INSURANCE CODE - NOT CODIFIED
CHAPTER 26. HEALTH INSURANCE AVAILABILITY
SUBCHAPTER A. GENERAL PROVISIONS
Art. 26.01. Short Title
This chapter may be cited as the Health Insurance Portability and
Availability Act.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.01, eff. July 1,
1997.
Art. 26.02. Definitions
In this chapter:
(1) "Affiliation period" means a period that, under the terms of the
coverage offered by a health maintenance organization, must expire
before the coverage becomes effective. During an affiliation
period:
(A) a health maintenance organization is not required to provide
health care services or benefits to the participant or beneficiary;
and
(B) a premium may not be charged to the participant or beneficiary.
(2) "Agent" means a person who may act as an agent for the sale of a
health benefit plan under a license issued under Section 15 or 15A,
Texas Health Maintenance Organization Act (Article 20A.15 or
20A.15A, Vernon's Texas Insurance Code), or under Subchapter A,
Chapter 21, of this code.
(3) "Base premium rate" means, for each class of business and for a
specific rating period, the lowest premium rate that is charged or
that could be charged under a rating system for that class of
business by the small employer carrier to small employers with
similar case characteristics for small employer health benefit
plans with the same or similar coverage.
(4) "Board of directors" means the board of directors of the Texas
Health Reinsurance System.
(5) "Case characteristics" means, with respect to a small employer,
the geographic area in which that employer's employees reside, the
age and gender of the individual employees and their dependents,
the appropriate industry classification as determined by the small
employer carrier, the number of employees and dependents, and other
objective criteria as established by the small employer carrier
that are considered by the small employer carrier in setting
premium rates for that small employer. The term does not include
health status related factors, duration of coverage since the date
of issuance of a health benefit plan, or whether a covered person is
or may become pregnant.
(6) "Class of business" means all small employers or a separate
grouping of small employers established under this chapter.
(7) "Creditable coverage" means coverage described by Article
26.035 of this code.
(8) "Dependent" means:
(A) a spouse;
(B) a newborn child;
(C) a child younger than 25 years of age;
(D) a child of any age who is medically certified as disabled and
dependent on the parent;
(E) any person who must be covered under:
(i) Section 3D or 3E, Article 3.51-6, of this code; or
(ii) Section 2(L), Chapter 397, Acts of the 54th Legislature,
Regular Session, 1955 (Article 3.70-2, Vernon's Texas Insurance
Code); and
(F) any other child eligible under an employer's benefit plan,
including a child described by Section 3, Article 21.24-2, of this
code.
(9) "Eligible employee" means an employee who works on a full-time
basis and who usually works at least 30 hours a week. The term also
includes a sole proprietor, a partner, and an independent
contractor, if the sole proprietor, partner, or independent
contractor is included as an employee under a health benefit plan of
a small or large employer. The term does not include:
(A) an employee who works on a part-time, temporary, seasonal, or
substitute basis; or
(B) an employee who is covered under:
(i) another health benefit plan;
(ii) a self-funded or self-insured employee welfare benefit plan
that provides health benefits and that is established in accordance
with the Employee Retirement Income Security Act of 1974 (29 U.S.C.
Section 1001 et seq.);
(iii) the Medicaid program if the employee elects not to be covered;
(iv) another federal program, including the CHAMPUS program or
Medicare program, if the employee elects not to be covered; or
(v) a benefit plan established in another country if the employee
elects not to be covered.
(10) "Employee" means any individual employed by an employer.
(11) "Health benefit plan" means a group, blanket, or franchise
insurance policy, a certificate issued under a group policy, a
group hospital service contract, or a group subscriber contract or
evidence of coverage issued by a health maintenance organization
that provides benefits for health care services. The term does not
include:
(A) accident-only or disability income insurance or a combination
of accident-only and disability income insurance;
(B) credit-only insurance;
(C) disability insurance coverage;
(D) coverage for a specified disease or illness;
(E) Medicare services under a federal contract;
(F) Medicare supplement and Medicare Select policies regulated in
accordance with federal law;
(G) long-term care coverage or benefits, nursing home care coverage
or benefits, home health care coverage or benefits, community-based
care coverage or benefits, or any combination of those coverages or
benefits;
(H) coverage that provides limited-scope dental or vision benefits;
(I) coverage provided by a single service health maintenance
organization;
(J) coverage issued as a supplement to liability insurance;
(K) workers' compensation or similar insurance;
(L) automobile medical payment insurance coverage;
(M) jointly managed trusts authorized under 29 U.S.C. Section 141
et seq. that contain a plan of benefits for employees that is
negotiated in a collective bargaining agreement governing wages,
hours, and working conditions of the employees that is authorized
under 29 U.S.C. Section 157;
(N) hospital indemnity or other fixed indemnity insurance;
(O) reinsurance contracts issued on a stop-loss, quota-share, or
similar basis;
(P) short-term major medical contracts;
(Q) liability insurance, including general liability insurance and
automobile liability insurance;
(R) other coverage that is:
(i) similar to the coverage described by this subdivision under
which benefits for medical care are secondary or incidental to
other insurance benefits; and
(ii) specified in federal regulations;
(S) coverage for on-site medical clinics; or
(T) coverage that provides other limited benefits specified by
federal regulations.
(12) "Health carrier" means any entity authorized under this code
or another insurance law of this state that provides health
insurance or health benefits in this state, including an insurance
company, a group hospital service corporation under Chapter 20 of
this code, a health maintenance organization under the Texas Health
Maintenance Organization Act (Chapter 20A, Vernon's Texas
Insurance Code), and a stipulated premium company under Chapter 22
of this code.
(13) "Health status related factor" means:
(A) health status;
(B) medical condition, including both physical and mental illness;
(C) claims experience;
(D) receipt of health care;
(E) medical history;
(F) genetic information;
(G) evidence of insurability, including conditions arising out of
acts of family violence; and
(H) disability.
(14) "Index rate" means, for each class of business as to a rating
period for small employers with similar case characteristics, the
arithmetic average of the applicable base premium rate and
corresponding highest premium rate.
(15) "Large employer" means an employer who employed an average of
at least 51 eligible employees on business days during the
preceding calendar year and who employs at least two employees on
the first day of the plan year. For purposes of this definition, a
partnership is the employer of a partner. A large employer includes
a governmental entity subject to Section 1, Chapter 123, Acts of the
60th Legislature, Regular Session, 1967 (Article 3.51-3, Vernon's
Texas Insurance Code), or Article 3.51-1, 3.51-2, 3.51-4, 3.51-5,
or 3.51-5A of this code that otherwise meets the requirements of
this section.
(16) "Large employer carrier" means a health carrier, to the extent
that carrier is offering, delivering, issuing for delivery, or
renewing health benefit plans subject to Subchapter H of this
chapter.
(17) "Large employer health benefit plan" means a health benefit
plan offered to a large employer.
(18) "Late enrollee" means any employee or dependent eligible for
enrollment who requests enrollment in a small or large employer's
health benefit plan after the expiration of the initial enrollment
period established under the terms of the first plan for which that
employee or dependent was eligible through the small or large
employer or after the expiration of an open enrollment period under
Article 26.21(h) or 26.83 of this code. An employee or dependent
eligible for enrollment is not a late enrollee if:
(A) the individual:
(i) was covered under another health benefit plan or self-funded
employer health benefit plan at the time the individual was
eligible to enroll;
(ii) declines in writing, at the time of the initial eligibility,
stating that coverage under another health benefit plan or
self-funded employer health benefit plan was the reason for
declining enrollment;
(iii) has lost coverage under another health benefit plan or
self-funded employer health benefit plan as a result of:
(a) the termination of employment;
(b) the reduction in the number of hours of employment;
(c) the termination of the other plan's coverage;
(d) the termination of contributions toward the premium made by the
employer; or
(e) the death of a spouse or divorce; and
(iv) requests enrollment not later than the 31st day after the date
on which coverage under the other health benefit plan or
self-funded employer health benefit plan terminates;
(B) the individual is employed by an employer who offers multiple
health benefit plans and the individual elects a different health
benefit plan during an open enrollment period;
(C) a court has ordered coverage to be provided for a spouse under a
covered employee's plan and request for enrollment is made not
later than the 31st day after the date on which the court order is
issued;
(D) a court has ordered coverage to be provided for a child under a
covered employee's plan and the request for enrollment is made not
later than the 31st day after the date on which the employer
receives the court order; or
(E) the individual is a child of a covered employee who has lost
coverage under Title XIX of the Social Security Act (42 U.S.C.
Section 1396 et seq.), other than coverage consisting solely of
benefits under Section 1928 of that Act (42 U.S.C. Section 1396s),
or under Chapter 62, Health and Safety Code, and the request for
enrollment is made not later than the 31st day after the date on
which the child loses coverage.
(19) "New business premium rate" means, for each class of business
as to a rating period, the lowest premium rate that is charged or
offered or that could be charged or offered by the small employer
carrier to small employers with similar case characteristics for
newly issued small employer health benefit plans that provide the
same or similar coverage.
(20) "Participation criteria" means any criteria or rules
established by a large employer to determine the employees who are
eligible for enrollment, including continued enrollment, under the
terms of a health benefit plan. Such criteria or rules may not be
based on health status related factors.
(21) "Person" means an individual, corporation, partnership, or
other legal entity.
(22) "Plan of operation" means the plan of operation of the system
established under Article 26.55 of this code.
(23) "Point-of-service contract" means a benefit plan offered
through a health maintenance organization that:
(A) includes corresponding indemnity benefits in addition to
benefits relating to out-of-area or emergency services provided
through insurers or group hospital service corporations; and
(B) permits the insured to obtain coverage under either the health
maintenance organization conventional plan or the indemnity plan as
determined in accordance with the terms of the contract.
(24) "Preexisting condition provision" means a provision that
denies, excludes, or limits coverage as to a disease or condition
for a specified period after the effective date of coverage.
(25) "Premium" means all amounts paid by a small or large employer
and eligible employees as a condition of receiving coverage from a
small or large employer carrier, including any fees or other
contributions associated with a health benefit plan.
(26) "Rating period" means a calendar period for which premium
rates established by a small employer carrier are assumed to be in
effect.
