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SUBCHAPTER Z. Point-of-Service Riders §§11.2501 - 11.2503

The Texas Department of Insurance proposes new Subchapter Z, §§11.2501 - 11.2503, concerning point-of-service plans. These new sections are necessary to implement legislation enacted by the 76 th Texas Legislature in House Bill 1498 which amended the Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art 26.09; Subchapter F, Chapter 3 was amended by adding Art 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of these proposed new sections are to develop provisions relating to point-of-service (POS) plans. A POS plan is a health care plan that combines managed care and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the managed care delivery system or from a physician or provider outside of the delivery system on a fee for services basis. The proposed rules implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO. The plan combines a traditional HMO plan with an indemnity rider that is underwritten by the HMO. An plan enrollee can use the rider to obtain services, benefits and supplies from provider who are not part of the HMO provider network. Proposed new §11.2501 defines the terms used in the proposed new subchapter. Proposed new §11.2502 sets forth the solvency requirements for HMOs issuing POS rider plans under this subchapter as well as the method for calculating the percentage of business that an HMO issuing these plans has actually issued in the form of POS rider business as compared to the total health coverage that the HMO has issued in the same period. This proposed section also sets forth the requirements that an HMO that has issued POS riders that exceed the ten percent cap set by House Bill 1468 must follow for issuing any additional POS coverage, the requirements for an HMO that can no longer meet the solvency requirements, and an HMO´s responsibilities should it discontinue its POS rider business either entirely or in order to bring its POS rider expenditures below the ten percent cap. Proposed §11.2503 describes the coverage required under and the contents required for a POS rider plan issued by an HMO pursuant to this subchapter.

Contemporaneously with this proposal, proposed new §§21.2901, 21.2902, and 26.312, and proposed amendments to §26.4 and §26.14 are published elsewhere in this issue of the Texas Register. The separately proposed new sections added to Chapter 21 implement the provisions of House Bill 1498 allowing POS plans to be created jointly by indemnity carriers and HMOs, either by issuing "a blended contract point-of-service plan," in which one contract issued by either the HMO or indemnity carrier contains the terms of both the indemnity and managed care components of the plan; or through a "dual contracts point-of-service plan." A dual contracts point-of-service plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the managed care portion of the plan, and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan. The separately proposed amendments to and new section added to Chapter 26 clarify that small and large employer carriers may issue point-of-service plans provided that the carrier complies with the standards relating to both the various types of point-of-service plans set forth in this proposal an well as the POS rider plans subject to the new sections contained in this proposal. The Chapter 26 proposal also creates standards for POS coverage options that large employer carriers issuing HMO coverage to large employers are required by House Bill 1498 to offer to eligible employees if the only coverage available to the employees is through a managed care plan or plans.

