Subchapter AA

Consumer Choice Health Benefit Plans

28 TAC §§21.3501 21.3505, 21.3510 21.3518,

21.3525 21.3530, 21.3535, and 21.3540 21.3544

The Texas Department of Insurance proposes new Subchapter AA, §§21.3501 21.3505, 21.3510 21.3518, 21.3525 21.3530, 21.3535, and 21.3540 21.3544 , concerning consumer choice health benefit plans. These proposed new sections are the result of the enactment of Senate Bill (SB) 541 during the 78 ^th Regular Legislative Session. That legislation added, among other provisions, Texas Insurance Code Arts. 3.80 and 20A.09N, which are designed to increase the availability of health insurance coverage by allowing authorized insurers and health maintenance organizations (HMOs) to issue health plans that, in whole or in part, do not offer or provide state-mandated health benefits. In furtherance of this goal of increased availability and to provide more flexibility in the HMO market, SB 541 also changed the definition of "basic health care services" in the HMO Act, Texas Insurance Code Chapter 843. Amendments relating to this change are the subject of proposed rules published elsewhere in this issue of the Texas Register.

The purpose of these rules is to implement the provisions and the intent of SB 541 by increasing availability of more affordable health benefit plans; developing a well-defined, efficient process for bringing those plans to market; and instituting appropriate safeguards to ensure consumer understanding of and freedom to choose between health benefit plan options.

Proposed §21.3501 provides the statement of purpose for the subchapter. Proposed §21.3502 adds definitions for terms used in the subchapter. Proposed §21.3503 contains authority for health carriers to offer consumer choice health benefit plans. Proposed §21.3504 contains a severability clause. Proposed §21.3505 provides that the rule applies only to a health plan delivered, issued for delivery, or renewed on or after the effective date for the subchapter.

Proposed §§21.3510 21.3518 enumerate the benefits considered "state-mandated health benefits," which a health carrier may exclude, for each type of consumer choice health benefit plan a health carrier may offer.

Proposed §21.3525 sets out the notice that health insurers must include on each application for a consumer choice health benefit plan, and proposed §21.3526 sets out the notice that health insurers must include on the policy itself. Proposed §§21.3527 and 21.3528 set out the notices that an HMO must provide on the application and evidence of coverage. Proposed §21.3529 enumerates duties of agents marketing, soliciting, receiving an application for, or administering a consumer choice health benefit plan. Proposed §21.3530 provides requirements for a disclosure which each health carrier offering or providing a consumer choice health benefit plan must provide each prospective or current policyholder. Proposed §21.3535 addresses requirements for health carrier retention of the signed disclosure statement required by §21.3530 and the written affirmation required by §21.3542. Proposed §21.3540 requires health carriers to include coverage for direct access to the health care services of an obstetrical or gynecological care provider. Proposed §21.3541 requires HMOs offering a consumer choice health benefit plan to provide basic health care services. Proposed §21.3542 requires a health carrier that offers a consumer choice health benefit plan to make available a comparable plan that includes all state-mandated health benefits. The section also requires a health carrier to obtain written affirmation that it offered one of these alternative plans. Proposed §21.3543 details the documents a health carrier must provide when filing a consumer choice health benefit plan with the department. Proposed §21.3544 addresses required annual reporting related to consumer choice health benefit plans which health carriers must make to the department.

The Department will consider the adoption of the proposed new §§21.3501 21.3505, 21.3510 21.3518, 21.3525 21.3530, 21.3535, and 21.3540 21.3544 in a public hearing under Docket No. 2587 scheduled for February 6, 2004, at 9:30 a.m. in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas.

Kimberly Stokes, Senior Associate Commissioner for the Life, Health, and Licensing Program, 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 and 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 availability of more affordable health benefit plans; a well-defined, efficient process for bringing those plans to market; and appropriate safeguards to ensure consumer understanding of and freedom to choose between health benefit plan options. Except as provided below, any cost to persons required to comply with these sections for each year of the first five years the proposed sections will be in effect is the result of the enactment of SB 541 and not the result of the adoption, enforcement, or administration of the sections.