(27) "Reinsured carrier" means a small employer carrier
participating in the system.
Text of subds. (28) to (32) as amended by Acts 2001, 77th Leg., ch.
608, Sec. 1
(28) "Risk-assuming carrier" means a small employer carrier that
elects not to participate in the system.
(29) "Small employer" means an employer who employed an average of
at least two employees but not more than 50 eligible employees on
business days during the preceding calendar year and who employs at
least two employees on the first day of the plan year. For purposes
of this definition, a partnership is the employer of a partner. A
small employer includes a governmental entity subject to Section 1,
Chapter 123, Acts of the 60th Legislature, Regular Session, 1967
(Article 3.51-3, Vernon's Texas Insurance Code), or Article 3.51-1,
3.51-2, 3.51-4, 3.51-5, or 3.51-5A of this code that otherwise
meets the requirements of this section.
(30) "Small employer carrier" means a health carrier, to the extent
that that carrier is offering, delivering, issuing for delivery, or
renewing health benefit plans subject to Subchapters C-G of this
chapter under Article 26.06(a) of this code.
(31) "Small employer health benefit plan" means a plan developed by
the commissioner under Subchapter E of this chapter or any other
health benefit plan offered to a small employer in accordance with
Article 26.42(c) or 26.48 of this code.
(32) "System" means the Texas Health Reinsurance System established
under Subchapter F of this chapter.
Text of subds. (28) to (32) as amended by Acts 2001, 77th Leg., ch.
823, Sec. 1
(28) "Risk characteristic" means:
(A) a health status related factor;
(B) the duration of coverage; or
(C) any characteristic similar to a characteristic described by
Paragraph (A) or (B) of this subdivision that is related to the
health status or experience of a small employer group or of any
member of a small employer group.
(29) "Risk load" means the percentage above the applicable base
premium rate a small employer carrier charges to a small employer to
reflect the risk characteristics associated with that particular
small employer group.
(30) "Small employer" means an employer who employed an average of
at least two but not more than 50 eligible employees on business
days during the preceding calendar year and who employs at least two
eligible employees on the first day of the plan year. For purposes
of this definition, a partnership is the employer of a partner. A
small employer includes a governmental entity subject to Section 1,
Chapter 123, Acts of the 60th Legislature, Regular Session, 1967
(Article 3.51-3, Vernon's Texas Insurance Code), or Article 3.51-1,
3.51-2, 3.51-4, 3.51-5, or 3.51-5A of this code that otherwise
meets the requirements of this section and elects to be treated as a
small employer.
(31) "Small employer carrier" means a health carrier, to the extent
that that carrier is offering, delivering, issuing for delivery, or
renewing health benefit plans subject to Subchapters C-G of this
chapter under Article 26.06(a) of this code.
(32) "Small employer health benefit plan" means a plan developed by
the commissioner under Subchapter E of this chapter or any other
health benefit plan offered to a small employer in accordance with
Article 26.42(c) or 26.48 of this code.
(32-a) "Small employer health coalition" means a private purchasing
cooperative composed solely of small employers that is formed under
Subchapter B of this chapter.
Text of subd. (33) as added by Acts 2001, 77th Leg., ch. 608, Sec. 1
(33) "Waiting period" means a period established by an employer
that must pass before an individual who is a potential enrollee in a
health benefit plan is eligible to be covered for benefits.
Text of subd. (33) as added by Acts 2001, 77th Leg., ch. 823, Sec. 1
(33) "System" means the Texas Health Reinsurance System established
under Subchapter F of this chapter.
(34) "Waiting period" means a period established by an employer
that must pass before an individual who is a potential enrollee in a
health benefit plan is eligible to be covered for benefits.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subds. (8), (12), (23) amended by and Subd. (25) added by Acts 1995,
74th Leg., ch. 893, Sec. 1, eff. Sept. 1, 1995. Amended by Acts
1997, 75th Leg., ch. 955, Sec. 1.02, eff. July 1, 1997; Subd. (8)
amended by Acts 2001, 77th Leg., ch. 1027, Sec. 9, eff. Sept. 1,
2001; Subds. (10) to (28) amended by Acts 2001, 77th Leg., ch. 608,
Sec. 1, eff. Sept. 1, 2001; Subd. (28) amended by Acts 2001, 77th
Leg., ch. 823, Sec. 1, eff. Sept. 1, 2001; Subd. (29) amended by
Acts 2001, 77th Leg., ch. 608, Sec. 1, eff. Sept. 1, 2001; Subd.
(29) amended by Acts 2001, 77th Leg., ch. 823, Sec. 1, eff. Sept. 1,
2001; Subd. (30) amended by Acts 2001, 77th Leg., ch. 608, Sec. 1,
eff. Sept. 1, 2001; Subd. (30) amended by Acts 2001, 77th Leg., ch.
823, Sec. 1, eff. Sept. 1, 2001; Subd. (31) amended by Acts 2001,
77th Leg., ch. 608, Sec. 1, eff. Sept. 1, 2001; Subd. (31) amended
by Acts 2001, 77th Leg., ch. 823, Sec. 1, eff. Sept. 1, 2001; Subd.
(32) amended by Acts 2001, 77th Leg., ch. 608, Sec. 1, eff. Sept. 1,
2001; Subd. (32) amended by Acts 2001, 77th Leg., ch. 823, Sec. 1,
eff. Sept. 1, 2001; Subd. (33) added by Acts 2001, 77th Leg., ch.
608, Sec. 1, eff. Sept. 1, 2001; Subd. (33) added by Acts 2001, 77th
Leg., ch. 823, Sec. 1, eff. Sept. 1, 2001; Subd. (34) added by Acts
2001, 77th Leg., ch. 823, Sec. 1, eff. Sept. 1, 2001; Subd. (32-a)
added by Acts 2003, 78th Leg., ch. 231, Sec. 1, eff. Sept. 1, 2003.
Art. 26.03. Affiliated Carriers
(a) For purposes of this chapter, health carriers that are
affiliates or that are eligible to file a consolidated tax return
are considered to be one carrier, and a restriction imposed by this
chapter applies as if the health benefit plans delivered or issued
for delivery to small employers in this state by the affiliates were
issued by one carrier.
(b) An affiliate that is a health maintenance organization is
considered to be a separate health carrier for purposes of this
chapter.
(c) In this article, "affiliate" has the meaning assigned by
Article 21.49-1 of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.035. Creditable Coverage
(a) An individual's coverage is creditable for purposes of this
chapter if the coverage is provided under:
(1) a self-funded or self-insured employee welfare benefit plan
that provides health benefits and that is established in accordance
with the Employee Retirement Income Security Act of 1974 (29 U.S.C.
Section 1001 et seq.);
(2) a group health benefit plan provided by a health insurance
carrier or health maintenance organization;
(3) an individual health insurance policy or evidence of coverage;
(4) Part A or Part B of Title XVIII of the Social Security Act (42
U.S.C. Section 1395c et seq.);
(5) Title XIX of the Social Security Act (42 U.S.C. Section 1396 et
seq.), other than coverage consisting solely of benefits under
Section 1928 of that Act (42 U.S.C. Section 1396s);
(6) Chapter 55, Title 10, United States Code (10 U.S.C. Section 1071
et seq.);
(7) a medical care program of the Indian Health Service or of a
tribal organization;
(8) a state or political subdivision health benefits risk pool;
(9) a health plan offered under Chapter 89, Title 5, United States
Code (5 U.S.C. Section 8901 et seq.);
(10) a public health plan as defined by federal regulations;
(11) a health benefit plan under Section 5(e), Peace Corps Act (22
U.S.C. Section 2504(e)); or
(12) short term limited duration coverage.
(b) Creditable coverage does not include:
(1) accident-only or disability income insurance, or a combination
of accident-only and disability income insurance;
(2) coverage issued as a supplement to liability insurance;
(3) liability insurance, including general liability insurance and
automobile liability insurance;
(4) workers' compensation or similar insurance;
(5) automobile medical payment insurance;
(6) credit-only insurance;
(7) coverage for on-site medical clinics;
(8) other coverage that is:
(A) similar to the coverage described by this subsection under
which benefits for medical care are secondary or incidental to
other insurance benefits; and
(B) specified in federal regulations;
(9) coverage that provides limited-scope dental or vision benefits;
(10) long-term care coverage or benefits, nursing home care
coverage or benefits, home health care coverage or benefits,
community-based care coverage or benefits, or any combination of
those coverages or benefits;
(11) coverage that provides other limited benefits specified by
federal regulations;
(12) coverage for a specified disease or illness;
(13) hospital indemnity or other fixed indemnity insurance; or
(14) Medicare supplemental health insurance as defined under
Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss),
coverage supplemental to the coverage provided under Chapter 55,
Title 10, United States Code (10 U.S.C. Section 1071 et seq.), and
similar supplemental coverage provided under a group plan.
Added by Acts 1997, 75th Leg., ch. 955, Sec. 1.03, eff. July 1,
1997. Subsec. (a) amended by Acts 2001, 77th Leg., ch. 608, Sec. 2,
eff. Sept. 1, 2001.
Art. 26.036. School District Election
(a) An independent school district may elect to participate in the
small employer market without regard to the number of eligible
employees of the independent school district.
(b) An independent school district that elects to participate in
the small employer market under this article is treated as a small
employer under this chapter for all purposes.
(c) An independent school district that is participating in the
uniform group coverage program established under Article 3.50-7 of
this code may not participate in the small employer market under
this article for health insurance coverage and may not renew a
health insurance contract obtained in accordance with this article
after the date on which the program of coverages provided under
Article 3.50-7 of this code is implemented. This subsection does
not affect a contract for the provision of optional coverages not
included in a health benefits plan under this chapter.
Added by Acts 1997, 75th Leg., ch. 955, Sec. 1.03, eff. July 1,
1997. Subsec. (c) added by Acts 2001, 77th Leg., ch. 1187, Sec.
3.17, eff. Sept. 1, 2001.
Art. 26.04. Rules
The commissioner shall adopt rules as necessary to implement this
chapter and to meet the minimum requirements of federal law and
regulations.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.04, eff. July 1,
1997.