Kim Stokes, Senior Associate Commissioner for Life, Health & Licensing, has determined that for each year of the first five years the proposed sections will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the rule. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Ms. Stokes has determined that for each year of the first five years the sections are in effect, the public benefits anticipated as a result of the proposed sections will be increased availability of health benefit options for eligible and potential enrollees in HMOs by allowing enrollees to choose physicians and other providers from outside of the HMO network. In addition, the proposed rules will ensure that the department will be able to monitor HMOs offering these unique plans for compliance with the statutory requirements that such HMOs cannot write indemnity riders that exceed ten percent of the total health care coverage being issued by the HMO. Finally, the proposed rules set net worth and solvency standards that take into account the economic differences that an HMO providing both coverage for managed health care services and indemnity coverage will encounter. Almost all of the economic costs to persons required to comply with the proposal for each year of the first five years the sections will be in effect are the result of the legislative enactment of House Bill 1498 and not the result of the adoption, enforcement, or administration of the proposed sections. The department is required by House Bill 1498 to set solvency and net worth requirements for HMOs that offer POS rider plans. The proposal contains the net worth and solvency standards that a prudently managed HMO can meet and that adequately and reasonably support the additional risks associated with POS riders. A component of these rules which is expected to result in expenditures in excess of the requirements imposed by statute are the costs of providing a side-by-side summary that compares the benefits provided under the POS rider portion of the plan and the services provided by the HMO portion of the plan. House Bill 1498 requires POS plans to contain corresponding benefits. The purpose of the summary is to provide an explanation to potential enrollees and enrollees that demonstrates that the POS plan contains the cor responding benefits. Only the cost of preparing the summary and including it in the plan documents is attributable to the rule. The department estimates that the length of the required summary will depend upon the total coverage that an HMO plans to offer. The printing cost is estimated by the department to be between $.02 and $.05 per page, thereby increasing the cost of each plan document by those amounts. Since the summaries are to be included in the plan documents which are required to be prepared by the HMO there should be no additional delivery costs. The total cost to HMOs affected by the proposed sections is not dependent upon the size of the HMO, but rather is dependent on the amount of coverage that an HMO decides to offer. Small businesses, micro-businesses and the largest businesses affected by these sections would incur the same additional cost per plan document. The number of plan documents distributed by an HMO would be dependent upon the entities the HMO targets for its business and the potential enrollees associated with the entities who accept the point-of-service plan marketed by the HMO. The adoption of these proposed sections will have no adverse economic impact on regulated entities that are required to comply with the proposed sections and that qualify as small and micro-businesses under the Government Code, §§2006.001-2006.002. The rules ensure that the HMOs demonstrate to potential enrollees and enrollees that the plan contains corresponding benefits as required by House Bill 1498. Therefore, it would be neither legal nor feasible to reduce their effect on small businesses or micro-businesses in this respect. Considering the purposes of House Bill 1498, it is neither legal nor feasible to waive or modify the requirement of these sections for small and micro-businesses as doing so would result in a disparate effect on persons obtaining coverage from these carriers and would not be consistent with the purpose of House Bill 1498.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 5, 2000 to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Patricia Brewer, Mail Code 103-6A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of the Chief Clerk.

The sections are proposed under the Insurance Code, Article 20A.22 and §36.001. Article 20A.22(a) provides that the commissioner shall adopt rules as necessary to implement the Texas Health Maintenance Organization Act. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

The following article is affected by this proposal: Article 20A.02 of the Insurance Code.

Subchapter Z. POINT-OF-SERVICE RIDERS

§11.2501. Definitions. The following words and terms, when used in this subchapter, shall have the following meaning.

(1) Coinsurance--An amount in addition to the premium and copayments due from an enrollee who accesses out-of-plan covered benefits, for which the enrollee is not reimbursed.

(2) Corresponding benefits--Benefits provided under a point-of-service (POS) rider or the indemnity portion of a point-of-service (POS) plan, as defined in Articles 3.64(a)(4) and 20A.02(bb) of the Code, that conform to the nature and kind of coverage provided to an enrollee under the HMO portion of a point-of-service plan .

(3) Coverage--Any benefits available to an enrollee through an indemnity contract or rider, any services available to an enrollee under an evidence of coverage, or combination of the benefits and services available to an enrollee under a POS plan.

(4) Health plan products--Any health care plan issued by an HMO pursuant to the Code or a rule adopted by the commissioner.

(5) In-plan covered services--Health care services, benefits, and supplies to which an enrollee is entitled under the evidence of coverage issued by an HMO, including emergency services, approved out-of-network services and other authorized referrals.

(6) Non-participating physicians and providers--Physicians and providers that are not part of an HMO delivery network.

(7) Out-of-plan covered benefits--All covered health care services, benefits, and supplies that are not in-plan covered services. Out-of-plan covered benefits include health care services, benefits and supplies obtained from participating physicians and providers under circumstances in which the enrollee fails to comply with the HMO´s requirements for obtaining in-plan covered services.

(8) Participating physicians and providers--Physicians and providers that are part of an HMO delivery network.

