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Subchapter A. Small Employer Health Insurance Portability and Availability Act Regulations 28 TAC §26.4 and §26.14

Subchapter C. Large Employer Health Insurance Portability and Availability Act Regulation 28 TAC §26.312

The Commissioner of Insurance adopts amendments to §26.4 and §26.14 and new §26.312, concerning point-of-service plans. The sections are adopted without changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 80) and will not be republished.

These amendments and new section are necessary to implement legislation enacted by the 76 th Texas Legislature in House Bill (HB) 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 the new section and amendments are to develop provisions relating to point-of-service plans offered by small and large employer carriers pursuant to Chapter 26 of the Texas Administrative Code (TAC). A point-of-service (POS) plan is a health care plan that combines HMO and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the HMO delivery system or from a physician or provider outside of the delivery system on a fee-for-service basis.

Contemporaneously with this adoption, the adoption of new §§11.2501-11.2503, 21.2901, and 21.2902 are published elsewhere in this issue of the Texas Register. The separately published new sections added to Chapter 11 implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO which contains an indemnity rider that is underwritten by the HMO. That adoption also sets forth the financial criteria an HMO must meet in order to issue these point-of-service rider plans. The separately adopted new sections added to Chapter 21 implement HB 1497 provisions that an indemnity carrier and an HMO can jointly create a POS plan, either by issuing "a blended contract point-of-service plan," in which one contract is issued by either the HMO or indemnity carrier that contains the terms of both the indemnity and HMO 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 HMO 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.

Amendments to §26.04(35) replace the former definition of a "point-of-service contract" with a new definition of "point-of-service coverage" which reflects the expansion of the types of point-of-service plans authorized by HB 1498 that can now be issued by large and small employer carriers under Texas Insurance Code Chapter 26. The amendment to §26.14 clarifies that a small employer carrier may issue POS plans provided that the carrier complies with applicable provisions of TAC Chapters 11 and 21 that are also being adopted elsewhere in this issue of the Texas Register. New §26.312 makes the same clarification for large employer carriers. New §26.312 also creates standards for POS coverage options that large employer carriers issuing HMO coverage to large employers are required by HB 1498 to offer to eligible employees if the only coverage available to the employees is through a network-based HMO plan or plans.

GENERAL: A commenter generally supports the rule and fully supports the intent to expand insurance coverage by providing at least one non-network option to employees who wish to purchase such coverage.

Response: The department appreciates this support. However, the department does wish to clarify that the provision of Art. 26.09 amended by HB 1498 as well as the section implementing that provision applies only to carriers providing coverage to eligible employees of large employers. Small employer carriers are not subject to the requirement.

Comment: A commenter believes the proposed sections expand the requirements of HB 1498 and exceed its statutory intent and authority. The commenter recommends that the department re-visit these sections of the rules.

Response: The department disagrees that the sections exceed the authority of HB 1498. The Commissioner has the authority to adopt rules as necessary to implement Chapter 26 of the Texas Insurance Code (Code). While HB 1498 does specifically exclude small employer plans from the applicability of Art. 26.09 of the Code, nothing in Chapters 3 or 20A of the Code as amended by the bill excludes small employers from applicability of those sections. Art. 26.48(a)(3) of the Code permits an HMO to offer a point-of-service contract in connection with an indemnity carrier. Article 26.42(c) of the Code permits HMOs to offer small employers any other health plan authorized under the Code. Art. 20A.06 of the Code, which authorizes an HMO to issue a point-of-service rider, does not exclude small employer carriers.

Adoption of the sections required to implement HB 1498 provides the department the opportunity to consider the general requirements that any plan incorporating a point-of-service component should meet. These sections incorporate these general requirements. They do not transfer to small employer carriers any of the statutory requirements of HB 1498 that are not applicable to small employer carriers. Just as a small employer HMO must comply, as applicable, with the general requirements for HMO plans in 28 TAC Chapters 11 and 21, and a small employer indemnity carrier must comply, as applicable, with the general requirements for group indemnity health plans under 28 TAC Chapters 3 and 21, these sections clarify that a small employer carrier issuing a plan that contains a point-of-service component must comply, as applicable, with the general requirements established in the new sections and amendments to 28 TAC Chapter 11 and 21 published elsewhere in this issue of the Texas Register relating to point-of-service coverage.§

§

For: Office of Public Insurance Counsel.

For with changes: PacifiCare of Texas.

The amendments and new section are adopted under the Insurance Code, Article 26.04 and §36.001. Article 26.04 provides that the commissioner shall adopt rules as necessary to implement Chapter 26 of the Insurance Code. 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.

Subchapter A. SMALL EMPLOYER HEALTH INSURANCE PORTABILITY AND AVAILABILITY ACT REGULATIONS.

§26.4. Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Actuary--A qualified actuary who is a member in good standing of the American Academy of Actuaries.

(2) Affiliation period--A period of time that under the terms of the coverage offered by a HMO, must expire before the coverage becomes effective. During an affiliation period a HMO is not required to provide health care services or benefits to the participant or beneficiary and a premium may not be charged to the participant or beneficiary.

(3) Agent--A person who may act as an agent for the sale of a health benefit plan under a license issued under the Insurance Code, Article 20A.15 or 20A.15A, or under the Insurance Code, Chapter 21, Subchapter A.

(4) Base premium rate--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.

(5) Case characteristics--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) Child--An unmarried natural child of the employee, including a newborn child; adopted child, including a child whom an insured is a party in a suit in which the adoption of the child by the insured is sought; natural child or adopted child of the employee's spouse, provided that the child resides with the employee.

(7) Class of business--All small employers or a separate grouping of small employers established under the Insurance Code, Chapter 26, Subchapters A-G.

(8) Commissioner--The commissioner of insurance.

(9) Creditable coverage--

(A) An individual's coverage is creditable for purposes of this chapter if the coverage is provided under:

(i) 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 USC Section 1001 et seq.);

(ii) a group health benefit plan provided by a health insurance carrier or an HMO;

(iii) an individual health insurance policy or evidence of coverage;

(iv) Part A or Part B of Title XVIII of the Social Security Act (42 USC Section 1395c et seq.);

(v) Title XIX of the Social Security Act (42 USC Section 1396 et seq.), other than coverage consisting solely of benefits under Section 1928 of that Act (42 USC Section 1396s);

(vi) Chapter 55 of Title 10, United States Code (10 USC Section 1071 et seq.);

(vii) a medical care program of the Indian Health Service or of a tribal organization;

(viii) a state or political subdivision health benefits risk pool;

(ix) a health plan offered under Chapter 89 of Title 5, United States Code (5 USC Section 8901 et seq.);

(x) a public health plan as defined in this section;

(xi) a health benefit plan under Section 5(e) of the Peace Corps Act (22 USC Section 2504(e)); and

(xii) short-term limited duration insurance as defined in this section.

(B) Creditable coverage does not include:

(i) accident-only, disability income insurance, or a combination of accident-only and disability income insurance;

(ii) coverage issued as a supplement to liability insurance;

(iii) liability insurance, including general liability insurance and automobile liability insurance;

(iv) workers' compensation or similar insurance;

(v) automobile medical payment insurance;

(vi) credit only insurance;

(vii) coverage for onsite medical clinics;

(viii) other coverage that is similar to the coverage described in this subsection under which benefits for medical care are secondary or incidental to other insurance benefits and specified in federal regulations;

(ix) if offered separately, coverage that provides limited scope dental or vision benefits;

(x) if offered separately, 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;

(xi) if offered separately, coverage for limited benefits specified by federal regulation;

(xii) if offered as independent, noncoordinated benefits, coverage for specified disease or illness;

(xiii) if offered as independent, noncoordinated benefits, hospital indemnity or other fixed indemnity insurance; or

(xiv) Medicare supplemental health insurance as defined under Section 1882(g)(1), Social Security Act (42 USC Section 1395ss), coverage supplemental to the coverage provided under Chapter 55 of Title 10, United States Code (10 USC Section 1071 et seq.), and similar supplemental coverage provided under a group plan, but only if such insurance or coverages are provided under a separate policy, certificate, or contract of insurance.