Art. 26.05. Statutory References
A reference in this chapter to a statutory provision applies to all
reenactments, revisions, or amendments of that statutory
provision.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.06. Applicability
(a) An individual or group health benefit plan is subject to
Subchapters C-G of this chapter if it provides health care benefits
covering two or more eligible employees of a small employer and if:
(1) a portion of the premium or benefits is paid by a small
employer;
(2) the health benefit plan is treated by the employer or by a
covered individual as part of a plan or program for the purposes of
Section 106 or 162, Internal Revenue Code of 1986 (26 U.S.C. Section
106 or 162); or
(3) the health benefit plan is an employee welfare benefit plan
under 29 C.F.R. Section 2510.3-1(j).
(b) For an employer who was not in existence throughout the calendar
year preceding the year in which the determination of whether the
employer is a small employer is made, the determination is based on
the average number of employees and eligible employees the employer
reasonably expects to employ on business days in the calendar year
in which the determination is made.
(c) Except as provided by Subsection (a) of this article, this
chapter does not apply to an individual health insurance policy
that is subject to individual underwriting, even if the premium is
remitted through a payroll deduction method.
(d) Except as expressly provided in this chapter, a small employer
health benefit plan is not subject to a law that requires coverage
or the offer of coverage of a health care service or benefit.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsecs. (a), (b) amended by Acts 1995, 74th Leg., ch. 893, Sec. 2,
eff. Sept. 1, 1995. Amended by Acts 1997, 75th Leg., ch. 955, Sec.
1.05, eff. July 1, 1997. Subsecs. (a), (b) amended by Acts 2001,
77th Leg., ch. 608, Sec. 3, eff. Sept. 1, 2001.
Art. 26.07. Certification
(a) Each health carrier shall certify, in accordance with rules
adopted by the commissioner, that the health carrier is offering,
delivering, issuing for delivery, or renewing, or that the health
carrier intends to offer, deliver, issue for delivery, or renew a
health benefit plan to or through a small employer in this state
that is subject to this chapter under Article 26.06(a) of this code.
(b) A health carrier must submit a revised certification to the
commissioner only if the health carrier changes its status as a
small employer carrier or changes its intent to become a small
employer health carrier to the extent that its previous
certification ceases to be accurate.
(c) The certification shall include a statement that the health
carrier is complying with this chapter to the extent it is
applicable to the carrier.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1999, 76th Leg., ch. 1032, Sec. 1, eff. Sept. 1,
1999.
Art. 26.08. Cost Containment
(a) A small employer carrier may use cost containment and managed
care features in a small employer health benefit plan, including:
(1) utilization review of health care services, including review of
the medical necessity of hospital and physician services;
(2) case management, including discharge planning and review of
stays in hospitals or other health care facilities;
(3) selective contracting with hospitals, physicians, and other
health care providers;
(4) reasonable benefit differentials applicable to health care
providers that participate or do not participate in restricted
network arrangements;
(5) precertification or preauthorization for certain covered
services; and
(6) coordination of benefits.
(b) A provision of a small employer health benefit plan that
provides for coordination of benefits must comply with this chapter
and guidelines established by the commissioner.
(c) Utilization review performed for any cost containment, case
management, or managed care arrangement must comply with Article
21.58A of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.09. Availability of Health Benefit Coverage Options
(a) In this article:
(1) "Non-network plan" means health benefit coverage that provides
an enrollee an opportunity to obtain health care services through a
health delivery system other than a health maintenance organization
delivery network, as defined by Section 2, Texas Health Maintenance
Organization Act (Article 20A.02, Vernon's Texas Insurance Code).
(2) "Point-of-service plan" means an arrangement under which an
enrollee may choose to obtain benefits and services, or both
benefits and services, through either a health maintenance
organization delivery network, including a limited provider
network, or through a non-network delivery system outside the
health maintenance organization's health care delivery network,
including a limited provider network, and that are administered
through an indemnity benefit arrangement for the cost of health
care services.
(3) "Preferred provider benefit plan" means an insurance policy
issued and licensed under Article 3.70-3C of this code, as added by
Chapter 1024, Acts of the 75th Legislature, Regular Session, 1997.
(b) If the only health benefit coverage offered under an employer's
health benefit plan is a network-based delivery system of coverage
offered by one or more health maintenance organizations, each
health maintenance organization offering coverage under the
employer's health benefit plan must offer to all eligible employees
the opportunity to obtain health benefit coverage through a
non-network plan at the time of enrollment and at least annually,
unless all health maintenance organizations offering coverage
under the employer's health benefit plan enter into an agreement
designating one or more of those health maintenance organizations
to offer that coverage. The coverage required under this
subsection may be provided through a point-of-service contract, a
preferred provider benefit plan, or any coverage arrangement that
allows an enrollee to access services outside the health
maintenance organization's or limited provider network's delivery
network.
(c) The premium for coverage required to be offered under this
article shall be based on the actuarial value of that coverage and
may be different than the premium for the health maintenance
organization coverage.
(d) Different cost-sharing provisions may be imposed for a
point-of-service contract offered under this article and may be
higher than cost-sharing provisions for in-network health
maintenance organization coverage. For enrollees in limited
provider networks, higher cost sharing may be imposed only when
obtaining benefits or services outside the health maintenance
organization delivery network.
(e) Any additional costs for the non-network plan are the
responsibility of the employee who chooses the non-network plan,
and the employer may impose a reasonable administrative cost for
providing the non-network plan option.
(f) This article does not apply to:
(1) a small employer health benefit plan; or
(2) a group model health maintenance organization that is a
nonprofit, state-certified health maintenance organization that
provides the majority of its professional services through a single
group medical practice that is governed by a board composed
entirely of physicians and that educates medical students or
resident physicians through a contract with the medical school
component of a Texas state-supported college or university
accredited by the Accrediting Council on Graduate Medical Education
or the American Osteopathic Association.
Added by Acts 1999, 76th Leg., ch. 1380, Sec. 1, eff. Sept. 1, 1999.
SUBCHAPTER B. COALITIONS AND PURCHASING COOPERATIVES
Art. 26.11. Definitions
In this subchapter:
(1) "Board of trustees" means the board of trustees of the Texas
cooperative.
(2) "Board of directors" means the board of directors elected by a
private purchasing cooperative or a health group cooperative.
(3) "Cooperative" means a private purchasing cooperative or a
health group cooperative established under this subchapter.
(4) "Texas cooperative" means the Texas Health Benefits Purchasing
Cooperative, a nonprofit corporation, established under Article
26.13 of this code.
(5) "Expanded service area" means any area larger than one county in
which a health group cooperative offers coverage.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subd. (4) amended by Acts 1997, 75th Leg., ch. 988, Sec. 1, eff.
Sept. 1, 1997; Subds. (2), (3) amended by Acts 2003, 78th Leg., ch.
782, Sec. 1, eff. Sept. 1, 2003; Subd. (5) added by Acts 2003, 78th
Leg., ch. 782, Sec. 1, eff. Sept. 1, 2003.
Art. 26.12. Applicability of Other Laws
(a) Section 1(a), Article 3.51-6, of this code, does not limit the
type of group that may be covered by a group health benefit plan
issued through a cooperative.
(b) The Texas cooperative is subject to the open records law,
Chapter 424, Acts of the 63rd Legislature, Regular Session, 1973
(Article 6252-17a, Vernon's Texas Civil Statutes).
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.13. Texas Health Benefits Purchasing Cooperative
(a) The Texas Health Benefits Purchasing Cooperative is a nonprofit
corporation established to make health care coverage available to
small and large employers and their eligible employees and eligible
employees' dependents.
(b) The Texas cooperative is administered by a five-member board of
trustees appointed by the governor with the advice and consent of
the senate. Two members must represent employers, two members must
represent employees, and one member must represent the public.
(c) The appointed members of the board of trustees serve staggered
six-year terms, with the terms of one or two members expiring
February 1 of each odd-numbered year.
(d) A member of the board of trustees may not be compensated for
serving on the board of trustees but is entitled to reimbursement
for actual expenses incurred in performing functions as a member of
the board of trustees as provided by the General Appropriations
Act.
(e) The board of trustees shall employ an executive director. The
executive director may hire other employees as necessary.
(f) The board of trustees may develop regional subdivisions of the
Texas cooperative and may authorize each subdivision to separately
exercise the powers and duties of a cooperative.
(g) Salaries for employees of the Texas cooperative and related
costs may be paid from administrative fees collected from employers
and participating carriers or other sources of funding arranged by
the Texas cooperative.
(h) The Texas cooperative or a member of the board of trustees, the
executive director, or an employee or agent of the Texas
cooperative is not liable for:
(1) an act performed in good faith in the execution of duties in
connection with the Texas cooperative; or
(2) an independent action of a small employer insurance carrier or a
person who provides health care services under a health benefit
plan.
(i) The Texas cooperative may not use money appropriated by the
state to pay or otherwise subsidize any portion of the premium for a
small employer insured through the cooperative.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (a) amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.06,
eff. July 1, 1997; Subsec. (a) amended by Acts 1997, 75th Leg., ch.
988, Sec. 2, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 1997,
75th Leg., ch. 988, Sec. 3, eff. Sept. 1, 1997; Subsec. (h) amended
by Acts 1997, 75th Leg., ch. 988, Sec. 4, eff. Sept. 1, 1997;
Subsec. (b) amended by Acts 2003, 78th Leg., ch. 1170, Sec. 17.01,
eff. Sept. 1, 2003; Subsec. (c) amended by Acts 2003, 78th Leg.,
ch. 1170, Sec. 17.01, eff. Sept. 1, 2003.
Art. 26.14. Private Purchasing Cooperatives and Health Group
Cooperatives.
(a) Two or more small or large employers may form a purchasing
cooperative for the purchase of small or large employer health
benefit plans. Subject to Subsection (f) of this article, a person
may form a health group cooperative for the purchase of employer
health benefit plans. A cooperative must be organized as a
nonprofit corporation and has the rights and duties provided by the
Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
Vernon's Texas Civil Statutes).
(b) On receipt of a certificate of incorporation or certificate of
authority from the secretary of state, the cooperative shall file
written notification of the receipt of the certificate and a copy of
the cooperative's organizational documents with the commissioner.
