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You are here: Home . rules . 2007 . 1203-059

SUBCHAPTER D. Health Group Cooperatives

28 TAC §§26.402 and 26.404

1. INTRODUCTION. The Texas Department of Insurance proposes 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 proposed amendments 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.

The proposed 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 proposed 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 proposed 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.

2. FISCAL NOTE. Jennifer Ahrens, Senior Associate Commissioner of Life, Health, and Licensing, has determined that for each year of the first five years the proposed amendments to §§26.402 and 26.404 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.

3. PUBLIC BENEFIT/COST NOTE. Ms. Ahrens has determined that for each year of the first five years the amendments to the sections are in effect, the public benefit anticipated as a result of the proposed amendments to the sections will be Department rules that are consistent with the Insurance Code §1501.0581 and §1501.063, as amended by SB 1255, and that will help facilitate the creation of health group cooperatives, making employer group coverage more affordable and accessible than it might otherwise be if the employers were purchasing the coverage individually. The proposed amendments, as part of a regulatory effort to encourage employers to continue to provide health coverage for their employees, may also result in coverage for previously uninsured employees. Any costs to persons required to comply with these proposed amendments for each year of the first five years the proposed amendments would be in effect are the result of the enactment of SB 1255 and not the result of the adoption, enforcement, or administration of the proposed amendments.

4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. In conjunction with the Government Code §2006.002(c), the Department has determined that the proposed amendments to §§26.402 and 26.404 concerning the establishment of, and provision of health benefit plan coverage to, health group cooperatives will not have an adverse economic effect on small businesses or micro businesses that are required to comply with the proposal. Because the proposal does not impose any new requirements or costs with which businesses, regardless of size, must comply, any costs to persons required to comply with these proposed amendments are the result of the enactment of SB 1255, and not the result of the adoption, enforcement, or administration of the proposed amendments. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.

5. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

6. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on January 14, 2008 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 comment must be simultaneously submitted to Jennifer Ahrens, Senior Associate Commissioner, Life, Health and Licensing Program, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

7. STATUTORY AUTHORITY. The amendments are proposed 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.

8. CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal:

Rule Statute

§§26.402 and 26.404 Insurance Code §§1501.0581 and 1501.063

9. TEXT.

§26.402. Membership of Health Group Cooperatives.

(a) The membership of a health group cooperative may consist of only [ of] small employers , [ or] only [ of] large employers, or [ but may not consist of] both small and large employers.

(b) (No change.)

(c) Subject to the requirements of Insurance Code §1501.101, and the limitations [ limitation] identified pursuant to subsections [ subsection] (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 [ a] health group cooperative [ that consists of only large employers] and, during the initial enrollment and annual open enrollment periods, enroll in health benefit plan coverage.

(d) (No change.)

(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) [ (e)] 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) [ (f)] 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) [ (g)] of this section.

(h) [ (g)] 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) [ (f)] 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) [ (h)] of this section.

(i) [ (h)] The contract between an employer and a health group cooperative may define what constitutes a financial hardship for the purposes of subsection (h) [ (g)] 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 [ is considered] a large employer for all purposes of Insurance Code Chapter 1501 and this chapter.

(b) (No change.)



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