(10) Department--The Texas Department of Insurance.

(11) Dependent--A spouse; newborn child; child under the age of 19 years; child who is a full-time student under the age of 23 years and who is financially dependent on the parent; child of any age who is medically certified as disabled and dependent on the parent; any person who must be covered under the Insurance Code, Article 3.51-6, §3D or §3E, or the Insurance Code, Article 3.70-2(L); and any other child included as an eligible dependent under an employer's benefit plan.

(12) DNA--Deoxyribonucleic acid.

(13) Effective date--The first day of coverage under a health benefit plan, or, if there is a waiting period, the first day of the waiting period.

(14) Eligible employee--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 United States Code, §§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.

(15) Franchise insurance policy--An individual health benefit plan under which a number of individual policies are offered to a selected group of a small or large employer. The rates for such a policy may differ from the rate applicable to individually solicited policies of the same type and may differ from the rate applicable to individuals of essentially the same class.

(16) Genetic information--Information derived from the results of a genetic test.

(17) Genetic test--A laboratory test of an individual's DNA, RNA, proteins, or chromosomes to identify by analysis of the DNA, RNA, proteins, or chromosomes the genetic mutations or alterations in the DNA, RNA, proteins, or chromosomes that are associated with a predisposition for a clinically recognized disease or disorder. The term does not include:

(A) a routine physical examination or a routine test performed as a part of a physical examination;

(B) a chemical, blood or urine analysis;

(C) a test to determine drug use; or

(D) a test for the presence of the human immunodeficiency virus.

(18) HMO--Any person governed by the Texas Health Maintenance Organization Act, Insurance Code, Chapter 20A, including:

(A) a person defined as a health maintenance organization under Section 2 of the Texas Health Maintenance Organization Act;

(B) an approved nonprofit health corporation that is certified under Section 5.01(a), Medical Practice Act, Article 4495b, Texas Civil Statutes, and that holds a certificate of authority issued by the commissioner under Insurance Code, Article 21.52F;

(C) a statewide rural health care system under Insurance Code, Article 20C.05; or

(D) a nonprofit corporation created and operated by a community center under Subchapter C, Health and Safety Code.

(19) Health benefit plan--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 the following plans of coverage:

(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) insurance coverage arising out of a workers' compensation or similar insurance;

(L) automobile medical payment insurance coverage;

(M) jointly managed trusts authorized under 29 United States Code §§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 United States Code §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 limited duration insurance as defined in this section;

(Q) liability insurance, including general liability insurance and automobile liability insurance;

(R) coverage for onsite medical clinics; or

(S) coverage that provides other limited benefits specified by federal regulations; or

(T) other coverage that is:

(i) similar to the coverage described in subparagraphs A-S of this paragraph under which benefits for medical care are secondary or incidental to other insurance benefits; and

(ii) specified in federal regulations.

(20) Health carrier--Any entity authorized under the Insurance 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 the Insurance Code, Chapter 20, an HMO and a stipulated premium company under the Insurance Code, Chapter 22.

(21) Health insurance coverage--Benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or HMO contract.

(22) Health status related factor--Health status; medical condition, including both physical and mental illnesses; claims experience; receipt of health care; medical history; genetic information; evidence of insurability, including conditions arising out of acts of domestic violence; and disability.

(23) Index rate--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.

(24) Large employer--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 eligible employees on the first day of the policy year. For purposes of this definition, a partnership is the employer of a partner.

(25) Large employer carrier--A health carrier, to the extent that carrier is offering, delivering, issuing for delivery, or renewing health benefit plans subject to Insurance Code, Subchapters A and H.

(26) Large employer health benefit plan--A health benefit plan offered to a large employer.

(27) Late enrollee--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 Insurance Code, Article 26.21(h) or 26.83(f), who does not fall within the exceptions listed below, and who is accepted for enrollment and not excluded until the next open enrollment period. An employee or dependent requesting enrollment cannot be excluded until the next open enrollment period and, when enrolled, is not a late enrollee, in the following special circumstances:

(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 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 the termination of employment, the reduction in the number of hours of employment, the termination of the other plan's coverage, the termination of contributions toward the premium made by the employer; or 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 the 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 notification of the court order;

(E) the individual has a change in family composition due to marriage, birth of a child, adoption of a child, or because an insured becomes a party in a suit for the adoption of a child;

(F) an individual becomes a dependent due to marriage, birth of a newborn child, adoption of a child, or because an insured becomes a party in a suit for the adoption of a child; and

(G) the individual described in subparagraphs E and F of this paragraph requests enrollment no later than the 31st day after the date of the marriage, birth, adoption of the child, or within 31 days of the date an insured becomes a party in a suit for the adoption of a child.

(28) Limited scope dental or vision benefits--Dental or vision benefits that are sold under a separate policy or rider and that are limited in scope to a narrow range or type of benefits that are generally excluded from hospital, medical, or surgical benefits contracts.

(29) Medical care--Amounts paid for:

(A) the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body;

(B) transportation primarily for and essential to the medical care described in subparagraph (A) of this paragraph; or

(C) insurance covering medical care described in either subparagraphs (A) or (B) of this paragraph.

(30) Medical Condition--Any physical or mental condition including, but not limited to, any condition resulting from illness, injury (whether or not the injury is accidental), pregnancy, or congenital malformation. Genetic information in the absence of a diagnosis of the condition related to such information shall not constitute a medical condition.

(31) New business premium rate--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.

(32) New entrant--An eligible employee, or the dependent of an eligible employee, who becomes part of a small or large employer group after the initial period for enrollment in a health benefit plan. After the initial enrollment period, this includes any employee or dependent who becomes eligible for coverage and who is not a late enrollee.

(33) Participation criteria--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.

(34) Person--An individual, corporation, partnership, or other legal entity.

(35) Point-of-service coverage (POS coverage)--Coverage provided under a POS plan as defined in Articles 3.64(a)(4), 20A.02(bb), 26.09(a)(2) of the Code and as permitted by Article 26.48 of the Code.

(36) Policy year--For purposes of the Insurance Code, Chapter 26, and this chapter, a 365-day period that begins on the policy's effective date or a period of one full calendar-year, under a health benefit plan providing coverage to small or large employers and their employees, as defined in the policy. Small or large employer carriers must use the same definition of policy year in all small or large employer health benefit plans.

(37) Postmarked--A date stamp by the US Postal Service or other delivery entity including any electronic delivery available.

(38) Preexisting condition provision--A provision that denies, excludes, or limits coverage as to a disease or condition for a specified period after the effective date of coverage.

(39) Premium--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.

(40) Public health plan--Any plan established or maintained by a State, county, or other political subdivision of a State that provides health insurance coverage to individuals who are enrolled in the plan.

(41) Rating period--A calendar period for which premium rates established by a small employer carrier are assumed to be in effect.

(42) Reinsured carrier--A small employer carrier participating in the Texas Health Reinsurance System.

