PART 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION
CHAPTER 84. DISCOUNT HEALTH CARE CARD PROGRAM
The Texas Commission of Licensing and Regulation ("Commission") adopts amendments to existing rules at 16 Texas Administrative Code ("TAC") Chapter 84, §84.70 and §84.73. Section 84.70, regarding discount health care card program operators, is adopted with changes as published in the November 28, 2008, issue of the Texas Register (33 TexReg 9640) and will be republished. Section 84.73 is adopted without changes as published and will not be republished. The amendments to §84.70 and §84.73 take effect April 1, 2009.
Background. Health and Safety Code, Chapter 76 ("the statute") currently requires program operators to register annually with the Department in order to do business in Texas. Program operators may sell their discount health care card programs directly to consumers or they may contract with marketers to solicit and sell these programs. Many of the program operators contract with marketers to sell these discount health care card programs; however, the statute does not give authority to the Department to register or to directly regulate marketers and/or private label entities that market and sell these cards in the state.
As a result of this regulatory structure, there has been confusion and a lack of information about which program operator is responsible for a particular program or is responsible for the activities of particular marketers. These rule amendments are necessary to address issues associated with program operators' marketing and membership materials.
Amendments. Health and Safety Code §76.053 and §76.054 require program operators to disclose and provide a variety of information to consumers including program membership materials and membership cards. The rules at §84.70, Responsibility of the Registrant--General, provide the details regarding these disclosures and written materials. As proposed, the amendments added a new subsection (c) to rule §84.70, which would require the name of the discount health care card program operator to be clearly and conspicuously identified on all discount health care card program materials used by the program operator or its marketers, including all membership cards. As a result of public comments, rule §84.70(c) as adopted requires the name of the discount health care card program operator to be clearly and conspicuously identified on all discount health care card program materials, with the exception of membership cards issued under a private label name.
Health and Safety Code §76.052 prohibits advertising that is false or misleading; however, under the statute, program operators may use marketers to sell their programs or may allow marketers to private label the programs, and many do. Because of this business practice, it is often not clear in the advertising materials who the program operator is. The materials may identify the marketer's name or the private label name of the program, but they may not identify the name of the entity that is ultimately responsible for the discount health care card program and that is required to be registered with the Department.
The amendments to rule §84.73, Responsibilities of the Registrant--Statements, Representations, and Advertising, add a new subsection (c). This new subsection requires all discount health care card program advertising to clearly and conspicuously identify the program operator, even if the program is being promoted by a marketer or if the program has a private label name. This requirement applies regardless of the form of the advertising and regardless of who disseminates or distributes the advertisement. No changes were made to rule §84.73(c) as a result of public comments.
Public Comments. The proposed rules were published in the Texas Register on November 28, 2008. The public comment period closed on December 29, 2008. The Department received one comment letter from the Consumer Health Alliance (CHA), a trade association of the discount health care industry. CHA also offered comments at the public meeting held on February 3, 2009, where the proposed rules were being considered for adoption by the Commission. Below is a summary of the public comments and the Department's responses to the comments.
CHA Comment: CHA submitted comments that "CHA companies have a strong interest in ensuring that their members have clear information about the program they are joining. As a result, CHA companies always provide extensive disclosures and information about program terms and conditions to consumers." Furthermore, "CHA members always include the name of the program operator on the membership materials that new members receive, even when the program is sold by a marketer. This practice ensures that no consumer confusion will exist."
TDLR Response: TDLR appreciates that the CHA companies provide extensive information to their members, and that these program operators include their names on their materials. TDLR appreciates that CHA recognizes that this practice helps eliminate consumer confusion. It should be noted, however, that CHA does not represent all of the program operators that are registered and doing business in Texas. While some operators may already be providing this important information, and TDLR thinks that many are, TDLR wants to ensure that all current and future program operators do the same.
CHA Comment: CHA questions the basis for making the amendments and believes that based on its experience there is not any consumer confusion due to consumers only knowing the name of the private label marketer that is selling the program but not the name of the program operator. CHA states that of the official complaints filed with TDLR, "none of them concerned confusion over the identity of the program operator."
