TITLE 28.INSURANCE

Part 1. TEXAS DEPARTMENT OF INSURANCE

Chapter 11. HEALTH MAINTENANCE ORGANIZATIONS

Subchapter Z. POINT-OF-SERVICE RIDERS

28 TAC §§11.2501 - 11.2503

The Commissioner of Insurance adopts new Subchapter Z, §§11.2501 - 11.2503, concerning point-of-service riders. The sections are adopted with changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 73).

These new sections are necessary to implement legislation enacted by the 76th Texas Legislature in House Bill (HB) 1498 which amended the Texas Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art. 26.09; Subchapter F, Chapter 3 was amended by adding Art. 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of these new sections are to develop provisions relating to point-of-service (POS) plans. A POS plan is a health care plan that combines health maintenance organization (HMO) and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the HMO delivery system or from a physician or provider outside of the delivery system on a fee-for-service basis. The sections implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO. The plan combines a traditional HMO plan with an indemnity rider that is underwritten by the HMO. A plan enrollee can use the rider to obtain services, benefits and supplies from physicians and providers who are not part of the HMO provider network.

Contemporaneously with this adoption, new 28 TAC §§21.2901, 21.2902, and 26.312, and amendments to §26.4 and §26.14 are published elsewhere in this issue of the Texas Register. The separately adopted new sections added to Chapter 21 implement the provisions of HB 1498 allowing POS plans to be created jointly by indemnity carriers and HMOs, either by issuing "a blended contract point-of-service plan," in which one contract issued by either the HMO or indemnity carrier contains the terms of both the HMO and indemnity components of the plan; or through a "dual contracts point-of-service plan." A dual contracts POS plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the HMO portion of the plan, and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan. The separately adopted amendments to and new section added to Chapter 26 clarify that small and large employer carriers may issue POS plans provided that the carrier complies with the standards relating to both the various types of POS plans set forth in new §§21.2901 and 21.2902 as well as the POS rider plans subject to the new sections adopted in this order. The Chapter 26 adoption also creates standards for POS coverage options that HMO large employer carriers are required by HB 1498 to offer to eligible employees if the only coverage available to the employees is through a network-based HMO.

New §11.2501 defines the terms used in the subchapter. New §11.2502 sets forth the solvency requirements for HMOs issuing POS rider plans under this subchapter as well as the method for calculating the percentage of business that an HMO issuing these plans has actually issued in the form of POS rider business as compared to the total health coverage that the HMO has issued in the same period. This section also sets forth the requirements that an HMO that has issued POS riders that exceed the ten percent cap set by HB 1468 must follow for issuing any additional POS coverage; the requirements for an HMO that can no longer meet the solvency requirements; and an HMO's responsibilities should it discontinue its POS rider business either entirely or bring its POS rider expenditures below the ten percent cap. Section 11.2503 describes the coverage required under, and the contents required for, a POS rider plan issued by an HMO pursuant to this subchapter.

Based on comments received and for clarification, the department has made the following changes: The term "cost containment requirements" has been substituted for the word "precertification" in §11.2503(e)(1)(J) and (e)(1)(L) and a definition of "cost-containment requirements" has been added to §11.2501. This change has no substantive effect on these sections. Rather, "cost-containment requirements" has been substituted for clarity because of inconsistencies in the way carriers use the word "precertification." Cost containment requirements may be used by carriers as a condition of indemnity coverage. As used in the sections, the term refers to a process in which an HMO requires, as a provision of a POS rider, that an enrollee planning to undergo certain medical procedures must first call to notify the carrier. The HMO will then review the proposed procedure to determine if it is being conducted in the most appropriate setting, and for some plans, whether it is a benefit provided by the rider. For example, a rider might require this process before an enrollee undergoes inpatient surgery. Failure to comply with the requirements before receiving the treatment, assuming the treatment is found to be a covered benefit, will result in a lower level of coverage under the rider for the procedure.

The department also deleted the references to the initial start up requirement of $1.5 million for HMOs writing POS indemnity riders in §11.2502 and added a reference to the minimum statutory net worth requirements in the Texas Insurance Code to incorporate the phase-in language contained in Art. 20A.13B.

§11.2502(1). A commenter believes the $1.5 million net worth requirement set forth in the rule exceeds the statutory phase-in schedule for increasing HMOs' net worth between 1999 and 2002 as provided in Insurance Code Article 20A.13B.

Response. The department agrees that HMOs subject to these rules should be subject to the statutory phase-in requirements of Art. 20A.13B if applicable. The references to the initial start up requirement of $1.5 million have been deleted. Instead, HMOs must comply with the minimum statutory net worth requirements in the Texas Insurance Code. This provision incorporates the phase-in provision of Art. 20A.13B, if applicable to that HMO.

Comment. A commenter believes the requirements of §11.2502(1) to have an unjustified, disproportionate impact on smaller HMOs.