(c) The board of directors shall file annually with the
commissioner a statement of all amounts collected and expenses
incurred for each of the preceding three years.
(d) A purchasing cooperative, a health group cooperative, or a
member of the board of directors, the executive director, or an
employee or agent of a purchasing cooperative or a health group
cooperative is not liable for:
(1) an act performed in good faith in the execution of duties in
connection with the purchasing cooperative or health group
cooperative; or
(2) an independent action of a small or large employer insurance
carrier or a person who provides health care services under a health
benefit plan.
(e) A health group cooperative or a member of the board of
directors, the executive director, or an employee or agent of a
health group cooperative is not liable for failure to arrange for
coverage of any particular illness, disease, or health condition.
(f) A health carrier may not form, or be a member of, a health group
cooperative. A health carrier may associate with a sponsoring
entity, such as a business association, chamber of commerce, or
other organization representing employers or serving an analogous
function, to assist the sponsoring entity in forming a health group
cooperative.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 3, eff. Sept. 1,
1995; Subsecs. (a), (d) amended by Acts 1997, 75th Leg., ch. 955,
Sec. 1.07, eff. July 1, 1997;
Art. heading amended by Acts 2003,
78th Leg., ch. 782, Sec. 2, eff. Sept. 1, 2003; Subsecs. (a), (d)
amended by Acts 2003, 78th Leg., ch. 782, Sec. 3, eff. Sept. 1,
2003; Subsecs. (e), (f) added by Acts 2003, 78th Leg., ch. 782,
Sec. 3, eff. Sept. 1, 2003.
Art. 26.14A. Special Provisions Relating to Health Group
Cooperatives
(a) The membership of a health group cooperative may consist only of
small employers or may, at the option of the health group
cooperative, consist of both small and large employers. To
participate as a member of a health group cooperative, an employer
must be a small or large employer as described by this chapter.
(b) Subject to the requirements of Article 26.22 of this code, a
health group cooperative:
(1) shall allow a small employer to join the health group
cooperative and enroll in health benefit plan coverage; and
(2) may allow a large employer to join the health group cooperative
and enroll in health benefit plan coverage.
(c) A health group cooperative shall allow any small employer to
join the health group cooperative and enroll in the cooperative's
health benefit plan coverage during the initial enrollment and
annual open enrollment periods.
(d) A sponsoring entity of a health group cooperative may inform the
members of the entity about the cooperative and the health benefit
plans offered by the cooperative. Coverage issued through the
cooperative must be issued through a licensed agent marketing the
coverage in accordance with Article 26.15(a)(3) of this code.
(e) The commissioner shall adopt rules that govern the manner in
which an employer may terminate, because of a financial hardship
affecting the employer, participation in a health group
cooperative.
(f) An employer's participation in a health group cooperative is
voluntary, but an employer electing to participate in a health
group cooperative must commit to purchasing coverage through the
health group cooperative for two years, except as provided by
Subsection (e) of this article.
(g) A health carrier issuing coverage to a health group
cooperative:
(1) shall use a standard presentation form, prescribed by the
commissioner by rule, to market health benefit plan coverage
through the health group cooperative;
(2) may contract to provide health benefit plan coverage with only
one health group cooperative in any county, except that a health
carrier may contract with additional health group cooperatives if
it is providing health benefit plan coverage in an expanded service
area in accordance with Subsection (l) of this article;
(3) shall allow enrollment in health benefit plan coverage in
compliance with Subsection (c) of this article and with the health
carrier's agreement with the health group cooperative;
(4) is exempt from the premium tax imposed by Article 4.11 of this
code or the tax on revenues imposed under Section 33, Texas Health
Maintenance Organization Act (Article 20A.33, Vernon's Texas
Insurance Code), and the retaliatory tax under Article 21.46 of
this code for two years, with respect to the premiums or revenues
received for coverage provided to each uninsured employee or
dependent as defined by the commissioner in accordance with
Subsection (h) of this article; and
(5) shall maintain documentation to be provided by health group
cooperatives to ensure compliance with the rules adopted by the
commissioner under Subsection (h) of this article with respect to
uninsured employees or dependents.
(h) The commissioner by rule shall determine who constitutes an
uninsured employee or dependent for purposes of Subsection (g)(4)
of this article.
(i) Notwithstanding any other law, and except as provided by
Subsection (n) of this article, a health benefit plan issued by a
health carrier to provide coverage with a health group cooperative
is not subject to a state law, including a rule, that:
(1) relates to a particular illness, disease, or treatment; or
(2) regulates the differences in rates applicable to services
provided within a health benefit plan network or outside the
network.
(j) The commissioner by rule shall implement the exemption
authorized by Subsection (i) of this article.
(k) A health group cooperative may offer more than one health
benefit plan, but each plan offered must be made available to all
employees covered by the cooperative.
(l) A health carrier may, with notice to the commissioner, provide
health benefit plan coverage to an expanded service area that
includes the entire state. A health carrier may apply for approval
of an expanded service area that comprises less than the entire
state by filing with the commissioner an application, in a form and
manner prescribed by the commissioner, at least 60 days before the
date the health carrier issues coverage to the health group
cooperative in the expanded service area. At the expiration of 60
days after the date of receipt by the department of a filed
application, the application shall be deemed approved by the
department unless, before that date, the application was either
affirmatively approved or disapproved by written order of the
commissioner. The commissioner, after notice and opportunity for
hearing, may rescind an approval granted to a health carrier under
this subsection if the commissioner finds that the health carrier
has failed to market fairly to all eligible employers in the state
or the expanded service area.
(m) The provisions of this article shall not serve to limit or
restrict a small or large employer's access to health benefit plans
under this chapter.
(n) A health benefit plan provided through a health group
cooperative must provide coverage for diabetes equipment,
supplies, and services as required by Article 21.53G of this code.
Added by Acts 2003, 78th Leg., ch. 782, Sec. 4, eff. Sept. 1, 2003.
Art. 26.15. Powers and Duties of Texas Health Benefits Purchasing
Cooperative, Private Purchasing Cooperatives, and Health Group
Cooperatives.
(a) A cooperative:
(1) shall arrange for small or large employer health benefit plan
coverage for small or large employer groups who participate in the
cooperative by contracting with small or large employer carriers
who meet the criteria established by Subsection (b) of this
article;
(2) shall collect premiums to cover the cost of:
(A) small or large employer health benefit plan coverage purchased
through the cooperative; and
(B) the cooperative's administrative expenses;
(3) may contract with agents to market coverage issued through the
cooperative;
(4) shall establish administrative and accounting procedures for
the operation of the cooperative;
(5) shall establish procedures under which an applicant for or
participant in coverage issued through the cooperative may have a
grievance reviewed by an impartial person;
(6) may contract with a small or large employer carrier or
third-party administrator to provide administrative services to
the cooperative;
(7) shall contract with small or large employer carriers for the
provision of services to small or large employers covered through
the cooperative;
(8) shall develop and implement a plan to maintain public awareness
of the cooperative and publicize the eligibility requirements for,
and the procedures for enrollment in coverage through, the
cooperative;
(9) may negotiate the premiums paid by its members; and
(10) may offer such other ancillary products and services to its
members as are customarily offered in conjunction with health
benefit plans.
(b) A cooperative may contract only with small or large employer
carriers that demonstrate:
(1) that the carrier is a health carrier or health maintenance
organization licensed and in good standing with the department;
(2) the capacity to administer the health benefit plans;
(3) the ability to monitor and evaluate the quality and cost
effectiveness of care and applicable procedures;
(4) the ability to conduct utilization management and applicable
procedures and policies;
(5) the ability to assure enrollees adequate access to health care
providers, including adequate numbers and types of providers;
(6) a satisfactory grievance procedure and the ability to respond
to enrollees' calls, questions, and complaints; and
(7) financial capacity, either through financial solvency
standards as applied by the commissioner or through appropriate
reinsurance or other risk-sharing mechanisms.
(c) A cooperative may not self-insure or self-fund any health
benefit plan or portion of a plan.
(d) A cooperative shall comply with federal laws applicable to
cooperatives and health benefit plans issued through cooperatives,
to the extent required by state law or rules adopted by the
commissioner of insurance. A cooperative shall comply with state
laws applicable to cooperatives and health benefit plans issued
through cooperatives. A cooperative may not limit, restrict, or
condition an employer's or employee's membership in the cooperative
or choice among benefit plans based on the risk characteristics of a
group or of any member of a group.
Text of subsec. (e) as added by Acts 2003, 78th Leg., ch. 231, Sec. 3
(e) A cooperative may not limit, restrict, or condition an
employer's or employee's membership in a cooperative or choice
among benefit plans based on health status related factors,
duration of coverage, or any similar characteristic related to the
health status or experience of a group or of any member of a group.
Text of subsec. (e) as added by Acts 2003, 78th Leg., ch. 782, Sec. 6
(e) To be eligible to exercise the authority granted under
Subsection (a)(1) of this article, a health group cooperative must
have at least 10 participating employers.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (a) amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.08,
eff. July 1, 1997. Subsec. (a) amended by Acts 1997, 75th Leg., ch.
988, Sec. 5, eff. Sept. 1, 1997; Subsec. (b) amended by Acts 1997,
75th Leg., ch. 955, Sec. 1.08, eff. July 1, 1997; Subsec. (d)
amended by Acts 1997, 75th Leg., ch. 988, Sec. 6, eff. Sept. 1,
1997; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 231, Sec. 3,
eff. Sept. 1, 2003; Subsec. (d) amended by Acts 2003, 78th Leg.,
ch. 782, Sec. 6, eff. Sept. 1, 2003; Subsec. (e) added by Acts 2003,
78th Leg., ch. 231, Sec. 3, eff. Sept. 1, 2003; Subsec. (e) added by
Acts 2003, 78th Leg., ch. 782, Sec. 6, eff. Sept. 1, 2003.
Art. 26.16. Cooperative Not Insurer
(a) A cooperative is not an insurer and the employees of the
cooperative are not required to be licensed under Subchapter A,
Chapter 21, of this code. This exemption from licensure includes a
health group cooperative that acts to provide information about and
to solicit membership in the cooperative, subject to Article
26.14A(d) of this code.