The additional probable economic costs to persons required to comply with the sections are as follows:

Section 21.3530(e) requires health carriers, upon request, to provide a prospective policyholder or contractholder with a copy of the written disclosure statement. While the statute requires a health carrier to retain the signed disclosure statement in the carrier´s records, the proposed section also requires that the carrier furnish the prospective policyholder with a copy of the statement. The department estimates the cost of producing this copy to be between one and four cents per copy. Depending on the circumstances under which the prospective policyholder or contractholder tenders the request, there may be costs associated with delivery of the document, including postage or expenses related to facsimile or other electronic transmission. Use of alternative means of delivery, such as via facsimile or other electronic transmission, may also reduce the cost of producing and delivering the document. Since the copy is furnished only upon request of the policyholder, the actual cost to a carrier will vary depending on the number of requests made to the carrier.

There are two potential costs identifiable with the §21.3542(d) requirement that a health carrier obtain a written affirmation that the carrier offered a prospective policyholder or contractholder an alternative plan in compliance with §21.3542(a). The first cost relates to obtaining the written affirmation. Since the health carrier must obtain the written affirmation no later than at the time of application, a carrier may include the written affirmation along with other portions of the application. Where a carrier adopts this practice, there should be no additional cost, unless the language of the written affirmation necessitates the creation of an additional application page. The cost in that instance would be the same as where a health carrier chooses to present the written affirmation separately, which the department estimates at between one and four cents per affirmation. The actual cost to a health carrier will vary according to the number of affirmations the carrier processes.

The second cost is the §21.3535(a)(2) requirement that a health carrier provide the written affirmation to the department at the commissioner´s request. Since the statute requires a health carrier to retain and produce the signed disclosure statement, a carrier should be able to store the affirmation as a part of its normal business operations without incurring additional cost. An additional cost would arise only if a health carrier lacks the capacity to store the affirmations, as part of its normal business operations. In such case, the department estimates that a health carrier in Texas can contract to store a 12" X 15" box of documents for approximately $5.00 annually. The total cost will vary depending on the number of documents a health carrier needs to store. Moreover, the rule does not prescribe the method the company uses to store and produce the documents. A health carrier may achieve savings by storing the affirmations electronically.

Section 21.3543(2)(B) requires a carrier to include a statement of the reduction in premium resulting from the differences in coverage and design between the consumer choice health benefit plan and an identical plan with all state-mandated health benefits. As a health carrier must determine this information in the process of developing its cost model, it can provide a statement of the differential as a component of normal business operations without additional cost. At most, any additional cost would stem from the actual expression of the statement, which the department estimates should take no more than 30 minutes of an actuary's time. The cost of an actuary's time will vary depending on whether the carrier employs or contracts independently with the actuary. The department estimates the average cost of an independent actuary's time to be $300.00 per hour.

The proposed reporting requirements of §21.3544 may result in additional administrative expenses to carriers. In addition, costs for carriers will vary based upon the particular carrier´s method for capturing data, current computer system and types of plans offered by the carrier. Despite these variances, all carriers will be required to incur initial costs to make certain changes to computer systems consistent with the intent of SB 541. According to 2002 data from the U.S. Bureau of Labor Statistics Occupational Employment Statistics Survey, as reported by the Texas Workforce Commission, the mean hourly rate for a computer programmer in the insurance business is $31.27. The amount of time necessary to implement system changes will vary greatly based on the size of the carrier, the carrier´s current data collection practices, and the type of plans offered by the carrier. The department has consulted with representatives of the industry, including small and large employer carriers, and estimates that the cost of compliance with these requirements will vary between $1,000 and $5,000 annually. However, as these reporting requirements are similar to those already required of employer carriers by Insurance Code Articles 26.71 and 26.91, the actual cost of compliance may be lower.

Ms. Stokes has determined, pursuant to Texas Government Code §2006.001, that the costs of compliance for small or micro businesses with those parts of the proposed sections that are not mandated by SB 541 fall in two categories: customer interaction and reporting. The rule´s costs regarding customer interaction include providing upon request a copy of the written disclosure statement, as well as obtaining and retaining the written affirmation. The cost of compliance with these provisions should not vary between carriers that are large, small, or microbusinesses. The department believes it would be neither legal nor feasible to exempt small or micro businesses from this part of the proposed rule, or to establish separate compliance standards, since to do so would create an unfairly disparate standard for customers of small or micro businesses with regard to critical consumer safeguards.