TDLR Response: While TDLR appreciates CHA's experience, its experience is not that of a state agency regulating this industry. While CHA requested information from the Department regarding complaints, the Department does not set policy based only on official complaints. The Department receives numerous inquiries and questions from a number of sources. These inquiries and questions do not have to result in a formal complaint in order for the Department to take notice of an issue. Since this is a relatively new program, the Department continues discussions on how to best regulate this industry.
CHA Comment: CHA stated that it "is difficult to imagine any negative consequences that stem from a consumer not knowing the name of the program operator. The marketer is required by statute to provide a website with program information and a toll-free number to handle questions and complaints. If those things are provided, the consumer should be satisfied--whether the website and toll-free number are operated by the marketer or the program operator. The consumer needs to get customer service and the ability to file complaints when he or she is not getting the promised benefits of the program. The name of the program operator does not matter to the consumer."
TDLR Response: While marketers are required to comply with advertising practices just as program operators are, marketers are not registered with TDLR. In addition, marketers are not required by statute to provide a website with program information and a toll-free number to handle questions and complaints. It is the program operator who is required to do these things under Health and Safety Code §76.053 and §76.054. Because it is the program operator who is ultimately responsible for the program, it is the program operator who should be identified to the consumer.
TDLR disagrees that there would not be any negative consequences that stem from a consumer not knowing the name of the program operator. TDLR publishes information on its website about enforcement actions it takes against the entities that it regulates. The Department does this for the benefit of the public, especially as members of the public search for licensees or registrants with whom to engage in business transactions. In the Discount Health Care Card Program, the program operators are the entities that are registered and regulated by the Department. If a consumer is holding a private label name card or a card that only identifies the marketer's name, the consumer will not know if and when the program operator who is responsible for the program has violated the applicable statutes and rules. When a consumer checks the TDLR website to see if any registered entity has a violation against it, the consumer will only see the program operator's name, not the marketer's name or the private label name that is known to the consumer. Consequently, a program operator that issues private label name cards and that has enforcement actions against it could continue to sell discount cards under a new private label name without the public knowing that the same program operator is behind the various cards. TDLR believes that the name of the program operator does matter to consumers.
CHA Comment: CHA also questions whether having the name of the program operator on the discount card that consumers show to providers at the time of service is helpful to providers. CHA states that program operators "typically contract with provider networks that, in turn, contract directly with providers. The provider will recognize the name of the provider network, but will not recognize the name of either the program operator or the marketer since the provider has no direct contract with either of these entities."
TDLR Response: The statute allows program operators to contract with provider networks, individual providers, and even other program operators who have their own provider contracts to provide health care services. While CHA's members may only contract with provider networks, this may not be the case for all current and future program operators.
CHA Comment: CHA also questions TDLR's assertion that having "the program operator's name on all program materials will reduce the time and resources TDLR spends on investigating complaints concerning marketers, since TDLR will quickly be able to identify the program operator associated with the marketer." CHA states that TDLR already has this information under the current statute and rules.
TDLR Response: CHA is correct in that Health and Safety Code §76.101(b)(4) requires the program operator to file with TDLR "a list of the marketers authorized to sell or distribute the program operator's program under the program operator's name and a list of the marketing entities authorized to private label the program operator's program." It is also true that under existing rule §84.20(a)(1)(C) the program operator is required to file with TDLR "all private label names used for each discount health care card program."
The problem with these lists is that as of September 1, 2008, one year after the industry became regulated, there were over 40,000 marketers selling discount health care cards in Texas. While operators are required to report the lists of their marketers to TDLR, each program operator submits its lists of marketers in a different format. There is not an electronic database into which program operators enter the lists of marketers. Even if there was an electronic database of marketers, similar to that used for TDLR's licensees and registrants, the database search functions require that names be exact. If a program operator has a typographical mistake in its submission or the operator submits a variation on the marketer's name, the name of the program operator tied to that marketer will not be identified. Having to search the list manually is time consuming due to the size of the lists and the various formats, and it does not necessarily guarantee a match of program operator to marketer based on name variations. Searching through lists of 40,000 marketers to find the name of the program operator behind a particular program and/or marketer is not an efficient way to regulate the industry.