Text of subsec. (b) as amended by Acts 2003, 78th Leg., ch. 231,
Sec. 4
(b) A small employer health coalition that otherwise meets the
description of a small employer is considered a single small
employer for all purposes under this chapter. Any other
cooperative formed under this subchapter is considered an employer
solely for the purposes of benefit elections under this code.
Text of subsec. (b) as amended by Acts 2003, 78th Leg., ch. 782,
Sec. 7
(b) A private purchasing cooperative is considered an employer
solely for the purposes of benefit elections under the code. A
health group cooperative that is composed only of small employers
is considered a single employer under this code and shall be treated
in the same manner as a small employer for the purposes of this
chapter, including for the purposes of any provision relating to
premium rates and issuance and renewal of coverage. A health group
cooperative that is composed of small and large employers is
considered a single employer under this code and, in relation to the
small employers that are members of the cooperative, shall be
treated in the same manner as a small employer. A health group
cooperative that is composed of small and large employers may elect
to extend the protections of this chapter that are applicable to
small employer groups to the large employer groups that participate
in the cooperative. A health group cooperative shall have sole
authority to make benefit elections and perform other
administrative functions under the code for the cooperative's
participating employers. The department shall develop an expedited
approval process for health benefit plan coverage arranged by a
health group cooperative.
(c) An agent or third-party administrator used and compensated by
the cooperative must be licensed as required by Section 15 or 15A,
Texas Health Maintenance Organization Act (Article 20A.15 or
20A.15A, Vernon's Texas Insurance Code), or Subchapter A, Chapter
21, of this code.
(d) A licensed agent used and compensated by the cooperative need
not be appointed by each small or large employer carrier
participating in the cooperative in order to market the products
and services sponsored by the cooperative. However, a licensed
agent may not market any other non-sponsored product or service of a
participating small or large employer carrier without first being
appointed by the small or large employer carrier.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 988, Sec. 7, eff. Sept. 1,
1997. Subsec. (a) amended by Acts 2003, 78th Leg., ch. 782, Sec. 7,
eff. Sept. 1, 2003; Subsec. (b) amended by Acts 2003, 78th Leg.,
ch. 231, Sec. 4, eff. Sept. 1, 2003; Subsecs. (b), (d) amended by
Acts 2003, 78th Leg., ch. 782, Sec. 7, eff. Sept. 1, 2003.
SUBCHAPTER C. GUARANTEED ISSUE AND RENEWABILITY OF SMALL EMPLOYER
HEALTH BENEFIT PLANS
Art. 26.21. Small Employer Health Benefit Plans; Employer Election
(a) Each small employer carrier shall provide the small employer
health benefit plans without regard to health status related
factors. Each small employer carrier shall issue the plan chosen by
the small employer to each small employer that elects to be covered
under that plan and agrees to satisfy the other requirements of the
plan.
(b) This article does not impose a statutory mandate of an employer
contribution to the premium paid to the small employer carrier.
However, the small employer carrier may require an employer
contribution in accordance with the carrier's usual and customary
practices on all employer group health insurance plans in this
state. The premium contribution level shall be applied uniformly
to each small employer offered or issued coverage by the small
employer carrier in this state. If two or more small employer
carriers participate in a purchasing cooperative established under
Article 26.14 of this code, the carrier may use the contribution
requirement established by the purchasing cooperative for policies
marketed by the cooperative.
(c) Coverage is available under a small employer health benefit
plan if at least 75 percent of a small employer's eligible
employees, or, if applicable, the lower participation level offered
by the small employer carrier under Subsection (d) of this article,
elect to be covered. If a small employer offers multiple health
benefit plans, the collective enrollment of all of those plans must
be at least 75 percent of the small employer's eligible employees
or, if applicable, the lower participation level offered by the
small employer carrier under Subsection (d) of this article. A
small employer carrier may elect not to offer health benefit plans
to a small employer who offers multiple health benefit plans if such
plans are to be provided by more than one carrier and the small
employer carrier would have less than 75 percent of the small
employer's eligible employees enrolled in the small employer
carrier's health benefit plan. A small employer who elects to make
contributions for payment of the premium is not required to pay any
amount with respect to an employee who elects not to be covered.
The small employer may elect to pay the premium cost for additional
coverage. This chapter does not require a small employer to
purchase health insurance coverage for the employer's employees.
(d) A small employer carrier may offer small employer health
benefit plans to a small employer even if less than 75 percent of
the eligible employees of that employer elect to be covered if the
small employer carrier permits the same percentage of participation
as a qualifying percentage for each small employer benefit plan
offered by that carrier in this state. A small employer carrier may
offer small employer health benefit plans to a small employer even
if the employer's participation level is less than the small
employer carrier's qualifying participation level established in
accordance with this article if:
(1) the small employer obtains a written waiver for each eligible
employee who declines coverage under a health plan offered to the
small employer ensuring that the eligible employee was not induced
or pressured into declining coverage because of the employee's risk
characteristics; and
(2) the small employer carrier accepts or rejects the entire group
of eligible employees that choose to participate and excludes only
those employees that have declined coverage, provided that the
carrier may underwrite the group of eligible employees that do not
decline coverage.
(e) A small employer carrier may not provide coverage to a small
employer or the employees of a small employer under Subsection
(d)(2) of this article if the health carrier or an agent for the
health carrier knows that the small employer has induced or
pressured an eligible employee or the employee's dependents to
decline coverage because of an individual's risk characteristics.
(f) A small employer carrier, an employer, or an agent may not use
the provisions of Subsection (d)(2) of this article to circumvent
the requirements of this chapter.
(g) Except as otherwise provided by this chapter, a small employer
carrier may not establish a separate class or classes of business
for small employers.
(h) The initial enrollment period for the employees and their
dependents must be at least 31 days, with a 31-day open enrollment
period provided annually.
(i) A small employer may establish a waiting period during which a
new employee is not eligible for coverage. A waiting period
established as provided by this subsection may not exceed 90 days
from the first day of employment.
(j) A new employee of a covered small employer and the dependents of
that employee may not be denied coverage if the application for
coverage is received by the small employer carrier not later than
the 31st day after the date on which the employment begins or on
completion of a waiting period established by the employer under
Subsection (i) of this article.
(k) A late enrollee may be excluded from coverage until the next
annual open enrollment period and may be subject to a 12-month
preexisting condition provision as described by Article 26.49 of
this code. The period during which a preexisting condition
provision is imposed may not exceed 18 months from the date of the
initial application.
(l) A small employer carrier may not exclude any eligible employee
or dependent, including a late enrollee, who would otherwise be
covered under a small employer group.
(m) A small employer health benefit plan issued by a small employer
carrier may not limit or exclude, by use of a rider or amendment
applicable to a specific individual, coverage by type of illness,
treatment, medical condition, or accident, except for preexisting
conditions or diseases as permitted under Article 26.49 of this
code.
(n) A small employer health benefit plan may not limit or exclude
initial coverage of a newborn child of a covered employee. Any
coverage of a newborn child of an employee under this subsection
terminates on the 32nd day after the date of the birth of the child
unless notification of the birth and any required additional
premium are received by the small employer carrier not later than
the 31st day after the date of birth.
(o) If the Consolidated Omnibus Budget Reconciliation Act of 1985
(Pub. L. No. 99-272, 100 Stat. 222) does not require continuation or
conversion coverage for dependents of an employee, a dependent who
has been covered by that small employer for at least one year or is
under one year of age may elect to continue coverage under a small
employer health benefit plan, if the dependent loses eligibility
for coverage because of the death, divorce, or retirement of the
employee, as required by Section 3B, Article 3.51-6, of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 4, eff. Sept. 1,
1995; Subsecs. (a), (h), (k), (n) amended by Acts 1997, 75th Leg.,
ch. 955, Sec. 1.09, eff. July 1, 1997. Subsec. (h) amended by Acts
1999, 76th Leg., ch. 620, Sec. 2, eff. Sept. 1, 1999; amended by
Acts 1999, 76th Leg., ch. 760, Sec. 2, eff. Sept. 1, 1999; Subsec.
(b) amended by Acts 2003, 78th Leg., ch. 231, Sec. 5, eff. Sept. 1,
2003; Subsec. (c) amended by Acts 2003, 78th Leg., ch. 231, Sec. 5,
eff. Sept. 1, 2003.
Art. 26.21A. Coverage for Adopted Children
(a) A small employer health benefit plan may not limit or exclude
initial coverage of an adopted child of an insured. A child is
considered to be the child of an insured if the insured is a party in
a suit in which the adoption of the child by the insured is sought.
(b) The adopted child of an insured may be enrolled, at the option
of the insured, within either:
(1) 31 days after the insured is a party in a suit for adoption; or
(2) 31 days of the date the adoption is final.
(c) Coverage of an adopted child of an employee under this article
terminates unless notification of the adoption and any required
additional premiums are received by the small employer carrier not
later than either:
(1) the 31st day after the insured becomes a party in a suit in which
the adoption of the child by the insured is sought; or
(2) the 31st day after the date of the adoption.
Added by Acts 1997, 75th Leg., ch. 955, Sec. 1.10, eff. July 1,
1997.
Art. 26.22. Geographic Service Area
(a) A small employer carrier is not required to offer or issue the
small employer health benefit plans:
(1) to a small employer that is not located within a geographic
service area of the small employer carrier;
(2) to an employee of a small employer who neither resides nor works
in the geographic service area of the small employer carrier; or
(3) to a small employer located within a geographic service area
with respect to which the small employer carrier demonstrates to
the satisfaction of the commissioner that:
(A) the small employer carrier reasonably anticipates that it will
not have the capacity to deliver services adequately because of
obligations to existing covered individuals; and
(B) the small employer carrier is acting uniformly without regard
to claims experience of the employer or any health status related
factor of employees or dependents or new employees or dependents
who may become eligible for the coverage.
(b) A small employer carrier that refuses to issue a small employer
health benefit plan in a geographic service area may not offer a
health benefit plan to a small employer in the affected service area
before the fifth anniversary of the date of the refusal.
(c) A small employer carrier must file each of its geographic
service areas with the commissioner. The commissioner may
disapprove the use of a geographic service area by a small employer
carrier.