(43) Renewal date--For each small or large employer's health benefit plan, the earlier of the date (if any) specified in such plan (contract) for renewal; the policy anniversary date; or the date on which the small or large employer's plan is changed. A change in the premium rate due solely to the addition or deletion of an employee or dependent if the deletion is due to a request by the employee, death or retirement of the employee or dependent, termination of employment of the employee, or because a dependent is no longer eligible is not considered a renewal date. For association or multiple employer trusts group health benefit plans, small or large employer carriers may use the date specified for renewal or the policy anniversary date, of either the master contract or the contract or certificate of coverage of each small or large employer in the association or trust, in determining the renewal date. Small or large employer carriers must use the same method of determining renewal dates for all small or large employer health benefit plans.

(44) Risk-assuming carrier--A small employer carrier that elects not to participate in the Texas Health Reinsurance System, as approved by the department.

(45) Risk characteristic--The health status related factors, duration of coverage, or any similar characteristic related to the health status or experience of a small employer group or of any member of a small employer group.

(46) Risk load--The percentage above the applicable base premium rate that is charged by a small employer carrier to a small employer to reflect the risk characteristics of the small employer group.

(47) Risk pool--The Texas Health Insurance Risk Pool established under Insurance Code, Article 3.77, or other similar arrangements in other states.

(48) RNA--Ribonucleic acid.

(49) Short-term limited duration insurance--Health insurance coverage provided under a contract with an issuer that has an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder without the issuer's consent) that is within 12 months of the date the contract becomes effective.

(50) Significant break in coverage--A period of 63 consecutive days during all of which the individual does not have any creditable coverage. Neither a waiting period nor an affiliation period is counted in determining a significant break in coverage.

(51) Small employer--An employer that 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 policy year. For purposes of this definition, a partnership is the employer of a partner. A small employer includes an independent school district that elects to participate in the small employer market as provided under Insurance Code, Article 26.036.

(52) Small employer carrier--A health carrier, to the extent that health carrier is offering, delivering, issuing for delivery, or renewing health benefit plans subject to Subchapters A-G of the Insurance Code, Chapter 26, under Article 26.06(a).

(53) Small employer health benefit plan--A plan developed by the commissioner under the Insurance Code, Chapter 26, Subchapter E, or any other health benefit plan offered to a small employer under the Insurance Code, Article 26.42(c) or Article 26.48.

(54) Standard benefit plans--The basic coverage benefit plan and the catastrophic care benefit plan required to be offered by health carriers, excluding HMOs, under the Insurance Code, Chapter 26, Subchapter E. For HMOs, the standard benefit plan means the prototype small employer group health benefit plan that may be offered by an HMO, as provided under the Insurance Code, Chapter 26, Subchapter E.

(55) Waiting period--A period of time, 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. If an employee or dependent enrolls as a late enrollee, under special circumstances that except the employee or dependent from the definition of late enrollee, or during an open enrollment period, any period of eligibility before the effective date of such enrollment is not a waiting period.

§26.14. Coverage.

(a) Every small employer carrier, except HMOs, shall, as a condition of transacting business in this state with small employers, offer to small employers two standard benefit plans, the basic coverage benefit plan and the catastrophic care benefit plan, as provided under the Insurance Code, Articles 26.42, 26.43, 26.44, 26.44A, 26.44B, and 26.49.

(b) In addition to the standard benefit plans required to be offered to small employers as provided in the Insurance Code, Chapter 26, Subchapters A-G, small employer carriers may, subject to the provisions of the Insurance Code, Article 26.42(c), and this subchapter, offer other health benefit plans to small employers, as provided in the Insurance Code, Article 26.42(c). Such other health benefit plans shall comply with all provisions of the Insurance Code, Chapter 26, and this subchapter, except that provisions defining the specific benefits required under the required standard benefit plans are not applicable. The Insurance Code, Article 26.06(d), does not apply to a health benefit plan offered to a small employer as provided under the Insurance Code, Article 26.42(c).

(c) Instead of the standard benefit plans described by this chapter, a health maintenance organization may offer a state-approved health benefit plan that complies with the requirements of Title XIII, Public Health Service Act (42 United States Code §§300e, et seq.) and rules adopted under that Act or by the Commissioner. An HMO may also offer the prototype small employer group health benefit plan.

(d) All small employer health benefit plans provided by a small employer carrier other than an HMO shall provide an option for conversion/continuation which complies with all provisions of Chapter 3, Subchapter F of this title (relating to Group Health Insurance Mandatory Conversion Privilege). An HMO shall provide coverage for continuation or if offered by the HMO conversion of any small employer health benefit plan which complies with the requirements of Insurance Code, Article 20A.09(k). A state approved health benefit plan that complies with the requirements of Title XIII, Public Health Service Act (42 USC §300e et seq.) shall provide coverage for continuation which complies with the requirements of Insurance Code, Article 20A.09(k) and must offer conversion in compliance with 42 CFR §417.124(e) and applicable federal law.

(e) Each health benefit plan, certificate, policy, rider, or application used by health carriers to provide coverage to small employers and their employees shall comply with the Insurance Code, Article 26.43; be written in plain language; and meet the requirements of Chapter 3, Subchapter G of this title (relating to Plain Language Requirements). Requirements for use of plain language are not applicable to a health benefit plan group master policy or a policy application or enrollment form for a health benefit plan group master policy.

(f) Every small employer carrier providing health benefit plans to small employers is required to offer dependent coverage to each employee. Dependent coverage may be paid for by the employer, the employee, or both.

(g) This subsection contains requirements for optional prototype policy forms for small employer carriers other than HMOs. The policy forms described in this subsection complete a prototype policy and/or certificate when combined with the required prescribed benefit prototype policy forms outlined in this section. The prototype policy forms have been developed to facilitate implementation of the Insurance Code, Chapter 26, Subchapters A-G, and to streamline the policy approval process. Small employer carriers are encouraged to use all of the prototype policy forms as described in this section to expedite the approval process. The forms referenced in this section can be found in §26.27(b) of this title (relating to Forms). Each form has a unique form number appearing in the lower left-hand corner and small employer carriers may use one or any number of the prototype forms. Alternate language, except for variables indicated by brackets, must be filed for review and approval under a different form number using 1212 as part of the form number. Additional filing requirements are outlined in §26.19 of this title (relating to Filing Requirements).

(1) This paragraph describes group policy face pages. These prototype policies provide for the entire contract to include any applications, the certificate of insurance, and any attached riders. If the small employer carrier elects to use policies other than the prototype forms, this shell format shall be used with any small employer health benefit plan. Each policy face page, whether or not the prototype form is used, shall include the small employer carrier name and address; policyholder name (and industry, if used on a multiple employer trustee basis); policy number; policy effective date; provision for the entire contract to include applications, the certificate of insurance, and any attached riders; workers' compensation disclaimer notice; description of the policy in bold type as a small employer benefit plan; and the form number in the lower left hand corner. The policy face page for the prototype form shall contain the description of the plan in bold type as the Group Small Employer Basic Coverage Benefit Plan or the Group Small Employer Catastrophic Care Benefit Plan. The small employer carrier may include or omit the variable provision addressing the free look period. The group policy face pages for the prototype policies include the following:

(A) Group Small Employer Basic Coverage Benefit Plan (Form Number 1212 SE.BASC) for a single employer policy provided at Figure 1 of §26.27(b)(1) of this title (relating to Forms);

(B) Group Small Employer Catastrophic Care Benefit Plan (Form Number 1212 SE.CAT) for a single employer policy provided at Figure 2 of §26.27(b)(2) of this title (relating to Forms);

(C) Group Small Employer Basic Coverage Benefit Plan (Form Number 1212 ASSN.BASC) for an association policy provided at Figure 3 of §26.27(b)(3) of this title (relating to Forms);

(D) Group Small Employer Catastrophic Care Benefit Plan (Form Number 1212 ASSN.CAT) for an association policy provided at Figure 4 of §26.27(b)(4) of this title (relating to Forms);

(E) Group Small Employer Basic Coverage Benefit Plan (Form Number 1212 MET.BASC) for a multiple employer trustee policy provided at Figure 5 of §26.27(b)(5) of this title (relating to Forms);

(F) Group Small Employer Catastrophic Care Benefit Plan (Form Number 1212 MET.CAT) for a multiple employer trustee policy provided at Figure 6 of §26.27(b)(6) of this title (relating to Forms).