As noted earlier, health carriers will likely experience some additional startup costs with regard to capturing data which the rule requires them to report. The department estimated these costs based on the mean hourly rate of computer programmers for the insurance business; this rate should be the same regardless of whether the entity is a small, micro or large business. Also as noted herein, there will be additional costs to carriers associated with the proposed rule´s provisions concerning reporting of data. These costs may vary depending on whether a carrier employs its own actuaries or contracts with independent actuaries. Regardless, receipt of a full set of data, representing the experience of all participating carriers, will be critical to the proper evaluation of the effect of the new consumer choice health benefit plans, and thus the department declines to waive or to establish separate reporting requirements for carriers that are small or micro businesses.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 9, 2004 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. Commenters must simultaneously submit an additional copy of the comment to Kimberly Stokes, Senior Associate Commissioner, Life, Health and Licensing Program, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The department proposes the new sections under the Insurance Code Articles 3.80, §7, 20A.09N(j), and §36.001. Articles 3.80, §7 and 20A.09N(j) require the commissioner to adopt rules as necessary to implement the statutes creating consumer choice health benefits plans. Section 36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

The following sections are affected by this proposal: Insurance Code Articles 3.80 and 20A.09N

DIVISION 1. GENERAL PROVISIONS

§21.3501. Statement of Purpose.

This subchapter is intended to implement the provisions of the Texas Consumer Choice of Benefits Health Insurance Plan Act. The general purpose of the Act and this subchapter is to implement the legislative goal of providing individuals, employers, and other purchasers of health care coverage in this state the opportunity to choose health benefit plans that are more affordable and flexible than plans available in the existing market. To that end, the legislature has authorized health carriers to issue policies or evidences of coverage that, in whole or in part, do not offer or provide certain state-mandated health benefits.

§21.3502. Definitions.

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

(1) Basic health care services--Health care services that the commissioner determines an enrolled population might reasonably need to be maintained in good health.

(2) Commissioner--The commissioner of insurance.

(3) Consumer choice health benefit plan--A group or individual accident or sickness insurance policy, or evidence of coverage that, in whole or in part, does not offer or provide state-mandated health benefits, but that provides creditable coverage as defined by Insurance Code Article 26.035(a) or Article 3.70-1.

(4) Consumer choice of benefits health insurance plan--A consumer choice health benefit plan.

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

(6) Health carrier--Any entity authorized under the Insurance Code or another insurance law of this state that provides health benefits in this state, including an insurance company, a group hospital service corporation under Insurance Code Chapter 842, a health maintenance organization under Insurance Code Chapter 843, and a stipulated premium company under Insurance Code Chapter 884.

(7) Standard health benefit plan--A consumer choice health benefit plan.

(8) State-mandated health benefits--

(A) Coverage required under the Insurance Code, this code, or other law of this state to be provided in an individual, blanket, or group policy for accident and health insurance, a contract for coverage of a health-related condition, or an evidence of coverage that:

(i) includes coverage for specific health care services or benefits;

(ii) places limitations or restrictions on deductibles, coinsurance, copayments, or any annual or lifetime maximum benefit amounts, including limitations provided in Insurance Code Article 20A.09(l) (as added by Section 7, Chapter 1026, Acts of the 75th Legislature, Regular Session, 1997); or

(iii) includes a specific category of licensed health care practitioner from whom an insured or enrollee is entitled to receive care.

(B) Do not include benefits or coverage mandated by federal law, or standard provisions or rights required under the Insurance Code, this code, or other law of this state, to be provided in an individual, blanket, or group policy for accident and health insurance, a contract for coverage of a health-related condition, or an evidence of coverage unrelated to specific health illnesses, injuries, or conditions of an insured or enrollee, including those benefits or coverages enumerated in Insurance Code Articles 3.80, §3(b) and 20A.09N(d).

§21.3503. Authority to Offer.

A health carrier may offer, and a health carrier that is also a small employer carrier shall offer, one or more consumer choice health benefit plans in accordance with this subchapter and other applicable law.

§21.3504. Severability.

A holding that any provision of this subchapter or the application thereof to any person or circumstances is for any reason invalid shall not affect the remainder of the subchapter and the application of its provisions to any persons under other circumstances.

§21.3505. Application Date.

This subchapter applies only to an insurance policy, contract, or evidence of coverage delivered, issued for delivery, or renewed on or after the effective date of the subchapter.

