Texas Register
(24 TexReg 293). Sections 21.2701,
21.2702, 21.2705 and 21.2706 are adopted without changes to the proposed text
and will not be republished.
These new sections are necessary to comply with the provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) (Public Law 104-191,
42 U.S.C. 300gg et seq.) and the interim regulations promulgated by the Department
of Health and Human Services, Health Care Financing Administration, as 45
CFR Subtitle A, Parts 144 and 146. These sections also clarify the applicability
of HIPAA and Texas insurance statutes and regulations to health benefit plans
issued and made available to associations and bona fide associations.
After receiving public comments, the department has made certain revisions.
Section 21.2703 was revised to clarify that carriers other than HMOs may consider
an association member's health status-related factors in determining whether
to issue coverage to that member. This revision was in response to a commenter's
concern that association plans could have guaranteed issue requirements placed
upon them. While it is true that bona fide associations, by their very nature,
may not consider a member's health status-related factors, such is not the
case with associations that are not bona fide.
Section 21.2704(b) was revised by allowing a carrier to cancel or non-renew
an association or bona fide association member's coverage if that member discontinues
membership in the association or bona fide association. Cancellation or non-renewal
for this reason is consistent with HIPAA. Section 21.2704(c) was revised to
allow a coordination of benefits provision that complied with group coordination
of benefits provisions of state law in association and bona fide association
plans. Such provision would allow plans that were sold to association and
bona fide association members before they attained Medicare eligibility to
exclude payment to the extent that Medicare paid.
Adopted §21.2701 sets forth the scope of these sections. Section 21.2702
defines relevant terms as they appear in the sections. The terms "association"
and "bona fide association" are both defined in recognition of the different
regulatory schemes for associations under Texas law and bona fide associations
under HIPAA and the federal interim regulations. Association is the broader
term and encompasses bona fide associations. Bona fide associations must have
been in active existence for five years, rather than an association's active
existence of two years. In order to be a bona fide association, health status-related
factors may not be considered in accepting members into the bona fide association,
or in making health benefit plans available to members of the bona fide association.
The practical effect of the difference between associations and bona fide
associations is that upon or after issuance of a health benefit plan to a
bona fide association all members of the bona fide association are guaranteed
the right to coverage regardless of the members' health status-related factors,
whereas a carrier other than an HMO that issues a health benefit plan to an
association that is not a bona fide association is not prohibited from declining
coverage to a member based upon the health status-related factors of that
member. These definitions are consistent with HIPAA and Texas' existing statutes
and regulations regulating group health benefit plans.
Section 21.2703 clarifies that plans issued to associations and bona fide
associations as defined in these new sections will be governed by statutes
and regulations relating to group insurance and group HMO products providing
medical/surgical benefits or services. This section also specifies that carriers
other than HMOs that issue health benefit plans to associations that are not
bona fide may consider health status-related factors in their determination
of whether to issue coverage to association members. Rating methodologies
used to determine the premium for each member of an association must be actuarially
sound and in compliance with the applicable statutory and regulatory rating
requirements. Section 21.2704 sets forth the guaranteed renewability requirements
for association and bona fide association health benefit plans. For purposes
of HIPAA, plans issued to associations, whether bona fide or not, are subject
to the renewability provisions of the individual market provisions of HIPAA.
Section 21.2705 requires that health carriers that issue health benefit
plans to associations or bona fide associations provide certifications of
coverage. Health benefit plans issued to associations or bona fide associations
are considered creditable coverage under HIPAA and Texas law. Section 21.2706
allows a health carrier to refuse to issue coverage to a bona fide association
in accordance with the carrier's underwriting standards and criteria. However,
if a health benefit plan is issued to a bona fide association, the health
carrier must issue coverage to all members, and dependents of members if dependent
coverage is offered, of the bona fide association that apply for coverage,
regardless of health status-related factors.
Comment: One commenter states that the regulations exceed the department's
statutory authority, and will have an adverse effect on the individual insurance
buying public.
Response: The department disagrees. Statutory authority for the adoption
of these sections arises from HIPAA and the Texas Insurance Code, and these
sections merely clarify the statutory requirements for health benefit plans
issued to associations and bona fide associations. Rather than having an adverse
effect on the individual insurance buying public, these sections clarify the
additional protections under HIPAA to which individuals who purchase coverage
issued to associations and bona fide associations are entitled.
Comment: One commenter states that the proposed regulations are not consistent
with HIPAA, because the sections subject association coverage in Texas to
the Texas group statutes and regulations, whereas HIPAA considers bona fide
association coverage to be group coverage and association coverage that is
not bona fide to be individual coverage.
Response: The department disagrees with the commenter's interpretation
of HIPAA in conjunction with state law. HIPAA considers coverage issued to
an association or a bona fide association to be individual coverage. See,
45 C.F.R. 144.102(c). Texas, on the other hand, considers association and
bona fide association coverage to be group coverage. See, Texas Insurance
Code Article 3.51-6, §1(a)(2). The inconsistency between state and federal
regulation of association and bona fide association coverage is addressed
in these sections, by recognizing that association and bona fide association
coverage is considered group coverage in Texas, and at the same time applying
HIPAA individual standards to Texas associations and bona fide associations.