(9) Point-of-service blended contract plan (POS blended contract plan)--A POS plan evidenced by a single contract, policy, certificate or evidence of coverage that provides a combination of indemnity benefits for which an indemnity carrier is at risk and services provided by an HMO under a POS plan.

(10) Point-of-service dual contracts plan (POS dual contracts plan)--A POS plan providing a combination of indemnity benefits and HMO services through separate contracts, one being the contract, policy or certificate offered by an indemnity carrier for which the indemnity carrier is at risk and the other being the evidence of coverage offered by the HMO.

(11) Point-of-service rider (POS rider)--A rider issued by an HMO that meets the solvency requirements of §11.2502 of this title (relating to Issuance of Point-of-service Riders) and that provides coverage for out-of-plan services, including services, benefits, and supplies obtained from participating physicians or providers under circumstances in which the enrollee fails to comply with the HMO´s requirements for obtaining approval for in-plan covered services.

(12) Point-of-service rider plan (POS rider plan)--A point-of-service (POS) plan provided by an HMO pursuant to this subchapter under an evidence of coverage that includes a POS rider.

§11.2502. Issuance of Point-of-service Riders. An HMO may issue a POS rider plan only if the HMO meets all of the applicable requirements set forth in this section.

(1) Solvency of HMOs Issuing Point-of-service Rider Plans.

(A) For HMOs that have been licensed for at least one calendar year, the HMO shall maintain a net worth of at least the sum of:

(i) the greater of:

(I) one million five hundred thousand dollars; or

(II) 100% of the authorized control level of risk-based capital as set forth in §11.809 of this title (relating to Risk-Based Capital for HMOs ); and

(ii) twenty-five percent of total gross point-of-service premium revenue reported in the preceding calendar year.

(B) For HMOs that have been licensed for less than one calendar year, the HMO shall maintain a net worth of at least the sum of:

(i) one million five hundred thousand dollars; and

(ii) fifty percent of the yearly average of the two-year annual premium gross point-of-service premium revenue as projected in its application for a certificate of authority.

(C) Assets of the HMO shall be of a sufficient amount to cover reserve liabilities for the POS riders and shall be limited to those allowable assets listed under §11.803(1) of this title (relating to Investments, Loans and Other Assets).

(D) Reserves held by an HMO for POS riders shall be calculated in accordance with Chapter 3, Subchapter GG of this title (relating to Minimum Reserve Standards for Individual and Group Accident and Health Insurance).

(E) An HMO that has issued a POS rider plan under this section and whose net worth or assets subsequently fall below the requirements of subparagraphs (A), (B) or (C) of this paragraph shall cease issuing additional new POS rider plans to groups or individuals, except as provided in paragraphs (4) and (5) of this section, until it comes into compliance with the requirements of this paragraph.

(2) Limitations on POS Rider Expenses. An HMO´s POS rider expenses must not exceed 10% of medical and hospital expenses on an annual basis for all health plan products sold by the HMO.

(A) An HMO may issue a POS rider plan under this section only if the total medical and hospital expenses incurred by the HMO for the preceding four calendar quarters for all POS riders issued by the HMO under this section do not exceed 10% of the annual medical and hospital expenses incurred by the HMO for all health plan products sold during the preceding four calendar quarters.

(B) An HMO that has issued any POS rider plans under this subchapter is responsible for compiling, maintaining, and reporting to the department the total medical and hospital expenses incurred by the HMO on an annual basis for all POS riders as well as the total medical and hospital expenses incurred by the HMO on an annual basis for all health plan products sold to ensure that the HMO is in compliance with the requirements of this subchapter.