DIVISION 2. State-Mandated Health Benefits

§21.3510. State-mandated Health Benefits in Individual Indemnity Policies.

The following enumerated items are state-mandated health benefits a health insurer does not have to include in an individual indemnity consumer choice health benefit plan:

(1) coverage of contraceptive drugs and devices as required by Insurance Code Article 21.52L and §21.404(3) of this title (relating to Underwriting);

(2) coverage of a minimum stay for maternity as required by Insurance Code Article 21.53F;

(3) coverage of reconstructive surgery incident to mastectomy as required by Insurance Code Article 21.53I;

(4) coverage of acquired brain injury treatment/services as required by Insurance Code Article 21.53Q;

(5) limitations or restrictions on coinsurance imposed by §3.3704(a)(6) of this title (relating to Freedom of Choice: Availability of Preferred Providers);

(6) coverage of a minimum stay for mastectomy treatment/services as required by Insurance Code Article 21.52G;

(7) coverage of diabetes care as required by Insurance Code Article 21.53D;

(8) coverage of telehealth and telemedicine as required by Insurance Code Article 21.53F;

(9) coverage of off-label drugs as required by Insurance Code Article 21.53M;

(10) coverage of mental/nervous disorders with demonstrable organic disease as required by §3.3057(d) of this title (relating to Standards for Exceptions, Exclusions, and Reductions Provision);

(11) coverage of transplant donor coverage as required by §3.3040(h) of this title (relating to Prohibited Policy Provisions); and

(12) offer of coverage for therapies for children with developmental delays as required by Insurance Code Article 21.53F.

§21.3511. State-mandated Health Benefits in Group Association Indemnity Policies. The following enumerated items are state-mandated health benefits that a health insurer does not have to include in a group association indemnity consumer choice health benefit plan:

(1) coverage of contraceptive drugs and devices as required by Insurance Code Article 21.52L and §21.404(3) of this title (relating to Underwriting);

(2) coverage of a minimum stay for maternity as required by Insurance Code Article 21.53F;

(3) coverage of reconstructive surgery incident to mastectomy as required by Insurance Code Article 21.53I;

(4) coverage of acquired brain injury treatment/services as required by Insurance Code Article 21.53Q;

(5) limitations or restrictions on coinsurance imposed by §3.3704(a)(6) of this title (relating to Freedom of Choice: Availability of Preferred Providers);

(6) the offer of in vitro fertilization coverage as required by Insurance Code Article 3.51-6, §3A;

(7) coverage of HIV, AIDS, or HIV-related illnesses as required by Insurance Code Article 3.51-6, §3C;

(8) coverage of chemical dependency and stays in a chemical dependency treatment facility as required by Insurance Code Article 3.51-9;

(9) coverage of serious mental illness as required by Insurance Code Article 3.51-14;

(10) the offer of mental or emotional illness coverage as required by Insurance Code Article 3.70-2(F);

(11) coverage of inpatient mental health and stays in a psychiatric day treatment facility as required by Insurance Code Article 3.70-2(F);

(12) the offer of speech and hearing coverage as required by Insurance Code Article 3.70-2(G);

(13) the offer of home health care coverage as required by Insurance Code Article 3.70-3B;

(14) coverage of stays in a crisis stabilization unit and/or residential treatment center for children and adolescents as required by Insurance Code Article 3.72;

(15) coverage of a minimum stay for mastectomy treatment/services as required by Insurance Code Article 21.52G;

(16) continuation of coverage of certain drugs under a drug formulary as required by Insurance Code Article 21.52J;

(17) coverage of diagnosis and treatment affecting temporomandibular joint and treatment for a person unable to undergo dental treatment in an office setting or under local anesthesia as required by Insurance Code Article 21.53A;

(18) coverage of bone mass measurement for osteoporosis as required by Insurance Code Article 21.53C;

(19) coverage of diabetes care as required by Insurance Code Article 21.53D;

(20) coverage of telehealth and telemedicine as required by Insurance Code Article 21.53F;

(21) coverage of off-label drugs as required by Insurance Code Article 21.53M; and

(22) offer of coverage for therapies for children with developmental delays as required by Insurance Code Article 21.53F.

§21.3512. State-mandated Health Benefits in Small Employer Indemnity Policies. The following enumerated items are state-mandated health benefits that a health insurer does not have to include in a small employer group indemnity consumer choice health benefit plan: