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Subchapter U. Arrangements between Indemnity Carriers and HMOs for Point-of-Service Coverage 28 TAC §21.2901 and §21.2902

The Commissioner of Insurance adopts new Subchapter U, §21.2901 and §21.2902, concerning point-of-service plans. The sections are adopted with changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 77).

The new sections are necessary to implement legislation enacted by the 76 th Texas Legislature in House Bill (HB) 1498 which amended the Texas 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 new sections are to develop provisions relating to point-of-service (POS) plans. A 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. Under the adopted rules, the POS plan can be created jointly by indemnity carriers and HMOs, either by 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 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.

Contemporaneously with this adoption, the adoption of new 28 TAC §§11.2501-11.2503 and 26.312, and adoption of amendments to §26.4 and §26.14, are published elsewhere in this issue of the Texas Register. The separately published new sections of 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 amendments and new section added to Chapter 26 clarify that small and large employer carriers may issue point of service plans provided the carrier complies with the standards relating to both the various types of POS plans set forth in this adoption as well as the amendments and new sections added to Chapter 11. The Chapter 26 adoption also creates standards for POS coverage options that large employer HMOs 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.

New §21.2901 defines the terms used in the subchapter. New §21.2902 sets forth the respective requirements for blended contract POS plans and dual contracts POS plans, including the required terms of the written agreement that must be entered into between the HMO and indemnity carrier that are jointly issuing the plan, the basic requirements both for the contract or contracts that constitute the plan, as well as the plan itself, and the filing requirements for the plans.

For clarification, the department has made the following changes§: §The term "cost containment requirements" has been substituted for the word "precertification" in §21.2902(c)(8) and (d)(1)(E) and a definition of "cost containment requirements" has been added to §21.2901. This change has no substantive effect on these sections. Rather, "cost containment requirements" has been substituted for clarity because of inconsistencies in the way carriers use the word "precertification." Cost containment requirements may be used by carriers as a condition of indemnity coverage. As used in these sections, the term refers to a process in which a carrier requires, as a provision of the indemnity portion of a POS plan, that an enrollee planning to undergo certain medical procedures must first call and notify the carrier. The carrier will then review the proposed procedure to determine if it is being conducted in the most appropriate setting, and for some plans, whether it is a benefit provided by the plan. For example, a policy or contract might require this process before an enrollee undergoes inpatient surgery. Failure to comply with the requirements before receiving the treatment, assuming the treatment is found to be a covered benefit, will result in a lower level of coverage under the indemnity portion of the plan for the procedure.

§21.2901(5) & (11): A commenter believes that the inclusion of "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" in the definitions of "out-of-plan covered benefits" and "POS indemnity coverage" appears to be a departure in scope and focus from the provisions of HB 1498.

Response: The department disagrees that these sections are not consistent with the scope and focus of HB 1498. The definition is necessary to ensure that the HMO gatekeeping and network requirements are not imposed on the coverage obtained under the indemnity portion of the plan. The purpose of HB 1498 is to provide increased choice by allowing an enrollee that elects a POS plan the option to choose whether to: (1) obtain services through the HMO network with lower out-of-pocket costs but be required to utilize the network and its gatekeeping requirements to access services; or (2) utilize the indemnity benefits offered by the plan to receive the services from the provider of his or her choice without the gatekeeping requirements of the HMO, knowing that the out-of-pocket costs will be greater than the cost of obtaining services through the HMO coverage.

These sections fulfill the purpose of HB 1468 by permitting an enrollee to obtain covered services from his or her provider of choice without complying with the HMO´s gatekeeper requirements. If coverage for services obtained from physicians and providers who are members of the HMO network were not included under the indemnity portion of the plan, an enrollee residing in an area dominated by one HMO that contracts with the majority of the providers in that area would have a restricted, rather than an enhanced, choice of physicians and providers.

An enrollee that purchases a POS plan pays a premium that includes both HMO and indemnity coverage. The enrollee is responsible for paying all excess out-of-pocket costs for indemnity benefits. The plan carriers consider the expense of reimbursing a physician or provider at a non-contracted rate in calculating the premium for the plan.

§21.2902(b)(2): A commenter feels that cancellation for non-payment of a portion of premium should not apply to both parts of the coverage unless they are billed as a single premium.