The other problem is that the lists of marketers and private label names submitted by the program operators are not current. Some program operators are adding marketers and/or private label names for their programs every day. Currently under rule §84.75, the list of marketers must be updated every six months, and the list of private label names must be updated within 30 days of any change. While TDLR considered amending this rule to have the operators update the lists of marketers and private label names more often, that type of change would put more of an ongoing administrative burden on both the Department and the industry and it would not eliminate the problem of searching through lists of thousands of marketers and/or private label names. TDLR has determined that a simpler and more efficient method to identify the program operator, which TDLR is charged with regulating, is to simply put the program operator's name on the membership and marketing materials.
CHA Comment: CHA questioned the statutory authority of the Commission and the Department to adopt the proposed amendments regarding membership materials, including membership cards. CHA points to the lists of information and materials required to be given to consumers found in the statute at Health and Safety Code §76.053 and §76.054. CHA states that these sections "do not mention anything about the name of the registered program operator" being provided to consumers, "[nor] do they authorize TDLR to add any additional disclosures or duties as TDLR may reasonably see fit."
TDLR Response: Health and Safety Code §76.003 requires the Commission to "adopt the rules necessary to implement" Chapter 76. Similar authorization is found in Occupations Code Chapter 51, the enabling statute of the Commission and the Department. The rules provide the details to the framework of the statute; the rules are not a recitation of the statute itself. Health and Safety Code §76.053 and §76.054 require program operators to provide certain information and materials to consumers. The list of information to be provided to consumers is not exclusive or exhaustive. The Legislature has given rulemaking authority to the agency to implement the statute that requires registration and regulation of the program operators. TDLR believes that it has a sound basis under the statute to require program operators to identify themselves in membership materials, since it is the program operators who are responsible for the programs and responsible to the consumers.
CHA Comment: CHA also questioned the statutory authority of the Commission and the Department to adopt the proposed amendments regarding the advertising materials. CHA points to the list of prohibited advertising practices found in the statute at Health and Safety Code §76.052. CHA states that "[failure] to include the name of the registered program operator on an advertisement is not mentioned as a false, misleading, or deceptive statement."
TDLR Response: Health and Safety Code §76.003 and Occupations Code §51.203 give rulemaking authority to the Commission to adopt the rules necessary to implement the statute. In addition, Occupations Code §51.204 allows the Commission to adopt rules to prohibit false, misleading, or deceptive practices. The issue regarding whether the list of prohibited practices in the statute is exclusive was raised by CHA when the original rules were proposed and adopted in 2007. The Department reiterates that the lists of prohibited adverting practices in the statute and in the current rules are examples of prohibited practices and are not exhaustive lists.
TDLR believes that by its very nature it is misleading and deceptive for a marketer to have its name, but not the name of the program operator, on advertising materials that promote the sale of a program that is operated by and is the responsibility of the program operator.
CHA Comment: CHA stated that its members "always include the name of the program operator on the membership materials that new members receive, even when the program is sold by a marketer." CHA stated that it was impractical, however, to include the name of the program operator on the discount card itself because there was not sufficient room on the card.
TDLR Response: While discount health care cards may include a variety of information on the card itself, currently the only requirement of what is included on the card is a clear and conspicuous statement that the program is not insurance. For those programs that have a prescription drug benefit, an identification number, group number, and telephone number for prescription drug benefits is also required. There should be sufficient room on the card to identify the program operator. In fact, many program operators already include their names on the cards.
CHA Comment: CHA further commented that including both the name of the marketer and the program operator on the membership card "is likely to confuse, not help, consumers, since consumers will be unsure which of the two entities is responsible for the program."
TDLR Response: It is the program operator, not the marketer, who is responsible for the program, and it is the program operator's name that should be on the card. The program operator is the one who is required to register with the Department, to provide program materials to consumers, to post financial security, to keep records and file reports, to have contracts with providers, and to collect a fee from members either directly or indirectly. The identity of the program operator should be revealed.
