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You are here: Home . rules . 2007 . 0215B-059

SUBCHAPTER D. Health Group Cooperatives

28 TAC §§26.402 and 26.404

1. INTRODUCTION. The Commissioner of Insurance adopts amendments to §§26.402 and 26.404, concerning the establishment of, and provision of health benefit plan coverage to, health group cooperatives pursuant to the Insurance Code Chapter 1501. The amendments are adopted without changes to the proposal published in the December 14, 2007 issue of the Texas Register (32 TexReg 9253).

2. REASONED JUSTIFICATION. The adopted amendments are necessary to implement SB 1255, 80th Legislature, Regular Session, which revised the standards by which carriers provide group health benefit plan coverage to health group cooperatives comprised of small employers, large employers, or both small and large employers. SB 1255 amended §1501.0581 to provide that a health group cooperative may be composed of small employers, large employers, or both small and large employers. It further amended §1501.0581 by adding subsection (a-1) to provide that health group cooperative membership may be restricted to small and large employers within a single industry grouping as defined by the most recent edition of the United States Census Bureau's North American Industry Classification System. SB 1255 also amended §1501.063 to provide that a health group cooperative composed only of small employers and that has not made the election described by §1501.0581(o)(1) in accordance with subsection (p) of that section, or a health group cooperative that is composed of both small and large employers, may be treated in the same manner as a large employer for purposes of the Insurance Code Chapter 1501.

3. HOW THE SECTIONS WILL FUNCTION. The adopted amendments to §26.402 make changes to provisions addressing authorized membership of a health group cooperative and amend subsections (a) and (c) to conform the subsections to the Insurance Code §1501.0581(a) - (c) as amended by SB 1255. The adopted amendments to §26.402 add new subsection (e), which provides that a health group cooperative may restrict its membership to small and large employers within a single industry grouping as defined by the most recent edition of the United States Census Bureau's North American Industry Classification System, and re-designates subsequent subsections accordingly.

The adopted amendment to §26.404 provides that a health group cooperative composed only of small employers and that has not made the election to limit participation in the cooperative to 50 eligible employees as described by §1501.0581(o)(1) and in accordance with subsection (p) of that section, or a health group cooperative that is composed of both small and large employers, may be treated in the same manner as a large employer for purposes of the Insurance Code Chapter 1501.

4. SUMMARY OF COMMENTS. The Department did not receive any comments on the published proposal.

5. STATUTORY AUTHORITY. The amendments are adopted under the Insurance Code §§1501.010, 1501.058, and 36.001. Section 1501.010 authorizes the Commissioner of Insurance to adopt rules as necessary to implement Chapter 1501. Section 1501.058 requires compliance with federal laws applicable to cooperatives and health benefit plans issued through cooperatives, to the extent required by state law or rules adopted by the Commissioner. 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. TEXT.

§26.402. Membership of Health Group Cooperatives.

(a) The membership of a health group cooperative may consist of only small employers, only large employers, or both small and large employers.

(b) To be eligible to arrange for coverage pursuant to Insurance Code §1501.058(a)(1) a health group cooperative must, at the end of its initial open enrollment period, have at least ten participating employers. Thereafter, if the health group cooperative does not, at any time, have at least ten participating employers, to maintain eligibility for coverage the health group cooperative must add additional members by the end of the next open enrollment period to maintain at least ten participating employers. If, by the end of the next open enrollment period the health group cooperative does not have at least ten participating employers, the health carrier may elect to immediately cease providing coverage to the health group cooperative.

(c) Subject to the requirements of Insurance Code §1501.101, and the limitations identified pursuant to subsections (d) and (e) of this section, a health group cooperative:

(1) shall allow any small employer to join a health group cooperative that consists of only small employers or both small and large employers and, during the initial and annual open enrollment periods, enroll in health benefit plan coverage; and

(2) may allow a large employer to join the health group cooperative and, during the initial enrollment and annual open enrollment periods, enroll in health benefit plan coverage.

(d) A health group cooperative that has elected to limit membership to 50 employees and has filed notification with the department as required by §26.401(e) of this subchapter (relating to Establishment of Health Group Cooperatives) may decline to allow a small employer to join the cooperative if, after the small employer has joined the cooperative, the total number of eligible employees employed on business days during the preceding calendar year by all small employers participating in the cooperative would exceed 50.

(e) A health group cooperative may restrict its membership to small and large employers within a single industry grouping as defined by the most recent edition of the United States Census Bureau's North American Industry Classification System.

(f) A health group cooperative may not use risk characteristics of an employer or employee to restrict or qualify membership in the health group cooperative.

(g) An employer's participation in a health group cooperative is voluntary, but an employer electing to participate in a health group cooperative must, through a contract with the health group cooperative, commit to purchasing coverage through the health group cooperative for two years, except as provided for in subsection (h) of this section.

(h) A contract between an employer and a health group cooperative must allow an employer to terminate without penalty its health benefit plan coverage with a health group cooperative before the end of the two year minimum contractual period required by subsection (g) of this section if it can demonstrate to the health group cooperative that continuing to purchase coverage through the cooperative would be a financial hardship in accordance with subsection (i) of this section.

(i) The contract between an employer and a health group cooperative may define what constitutes a financial hardship for the purposes of subsection (h) of this section. If the contract does not define the term, an employer may demonstrate financial hardship if it can show that at the end of the immediately preceding fiscal quarter, or upon receipt of notice of a rate increase, the premium cost to the employer, as a percentage of the employer's gross receipts, increased by a factor of at least .50.

§26.404. Health Group Cooperative's Status as Employer.

(a) Except as provided by subsection (b) of this section, a health group cooperative may be treated in the same manner as a large employer for all purposes of Insurance Code Chapter 1501 and this chapter.

(b) A health group cooperative that is composed of only small employers and that has elected to limit participation in the cooperative to 50 employees is considered a small employer for all purposes of Insurance Code Chapter 1501 and this chapter, including guaranteed issuance of coverage.



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