Response: The department disagrees. This provision clarifies that coverage under a plan that combines both HMO and indemnity coverage as a POS plan is a distinct plan from a plan providing coverage solely through an HMO or an indemnity carrier. Renewability requirements for the plan apply to both the HMO and indemnity coverage contained in the plan. Conversely, although the amount of premium charged for the plan to cover the costs of the HMO coverage and the indemnity coverage will be determined separately, the total premium paid goes toward the total coverage available under the plan. Neither the coverage nor the premium is severable. Therefore, the carriers issuing the plan cannot treat an enrollee's failure to pay the entire premium as an election to sever the HMO coverage from the indemnity coverage. The subsection specifically requires that this provision be included in all POS contracts offered or issued to an enrollee so enrollees will be on notice of this requirement.

§21.2902(b)(4)(B) & (b)(4)(C): A commenter supports provisions prohibiting HMOs and insurers from requiring enrollees to use either HMO or indemnity coverage before using other coverage, but expressed concern about provisions allowing a reduction in the amount of coverage in the indemnity portion if HMO coverage is used first. The commenter believes enrollees should be allowed to use coverage in whatever order they want without penalty.

Response: Section 21.2902(b)(4)(B) prohibits coverage under the HMO from being reduced by benefits the enrollee obtains through the indemnity portion of the plan. Section 21.2902(b)(4)(C) allows the plan to reduce the annual limits in the indemnity portion of the plan by services accessed by the enrollee under the HMO coverage. For example, an enrollee who always utilizes the indemnity coverage first during each plan year could utilize all coverage up to an annual limit imposed on the indemnity benefits and then switch to HMO coverage for the remainder of the plan year. An enrollee that begins the plan year by using HMO coverage, which is then charged against the coverage available under the indemnity portion of the plan, could conceivably exhaust that plan year´s annual indemnity benefits and be left with only HMO coverage for the remainder of the plan year.

The department disagrees that this constitutes a penalty. The rule is not designed to require an enrollee to utilize coverage in a particular order. Federal law mandates §21.2902(b)(4)(B). Section 21.2902(b)(4)(C) is necessary because otherwise carriers, in order to provide POS plan benefits, would be required to charge a premium that would be prohibitively high, possibly depriving all but the most affluent consumers of the ability to obtain this type of coverage. Rather than acting as a penalty, §21.2902(b)(4)(C) benefits consumers by keeping the POS option more affordable.

§21.2902(c)(8) & (d)(1)(C): A commenter suggests limiting coinsurance to no more than 30%. The commenter believes that allowing cost-sharing of up to 50% does not provide a valid option to health plan enrollees.

Response: The department disagrees. The POS option is intended to provide an enrollee with the option to obtain services outside of the HMO network. The statute contemplates that the enrollee choosing this option must bear the additional cost involved. Nothing in the statute suggests that the indemnity coverage provided under a POS plan should be subject to requirements that are not imposed on other types of indemnity coverage.

The 50% coinsurance maximum does not deprive enrollees of a valid POS option. Fifty percent is the maximum coinsurance the department will permit a carrier to require an enrollee to provide for indemnity coverage. Nothing in the statute indicates that indemnity coverage provided under a POS plan must exceed coverage provided under any other type of indemnity coverage.

§21.2902(c)(8) & (d)(1)(E): A commenter believes that allowing potential penalties of up to 50% for failure to comply with cost containment requirement provisions could result in no real coverage. The commenter recommends that the penalty for failure to comply be no more than 10 or 15 percent and either removing the term or adding a more specific definition of "other cost containment."

Response: The department disagrees that the 50% limit results in a lack of real coverage. The POS plan is intended to provide an enrollee with the option to obtain services both in and outside of the HMO network. It does not exempt the indemnity portion of the coverage from the standards generally applied to indemnity coverage. Removal of the phrase "other types of cost containment" or limitations on the penalty to no more than 10 or 15 percent would result in the imposition of limitations on the types of cost containment that can be applied to a POS plan that is not imposed on other indemnity coverage offered by carriers. As stated previously, this is not supported by the statute. A definition of cost containment requirements was added to §21.2501.

General: A commenter indicates that there are provisions in the proposed rules stating that certain other statutory provisions continue to apply to HMOs that should be stated in both Subchapter Z and Subchapter U. The commenter also believes that the phrase "all applicable laws, including" should be placed in front of the specific laws since specific provisions of the Code still apply.