(2) The Notice of Toll-Free Telephone Numbers and Information and Complaint Procedures Form (Form Number TOLLFREE) for group policies is described in this paragraph. This prototype form contains the language prescribed in §1.601 of this title (relating to Notice of Toll-Free Telephone Numbers and Information and Complaint Procedures) and shall be attached as the second or third page of the policy and the certificate of insurance. The variable provisions are optional only to the extent outlined in §1.601 of this title.

(3) The group certificate of insurance face page is described in this paragraph. Each certificate of insurance face page, whether or not the prototype form is used, shall include the small employer carrier name and address; the certification provision; a provision that the certificate face page, all attached provisions, and any riders shall constitute the entire certificate of insurance; the workers' compensation disclaimer notice; a description of the plan in bold type as a small employer benefit plan; and the form number in the lower left hand corner. The certificate face page for the prototype form shall contain the description of the plan in bold type as the Group Small Employer Basic Coverage Benefit Plan or the Group Small Employer Catastrophic Care Benefit Plan. The identification information (Employee name, ID Number, Certificate Effective Date, Policyholder Name, Policy Number, Policy Effective Date, Dependent Coverage) is variable to the extent that small employer carriers may include all of the information in the certificate of insurance by any appropriate method, such as an insert or as a sticker on the face page or schedule of benefits or printed on the face page as provided in the prototype form. The dependent coverage information is variable for small employer carriers to insert an employee's election of dependent coverage. The variable replacement provision is an optional provision which carriers may include as provided in the prototype form or carriers may alter the language in any appropriate manner or may elect to omit the provision in its entirety. The group certificate of insurance face pages include the following:

(A) Certificate of Insurance Face Page for the Group Small Employer Basic Coverage Benefit Plan (Form Number 1212 CERT.BASC) provided at Figure 8 of §26.27(b)(8) of this title (relating to Forms);

(B) Certificate of Insurance Face Page for the Group Small Employer Catastrophic Care Benefit Plan (Form Number 1212 CERT.CAT) provided at Figure 9 of §26.27(b)(9) of this title (relating to Forms).

(4) The table of contents for group policies (Form Number 1212 TCG) is described in this paragraph and provided at Figure 10 of §26.27(b)(10) of this title (relating to Forms). The variable items shall be included or omitted as appropriate for the policy or certificate and page numbers shall be numbered accordingly. If the prototype table of contents is not used, the format and order shall be the same as provided in the prototype.

(5) The General Provisions Form for Group Policies (Form Number 1212 GGP) and provided at Figure 11 of §26.27(b)(11) of this title (relating to Forms) may be used with all group small employer health benefit plans. If the prototype general provisions form is not used, each general provision with same or similar language shall be included in each policy/certificate. Variable language for the general provisions form are described as follows:

(A) The definition of an Eligible Employee under the Eligibility for Coverage (Employee Coverage) provision shall add that an "Eligible Employee also includes an Employee of an Employer member of an association" when the policy is to be issued to an association.

(B) The definition of Eligible Dependents under the Eligibility for Coverage (Dependent Coverage) provision allows a variable to include language describing other children who are included under an employer's benefit plan.

(C) The Initial Enrollment for New Eligible Employees provision under Effective Dates allows a variable for receipt of the application or enrollment form within 31 days of the:

(i) date of employment; or

(ii) completion of any waiting period established by the small employer. The length of time for the waiting period is also variable to allow flexibility for small employers to elect a period of time not to exceed 90 days.

(D) The Newborn Children provision under Effective Dates allows a variable to be included if the small employer carrier requires a premium to be charged for the 31-day period of coverage if the insured person elects not to continue coverage for the newborn child. If no premium will be charged, this provision shall be omitted.

(E) The Newly Adopted Children provision under Effective Dates allows a variable to be included if the small employer carrier requires a premium to be charged for the 31-day period of coverage if the insured person elects not to continue coverage for the newly adopted child. If no premium will be charged, this provision shall be omitted.

(F) The Late Enrollment provision under Effective Dates is variable based on whether the small employer carrier has elected to exclude eligible employees or dependents who request late enrollment under a health benefit plan until the next open enrollment period or enroll such applicants immediately. The provision shall be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. The time period is variable to allow a shorter period of time, if elected by the small employer carrier.

(G) The Preexisting Conditions provision is variable only to the extent that it shall be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. If a preexisting condition limitation applies, this provision shall be included in its entirety. The time period is variable to allow a shorter period of time if elected by the small employer carrier.

(H) The Eligible Employees provision under Termination of Insurance allows variables for continued coverage for an employee who is on an approved leave of absence for a specified period of time to be inserted if the provision remains. This provision shall be included or omitted as appropriate.

(I) The Eligible Employees and Dependents provisions under Termination of Insurance allow a variable to be included if the policy contains a grace period.

(J) The Eligible Employees and Dependents provisions under Termination of Insurance allow variables for coverage to end on either "the date the Employer terminates participation in the Trust" which may be included when the policy is to be issued to a multiple employer trust; or "the date the Employer member terminates membership in the Association" which may be included when the policy is to be issued to an association.

(K) The Policyholder and Company provision under Termination of Insurance provides alternate provisions for termination by the Employer as Policyholder; termination by the Association as Policyholder; termination of participation by an Employer (member) under an Association policy, or termination of participation by an Employer under a Multiple Employer Trust policy. Provisions shall be included appropriately for a single employer policy, an association policy or a multiple employer trust policy.

(L) The Policyholder and Company provision under Termination of Insurance allows a variable to be included for the exception to nonpayment of premiums if a grace period is provided. If a grace period is not provided, the variable "Coverage will end at the end of the last period for which premium payment has been made to Us" shall be included. The policy shall contain a provision allowing for termination by the small employer carrier due to fraud or intentional misrepresentation of a material fact by the "Policyholder or" Employer. The phrase "Policyholder or" shall be used when policies are issued to an association or to a multiple employer trust. A variable is allowed to be included if the small employer carrier will terminate the employer's plan for failure to maintain the required minimum participation requirements.

(6) The Group Provisions Form (Form Number 1212 GRP) provided at Figure 12 of §26.27(b)(12) of this title (relating to Forms) may be used with all group small employer health benefit plans. If the prototype Group Provisions form is not used, each provision with the same or similar language shall be included in each policy/certificate. Variable provisions for the Group Provisions form include the following.

(A) A variable is provided in the Payment of Premiums provision for the mode of premium to be inserted.

(B) The Time Limit on Certain Defenses provision allows a variable for Preexisting Conditions only to the extent that it may be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. If a preexisting condition limitation applies, this provision shall be included in its entirety. The time period is variable to allow a shorter period of time if elected by the small employer carrier.