(C) An HMO that has issued any POS rider plans under this subchapter and whose total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this subchapter has exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters shall:

(i) immediately cease issuance of additional new POS rider plans to groups or individuals, except as provided in paragraphs (4) and (5) of this section;

(ii) offer all subsequent new POS plans through POS blended contracts or POS dual contracts in accordance with Chapter 21, Subchapter U of this title (relating to Arrangements between Indemnity Carriers and HMOs for Point-of-service Coverage); and

(iii) not issue any additional new POS rider plans until it has either:

(I) established to the satisfaction of the commissioner that

(-a-) its total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this section have not exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters; and

(-b-) its total medical and hospital expenses incurred for all POS riders issued under this section for the next four calendar quarters will not exceed 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the next four calendar quarters; or

(II) become an indemnity carrier licensed under the Code.

(D) Notwithstanding subparagraph (C)(iii) of this subsection, an HMO that has issued POS riders for which the HMO´s annual medical and hospital expenses incurred by the HMO for the POS riders have exceeded 10% of the HMO´s total annual medical and hospital expenses incurred by the HMO for all health plan products that can establish, to the satisfaction of the commissioner, that its total medical and hospital expenses incurred on an annual basis for all POS riders issued under this section will not exceed 10% of the total annual medical and hospital expenses incurred by the HMO for all health plan products for the following one year period, may offer new POS rider plans under this section during that following year.

(3) Renewability and discontinuance of POS rider plans.

(A) POS rider plans issued under this subchapter are guaranteed renewable if the plan is:

(i) a small employer plan, pursuant to Article 26.23 of the Code;

(ii) a large employer plan, pursuant to Article 26.86 of the Code;

(iii) an individual plan, pursuant to §11.506(3)(D) of this chapter (relating to Mandatory Contractual Provisions: Group, Individual and Conversion Agreement and Group Certificate); or

(iv) an association plan, pursuant to §21.2704 of this title (relating to Mandatory Guaranteed Renewability Provisions for Health Benefit Plans Issued to Members of an Association or Bona Fide Association).

(B) An HMO that discontinues a POS rider plan must comply with all laws and rules applicable to that plan.

(C) An HMO that discontinues existing POS rider plans in order to bring the HMO into compliance with the10% cap:

(i) shall offer, if the discontinued plan is issued to:

(I) a small employer group, to each employer, the option to purchase other small employer coverage offered by the small employer carrier at the time of the discontinuation, pursuant to Article 26.24(d) of the Code;

(II) a large employer group, to each employer, the option to purchase any other large employer coverage offered by the large employer carrier at the time of the discontinuation, pursuant to Article 26.87(d) of the Code;

(III) an individual, the option to each enrollee any other individual basic health care coverage offered by the HMO pursuant to §11.506(3)(D)(v) of this title;

(IV) an association, the option to purchase any other health benefit plan being offered by the HMO pursuant to §21.2704(d)(1)(B) of this title.

(ii) shall not issue any additional new POS rider plans:

(I) for at least one calendar year after the date on which it last discontinued any of its existing POS rider business and then only if it can establish to the satisfaction of the commissioner that:

(-a-) its total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this subchapter will not have exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters; and

(-b-) its total medical and hospital expenses incurred for all POS riders issued under this subchapter for the next four calendar quarters will not exceed 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the next four calendar quarters; or

(II) until it has become licensed as an indemnity carrier under the Code.

(4) An HMO that ceases to issue a POS rider plan in order to comply with the 10% cap required under paragraph (2) of this section shall continue to offer the plan to each new member of a group to which the POS rider plan has been issued unless and until the HMO divests itself of the group´s business by discontinuing the plan as set forth in paragraph (3) of this section.

(5) An HMO that ceases to issue a POS rider plan in order to comply with the 10% cap required under paragraph (2) of this section must continue to offer the plan to each new individual entitled to coverage under an existing individual plan for which a POS rider has been issued unless and until the HMO divests itself of the individual plan by discontinuing the plan as set forth in paragraph (3) of this section.

§11.2503. Coverage Relating to POS Rider Plans.

(a)_ An HMO may not consider an in-plan covered service to be a benefit provided under the POS rider.

(b) An HMO shall not require an enrollee to use either the POS rider benefits or in-plan covered services first.