Response: The department disagrees that a section must recite that other rules and laws apply to plans issued under this subchapter in order for those rules and laws to apply. It is axiomatic that a carrier must comply with all other applicable statutes and rules when issuing a plan under this subchapter, regardless of whether the subchapter specifically includes such a statement.

For with changes: Office of Public Insurance Counsel and PacifiCare of Texas.

The new sections are adopted under the Insurance Code, Articles 3.64 and 20A.22 and §36.001. Article 3.64(f) provides that the Commissioner of Insurance may adopt rules to implement Article 3.64 of the Insurance Code. 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.

Subchapter U. Arrangements between Indemnity Carriers

and HMOs for Point-of-Service Coverage

§21.2901. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Corresponding benefits--Benefits provided under 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.

(2) Cost containment requirements--Provisions in POS indemnity coverage requiring a specific action, such as the provision of specified information to the plan, that must be taken by an enrollee or by a physician or a provider on behalf of the enrollee in order to avoid the imposition of a specified penalty on the coverage provided under the plan for a proposed service or treatment.

(3) 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.

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

(5) 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.

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

(7) 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 are provided by an HMO under a POS plan.

(8) Point-of-service coverage (POS coverage)--Coverage provided under a POS plan.

(9) 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.

(10) Point-of-service HMO coverage (POS HMO coverage)--Services provided by an HMO in an evidence of coverage under a POS plan.

(11) Point-of-service indemnity coverage (POS indemnity coverage)--Coverage for which an indemnity carrier is at risk under a POS plan for self-referred health care services, benefits and supplies, other than emergency services, selected at the option of the enrollee, from non-participating physicians or providers, as well as services, benefits and supplies from participating physicians or providers under circumstances in which the enrollee fails to comply with the requirements of the HMO providing the POS HMO coverage under a POS plan for obtaining in-plan covered services.

§21.2902. Arrangements between Indemnity Carriers and HMOs to Provide Coverage.

(a) Written agreement between the HMO and the indemnity carrier. A POS plan offered under this subchapter must be evidenced by a written agreement between the HMO and indemnity carrier that must be filed with the department as a plan document and shall provide the following:

(1) the identity of each entity, including the HMO, the indemnity carrier, or any third party administrator (TPA) that will administer the coverages offered under the POS plan;

(2) all duties of the HMO and indemnity carrier to each other relating to the POS plan issued under this subchapter;

(3) all costs allocable to the HMO or the indemnity carrier relating to the POS plan;

(4) the HMO´s network of providers and, if the POS indemnity coverage includes preferred provider benefits, as allowed by Article 3.70-3C of the Code and applicable rules, the indemnity carrier´s list of preferred providers, which shall not be identical and;

(5) the respective premium rates for the POS HMO coverage and for the POS indemnity coverage shall be derived separately by the HMO and the indemnity carrier and shall be separately identified in each POS plan contract; however, the agreement may provide that for a POS plan offered by the entities under this subchapter:

(A) the HMO, the indemnity carrier or a TPA may collect the premiums for both coverages;

(B) the purchaser may issue one payment for both coverages; and

(C) the entity delegated to collect the premium shall then disburse the appropriate premium to the other party or parties;

(6) premium rates charged by the HMO must be based on the actuarial value of the POS HMO coverage and may be different from the premium rates charged by the indemnity carrier, which must be based on the actuarial value of the POS indemnity coverage offered by the indemnity carrier;

(7) the HMO and indemnity carrier must maintain separate books and records for the POS plan, including but not limited to information regarding premiums, lists of covered persons, claim payment data, complaint records, maintenance tax records, and all other books and records required to be maintained by law or rule;

(8) neither entity shall use the other to perform functions or duties that are its own responsibility by§ §law or rule, including but not limited to, making all reports and filings required by law or rule;

(9) the entities may delegate those functions or duties permitted by law or rule to be delegated to another party to perform, including but not limited to contracting with providers, administering claims, and conducting grievance procedures, provided that the delegating entity shall remain responsible for ensuring that all delegated functions shall be conducted in compliance with all applicable laws and rules;

(10) the agreement between the indemnity carrier and the HMO may not be canceled or terminated until the coverage for each enrollee in a POS plan issued by both the indemnity carrier and HMO is terminated or canceled pursuant to the provisions of this subchapter; and

(11) the arrangements to be made in the event of insolvency, loss of certification or any other circumstances affecting the ability of the indemnity carrier, the HMO, or both to comply with this subchapter.