(C) The alternate Time Limit on Certain Defenses provision is allowed to be used in policies that are underwritten as permitted by and in accordance with the Insurance Code, Article 26.21(d). The Preexisting Conditions under the alternate Time Limit on Certain Defenses provision is variable only to the extent that it may be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. If a preexisting condition limitation applies, this provision shall be included in its entirety. The time period is variable to allow a shorter period of time if elected by the small employer carrier.

(D) The Payment to Assignee provision under Payment of Claims is variable only to the extent that Chapter 20 companies may substitute this provision for the alternate Assignment provision.

(E) The Grace Period provision is a variable to be included when a grace period is provided for the specified number of days as determined by the small employer carrier.

(F) Dividends, Right to Recovery/Clerical Error, and Subrogation provisions may be included, omitted, or modified by the small employer carrier. Right to Recovery/Clerical Error provisions shall be considered one provision for purposes of variability and both provisions shall be either included or omitted.

(7) Alternate Cost Containment Provisions for Large Case Management and Second Opinion Requirements (Form Number 1212 ACC) provided at Figure 13 of §26.27(b)(13) of this title (relating to Forms) are provided as optional provisions for all plans. Small employer carriers may use these provisions or modifications of these provisions. The reduction in Percentage Payable is variable but cannot be more than 50%. Other alternate cost containment provisions, including precertification, pre-authorization, case management and utilization review may be used. Penalties for noncompliance with cost containment provisions shall not reduce benefits more than 50% in the aggregate.

(h) Prescribed benefits are discussed in this subsection. No policy, subscriber contract or certificate shall be issued or delivered for issue in this state to a small employer by a small employer carrier as a Basic Coverage Benefit Plan or a Catastrophic Care Benefit Plan unless such policy, subscriber contract, or certificate contains the prescribed benefit provisions outlined in paragraphs (1)-(4) of this subsection.

(1) The Basic Coverage Benefit Plan is discussed in this paragraph. The forms which follow shall be included in this plan as prescribed. Variable language in the prescribed forms is indicated by brackets. These forms can be found in §26.27(b) of this title (relating to Forms. A small employer carrier shall provide the benefits as described in the following subparagraphs (A) and/or (B):

(A) The Schedule of Benefits (Non-PPO Plan) for the Basic Coverage Benefit Plan (Form Number 1212 SCH.BASC) provided at Figure 14 of §26.27(b)(14) of this title (relating to Forms) shall be in the language and format prescribed. This Schedule of Benefits shall be used when the plan does not include preferred provider (PPO) benefits.

(i) A small employer carrier shall offer and make available to the small employer the Basic Coverage Benefit Plan with a Policy Year Deductible of $500 per Insured Person, a Policy Year Coinsurance Maximum of $3,000 per Insured Person and a Percentage Payable of 80%. The amounts are variable to allow the small employer carrier to offer other deductible, coinsurance maximum and percentage payable amounts but the Policy Year Deductible shall not exceed $1,000 per Insured Person, the Policy Year Coinsurance Maximum shall not exceed $5,000 per Insured Person and the Percentage Payable shall not be less than 70%.

(ii) The Schedule of Benefits shall reflect any benefits added by riders and any penalties for failing to comply with any precertification or cost containment provisions. Any such penalties shall not reduce benefits more than 50% in the aggregate.

(B) The Schedule of Benefits (PPO Plan) for the Basic Coverage Benefit Plan (Form Number 1212 SCHPPO.BASC) provided at Figure 15 of §26.27(b)(15) of this title (relating to Forms) shall be in the language and format prescribed. This Schedule of Benefits shall be used when the plan includes preferred provider benefits.

(i) The terms "Policy Year Deductible," "Non-Preferred Provider Policy Year Deductible" and "Preferred Provider Policy Year Deductible" are variable to allow the same policy year deductible to apply to both preferred and non-preferred provider options or to allow a "Non-Preferred Provider Policy Year Deductible" and a "Preferred Provider Policy Year Deductible" if different deductibles will apply. A "Per Office Visit Copayment" may be used in lieu of a Preferred Provider Policy Year Deductible. The deductible may be waived for either option.

(ii) If the small employer carrier elects to include preferred provider benefits, the carrier shall offer and make available to the small employer a Basic Coverage Benefit Plan with a Policy Year Deductible or Non-Preferred Provider Policy Year Deductible of $500 per Insured Person with a Preferred Provider Policy Year Deductible of $250 per Insured Person if a preferred provider deductible is chosen, a Policy Year Coinsurance Maximum of $3,000 per Insured Person and Percentages Payable of 90% for preferred providers and 70% for non-preferred providers. A Per Office Visit Copayment of $10 or $15 can be used in lieu of the Preferred Provider Policy Year Deductible.

(iii) Variability is permitted to allow the small employer carrier to offer other deductible, coinsurance maximum, and percentage payable amounts within the limits set out in the following subclauses.

(I) A variable amount not to exceed $1,000 for the Policy Year Deductible or the Non-Preferred Provider Policy Year Deductible may be elected by the small employer carrier or offered as an option to the small employer. The Preferred Provider Policy Year Deductible amount shall not be less than one half of the Non-Preferred Provider Policy Year Deductible.

(II) In lieu of the Preferred Provider Policy Year Deductible, a Per Office Visit Copayment of $10 or $15 may be included for the preferred provider option for office visits. A carrier may use an office copayment in combination with a preferred provider policy year deductible which is applicable to other services.

(III) A variable amount not to exceed $5,000 for the Policy Year Coinsurance Maximum may be elected by the small employer carrier or offered as an option to the small employer. The preferred provider and non-preferred provider amounts shall be combined for the Policy Year Coinsurance Maximum. Office visit copayments are not required to be included in the calculation of coinsurance maximums.

(IV) A variable Percentage Payable of not less than 60% when non-preferred providers are utilized may be elected by the small employer carrier or offered as an option to the small employer. A variable Percentage Payable when preferred providers are utilized may not be more than 30% greater than the Percentage Payable for non-preferred providers as required by §3.3704(1) of this title (relating to Preferred Provider Plans).

(iv) The Schedule of Benefits shall reflect any benefits added by riders and any penalties for failing to comply with any precertification or cost containment provisions. Any such penalties shall not reduce benefits more than 50% in the aggregate.

(C) The Policy Definitions for the Basic Coverage Benefit Plan (Form Number 1212 DEF.BASC) provided at Figure 16 of §26.27(b)(16) of this title (relating to Forms) shall be in the language and format prescribed.

(i) The terms and definitions for "Contracting Facility" and "Noncontracting Facility" are variables to be included by Chapter 20 companies only and neither provision shall be used by other than Chapter 20 companies.

(ii) The definition Dependent allows a variable to include language describing other children who are included under an employer's benefit plan.

(iii) The term and definition of "Employer" provides a variable to include an Employer member of an association when a policy is to be issued to an association.

(iv) The term and definition of "Hospital" is variable only to allow for additional criteria for purposes of clarification or to accommodate carriers with unique operations and special statutory rights, such as Chapter 20 companies.

(v) The alternate language in the definition of "Initial Enrollment Period" is included for use in a policy that contains a waiting period.

(vi) The alternate definitions for the term "Policy Year" are included to allow the small employer carrier to select the definition that is consistent with the carrier's and employer's practices. The definition as selected shall be included in the policy/certificate.

(vii) The term and definition of "Policyholder" shall be included in the Policy Definitions as appropriate to define the Policyholder as the Employer, the Association, the Trustee of a Multiple Employer Trust or the Cooperative.