(c) An HMO that includes limited provider networks:

(1) shall not limit the access, under the POS rider, of an enrollee whose in-plan covered services are restricted to the limited provider network, either to participating physicians and providers or to non-participating physicians and providers;

(2) shall not impose cost-sharing arrangements for an enrollee whose in-plan covered services are restricted to a limited provider network, and who, through the POS rider accesses a participating physician or provider outside the limited provider network, that differ from the cost-sharing arrangements for in-plan covered services obtained by the enrollee from a physician or provider in the limited provider network;

(3) may provide for cost-sharing arrangements for benefits obtained from non-participating physicians and providers that are different from the cost sharing arrangements for in-plan covered services, provided that coinsurance required under a POS rider shall never exceed 50% of the total amount to be covered.

(d) An HMO that issues or offers to issue a POS rider plan is subject, to the same extent as the HMO is subject in issuing any other health plan product, to all applicable provisions of Chapter 20A, and Articles 21.21, 21.21-A, 21.21-1, 21.21-2, 21.21-5 and 21.21-6 of the Code.

(e) A POS rider plan offered under this subchapter must contain :

(1) a POS rider that :

(A) shall contain coverage that corresponds to all in-plan covered services provided in the evidence of coverage as well as coverage that is provided to an enrollee as part of the enrollee´s in-plan coverage through separate riders attached to the evidence of coverage;

(B) may include benefits in addition to in-plan covered services;

(C) may limit or exclude coverage for benefits that do not correspond to in-plan covered services;

(D) shall not limit coverage for benefits that correspond to in-plan covered services except as provided in subparagraphs (E), (F) and (G) of this paragraph;

(E) may include reasonable out-of-pocket limits and annual and lifetime benefit allowances which differ from limits or allowances on in-plan covered services provided under other riders attached to the evidence of coverage so long as the allowances and limits comply with applicable federal and state laws;

(F) may provide for cost-sharing arrangements that are different from the cost sharing arrangements for in-plan covered services, provided that coinsurance required under a POS rider shall never exceed 50% of the total amount to be covered;

(G) may be reduced by benefits obtained as in-plan covered services;

(H) shall not reduce or limit in-plan covered services in any way by coverage for benefits obtained by an enrollee under the POS rider;

(I) if applicable, shall disclose how the POS rider cost-sharing arrangements differ from those in the evidence of coverage, any reduction of benefits as set forth in subparagraph (G) of this paragraph, any deductible that must be met by the enrollee under the POS rider, and whether copayments made for in-plan covered services apply toward the POS rider deductible;

(J) shall provide coverage for services obtained without the HMO´s authorization from a participating physician or provider. However, the enrollee must comply with any precertification requirements as set forth in subparagraph (L) of this paragraph that are applicable to the POS rider;

(K) shall include a description of how an enrollee may access out-of-plan covered benefits under the POS rider, including coverage contained in other riders attached to the evidence of coverage;

(L) shall disclose all precertification requirements for coverage under the POS rider including any penalties for failure to comply with any precertification or cost containment provisions, provided that any such penalties shall not reduce benefits more than 50% in the aggregate;

(M) if it is issued to a group, shall contain provisions that comply with Article 3.51-6 Sec. 1(d)(2)(vii)-(xiii) of the Code; and

(N) if it is issued to an individual, shall contain provisions that comply with Article 3.70-3(A)(5)-(11) of the Code;

(2) an evidence of coverage that includes a description and reference to the POS rider sufficient to notify a prospective or current enrollee that the plan provides the option of accessing participating physicians and providers as well as non-participating physicians and providers for out-of-plan covered benefits and that accessing these benefits through the POS rider may involve greater costs than accessing corresponding in-plan covered services; and

(3) a side-by-side summary of the schedule of the corresponding coverage for services, benefits, and supplies available under the POS rider and services, benefits, and supplies available in the evidence of coverage that together constitute the POS rider plan.



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