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You are here: Home . rules . 2006 . 0130a-059

SUBCHAPTER FF. Obligation to Continue Premium Payment and Coverage After Notice of Lost Group Eligibility 28 TAC §§21.4001 - 21.4003

1. INTRODUCTION. The Texas Department of Insurance proposes new Subchapter FF, §§21.4001 - 21.4003, concerning the obligation of certain group health coverage policyholders and contract holders to continue premium payment after notice of an individual's lost group eligibility. These new sections are necessary to implement §§1 and 2 of SB 51, enacted by the 79th Legislature, Regular Session, which added Insurance Code §§1301.0061 and 843.210, effective September 1, 2005. Sections 1301.0061 and 843.210 apply to group preferred provider organization policies and group health maintenance organization contracts entered into or renewed on or after January 1, 2006.

Subsequent to the enrollment of SB 51, the department received requests for clarification of this new legislation. In response, the proposed rule outlines the scope of a group policyholder or contract holder's liability for premium payment; defines certain terms; and details means of compliance with, as well as limitations and exceptions to, the statute. The various limitations and exceptions allow some relief from the difficulty a group policyholder or contract holder may face in providing notice of late-month termination, as well as prevent costly and unnecessarily duplicative coverage of individuals replacing health coverage.

Proposed §21.4001 explains the purpose and scope of this subchapter, clarifying that the subchapter does not impose requirements on a group policyholder, a group contract holder, or a health carrier when an entire group ends coverage under a health benefit plan or when an individual terminates coverage without leaving the group eligible for coverage. Proposed §21.4002 contains definitions relevant to this subchapter; of particular significance, it defines "month" in a manner allowing the parties to define by contract the start and end of the monthly period.

Proposed §21.4003(a) restates the duties the bill imposes on a health carrier and a group policyholder or group contract holder under a health benefit plan contract. Subsections (b) and (c) define a receipt date for notice tendered by mail and establish a five-day period during which immediate written notification that an individual lost eligibility for group coverage during the previous month will avoid additional premium payment and coverage obligations.

Subsection (d) recognizes that in some instances, a group policyholder or group contract holder will be able to notify a health carrier that an individual will no longer be part of the group eligible for coverage prior to the date the individual actually leaves the group. Accordingly, the subsection allows for termination of coverage on the date the individual leaves the group if the employer provides at least 30 days prior notice. Subsection (e) allows a group policyholder or group contract holder and a health carrier to eliminate their premium payment and coverage responsibilities if the individual no longer a part of the group eligible for coverage under the plan elects to terminate coverage and obtains coverage under a new health benefit plan that takes effect immediately upon termination of coverage under the group health benefit plan. The subsection authorizes a health carrier to require a group policyholder or group contract holder seeking to avoid payment of additional premium for an individual to provide proof of the new coverage and to agree to be responsible for payment of premium if the individual's new health benefit plan does not cover the individual for the entire period for which the health carrier and the group policyholder or group contract holder are responsible for premium payment and coverage. The subsection also clarifies that the group policyholder or group contract holder and the health carrier remain responsible for premium payment and coverage should the individual's new health benefit plan fail to provide coverage during the period for which the rule otherwise obligates them to continue premium payment and coverage.

Subsections (f) and (g) clarify that the statute does not apply to certain continuation coverage and to health benefit plans where the group policyholder or group contract holder does not make any contribution to the payment of premium for individuals covered under the plan. Subsection (h) ends the obligation to pay premium and to provide coverage upon an individual's demise.

2. FISCAL NOTE. Jennifer Ahrens, 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 a reduction in costs of premium payments for duplicative coverage to the state and to local governments as a result of enforcing or administering the rule, since some governmental entities provide health coverage to their employees through health plans subject to §§1301.0061 and 843.210. The amount of savings is impossible to estimate as it will depend primarily on the number of individuals leaving state and local governmental employment during the five-year time period and the circumstances of their severance, factors unknown at this time. Ms. Ahrens also estimates that, due to private group policyholders and/or contract holders providing health coverage to their employees through health plans subject to §§1301.0061 and 843.210, enforcing or administering the rule will result in a similar reduction in costs of premium payments for duplicative coverage within local economies across the state. The same factors affecting state and local governments affect private group policyholders and group contract holders, and thus the savings to local economies are currently equally impossible to estimate. It is thus impossible at this time to determine whether the savings as a result of the proposal will produce a measurable effect on local employment or the local economy.

