maintaining the reserves (Sec. 18D, Art.
20A).  If an enrollee designates a primary care physician who practices in
a limited provider network or delegated entity, the bill requires the HMO
within a specified time period to provide an accurate written description
of health care plan terms and conditions to an enrollee with the enrollee's
identification card or in a separate mailing (Sec. 11, Art. 20A). The bill
modifies the record requirements for an HMOs complaint system to provide
that the records identify those complaints relating to limited provider
networks and delegated entities (Sec. 12, Art. 20A).  The bill requires
that an HMO and a delegated entity establish in each written agreement
which party will bear the expense of compliance with any requirement in
state law related to delegation (Sec. 18C, Art. 20A). 

The bill expands the contents of the written agreement between an HMO and a
delegated entity to include provisions related to financial solvency and
the qualifications of utilization review agents.  The bill requires the
commissioner of insurance (commissioner) to determine the information that
an HMO is required to provide to each delegated entity in a written
agreement.  The bill requires an HMO to take specified actions against a
delegated entity if an HMO becomes aware of any information that indicates
that a delegated entity is not operating in accordance with its written
agreement or is operating in a condition that renders  the continuance of
its business hazardous to enrollees.  On completion of the investigation of
a complaint by the Texas Department of Insurance (department), the bill
requires the department to report certain findings to the delegated entity
subject to the investigation (Sec. 18C, Art. 20A).   

Regardless of whether a delegated entity complies with a request for
corrective action, the bill authorizes the commissioner, rather than the
department, to order the HMO to take any action the commissioner determines
is necessary to ensure that the HMO is in compliance with the Texas Health
Maintenance Organization Act.  The bill requires the department, rather
than the commissioner, to maintain enrollee and provider complaints in a
manner that identifies complaints about limited providers networks and
delegated entities, and sets forth provisions for a periodic report to be
issued by the department.  The bill authorizes the commissioner to suspend
or revoke the license of any third party administrator or utilization
review agent that fails to comply with the delegation provisions.  The bill
authorizes the commissioner to impose sanctions or penalties against an HMO
that does not provide timely required information to delegated entities.
The bill requires HMOs to establish penalties for delegated entities that
do not provide timely information required under a monitoring plan.  The
bill authorizes the commissioner to adopt rules as necessary to implement
these provisions (Sec. 18C, Art. 20A).   The bill requires a limited
provider network or delegated entity to comply with all statutory and
regulatory requirements relating to any function, duty, responsibility, or
delegation assumed by or carried out by the limited provider network or
delegated entity (Sec. 18G, Art. 20A). 

EFFECTIVE DATE

September 1, 2001.  The Act applies only to a contract entered into or
renewed on or after January 1, 2002.