Application of HIPAA individual standards to Texas associations and bona fide
associations is accomplished by recognizing that association and bona fide
association coverage must be guaranteed renewable, and by recognizing that
if a carrier issues coverage to a bona fide association, coverage must be
issued to each member that applies for coverage without regard to the health
status-related factors of individual members. Thus, Texas complies with HIPAA,
yet retains its own regulatory scheme recognizing association and bona fide
association plans as group coverage.
Comment: One commenter states that these sections attempt to make all health
plans offered through associations subject to regulation as a group health
plan.
Response: The department disagrees. Health plans issued to associations
and bona fide associations, which in turn offer coverage to their members,
will be subject to regulation as a group health plan. Health plans marketed
through associations and bona fide associations where coverage is issued to
the member and not the association or bona fide association is individual
coverage, and subject to the statutes and rules pertaining to individual coverage.
The distinction is that plans in which the master policy or agreement is issued
to the association or bona fide association, and members receive certificates,
are governed by these sections. Plans in which each association or bona fide
association member is issued his or her own policy or evidence of coverage,
and in which the association or bona fide association membership list is used
by the carrier mainly as a prospect list, are not governed by these sections
and will be considered individual products.
Comment: One commenter suggested withdrawing these sections in their entirety,
or alternatively, suggested revisions to specific sections.
Response: The department declines to withdraw these sections, as they provide
clarification for regulating association and bona fide association coverage
in Texas, and bring Texas into compliance with HIPAA. However, based upon
comments, revisions to the rules have been made.
Section 21.2702(1)(D). One commenter suggested that language be added to
the definition of association, which explicitly indicates that an association
may consider health status-related factors of association members.
Response: The department agrees that the suggested revision is useful,
but declines to revise the definition of association as the definition is
consistent with the Insurance Code. To make the suggested revision could force
an association that does not wish to consider health status-related factors
to take such factors into consideration to meet the definition of association.
However, the department has made a revision to §21.2703 that addresses
the commenter's concern.
Section 21.2703. One commenter expressed concern that by treating association
plans as group health plans, this section would allow the department to subject
association plans to the guaranteed issue requirements of small employer plans.
The commenter provided suggested alternative language.
Response: The department disagrees that the language of this section would
allow a future application of guaranteed issue requirements of small employer
plans to association plans. Such was not the intent of this section. However,
the department recognizes that clarifying language is useful, and has revised
this section by adding additional language which recognizes that carriers
other than HMOs may consider health status-related factors and make appropriate
issuance decisions on a per-member basis. HMOs that issue coverage to associations
may make initial determinations as to issuance of coverage to an association,
but once coverage has been issued to an association, individual members of
the association may not be excluded on the basis of health status-related
factors. Rating methodologies used to determine the premium for each member
of an association must be actuarially sound and in compliance with the applicable
statutory and regulatory rating requirements. See, §21.2704(F). Health
benefit plans issued to employer associations are subject to the requirements
of the Insurance Code governing employer coverage.
Section 21.2704(b). One commenter suggests adding a provision allowing
for cancellation of a member's coverage if the member ceases to belong to
an association or bona fide association, in accordance with HIPAA. The commenter
provided suggested language.
Response: The department agrees, and has made an appropriate revision.
Section 21.2704(c). One commenter requested that language be added that
would allow a provision that excludes payments for benefits under the policy
to the extent that Medicare pays for such benefits.
Response: The department agrees that a revision is appropriate, and has
revised this subsection to allow a coordination of benefits provision that
complies with Texas law.
For, with changes: Insurance Alliance of America.
These new sections are adopted under the Insurance Code Articles
3.42, 3.51-6 and 20A.22; the Health Insurance Portability and Accountability
Act of 1996 (Public Law 104-191, 42 U.S.C. 300gg et seq.); the interim federal
regulations implementing HIPAA published by the Department of Health and Human
Services (62 FR 16985-17004); and Insurance Code Article 1.03A. The Insurance
Code Article 3.42(p) grants the commissioner rulemaking authority to regulate
health insurance policy forms. The Insurance Code Article 3.51-6, §5
grants the commissioner rule-making authority to regulate group insurance
products. The Insurance Code Article 20A.22(c) grants the commissioner rulemaking
authority to meet the minimum requirements of federal laws and regulations
regarding HMOs. The minimum requirements of federal law regarding association
plans are contained in HIPAA. Interim federal regulations implementing HIPAA
have been promulgated by the Department of Health and Human Services and published
in the Federal Register at 62 FR 16985-17004. Article 1.03A provides that
the Commissioner of Insurance may adopt rules and regulations to execute the
duties and functions of the Texas Department of Insurance only as authorized
by statute.
§21.2703. Health Care Plans Issued to Associations and Bona Fide Associations.