(b) Basic requirements. In addition to complying with all of the requirements listed in subsection (a) of this section, a contract creating a POS blended contract plan and contracts that together create a POS dual contracts plan must provide the following:

(1) enrollees shall not be required to first use either the POS indemnity coverage or POS HMO coverage ;

(2) if the premiums necessary to maintain both the POS HMO coverage and the POS indemnity coverage are not paid, both coverages shall be cancelled simultaneously, and any premium the enrollee has remitted to maintain coverage shall be returned to the enrollee;

(3) the POS HMO evidence of coverage must include all mandatory HMO coverages and the POS indemnity coverage must contain all mandatory indemnity coverages;

(4) corresponding coverage for a POS plan must include the following:

(A) all mandatory benefit offers required by the Code that are accepted or rejected by the purchaser must also be accepted or rejected in the same manner with respect to both the POS HMO and the POS indemnity coverage;

(B) benefits under the POS HMO coverage may not be reduced by the benefits received under the POS indemnity coverage; and

(C) benefits for POS indemnity coverage under the plan may be reduced by benefits received under the POS HMO coverage.

(5) if medically necessary covered services, benefits and supplies are not available through the HMO´s participating physicians or providers, the HMO is not relieved of its obligation to provide out-of-network services under Article 20A.09 of the Code on the basis that the same services are available to an enrollee through POS indemnity coverage; and

(6) each POS contract must identify the respective premium rates for the POS HMO coverage and for the POS indemnity coverage, as well as the name and address of the entity to whom the premiums must be paid.

(c) POS blended contracts. Contracts for POS blended contract plans must:

(1) list all POS HMO coverage;

(2) specify how services, benefits and supplies under the POS HMO coverage are accessed;

(3) list all POS indemnity coverage;

(4) specify how claims are made for POS indemnity coverage;

(5) disclose all copayments required;

(6) disclose all coinsurance required for POS indemnity coverage, which shall never exceed 50% of the total amount to be covered;

(7) disclose all deductibles required;

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

(9) disclose how the enrollee may complain about a denial of coverage and appeal an adverse determination rendered concerning the coverage under the POS plan and disclose any rights the enrollee may have to an independent review of an adverse determination under Article 21.58A of the Code;

(10) POS indemnity coverage issued to a group shall contain provisions that comply with Article 3.51-6 Sec. (1)(d)(2)(vii) - (xiii) of the Code; and

(11) POS indemnity coverage issued to an individual shall contain provisions that comply with Article 3.70-3(A)(5) - (11) of the Code.

(d) POS dual contracts. Contracts comprising a POS dual contract plan must comply with the following:

(1) The contract issued by the indemnity carrier shall comply with all applicable requirements for indemnity carriers and shall:

(A) list all indemnity coverage;

(B) specify how claims are made;

(C) disclose all applicable copayments and coinsurance, which shall never exceed 50% of the total amount to be covered;

(D) disclose all applicable deductibles;

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

(F) disclose how the enrollee may complain about a denial of coverage and appeal an adverse determination rendered concerning the coverage under the POS indemnity coverage and disclose any rights the enrollee may have to an independent review of an adverse determination under Article 21.58A of the Code, if applicable;

(G) POS indemnity coverage issued to a group, shall contain provisions that comply with Article 3.51-6 Sec (1)(d)(2)(vii) - (xiii) of the Code;

(H) POS indemnity coverage issued to an individual shall contain provisions that comply with Article 3.70-3(A)(5) - (11) of the Code.

(2) The contract issued by the HMO shall comply with all requirements for an HMO evidence of coverage and shall:

(A) list all covered services, benefits and supplies;

(B) specify how covered services, benefits and supplies are accessed by the enrollee; and

(C) disclose all applicable copayments.

(e) Filings. All plan documents for a POS plan offered under this subchapter shall be submitted to the Filings Intake Division in accordance with:

(1) Article 20A.09 of the Code and Chapter 11 of this title (relating to Health Maintenance Organizations) including the filing fee requirements; and

(2) Article 3.42 of the Code and Chapter 3, Subchapter A of this title (relating to Requirements for Filing of Policy Forms, Riders, Amendments, Endorsements for Life, Accident, and Health Insurance and Annuities) including the filing fee requirements.

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