3. PUBLIC BENEFIT/COST NOTE. Ms. Ahrens has also 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 more efficient and equitable administration of the requirements imposed by new Insurance Code §§1301.0061 and 843.210, resulting in a reduction in premium costs for unnecessary overlaps in coverage of individuals losing eligibility for coverage through a group policyholder or group contract holder. Any economic costs to comply with the proposed rule result from the enactment of Insurance Code §§1301.0061 and 843.210, and are not the result of the proposed rule. There is no anticipated difference in the cost of compliance between large and small or micro businesses as a result of the proposed sections. Even if the proposed rule would have an adverse effect on small or micro businesses, it is neither legal nor feasible to waive the requirements of the sections for small or micro businesses because the Insurance Code requires equal application of these provisions to all affected individuals.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on March 13, 2006, 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. An additional copy of the comments must be simultaneously submitted to Jennifer Ahrens, Associate Commissioner , Life, Health & Licensing Program, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The department will consider the adoption of the proposed new sections in a public hearing under Docket Number 2636, scheduled for 10:00 a.m. on February 21, 2006, in Room 100 at the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas 78701.

5. STATUTORY AUTHORITY. The new sections are proposed under Insurance Code §§1301.007, 843.151 and 36.001. Section 1301.007 provides that the commissioner shall adopt rules as necessary to implement Chapter 1301 and to ensure reasonable accessibility and availability of preferred provider benefits and basic level of benefits to residents of this state. Section 843.151 provides that the commissioner may adopt reasonable rules as necessary and proper to fully implement Insurance Code Chapters 843 and Article 20A (recodified as Chapter 1271). Section 36.001 provides that the Commissioner of Insurance 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.

6. CROSS REFERENCE TO STATUTE. The following sections are affected by this proposal:

Rule Statute

§§21.4001 - 21.4003 Insurance Code §§1301.0061,1301.007, 843.151, and 843.210

7. TEXT.

§21.4001. Purpose and Scope. This subchapter applies to group preferred provider benefit plans and evidences of coverage issued pursuant to Insurance Code Chapters 843 and 1301. The subchapter outlines a group policyholder's or group contract holder's liability for premium payment, and a health carrier's obligation to provide coverage, from the time an individual insured or enrollee loses eligibility for coverage as part of a particular group until the end of the month in which the policyholder or contract holder notifies the health carrier that the individual is no longer part of the group eligible for coverage. The subchapter does not impose requirements on a group policyholder, a group contract holder, or a health carrier when an entire group ends coverage under a health benefit plan or when an individual terminates coverage without leaving the group eligible for coverage.

§21.4002. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise.

(1) Evidence of coverage--Any certificate, agreement, or contract, including a blended contract, that:

(A) is issued to an enrollee; and

(B) states the coverage to which the enrollee is entitled.

(2) Health benefit plan--A preferred provider benefit plan or health maintenance organization evidence of coverage or other group health benefit plan issued by a health maintenance organization.

(3) Health carrier--A health insurer issuing a preferred provider benefit plan, as defined in Insurance Code § 1301.001(9), or a health maintenance organization, as defined in Insurance Code § 843.002(14).

(4) Health insurer--A life, health, and accident insurance company, health and accident insurance company, health insurance company, or other company operating under Insurance Code Chapters 841, 842, 884, 885, 941, 982, or 1501 that is authorized to issue, deliver, or issue for delivery in this state health insurance policies.

(5) Health maintenance organization--A person who arranges for or provides to enrollees on a prepaid basis a health care plan, a limited health care service plan, or a single health care service plan.