(d) A small employer carrier that is unable to offer coverage in a
geographic service area in accordance with a determination made by
the commissioner under Subsection (a)(3) of this article may not
offer a small employer benefit plan in the applicable geographic
service area before the 180th day after the later of:
(1) the date of the refusal; or
(2) the date the carrier demonstrates to the satisfaction of the
commissioner that it has regained the capacity to deliver services
to small employers in the geographic service area.
(e) If the commissioner determines that requiring the acceptance of
small employers under this subchapter would place a small employer
carrier in a financially impaired condition and that the small
employer carrier is acting uniformly without regard to the claims
experience of the small employer or any health status related
factors of eligible employees or dependents or new employees or
dependents who may become eligible for the coverage, the small
employer carrier shall not offer coverage to small employers until
the later of:
(1) the 180th day after the date the commissioner makes the
determination; or
(2) the date the commissioner determines that accepting small
employers would not place the small employer carrier in a
financially impaired condition.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsecs. (a), (e) amended by Acts 1997, 75th Leg., ch. 955, Sec.
1.11, eff. July 1, 1997; Subsecs. (b), (e) amended by Acts 2001,
77th Leg., ch. 608, Sec. 4, eff. Sept. 1, 2001.
Art. 26.23. Renewability of Coverage; Cancellation
(a) Except as provided by Article 26.24 of this code, a small
employer carrier shall renew the small employer health benefit plan
for any covered small employer, at the option of the small employer,
unless:
(1) a premium has not been paid as required by the terms of the plan;
(2) the small employer has committed fraud or intentional
misrepresentation of a material fact;
(3) the small employer has not complied with the terms of the health
benefit plan;
(4) no enrollee in connection with the plan resides or works in the
service area of the small employer carrier or in the area for which
the small employer carrier is authorized to do business; or
(5) membership of an employer in an association terminates, but
only if coverage is terminated uniformly without regard to a health
status related factor of a covered individual.
(b) A small employer carrier may refuse to renew the coverage of a
covered employee or dependent for fraud or intentional
misrepresentation of a material fact by that individual.
(c) A small employer carrier may not cancel a small employer health
benefit plan except for the reasons specified for refusal to renew
under Subsection (a) of this article. A small employer carrier may
not cancel the coverage of a covered employee or dependent except
for the reasons specified for refusal to renew under Subsection (b)
of this article.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsecs. (a), (b) amended by Acts 1997, 75th Leg., ch. 955, Sec.
1.12, eff. July 1, 1997; Subsecs. (b), (c) amended by Acts 2001,
77th Leg., ch. 608, Sec. 5, eff. Sept. 1, 2001.
Art. 26.24. Refusal to Renew
(a) A small employer carrier may elect to refuse to renew all small
employer health benefit plans delivered or issued for delivery by
the small employer carrier in this state or in a geographic service
area approved under Article 26.22 of this code. The small employer
carrier shall notify the commissioner of the election not later
than the 180th day before the date coverage under the first small
employer health benefit plan terminates under this subsection.
(b) The small employer carrier must notify each affected covered
small employer not later than the 180th day before the date on which
coverage terminates for that small employer.
(c) A small employer carrier that elects under Subsection (a) of
this article to refuse to renew all small employer health benefit
plans in this state or in an approved geographic service area may
not write a new small employer health benefit plan in this state or
in the geographic service area, as applicable, before the fifth
anniversary of the date of notice to the commissioner under
Subsection (a) of this article.
(d) A small employer carrier may elect to discontinue a particular
type of small employer coverage only if the small employer carrier:
(1) before the 90th day preceding the date of the discontinuation of
the coverage:
(A) provides notice of the discontinuation to the employer and the
commissioner; and
(B) offers to each employer the option to purchase other small
employer coverage offered by the small employer carrier at the time
of the discontinuation; and
(2) acts uniformly without regard to the claims experience of the
employer or any health status related factors of employees or
dependents or new employees or dependents who may become eligible
for the coverage.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (a) amended by and Subsec. (d) added by Acts 1997, 75th
Leg., ch. 955, Sec. 1.13, eff. July 1, 1997; Subsec. (d) amended by
Acts 1999, 76th Leg., ch. 1032, Sec. 2, eff. Sept. 1, 1999.
Art. 26.25. Notice to Covered Persons
(a) Not later than the 30th day before the date on which termination
of coverage is effective, a small employer carrier that cancels or
refuses to renew coverage under a small employer health benefit
plan under Article 26.23 or 26.24 of this code shall notify the
small employer of the cancellation or refusal to renew. It is the
responsibility of the small employer to notify enrollees of the
cancellation or refusal to renew the coverage.
(b) The notice provided to a small employer by a small employer
carrier under this article is in addition to any other notice
required by Article 26.23 or 26.24 of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.14, eff. July 1,
1997.
SUBCHAPTER D. UNDERWRITING AND RATING OF SMALL EMPLOYER HEALTH
BENEFIT PLANS
Art. 26.31. Establishment of Classes of Business
(a) A small employer carrier may establish a separate class of
business only to reflect substantial differences in expected claim
experience or administrative costs related to the following
reasons:
(1) the small employer carrier uses more than one type of system for
the marketing and sale of small employer health benefit plans to
small employers;
(2) the small employer carrier has acquired a class of business from
another health carrier; or
(3) the small employer carrier provides coverage to one or more
employer-based association groups.
(b) A small employer carrier may establish up to nine separate
classes of business under this article.
(c) The commissioner may establish regulations to provide for a
period of transition in order for a small employer carrier to come
into compliance with Subsection (b) of this article in the instance
of acquisition of an additional class of business from another
small employer carrier.
(d) The commissioner may approve the establishment of additional
classes of business on application to the commissioner and a
finding by the commissioner that the establishment of additional
classes would enhance the efficiency and fairness of the insurance
market for small employers.
(e) A small employer carrier may not establish a separate class of
business based on participation requirements.
(f) A small employer carrier may not establish a separate class of
business based on whether the coverage provided to a small employer
group is provided on a guaranteed issue basis or is subject to
underwriting or proof of insurability.
(g) A small employer carrier may not directly or indirectly use as a
criterion for establishing a separate class of business:
(1) the number of employees and dependents of a small employer; or
(2) except as provided in Subsection (a)(3) of this article, the
trade or occupation of the employees of a small employer or the
industry or type of business of the small employer.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsecs. (e), (f) added by Acts 1995, 74th Leg., ch. 893, Sec. 5,
eff. Sept. 1, 1995; Subsec. (g) added by Acts 2001, 77th Leg., ch.
823, Sec. 2, eff. Sept. 1, 2001.
Art. 26.32. Index Rates
(a) The premium rates for a small employer health benefit plan are
subject to this article.
(b) The index rate for a rating period for any class of business may
not exceed the index rate for any other class of business by more
than 20 percent.
(c) For a class of business, the premium rates charged during a
rating period to small employers with similar case characteristics
for the same or similar coverage, or the rates that could be charged
to those employers under the rating system for that class of
business, may not vary from the index rate by more than 25 percent.
(d) Small employer carriers shall develop premium rates for each
small employer group in a two-step process. In the first step, the
small employer carrier shall develop a base premium rate for each
small employer group without regard to any risk characteristic of
the group. In the second step, the small employer carrier may
adjust the resulting base premium rate by the risk load of the
group, subject to the provisions of this subchapter, to reflect the
risk characteristics of the group.
(e) The risk load assessed to a particular group shall reflect the
risk characteristics of the particular group.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsecs. (d), (e) added by Acts 2001, 77th Leg., ch. 823, Sec. 3,
eff. Sept. 1, 2001.
Art. 26.33. Premium Rates; Adjustments
(a) The percentage increase in the premium rate charged to a small
employer for a new rating period may not exceed the sum of:
(1) the percentage change in the new business premium rate measured
from the first day of the prior rating period to the first day of the
new rating period;
(2) any adjustment, not to exceed 15 percent annually and adjusted
pro rata for rating periods of less than one year, due to the claim
experience, health status, or duration of coverage of the employees
or dependents of the small employer as determined from the small
employer carrier's rate manual for the class of business; and
(3) any adjustment due to change in coverage or change in the case
characteristics of the small employer as determined from the small
employer carrier's rate manual for the class of business.
(b) Adjustments in premium rates for claim experience, health
status, or duration of coverage may not be charged to individual
employees or dependents. Such an adjustment must be applied
uniformly to the rates charged for all employees and dependents of
employees of the small employer.
(c) A health carrier may use the industry classification to which a
small employer belongs as a case characteristic in establishing
premium rates, but the highest rate factor associated with any
industry classification may not exceed the lowest rate factor
associated with any industry classification by more than 15
percent.
(d) A small employer carrier may use the number of employees and
dependents of a small employer as a case characteristic in
establishing premium rates for the group. The highest rate factor
associated with a classification based on the number of employees
and dependents of a small employer may not exceed by more than 20
percent the lowest rate factor associated with a classification
based on the number of employees and dependents of a small employer.
(e) A small employer carrier may establish premium discounts,
rebates, or a reduction in otherwise applicable copayments or
deductibles in return for adherence to programs of health promotion
and disease prevention. A discount, rebate, or reduction
established under this subsection does not violate Section 4(8),
Article 21.21, of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (d) added by Acts 1997, 75th Leg., ch. 955, Sec. 1.15, eff.
July 1, 1997; Subsecs. (d) amended by and (e) added by Acts 2001,
77th Leg., ch. 823, Sec. 4, eff. Sept. 1, 2001.
Art. 26.34. Effect of Prior Coverage
For a health benefit plan delivered or issued for delivery before
September 1, 1993, a premium rate for a rating period may exceed the
ranges set forth in Articles 26.32 and 26.33 of this code until
September 1, 1995. The percentage increase in the premium rate
charged to a small employer under this article for a new rating
period may not exceed the sum of:
(1) the percentage change in the new business premium rate measured
from the first day of the prior rating period to the first day of the
new rating period; and
(2) any adjustment due to change in coverage or change in the case
characteristics of the small employer as determined from the small
employer carrier's rate manual for the class of business.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.35. Rate Adjustment in Closed Plan
In the case of a health benefit plan into which a small employer
carrier is no longer enrolling new small employers, the small
employer carrier shall use the percentage change in the base
premium rate to adjust rates under Articles 26.33(a)(1) and
26.34(1) of this code. The portion of change in rates computed
under those subdivisions may not exceed, on a percentage basis, the
change in the new business premium rate for the most similar health
benefit plan into which the small employer carrier is actively
enrolling new small employers.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.36. Premium Rates; Nondiscrimination
(a) A small employer carrier shall apply rating factors, including
case characteristics, consistently with respect to all small
employers in a class of business. Rating factors shall produce
premiums for identical groups that differ only by the amounts
attributable to plan design and that do not reflect differences due
to the nature of the groups assumed to select particular health
benefit plans.
(b) A small employer carrier shall treat each health benefit plan
issued or renewed in the same calendar month as having the same
rating period.
(c) A small employer carrier may not use case characteristics
without the prior approval of the commissioner other than the
geographic area in which the small employer's employees reside, the
age and gender of the individual employees and their dependents,
the appropriate industry classification, and the number of
employees and dependents.
(d) Premium rates for a small employer health benefit plan must
comply with the requirements of this chapter, notwithstanding any
assessments paid or payable by small employer carriers.
(e) The board may adopt rules to implement this article and to
ensure that rating practices used by small employer carriers are
consistent with the purposes of this chapter, including rules that
ensure that differences in rates charged for each small employer
health benefit plan are reasonable and reflect objective
differences in plan design.
(f) A small employer carrier may not transfer a small employer
involuntarily into or out of a class of business. A small employer
carrier may not offer to transfer a small employer into or out of a
class of business unless the offer is made to transfer all small
employers in that class of business without regard to case
characteristics, claim experience, health status, or duration of
coverage since the issuance of the health benefit plan.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.37. Restricted Provider Networks
For purposes of this subchapter, a small employer health benefit
plan may use a restricted provider network to provide the benefits
under the plan. A plan that uses a restricted provider network does
not provide similar coverage to a small employer health benefit
plan that does not use a restricted provider network, if the use of
the network results in reduced premiums to the small employer or
substantial differences in claim costs.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.38. Health Maintenance Organization; Approved Health
Benefit Plan
(a) The premium rates for a state-approved health benefit plan
offered by a health maintenance organization under Article 26.48 of
this code must be established in accordance with formulas or
schedules of charges filed with the department.
(b) A health maintenance organization that participates in a
purchasing cooperative that provides employees of small employers a
choice of benefit plans, that has established a separate class of
business as provided by Article 26.31 of this code, and that has
established a separate line of business as provided under Article
26.48(a) of this code may use rating methods in accordance with this
subchapter that are used by other small employer carriers
participating in the same cooperative, including rating by age and
gender.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 6, eff. Sept. 1,
1995; Subsec. (b) amended by Acts 2003, 78th Leg., ch. 1179, Sec.
3, eff. Sept. 1, 2003.
Art. 26.39. Enforcement
If the commissioner finds that a small employer carrier subject to
this chapter exceeds the applicable rate established under this
subchapter, the commissioner may order restitution and assess
penalties as provided by Section 7, Article 1.10, of this code.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.40. Disclosure
(a) In connection with the offering for sale of any small employer
health benefit plan, each small employer carrier and each agent
shall make a reasonable disclosure, as part of its solicitation and
sales materials, of:
(1) the extent to which premium rates for a specific small employer
are established or adjusted based on the actual or expected
variation in claim costs or the actual or expected variation in
health status of the employees of the small employer and their
dependents;
(2) provisions concerning the small employer carrier's right to
change premium rates and the factors other than claim experience
that affect changes in premium rates;
(3) provisions relating to renewability of policies and contracts;
and
(4) any preexisting condition provision.
(b) Each small employer carrier shall disclose on request by a small
employer the benefits and premiums available under all small
employer coverage for which the employer is qualified.
(c) A small employer carrier is not required to disclose any
information to a small employer that is proprietary or trade secret
information under applicable law.
(d) Information provided under this article to small employers must
be provided in a manner that is understandable by the average small
employer and sufficient to reasonably inform small employers of
their rights and obligations under a small employer health benefit
plan.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1997, 75th Leg., ch. 955, Sec. 1.16, eff. July 1,
1997.
Art. 26.41. Reporting Requirements
(a) Compliance with the underwriting and rating requirements of
this chapter shall be demonstrated through actuarial
certification. Small employer carriers offering a small employer
health benefit plan shall file annually with the commissioner an
actuarial certification stating that the underwriting and rating
methods of the small employer carrier:
(1) comply with accepted actuarial practices;
(2) are uniformly applied to each small employer health benefit
plan covering a small employer; and
(3) comply with the provisions of this chapter.
(b) Each small employer carrier shall maintain at its principal
place of business a complete and detailed description of its rating
practices and renewal underwriting practices, including
information and documentation that demonstrate that its rating
methods and practices are based on commonly accepted actuarial
assumptions and are in accordance with sound actuarial principles.
(c) A small employer carrier shall make the information and
documentation described in Subsection (b) of this article available
to the commissioner on request. Except in cases of violations of
this chapter, the information shall be considered proprietary and
trade secret information and shall not be subject to disclosure by
the commissioner to persons outside the department except as agreed
to by the small employer carrier or as ordered by a court of
competent jurisdiction.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
SUBCHAPTER E. COVERAGE UNDER SMALL EMPLOYER HEALTH BENEFIT PLANS
Art. 26.42. Small Employer Health Benefit Plans
(a) A small employer carrier shall offer a standard health benefit
plan as authorized by Article 3.80 of this code and Section 9N,
Texas Health Maintenance Organization Act (Article 20A.09N,
Vernon's Texas Insurance Code)
(b) A small employer carrier may offer to a small employer
additional benefit riders to the standard health benefit plan or
may design and offer standard health benefit plans with additional
mandatory benefits.
(c) Subject to the provisions of this chapter, a small employer
carrier shall also offer to small employers at least one other
health benefit plan authorized under this code that provides
state-mandated health benefits. Article 26.06(c) does not apply to
a health benefit plan offered to a small employer under this
subsection.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 7, eff. Sept. 1,
1995; Amended by Acts 2003, 78th Leg., ch. 1179, Sec. 4, eff. Sept.
1, 2003.
Art. 26.43. Policy Forms
(a) A small employer carrier shall comply with Article 3.42 of this
code as it relates to policy form approval and with the Texas Health
Maintenance Organization Act (Article 20A.01 et seq., Vernon's
Texas Insurance Code) as it relates to approval of an evidence of
coverage. A small employer carrier may not offer benefit plans
through a policy form or evidence of coverage that does not comply
with this chapter.
(b) A health carrier may not issue and the commissioner may not
approve a health benefit plan certificate or policy or a rider to a
health benefit plan certificate or policy unless it is written in
plain language.
(c) Each provision of a health benefit plan certificate or policy or
a rider to a health benefit plan certificate or policy relating to
renewal of coverage, conditions of coverage, or per occurrence or
aggregate dollar limitations on coverage must be clearly explained
in plain language.
(d) A health carrier may not use and the commissioner may not
approve a health benefit plan application form unless it is in plain
language.
(e) Subsections (b) through (d) of this article do not apply if the
specific language to be used is mandated by federal law or state
statute or by rules implementing federal law.
(f) For purposes of Subsections (b) through (e) of this article, a
health benefit plan certificate or policy, a rider to or a provision
of a health benefit plan certificate or policy, or a health benefit
plan application form is written in plain language if it achieves
the minimum score established by the commissioner on the Flesch
reading ease test or an equivalent test selected by the
commissioner.
(g) The provisions of Subsections (b) through (f) of this article
requiring the use of plain language do not apply to a health benefit
plan group master policy or to a policy application or enrollment
form for a health benefit plan group master policy.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (a) amended by Acts 1995, 74th Leg., ch. 893, Sec. 8, eff.
Sept. 1, 1995; Subsec. (a) amended by Acts 2003, 78th Leg., ch.
1179, Sec. 5, eff. Sept. 1, 2003.
Art. 26.44. Riders; Filing With Commissioner
(a) A small employer carrier shall file with the commissioner, in a
form and manner prescribed by the commissioner, riders to the small
employer health benefit plans as allowed under Article 26.42 of
this code to be used by the small employer carrier. A small
employer carrier may use a rider filed under this article after the
30th day after the date the rider is filed unless the commissioner
disapproves its use.
(b) The commissioner, after notice and an opportunity for a
hearing, may disapprove the continued use by a small employer
carrier of a rider if the rider does not meet the requirements of
this chapter and other applicable statutes.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.44B. Alcohol and Substance Abuse Benefits
If the small employer basic coverage benefit plan developed by the
commissioner includes coverage for alcohol and substance abuse
benefits, the employees of a small employer group may accept and
small employer carriers may offer the basic coverage benefit plan
without providing coverage for alcohol and substance abuse benefits
if:
(1) at least 50 percent of the employees waive in writing the
benefits and indicate in writing that they have undergone
alcoholism or substance abuse treatment or counseling within the
last three years; and
(2) the exclusion from coverage of alcohol and substance abuse
applies to only those employees.
Added by Acts 1995, 74th Leg., ch. 893, Sec. 10, eff. Sept. 1, 1995.
Art. 26.48. Health Maintenance Organization Plans
(a) A health maintenance organization:
(1) shall offer at least one state-approved basic health care plan
that complies with this chapter, the Texas Health Maintenance
Organization Act (Chapter 20A, Vernon's Texas Insurance Code),
Title XIII, Public Health Service Act (42 U.S.C. Section 300e et
seq.), and its subsequent amendments, and rules adopted under these
laws and may offer additional such plans;
(2) shall offer a standard health benefit plan under Section 9N,
Texas Health Maintenance Organization Act (Article 20A.09N,
Vernon's Texas Insurance Code), and may offer additional benefit
riders to the standard health benefit plan or offer standard health
benefit plans with additional mandatory benefits; and
(3) may offer a point-of-service contract in connection with an
insurance carrier that includes optional coverage for out-of-area
services, emergency care, or out-of-network care.