CHA Comment: CHA raised concerns about the costs of re-issuing membership cards to current members in Texas. CHA stated that its program operators have more than 3 million members in Texas, although CHA did not provide exact figures on the number of membership cards that do not currently have the program operator's name on the card and that would have to be re-issued. CHA stated that most of the marketers operating in Texas would be individuals who are marketing the program operator's card under the program operator's name. A much smaller number of marketers issue membership cards under a private label name that is different from the name of the program operator.
TDLR Response: TDLR believes that since the program operator is the only entity that is registered with TDLR and is the entity that is contractually, financially and legally responsible for the programs, the program operator's name should be on the membership cards. That being said, TDLR agreed to amend the current proposal at §84.70 as it relates to membership cards, but revisit the issue in the future when more accurate information regarding the number of membership cards that would have to be re-issued and the costs for re-issuing those cards could be obtained from CHA's member companies and the other program operators in Texas. The adopted rule §84.70 will not require the program operator's name be included on membership cards that are issued under a private label name. The program operator's name still must be included on all other program materials, even for those programs with a private label name. The program operator's name also must be included on membership cards issued under the program operator's own name.
CHA Comments: CHA stated that including "the name of the program operator on advertising is also impractical. For those small number of program operators who contract with many private label marketers, hundreds of thousands if not millions of pieces of advertising would potentially need to be discarded, redesigned, and reprinted with the program operators' name." CHA further stated that including the name of the marketer and the program operator on the advertising would be confusing to consumers.
TDLR Response: As recognized by CHA, a small number of program operators may be affected by this change. Based on the number of program operators who already identify themselves on membership and marketing materials, the Department anticipates very minimal costs to all program operators who are required to comply with the amendments. As with the membership materials, TDLR believes there is a significant benefit to consumers and to the Department for the program operator who is responsible for the program to be identified on the program advertising materials. TDLR did not make any changes to rule §84.73 as proposed based on the public comments.
The amendments are adopted under Texas Occupations Code, Chapter 51, and Texas Health and Safety Code, Chapter 76, both of which authorize the Texas Commission of Licensing and Regulation, the Department's governing body, to adopt rules as necessary to implement these chapters.
The statutory provisions affected by the adoption are those set forth in Texas Occupations Code, Chapter 51, and Texas Health and Safety Code, Chapter 76. No other statutes, articles, or codes are affected by the adoption.
§84.70.Responsibility of the Registrant--General.
(a) No later than 15 days after enrolling a new member, a discount health care card program operator shall provide each new member a membership card and the written materials described in §76.053 of the Act, which shall include:
(1) clear and conspicuous statements that:
(A) the discount health care card program is NOT insurance; and
(B) the member may cancel the membership within 30 days after joining the discount health care card program and the member will receive a refund of all membership fees paid to the discount health care card program other than money paid as a nominal one-time enrollment fee or money paid by the member to a provider for health care services or products received;
(2) the following clear and conspicuous statement: "Note to Texas Consumers: Regulated by the Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711; telephone 1-800-803-9202 or (512) 463-6599; website: www.license.state.tx.us/complaints."; and
(3) the written cancellation policy under subsection (b).
(b) A discount health care card program operator shall have a written cancellation policy which:
(1) identifies the valid cancellation notice used for the program;
(2) provides clear and conspicuous instructions to members regarding how to use the cancellation method(s);
(3) provides for a refund of all membership fees paid by a new member when the member submits to the program operator a valid cancellation notice no later than 30 days after the member receives the membership card; and
(4) states that the program operator will accept and cancel program memberships at any time during the membership period and that the program operator will cease collecting membership fees in a reasonable amount of time, but no later than 30 days after receiving a valid cancellation notice.
(c) A discount health care card program operator shall clearly and conspicuously identify itself on all discount health care card program materials that are used by the program operator or its marketers, excluding membership cards issued under a private label name.
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 March 12, 2009.
TRD-200901064
William H. Kuntz, Jr.
Executive Director
Texas Department of Licensing and Regulation
Effective date: April 1, 2009
Proposal publication date: November 28, 2008
For further information, please call: (512) 463-7348