HBA-DMH C.S.H.B. 2828 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2828 By: Smithee Insurance 4/2/2001 Committee Report (Substituted) 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. C.S.H.B. 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 C.S.H.B. 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. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2828 differs from the original bill by including provisions relating to financial reserves, continuity of care for certain enrollees, out of network services, and statutory and regulatory compliance by a limited provider network or delegated entity (Secs. 18D, 18E, 18F, and 18G, Art. 20A). C.S.H.B. 2828 adds provisions modifying the record keeping requirements for an HMO's complaint system, establishes responsibility in a joint delegation agreement for any delegated function, and requires the commissioner to determine the information that an HMO is required to provide to each delegated entity in a joint delegation agreement (Secs. 12 and 18C, Art. 20A). C.S.H.B. 2828 expands the contents of the written agreement, establishes penalties for third party administrators, utilization review agents, and delegated entities that fail to comply with the delegation provisions, and authorizes the commissioner to adopt rules as necessary to implement these provisions (Sec. 18C, Art. 20A). The substitute 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 the enrollees. On completion of the investigation of a complaint by the Texas Department of Insurance (department) the substitute requires the department to report certain findings to the delegated entity subject to the investigation (Sec. 18C, Art. 20A). The substitute authorizes the commissioner, rather than the department, to order the HMO to take any action the commissioner determines is necessary. The substitute requires the department, rather than the commissioner, to maintain enrollee and provider complaints in a specified manner and sets forth provisions for a periodic report to be issued by the department (Sec. 18C, Art. 20A). C.S.H.B. 2828 removes provisions from the original bill prohibiting an HMO from delegating certain duties or waiving or eliminating duties by contract and requiring the department to make information from the report it issues about HMO complaints periodically available to the public. C.S.H.B. 2828 modifies provisions relating to continuity of care and out of network services. The substitute removes provisions from the original requiring a denial of out of network service by a delegated network to an enrollee to be sent by a delegated network to the HMO for second review.