(6) Month--The period from a date in a calendar month to the corresponding date in the succeeding calendar month. If the succeeding calendar month does not have a corresponding date, the period ends on the last day of the succeeding calendar month.

(7) Preferred provider benefit plan--Any policy or contract issued pursuant to Insurance Code Chapter 1301.

§21.4003. Group Policyholder Liability for Premiums.

(a) A contract between a health carrier and a group policyholder or group contract holder under a health benefit plan contract must provide that:

(1) the group policyholder or group contract holder, as described in Insurance Code Chapter 1251, is liable for an individual insured's or enrollee's premiums from the time the individual is no longer part of the group eligible for coverage under the plan until the end of the month in which the policyholder or contract holder notifies the health carrier that the individual is no longer part of the group eligible for coverage under the plan; and

(2) the individual remains covered under the plan until the end of the period specified in paragraph (1) of this subsection.

(b) If a health carrier accepts the notice referenced in subsection (a)(1) of this section by mail, the date the group policyholder or group contract holder tenders the notice to the postal service is the date the policyholder or contract holder notifies the health carrier.

(c) A group policyholder or group contract holder and a health carrier is not subject to subsection (a) of this section if the policyholder or contract holder notifies the health carrier within five days, not including a Saturday, Sunday, or legal holiday, after the end of each month that an individual lost eligibility for group coverage under the plan during the previous month. During this additional notification period, the policyholder or contract holder must transmit the notification of an individual's loss of eligibility during the previous month by a method:

(1) agreed upon by the policyholder or contract holder and the carrier, and

(2) which provides immediate written notification, such as an internet portal, electronic mail, or telefacsimile.

(d) Subsection (a) of this section does not apply if a group policyholder or group contract holder notifies a health carrier that an individual will no longer be part of the group eligible for coverage at least 30 days prior to the date the ind ividual will no longer be part of the group eligible for coverage.

(e) A group policyholder or group contract holder and a health carrier is not subject to subsection (a) of this section and may terminate an individual insured's or enrollee's coverage under a group health benefit plan at the time the individual is no longer a part of the group eligible for coverage under the plan, if the individual elects to terminate coverage under the plan and obtains coverage under a new health benefit plan that takes effect immediately upon termination of coverage under the group health benefit plan. A health carrier may require a group policyholder or group contract holder seeking to avoid payment of additional premium for an individual no longer part of the group eligible for coverage to provide proof of the new coverage and to agree to be responsible for payment of premium if the individual's new health benefit plan does not cover the individual from the termination of the health carrier's coverage until the end of the month in which the group policyholder or group contract holder notifies the health carrier that the individual is no longer part of the group eligible for coverage. In addition, the group policyholder or group contract holder and the health carrier remain responsible for compliance with Insurance Code §§843.210 and 1301.0061 if the individual's new health benefit plan does not cover the individual from the termination of the health carrier's coverage until the end of the month in which the group policyholder or group contract holder notifies the health carrier that the individual is no longer part of the group eligible for coverage.

(f) Subsection (a) of this section does not apply to coverage a health carrier extends to an individual in compliance with 29 U.S.C. §1161 et seq . (COBRA), Insurance Code Chapter 1251, Subchapter F, or any other federal or state continuation of coverage requirement that allows an individual insured or enrollee, upon termination of eligibility from a group, to pay premium and extend the period of group health benefit plan coverage after the individual has left employment or otherwise no longer qualifies as a member of the group.

(g) Subsection (a) of this section does not apply to a health benefit plan for which a group policyholder or group contract holder does not contribute to the payment of any individual insured's or enrollee's premium.

(h) Notwithstanding subsection (a) of this section, in the event of the individual insured's or enrollee's death, a group policyholder or group contract holder is not liable for an individual insured's or enrollee's premiums, and the individual does not remain covered under the plan, after the later of the date of the individual insured's or enrollee's:

(1) death; or

(2) receipt of the last covered service under the plan.

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