(viii) The term and definition of "Preexisting Condition" is variable only to the extent that it may be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. If a preexisting condition limitation applies, the provision shall be included in its entirety. The time period is variable to allow a shorter period of time to be elected by the small employer carrier or offered as an option to the small employer. Language addressing the waiting period is variable only to the extent that it may be omitted in its entirety if the small employer elects not to impose a waiting period.

(ix) The term and definition of "Waiting Period" is variable only to the extent that it may be omitted in its entirety if the small employer elects not to impose a waiting period.

(D) The Benefits Provided for the Basic Coverage Benefit Plan (Form Number 1212 BEN.BASC) provided at Figure 17 of §26.27(b)(17) of this title (relating to Forms) shall be in the language and format prescribed. The Policy Year Coinsurance Maximum amount elected shall be inserted in this provision. Services provided by first assistant at surgery may be included as a covered service if elected by the small employer carrier or offered as an option to the small employer.

(E) The Exclusions and Limitations for the Basic Coverage Benefit Plan (Form Number 1212 EXC.BASC) provided at Figure 18 of §26.27(b)(18) of this title (relating to Forms) shall be in the language and format prescribed. Exclusions of elective abortions, if any, are to be determined by an agreement between the employer and the small employer carrier and shall be included in the exclusions and limitations of the policy and the certificate. Other variable exclusions may be included by Chapter 20 companies for their Non-PPO products only.

(2) The Catastrophic Care Benefit Plan is discussed in this paragraph. The forms which follow shall be included in this plan as prescribed. These forms can be found in §26.27(b) of this title (relating to Forms). Variable language in the prescribed forms is indicated by brackets. A small employer carrier shall provide the benefits as described in the following subparagraphs (A) and/or (B).

(A) The Schedule of Benefits (Non-PPO Plan) for the Catastrophic Care Benefit Plan (Form Number 1212 SCH.CAT) provided at Figure 19 of §26.27(b)(19) of this title (relating to Forms) shall be in the language and format prescribed. This Schedule of Benefits shall be used when the plan does not include preferred provider (PPO) benefits.

(i) A small employer carrier shall offer and make available to the small employer Catastrophic Care Benefit Plans with each of the coverage options described in subclauses (I)-(IV) as follows.

(I) A Policy Year Deductible in the amount of $2,500 per Insured Person with a Policy Year Coinsurance Maximum of $5,000 per Insured Person and a Percentage Payable of 80%.

(II) A Policy Year Deductible in the amount of $2,500 per Insured Person with a Policy Year Coinsurance Maximum of $5,000 per Insured Person and a Percentage Payable of 90%.

(III) A Policy Year Deductible in the amount of $5,000 per Insured Person with a Policy Year Coinsurance Maximum of $10,000 and a Percentage Payable of 80%.

(IV) A Policy Year Deductible in the amount of $5,000 per Insured Person with a Policy Year Coinsurance Maximum of $10,000 and a Percentage Payable of 90%.

(ii) Variability is permitted to allow the small employer carrier to offer additional deductible, coinsurance maximum and percentage payable amounts; but the Policy Year Deductible shall not exceed $5,000 per Insured Person, the Policy Year Coinsurance Maximum shall not exceed $10,000 per Insured Person and the Percentage Payable shall not be less than 70%.

(iii) The Schedule of Benefits shall reflect any benefits added by riders and any penalties for failing to comply with any precertification or cost containment provisions. Any such penalties shall not reduce benefits more than 50% in the aggregate.

(B) The Schedule of Benefits (PPO Plan) for the Catastrophic Care Benefit Plan (Form Number 1212 SCHPPO.CAT) provided at Figure 20 of §26.27(b)(20) of this title (relating to Forms) shall be in the language and format prescribed. This Schedule of Benefits shall be used when the plan includes preferred provider benefits.

(i) The terms "Policy Year Deductible," "Non-Preferred Provider Policy Year Deductible" and "Preferred Provider Policy Year Deductible" are variable to allow the same policy year deductible to apply to both preferred and non-preferred provider options or to allow a "Non-Preferred Provider Policy Year Deductible" and a "Preferred Provider Policy Year Deductible" if different deductibles will apply.

(ii) If the small employer carrier elects to include preferred provider benefits, the carrier shall offer and make available to the small employer the Catastrophic Care Benefit Plan with all of the coverage options described in subclauses (I) and (II) as follows.

(I) A Policy Year Deductible or a Non-Preferred Provider Policy Year Deductible of $2,500 per Insured Person with a Preferred Provider Policy Year Deductible of $1,250 per Insured Person if a preferred provider deductible is chosen and a Policy Year Coinsurance Maximum of $5,000 per Insured Person. Percentages Payable shall be offered at each of the following levels: 80% for preferred providers with 60% for non-preferred providers, and 90% for preferred providers and 70% for non-preferred providers.

(II) A Policy Year Deductible or a Non-Preferred Provider Policy Year Deductible of $5,000 per Insured Person, a Preferred Provider Policy Year Deductible of $2,500 per Insured Person if a preferred provider deductible is chosen, and a Policy Year Coinsurance Maximum of $10,000 per Insured Person. Percentages Payable shall be offered at each of the following levels: 80% for preferred providers with 60% for non-preferred providers, and 90% for preferred providers and 70% for non-preferred providers.

(iii) Variability is permitted to allow the small employer carrier to offer other deductible, coinsurance maximum and percentage payable amounts within the limits set out in the following subclauses.

(I) A variable amount not to exceed $10,000 for the Policy Year Deductible or the Non-Preferred Provider Policy Year Deductible may be elected by the small employer carrier or offered as an option to the small employer. The Preferred Provider Policy Year Deductible shall not be less than one half of the Non-Preferred Provider Policy Year Deductible.

(II) A variable amount not to exceed $15,000 for the Policy Year Coinsurance Maximum may be elected by the small employer carrier or offered as an option to the small employer. The preferred provider and non-preferred provider amounts shall be combined for the Policy Year Coinsurance Maximum.

(III) A variable Percentage Payable of not less than 60% when non-preferred providers are utilized may be elected by the small employer carrier or offered as an option to the small employer. A variable Percentage Payable when preferred providers are utilized may not be more than 30% greater than the Percentage Payable for non-preferred providers as required by §3.3704(1) of this title (relating to Preferred Provider Plans).

(iv) The Schedule of Benefits shall reflect any benefits added by riders and any penalties for failing to comply with any precertification or cost containment provisions. Any such penalties shall not reduce benefits more than 50% in the aggregate.

(C) A small employer carrier may offer and make available to an employer eligible for medical savings account coverage a Catastrophic Care Medical Savings Account Plan. If a small employer carrier elects to offer this plan, the small employer carrier shall develop and submit to the department for approval alternate Schedule of Benefits for either or both a Catastrophic Care Medical Savings Account (Non-PPO) Plan or a Catastrophic Care Medical Savings Account (PPO) Plan. The Schedule of Benefits must comply with applicable laws pertaining to Medical Savings Accounts and include appropriate amendatory language.

(D) The Policy Definitions for the Catastrophic Care Benefit Plan (Form Number 1212 DEF.CAT) provided at Figure 21 of §26.27(b)(21) of this title (relating to Forms) shall be in the language and format prescribed.

(i) The terms and definitions for "Contracting Facility" and "Noncontracting Facility" are variables to be included by Chapter 20 companies only and neither provision shall be used by other than Chapter 20 companies.

(ii) The term and definition of "Employer" provides a variable to include an Employer member of an association when a policy is to be issued to an association.

(iii) The definition Dependent allows a variable to include language describing other children who are included under an employer's benefit plan.

(iv) The term and definition of "Hospital" is variable only to allow for additional criteria for purposes of clarification or to accommodate carriers with unique operations and special statutory rights, such as Chapter 20 companies.

(v) The alternate language in the definition of "Initial Enrollment Period" is included for use in a policy that contains a waiting period.

(vi) The alternate definitions for the term "Policy Year" are included to allow the small employer carrier to select the definition that is consistent with the carrier's and employer's practices. The definition as selected shall be included in the policy/certificate.

(vii) The term and definition of "Preexisting Condition" is variable only to the extent that it may be omitted in its entirety if the small employer carrier elects not to impose a limitation for preexisting conditions. If a preexisting condition limitation applies, the provision shall be included in its entirety. The time period is variable to allow a shorter period of time to be elected by the small employer carrier or offered as an option to the small employer. Language addressing the waiting period is variable only to the extent that it may be omitted in its entirety if the small employer elects not to impose a waiting period.

(viii) The term and definition of "Waiting Period" is variable only to the extent that it shall be omitted in its entirety if the small employer elects not to impose a waiting period.

(E) The Benefits Provided for the Catastrophic Care Benefit Plan (Form Number 1212 BEN.CAT) provided at Figure 22 of §26.27(b)(22) of this title (relating to Forms) shall be in the language and format prescribed. The Policy Year Coinsurance Maximum amount shall be inserted in this provision. Services provided by first assistant at surgery may be included as a covered service if elected by the small employer carrier or offered as an option to the small employer.

(F) The Exclusions and Limitations for the Catastrophic Care Benefit Plan (Form Number 1212 EXC.CAT) provided at Figure 23 of §26.27(b)(23) of this title (relating to Forms) shall be in the language and format prescribed. Exclusions of elective abortions, if any, are to be determined by an agreement between the employer and the small employer carrier and shall be included in the exclusions and limitations of the policy and the certificate. Other variable exclusions may be included by Chapter 20 companies for their Non-PPO products only.

(3) Riders are discussed in this paragraph. The small employer carrier shall offer and make available to the small employer the riders described in subparagraphs (A)-(D). Any benefits added by riders shall be reflected on the Schedule of Benefits.

(A) The Alcohol and Drug Abuse Benefit Rider (Form Number 1212 ADB) provided at Figure 24 of §26.27(b)(24) of this title (relating to Forms) is required to be offered with the Basic Coverage Benefit Plan and the Catastrophic Care Benefit Plan. Variable amounts of five or ten days of care per Insured Person per Policy Year are allowed to be elected by the small employer carrier or offered as an option to the small employer. The coinsurance and deductible amounts are variable.

(B) The Mental Health Benefit Rider (Form Number 1212 MHB) provided at Figure 25 of §26.27(b)(25) of this title (relating to Forms) is required to be offered with the Basic Coverage Benefit Plan and the Catastrophic Care Benefit Plan. The 30 days of inpatient benefits and the 20 outpatient treatments per Insured Person per Policy Year are variable to allow longer periods of time to be elected by the small employer carrier or offered as an option to the small employer. The coinsurance and deductible amounts are variable.

(C) The Prescription Drug Benefit Rider (Form Number 1212 RX) provided at Figure 26 of §26.27(b)(26) of this title (relating to Forms) is required to be offered with the Basic Coverage Benefit Plan and the Catastrophic Care Benefit Plan. Benefits shall be provided at a Percentage Payable of at least 50% but may be provided at a greater Percentage Payable to be elected by the small employer carrier or offered as an option to the small employer. In the alternative the small employer carrier may elect to provide the prescription drug benefit through a prescription drug card program with a copayment not to exceed $8.00 per prescription or refill for a generic drug, or name brand drug if less than the generic drug, and $12 per prescription or refill for a name brand drug. Exclusions of a prescription drug card program shall not be more restrictive than the exclusions contained in Form Number 1212 RX.

(D) The Preventive Care Benefit Rider (Form Number 1212 PCR) provided at Figure 27 of §26.27(b)(27) of this title (relating to Forms) is required to be offered with the Basic Coverage Benefit Plan. The coinsurance and deductible amounts are variable.

(E) Additional riders may be offered as elected by the small employer carrier. Any such riders must be filed in accordance with Chapter 3, Subchapter A of this title (relating to Requirements for Filing of Policy Forms, Riders, Amendments, and Endorsements for Life, Accident and Health Insurance and Annuities).

(4) Forms common to more than one health benefit plan are described in subparagraphs (A)-(C) and shall be included with the benefit provisions of each plan as specified.

(A) Continuation/Conversion Provisions are described in this subparagraph.

(i) Small employer carriers shall include (Form Number 369 CONV) provided at Figure 28 of §26.27(b)(28) of this title (relating to Forms) shall be included with all group plans issued prior to June 1, 1996.

(ii) Small employer carriers shall include Form 369 CCPRO adopted under §3.520 of this title (relating to Appendix) with all group plans issued after June 1, 1996.

(iii) The forms shall be in the language and format prescribed in accordance with Chapter 3, Subchapter F of this title (relating to Group Health Insurance Mandatory Conversion Privilege). The small employer carrier shall include one of the variable provisions for continuation upon policy termination.

(B) The Coordination of Benefits (Form Number 1212 COB) provided at Figure 29 of §26.27(b)(29) of this title (relating to Forms) shall be included with all plans. This form shall be in the language and format prescribed. The variable insert language "This provision will only apply for the duration of your employment with the Employer" is required to be included in the individual policies.

(C) The Preferred Provider Provisions (PPO) (Form Number 1212 PPO) provided at Figure 30 of §26.27(b)(30) of this title (relating to Forms) shall be included with all plans when preferred provider options are included. This form shall be in the language and format prescribed. Additional provisions may be added as necessary to disclose preferred provider information.

(i) Variable provisions are allowed for the definition of service area to be in terms of counties, zip codes, in terms of a 50 mile radius from the employee's principal place of employment unless there are no providers located within the 50 mile radius, or the service area may be described in a specific document to be referenced in the policy/certificate provision. Service areas by zip codes shall be defined in a non-discriminatory manner and in compliance with the Insurance Code, Articles 21.21, §4, and 21.21-6. Service area definitions and descriptions shall be filed with the form filings. The small employer carrier shall obtain approval for any definition of the service area by counties or zip codes where the grouping of counties or zip codes exceed a 50 mile radius from the principal place of employment or for a different definition of a service area.

(ii) Small employer carriers shall include language regarding complaint and appeal procedures in accordance with applicable law.

(iii) Except as provided in §26.21 of this title (relating to Cost Containment) preferred provider arrangements shall comply with Chapter 3, Subchapter X of this title (relating to Preferred Provider Plans) and Insurance Code, Article 3.70-3C.

(5) Applications are discussed in this paragraph. The Texas Small Employer Group Health Benefit Plan Master Application (Form Number 1212 APP) provided at Figure 31 of §26.27(b)(31) of this title (relating to Forms) may be used by small employer carriers. Small employer carriers may use any appropriate application, enrollment or participation agreement forms in lieu of this form. Variability is described in the following subparagraphs:

(A) Language relating to a waiting period is variable only to the extent that it may be omitted in its entirety if the small employer elects not to impose a waiting period.

(B) Language relating to additional deductibles, coinsurance and percentage payable is variable only to the extent that the amounts offered comply with the provisions of this subsection.

(6) The House Bill 1212 Compliance Rider for Small Employers (Form Number 1212 SE END) provided at Figure 32 of §26.27(b)(32) of this title (relating to Forms) may be used as a guide for carriers to bring existing policies into compliance with the requirements of these regulations. Because of the differences in small employer health benefit plans, the compliance rider provisions may not be all encompassing and carriers should amend the rider as needed to achieve compliance with these rules and with the provisions of Insurance Code, Chapter 26, Subchapters A-G. Any variability that was previously discussed in these rules regarding the prototype policies shall be addressed accordingly in this rider.

(7) Individual small employer benefit plans are discussed in this paragraph. Although individual prototype policies were not developed, carriers must develop their own individual small employer policies using the rules for the group small employer prototype forms, amended as necessary to comply with the statutes and regulations pertaining to individual accident and sickness insurance. Prescribed components include the Benefits, Definitions, and Exclusions and Limitations provisions as set out in paragraphs (1)-(4) of this subsection relating to prescribed benefit provisions. All forms must be filed with the department in accordance with Chapter 3, Subchapter A of this title (relating to Requirements for Filing of Policy Forms, Riders, Amendments, and Endorsements for Life, Accident and Health Insurance and Annuities).

(i) HMO Coverage. Every HMO small employer carrier shall, as a condition of transacting business in this state with small employers, offer to small employers a standard benefit plan as provided under the Insurance Code, Articles 26.42, 26.43, 26.44, 26.44A, 26.44B, 26.48, and 26.49(g). The HMO forms are as follows:

(1) Prototype contract/certificate of coverage and benefit plans have been developed to facilitate implementation of the Insurance Code, Chapter 26, and to streamline the contract approval process. The required benefit language is provided in the prototype Small Employer Group Health Benefit Plan (Form Numbers 1212 HMO-GRP CONT, Contract and Certificate of Coverage; 1212 HMO-APP, Group Application; 1212 HMO-SCHB, Schedule of Benefits; 1212 HMO-RX, Prescription Drugs Benefit Rider; 1212 HMO-DAA, Drug and Alcohol Abuse Benefit Rider; 1212 HMO-INF, Infertility Benefit Rider; 1212 HMO-MHMR, Mental Health Benefit Rider). These forms can be found at Figures 33-39 of §26.27(b)(33)-(39) of this title (relating to Forms. Variable provisions in these forms are denoted in brackets. HMOs may use various options in accordance with the bracketed provisions. Exclusions of elective abortions, and health services that violate religious convictions, if any, are to be determined by an agreement between the employer and the small employer carrier and must be in the contract/certificate of coverage in the Exclusions contract provision.

(2) The prototype contracts/certificates of coverage provide for the entire contract to include an application, schedule of benefits, and any attached riders.

(3) If the HMO elects to be a small employer carrier and offers a health benefit plan other than the prototype benefit plan, that plan must be a state approved health benefit plan that complies with the requirements of Title XIII, Public Health Service Act (42 United States Code §§300, et seq.) and the rules adopted under the Act or by the Commissioner. An HMO small employer carrier that is offering a state approved health plan shall submit health benefit plan forms that contain the following:

(A) CONTRACT FACE PAGE. This page shall contain the name, address and telephone numbers (800 number, if applicable) of the health maintenance organization, workers compensation disclaimer notice, and the form number in the lower left hand corner.

(B) TOLL-FREE NUMBER PAGE. This form must contain the language prescribed in §1.601 of this title (relating to Notice of Toll-free Telephone Numbers and Information and Complaint Procedures) and shall be attached as the first, second or third page of the contact.

(C) CONTRACT PROVISIONS. At a minimum, the contract must contain the following provisions:

(i) Face Page;

(ii) Benefits;

(iii) Cancellation;

(iv) Claim filing procedure;

(v) Complaint procedure;

(vi) Conformity with state law;

(vii) Continuation of coverage for certain dependents;

(viii) Conversion privilege;

(ix) Coordination of Benefits;

(x) Definitions;

(xi) Effective date;

(xii) Eligibility;

(xiii) Emergency services;

(xiv) Entire contract provisions;

(xv) Exclusions and limitations;

(xvi) Grace period;

(xvii) Incontestability;

(xviii) Schedule of charges;

(xix) Service area;

(xx) Subrogation;

(xxi) Termination.

(D) RIDERS. Riders allowing for additional benefits may be attached to the state approved health benefit plan and to the Texas Small Employer Group Health Benefit Plan.

(E) PREMIUM RATES. Premium rates must be established in accordance with Article 26.38(a) or 42 CFR §417.104.

(j) Every small employer carrier providing a health benefit plan to a small employer shall comply with Insurance Code Article 21.53F if the plan provides maternity coverage, including benefits for childbirth.

(k) A small employer carrier that offers point-of-service coverage shall comply, as applicable, with the requirements set forth in either Chapter 11, Subchapter Z of this title (relating to Point-of-Service Riders) or Chapter 21, Subchapter U of this title (relating to Arrangements between Indemnity Carriers and HMOs for Point-of-Service Coverage).

Subchapter C. LARGE EMPLOYER HEALTH INSURANCE PORTABILITY AND AVAILABILITY ACT REGULATION.

§26.312. Point-of-service Coverage.

(a) Definitions. The following words and terms when used in this section shall have the following meanings.

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

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

(3) 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 for 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.

(4) Participating physicians and providers--Physicians and providers that are part of an enrollee´s HMO delivery network.

(5) Point-of-service (POS) option--Coverage that complies with the out-of-plan coverage set forth in either Chapter 11, Subchapter Z of this title (relating to Point-of-Service Riders) or Chapter 21, Subchapter U of this title (relating to Arrangements between Indemnity Carriers and HMOs for Point-of-Service Coverage) and that allows the enrollee to access out-of-plan coverage at the option of the enrollee.

(6) Point-of-service (POS) plan--As defined in Article 26.09(a)(2) of the Code.

(b) A large employer carrier that offers POS coverage shall comply, as applicable, with the requirements set forth in either Chapter 11, Subchapter Z of this title or Chapter 21, Subchapter U of this title.

(c) If an HMO issues coverage to a large employer and eligible employees have access only to in-plan covered services through one or more HMOs, each of the HMOs issuing such coverage must offer the eligible employees the option of obtaining coverage that complies with the out-of-plan coverage set forth in either Chapter 11, Subchapter Z of this title or Chapter 21, Subchapter U of this title, and that allows the enrollee to access out-of-plan coverage at the option of the enrollee.

(d) All HMOs offering coverage to eligible employees of a large employer may enter into a written agreement designating one or more of the HMOs to offer the POS option required under this section.

(1) A copy of the agreement must be retained on file by each of the HMOs participating in the agreement and be made available to the department upon request.

(2) If an HMO participating in the agreement ceases to offer coverage to the large employer, a new agreement that complies with all of the requirements of this section must be entered into by all remaining HMOs offering coverage to employees of the large employer.

(3) If for any reason, an agreement is not in existence that ensures that all eligible employees have the option of selecting out-of-plan covered benefits under this section from at least one of the HMOs offering coverage to the eligible employees, each HMO must offer the eligible employees the option of selecting out-of-plan coverage as required by this section.

(e) An eligible employee that selects a POS option is responsible for paying all costs, including premiums, coinsurance, copayments, deductibles and any other cost sharing provisions imposed by the POS option, including any administrative cost imposed by a large employer as permitted by Article 26.09(e) of the Code.

(f) The premium for coverage required to be offered under this section shall be based on the actuarial value of that coverage and may be different than the premium for the in-plan covered services provided by the HMO through the enrollee´s evidence of coverage.

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