A health benefit plan issued to an association or a bona fide association
is considered a group product, and shall comply with the statutes and regulations
applicable to coverages and benefits relating to group products. Notwithstanding
any other provisions of this subchapter to the contrary, health carriers other
than HMOs that offer health benefit plans to associations that are not bona
fide associations may decline, restrict, limit, exclude or rate-up coverage
based upon a member's health status-related factors.
§21.2704. Mandatory Guaranteed Renewability Provisions for Health Benefit Plans Issued to Members of an Association or Bona Fide Association.
(a)
Except as provided by subsection (d) of this section,
a health carrier shall renew a health benefit plan issued to an association,
or a bona fide association, at the option of the association or bona fide
association, unless:
(1)
the association or bona fide association has failed to
pay premiums or contributions in accordance with the terms of the health benefit
plan, including any timeliness requirements;
(2)
the association or bona fide association has performed
an act or practice that constitutes fraud, or has made an intentional misrepresentation
of material fact, relating in any way to the health benefit plan, including
claims for benefits under the health benefit plan;
(3)
in regards only to a health benefit plan offered
by an HMO or a group hospital service plan issued under the Insurance Code
Chapter 20, the association or bona fide association ceases to have any covered
members who reside, live, or work in the service area of the HMO or group
hospital service plan, but only if coverage is terminated uniformly without
regard to any health status-related factor of covered members or dependents
of covered members, if dependent coverage is offered; or
(4)
the health carrier is ceasing to offer health benefit
plan coverage in the association market in accordance with subsection (d)
of this section.
(b)
A health carrier may refuse to renew the coverage of a
covered member or dependent if:
(1)
the member fails to pay premiums or contributions in accordance
with the terms of the health benefit plan, including any timeliness requirements;
(2)
the covered member or dependent has performed an
act or practice that constitutes fraud, or has made an intentional misrepresentation
of material fact, relating in any way to the health benefit plan, including
claims for benefits under the health benefit plan;
(3)
in regards only to coverage offered by an HMO or
a group hospital service plan issued under the Insurance Code Chapter 20,
the covered member no longer resides, lives, or works in the service area
of the HMO or group hospital service plan, but only if coverage is terminated
uniformly without regard to any health status-related factor of the covered
member or dependent;
(4)
the health carrier is ceasing to offer health benefit
plan coverage in the association market in accordance with subsection (d)
of this section; or
(5)
the covered member or dependent ceases to be a member
of the association or bona fide association to which the coverage is offered,
but only if such coverage is terminated under this paragraph uniformly without
regard to any health status-related factor of the covered member or dependent.
(c)
Medicare eligibility or entitlement is not a basis for
non-renewal or termination of a health benefit plan issued to an association
or bona fide association or members of an association or bona fide association.
However, health benefit plan coverage sold to association and bona fide association
members before the members attain Medicare eligibility may contain coordination
of benefit provisions that comply with Chapter 3, Subchapter V of this title
(relating to Group Coordination of Benefits) and §11.511 of this title
(relating to Optional Provisions).
(d)
A health carrier may discontinue a particular health benefit
plan pursuant to paragraph (1) of this subsection. A health carrier may discontinue
all health benefit plans pursuant to paragraph (2) of this subsection.
(1)
A health carrier may discontinue offering a particular
type of health benefit plan offered to associations or bona fide associations
only if, at least 90 days before the date coverage will be discontinued, the
health carrier:
(A)
provides notice in writing to each association or bona
fide association and each member covered under the health benefit plan being
discontinued;
(B)
offers to the association or bona fide association the
option to purchase any other health benefit plan currently being offered by
the carrier to associations or bona fide associations; and
(C)
acts uniformly without regard to any health status-related
factor of covered members or dependents, or new members or dependents who
may become eligible for the coverage.
(2)
A health carrier may discontinue offering all
health benefit plans offered to associations or bona fide associations only
if, at least 180 days before the date coverage will expire, the health carrier:
(A)
provides notice in writing to the commissioner of insurance,
each association or bona fide association, and each covered member;
(B)
discontinues and does not renew all health benefit plans
issued in this state or an approved geographic service area of an HMO or group
hospital service corporation to associations or bona fide associations; and
(C)
acts uniformly without regard to any health status-related
factor of covered members or dependents of covered members, if dependent coverage
is offered, or new members or dependents who may become eligible for coverage.
(e)
A health carrier that elects not to renew all health benefit
plans to associations or bona fide associations in accordance with subsection
(d)(2) of this section may not issue any association or bona fide association
coverage in this state, or in an approved geographic service area of an HMO
or group hospital service corporation, during the five year period beginning
on the date of discontinuation of the last such coverage not renewed.
(f)
Nothing in this section prohibits or restricts a health
carrier's ability to make changes in premium rates by classes in accordance
with applicable laws and regulations.
(g)
Nothing in this section shall be interpreted as prohibiting
a health carrier from making modifications to a health benefit plan mandated
by state or federal law.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on June
15, 1999.
TRD-9903577
Lynda H. Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: July 5, 1999
Proposal publication date: January 15, 1999
For further information, please call: (512) 463-6327