(b) A contract offered by an insurance carrier under Subsection
(a)(3) of this article is subject to all provisions of this chapter
unless specifically exempted. The insurance carrier with which the
health maintenance organization contracts for a point-of-service
contract is not required to otherwise make available the benefit
plans adopted under Subchapter E of this chapter if the insurance
carrier's small employer products are limited to the
point-of-service contract.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 11, eff. Sept. 1,
1995; Subsec. (a) amended by Acts 1999, 76th Leg., ch. 759, Sec. 1,
eff. Sept. 1, 1999; Subsec. (a) amended by Acts 2003, 78th Leg.,
ch. 1179, Sec. 6, eff. Sept. 1, 2003.
Art. 26.49. Preexisting Condition Provisions
(a) A preexisting condition provision in a small employer health
benefit plan may not apply to expenses incurred on or after the
expiration of the 12 months following the initial effective date of
coverage of the enrollee or late enrollee.
(b) A preexisting condition provision in a small employer health
benefit plan may not apply to coverage for a disease or condition
other than a disease or condition for which medical advice,
diagnosis, care, or treatment was recommended or received during
the six months before the earlier of:
(1) the effective date of coverage; or
(2) the first day of the waiting period.
(c) A small employer carrier shall not treat genetic information as
a preexisting condition described by Subsection (b) of this article
in the absence of a diagnosis of the condition related to the
information.
(d) A small employer carrier shall not treat a pregnancy as a
preexisting condition described by Subsection (b) of this article.
(e) A preexisting condition provision in a small employer health
benefit plan may not apply to an individual who was continuously
covered for an aggregate period of 12 months under creditable
coverage that was in effect up to a date not more than 63 days before
the effective date of coverage under the small employer health
benefit plan, excluding any waiting period.
(f) In determining whether a preexisting condition provision
applies to an individual covered by a small employer health benefit
plan, the small employer carrier shall credit the time the
individual was covered under creditable coverage if the previous
coverage was in effect at any time during the 12 months preceding
the effective date of coverage under a small employer health
benefit plan. If the previous coverage was issued under a health
benefit plan, any waiting period that applied before that coverage
became effective also shall be credited against the preexisting
condition provision period.
(g) A health maintenance organization may impose an affiliation
period if the period is applied uniformly without regard to any
health status related factor. The affiliation period shall not
exceed two months for an enrollee, other than a late enrollee, and
shall not exceed 90 days for a late enrollee. An affiliation period
under a plan shall run concurrently with any applicable waiting
period under the plan. The health maintenance organization must
credit an affiliation period to any preexisting condition provision
period. A health maintenance organization may use an alternative
method approved by the commissioner to address adverse selection.
(h) This article does not preclude application of any waiting
period applicable to all new enrollees under the health benefit
plan.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Amended by Acts 1995, 74th Leg., ch. 893, Sec. 12, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 955, Sec. 1.17, eff. July 1, 1997.
Art. 26.50. Coordination With Federal Law
The board by rule may modify a small employer benefit plan described
by this subchapter or adopt a substitute for that plan to the extent
required to comply with federal law applicable to the plan. The
board shall use the Texas Health Benefits Purchasing Cooperative in
the implementation of this article.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
SUBCHAPTER F. REINSURANCE FOR SMALL EMPLOYER HEALTH BENEFIT PLANS
Art. 26.51. Election to be Risk-Assuming or Reinsured Carrier;
Notice to Commissioner
(a) Each small employer carrier shall notify the commissioner of
the carrier's election to operate as a risk-assuming carrier or a
reinsured carrier. A small employer carrier seeking to operate as a
risk-assuming carrier shall make an application under Article 26.52
of this code.
(b) A small employer carrier's election under Subsection (a) of
this article is effective until the fifth anniversary of the
election. The commissioner may permit a small employer carrier to
modify its decision at any time for good cause shown.
(c) The commissioner shall establish an application process for
small employer carriers seeking to change their status under this
article.
(d) A reinsured carrier that elects to change its status to operate
as a risk-assuming carrier may not continue to reinsure a small
employer health benefit plan with the system. The carrier shall pay
a prorated assessment based on business issued as a reinsured
carrier for any portion of the year that the business was reinsured.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.52. Application to Become a Risk-Assuming Carrier
(a) A small employer carrier may apply to become a risk-assuming
carrier by filing an application with the commissioner in a form and
manner prescribed by the commissioner.
(b) In evaluating an application filed under Subsection (a) of this
article, the commissioner shall consider the small employer
carrier's:
(1) financial condition;
(2) history of rating and underwriting small employer groups;
(3) commitment to market fairly to all small employers in the state
or in its established geographic service area; and
(4) experience managing the risk of small employer groups.
(c) The commissioner shall provide public notice of an application
by a small employer carrier to be a risk-assuming carrier and shall
provide at least a 60-day period for public comment before making a
decision on the application. If the application is not acted on
before the 90th day after the date the commissioner received the
application, the carrier may request and the commissioner shall
grant a hearing.
(d) The commissioner, after notice and hearing, may rescind the
approval granted to a risk-assuming carrier under this article if
the commissioner finds that the carrier:
(1) is not financially able to support the assumption of risk from
issuing coverage to small employers without the protection afforded
by the system;
(2) has failed to market fairly to all small employers in the state
or its established geographic service area; or
(3) has failed to provide coverage to eligible small employers.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.53. Texas Health Reinsurance System
(a) The Texas Health Reinsurance System is created as a nonprofit
entity.
(b) The system is administered by a board of directors and operates
subject to the supervision and control of the commissioner.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.54. Board of Directors
(a) The board of directors is composed of nine members appointed by
the commissioner. The commissioner or the commissioner's
representative shall serve as an ex officio member. Five members
must be representatives of reinsured carriers selected from
individuals nominated by small employer carriers in this state
according to procedures developed by the commissioner. Four
members must represent the general public. A member representing
the general public may not be:
(1) an officer, director, or employee of an insurance company,
agency, agent, broker, solicitor, or adjuster or any other business
entity regulated by the department;
(2) a person required to register with the Texas Ethics Commission
under Chapter 305, Government Code; or
(3) related to a person described by Subdivision (1) or (2) of this
subsection within the second degree of affinity or consanguinity.
(b) The members appointed by the commissioner serve two-year terms.
The terms expire on December 31 of each odd-numbered year. A
member's term continues until a successor is appointed.
(c) A member of the board of directors may not be compensated for
serving on the board of directors but is entitled to reimbursement
for actual expenses incurred in performing functions as a member of
the board of trustees as provided in the General Appropriations
Act.
(d) The board of directors is subject to the open meetings law,
Chapter 271, Acts of the 60th Legislature, Regular Session, 1967
(Article 6252-17, Vernon's Texas Civil Statutes), and the open
records law, Chapter 424, Acts of the 63rd Legislature, Regular
Session, 1973 (Article 6252-17a, Vernon's Texas Civil Statutes).
(e) There is no liability on the part of, and no cause of action of
any nature arises against, a member of the board of directors for
action or omission performed in good faith in the performance of
powers and duties under this subchapter.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Subsec. (e) added by Acts 1995, 74th Leg., ch. 893, Sec. 13, eff.
Sept. 1, 1995.
Art. 26.55. Plan of Operation
(a) Not later than the 180th day after the date on which a majority
of the members of the board of directors have been appointed, the
board of directors shall submit to the commissioner a plan of
operation and thereafter any amendments necessary or suitable to
ensure the fair, reasonable, and equitable administration of the
system. The commissioner, after notice and hearing, may approve
the plan of operation if the commissioner determines the plan is
suitable to ensure the fair, reasonable, and equitable
administration of the system and provides for the sharing of system
gains or losses on an equitable and proportionate basis in
accordance with the provisions of this subchapter. The plan of
operation is effective on the written approval of the commissioner.
(b) If the board of directors fails to timely submit a suitable plan
of operation, the commissioner, after notice and hearing, shall
adopt a temporary plan of operation. The commissioner shall amend
or rescind any plan adopted under this subsection at the time a plan
of operation is submitted by the board of directors and approved by
the commissioner.
(c) The plan of operation must:
(1) establish procedures for the handling and accounting of system
assets and money and for an annual fiscal report to the
commissioner;
(2) establish procedures for the selection of an administering
carrier or third-party administrator and establish the powers and
duties of that administering carrier or third-party administrator;
(3) establish procedures for reinsuring risks in accordance with
the provisions of this article;
(4) establish procedures for collecting assessments from reinsured
carriers to fund claims and administrative expenses incurred or
estimated to be incurred by the system, including the imposition of
penalties for late payment of an assessment; and
(5) provide for any additional matters necessary for the
implementation and administration of the system.
Added by Acts 1993, 73rd Leg., ch. 607, Sec. 1, eff. Sept. 1, 1993.
Art. 26.56. Powers and Duties of System
The system has the general powers and authority granted under the
laws of this state to insurance companies and health maintenance
organizations licensed to transact business, except that the system
may not directly issue health benefit plans. The system is exempt
from all taxes. The system may:
(1) enter into contracts necessary or proper to carry out the
provisions and purposes of this subchapter and may, with the
approval of the commissioner, enter into contracts with similar
programs of other states for the joint performance of common
functions or with persons or other organizations for the
performance of administrative functions;
(2) sue or be sued, including taking legal actions necessary or
proper to recover assessments and penalties for, on behalf of, or
against the system or a reinsured carrier;
(3) take legal action necessary to avoid the payment of improper
claims against the system;
(4) issue reinsurance contracts in accordance with the requirements
of this subchapter;
(5) establish guidelines, conditions, and procedures for
reinsuring risks under the plan of operation;
(6) establish actuarial functions as appropriate for the operation
of the system;
(7) assess reinsured carriers in accordance with the provisions of
Article 26.60 of this code and make advance interim assessments as
may be reasonable and necessary for organizational and interim
operating expenses, provided that any interim assessments shall be
credited as offsets against regular assessments due after the close
of the fiscal year;
(8) appoint appropriate legal, actuarial, and other committees as
necessary to provide technical assistance in the operation of the
system, policy and other contract design, and any other function
within the authority of the system; and
(9) borrow money for a period not to exceed one year to effect the
purposes of the system, provided that any notes or other evidence of
indebtedness of the system not in default shall be legal
investments for small employer carriers and may be carri
