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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 Texas Department of Insurance proposes new Subchapter U, §21.2901 and §21.2902, concerning point-of-service plans. These new sections are necessary to implement legislation enacted by the 76 th Texas Legislature in House Bill 1498 which amended the Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art. 26.09; Subchapter F, Chapter 3, was amended by adding Art. 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of these proposed new sections are to develop provisions relating to point-of-service (POS) plans. A POS plan is a health care plan that combines managed care and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the managed care delivery system or from a physician or provider outside of the delivery system on a fee for services basis. Under the proposed 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 managed care components of the plan; or through a "dual contracts point-of service plan." A dual contracts point-of-service plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the managed care portion of the plan, and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan. Proposed new §21.2901 defines the terms used in the subchapter. Proposed 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.

Contemporaneously with this proposal, proposed new §§11.2501-11.2503 and 26.312, and proposed amendments to §26.4 and §26.14, are published elsewhere in this issue of the Texas Register. The separately published proposed new sections 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 proposal also sets forth the financial criteria an HMO must meet in order to issue these point-of-service rider plans. The separately proposed amendments to and new section added to Chapter 26 clarify that small and large employer carriers may issue point of service plans provided the carrier complies with the standards relating to both the various types of POS plans set forth in this proposal as well as the amendments and new sections added to Chapter 11. The Chapter 26 proposal also creates standards for POS coverage options that large employer carriers issuing HMO coverage to large employers are required by House Bill 1498 to offer to eligible employees if the only coverage available to the employees is through a managed care plan or plans.

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

Ms. Stokes has determined that for each year of the first five years the sections are in effect, the public benefits anticipated as a result of the proposed sections will be increased availability of health benefit options for eligible and potential enrollees in HMOs by allowing enrollees to choose physicians and other providers from outside of the HMO. In addition, HMOs, insurers and other entities that offer indemnity health plans will have more flexibility in joining together to create new products combining the cost-containment features of a managed care plan with the freedom to go outside of the managed care services delivery network to obtain services from providers without obtaining the plan approval. Almost all of the economic costs to persons required to comply with the new sections for each year of the first five years the sections will be in effect are the result of the legislative enactment of House Bill 1498 and not the result of the adoption, enforcement, or administration of the new sections. One component of these rules which is expected to result in expenditures in excess of the requirements imposed by statute are the costs of providing a side-by-side summary of the benefits provided under the indemnity portion of the plan and the services provided by the HMO portion of the plan. House Bill 1498 requires POS plans to offer corresponding benefits. The purpose of the summary is to provide an explanation to potential enrollees and enrollees that demonstrates that the POS plan contains the corresponding benefits. Only the cost of preparing the summary and including it in the plan documents is attributable to the rule. The department estimates that the length of the required summary will depend upon the total coverage that the HMO and indemnity carrier plan to offer. The printing cost and paper is estimated by the department to be between $.02 and $.05 per page, thereby increasing the cost of each plan document by between $.02 and $.05 per page. Since the summaries are included in the plan documents that are prepared by the HMO and indemnity carriers, there should be no additional delivery costs. The total cost to HMO and indemnity carriers affected by the proposed sections is not dependent upon the size of the carrier, but rather is dependent on the amount of coverage that the HMO and indemnity carriers decide to offer. Small businesses, micro-businesses and the largest businesses affected by these sections would all incur the same additional cost per plan document. The number of plan documents distributed by the HMO and indemnity carriers would be dependent upon the entities targeted for their business and the enrollees and potential enrollees associated with the entities who accept the point-of-service plan marketed by the HMO and indemnity carriers. The adoption of these proposed sections will have no adverse economic impact on regulated entities that are required to comply with the proposed sections and that qualify as small and micro-businesses under the Government Code, §§2006.001-2006.002. The rules ensure that the HMO and indemnity carriers can explain to potential enrollees and enrollees that the plan contains corresponding benefits as required by House Bill 1498. Considering the purposes of House Bill 1498, it is neither legal nor feasible to waive or modify the requirement of these sections for small and micro-businesses. as doing so would result in a disparate effect on persons obtaining coverage from these HMO and indemnity carriers and would not be consistent with the purpose of House Bill 1498.

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

The new sections are proposed 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.

The following articles are affected by this proposal: Articles 3.42 and 20A.02 of the Insurance Code.

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) 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.

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

(4) 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.

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

(6) 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.

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

(8) 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.

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

(10) 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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