Response. Although the department has, in response to another comment, deleted the initial start up requirement of $1.5 million in §11.2502(1), the department does not agree that the requirements of §11.2502(1) have an unjustified, disproportionate impact on smaller HMOs. The section tracks the requirements of the statute. Art. 20A.06(c) as enacted by HB 1468 permits only those HMOs with the financial capacity to absorb the increased risk involved in issuing indemnity riders. Any HMO that wishes to underwrite its own POS rider must have a net worth and reserves sufficient to support undertaking the increased risk involved in writing indemnity coverage in addition to providing HMO coverage. The statute takes into account that there may be HMOs that do not have the financial capacity to or do not wish to maintain the higher solvency requirements by providing in Art. 20A.06(a)(6)(C) that HMOs may offer POS coverage by contracting with an indemnity carrier.

Comment. A commenter believes that the proposal does not set forth an estimate of the economic cost of the solvency requirements imposed by these sections and thus does not accurately state the reasonable actual costs required.

Response. The department disagrees. As stated in the preamble to the proposal of these sections, it is HB 1498, rather than these sections, that imposes the higher solvency requirements upon HMOs. Therefore, the cost to HMOs required to meet these requirements is a cost imposed by the statute rather than these sections. The department further notes that the solvency requirements include a net worth requirement for certain HMOs. These HMOs may reflect a financial statement credit for this additional capital. This additional capital is not a cost because a cost is a decrease to capital.

§11.2501(8) & (12). A commenter believes that the inclusion of "health care services, benefits and supplies obtained from participating physicians and providers under circumstances in which the enrollee fails to comply with the HMO's requirements for obtaining in-plan covered services" in the definitions of "out-of-plan covered benefits" and "POS indemnity coverage" appears to be a departure from the scope and focus of HB 1498.

Response. The department disagrees that these sections are not consistent with the scope and focus of HB 1498. The definitions are necessary to ensure that an HMO does impose its gatekeeping and network requirements on coverage obtained under the POS rider. The purpose of HB 1498 is to provide increased choice by allowing an enrollee that elects a POS rider the option to choose whether to: (1) obtain services through the HMO network with lower out-of-pocket costs but be required to utilize the network and its gatekeeping requirements to access services; or (2) utilize the POS rider to receive the services from the provider of his or her choice without the gatekeeping requirements of the HMO, knowing that the out-of-pocket costs will be greater than the cost of obtaining services through the HMO's coverage.

These sections fulfill the purpose of HB 1468 by permitting an enrollee to obtain covered services from his or her provider of choice without complying with the HMO's gatekeeper requirements. If coverage for services obtained from physicians and providers who are members of the HMO network were not included under the POS rider, an enrollee residing in an area dominated by one HMO that contracts with the majority of the providers in that area would have a restricted, rather than an enhanced, choice of physicians and providers.

An enrollee that purchases a POS plan pays a premium that includes both HMO and the POS rider coverage. The enrollee is responsible for paying all excess out-of-pocket costs for services received under the POS rider. The HMO considers the expense of reimbursing a physician or provider at a non-contracted rate in calculating the premium for the POS rider.

§11.2503(e)(1)(G) & (e)(1)(H). A commenter supports provisions prohibiting HMOs from requiring enrollees to use either HMO or rider coverage before using the other coverage, but expressed concern about provisions allowing a reduction in the amount of coverage under the rider if HMO coverage is used first. The commenter believes enrollees should be allowed to use coverage in whatever order they want without penalty.

Response. Section 11.2503(e)(1)(G) allows an HMO to reduce the limits offered under the POS rider by services accessed by the enrollee under the HMO coverage. Section 11.2503(e)(1)(H) prohibits coverage under the HMO from being reduced by benefits the enrollee obtains through the POS rider. For example, an enrollee who always utilizes the POS rider coverage first during each plan year could utilize all coverage up to an annual limit imposed under the rider and then switch to HMO coverage for the remainder of the plan year. An enrollee that begins the plan year by using HMO coverage, which is then charged against the coverage available under the POS rider, could conceivably exhaust the rider benefits and be left with only HMO coverage for the remainder of the plan year.

The department disagrees that this constitutes a penalty. The section is not designed to require an enrollee to utilize coverage in a particular order. Federal law mandates §11.2503(e)(1)(H). Section 11.25003(e)(1)(G) is necessary because otherwise an HMO, in order to provide POS rider benefits, would be required to charge a premium that would be prohibitively high, possibly depriving all but the most affluent consumers of the ability to obtain this type of coverage. Rather than acting as a penalty, §11.2503(e)(1)(G) benefits consumers by keeping the POS option more affordable.

§11.2503(e)(1)(F). A commenter requests clarification about this section because it is unclear as to whether the 50% threshold applies to a single health care service or to an aggregate of all the health care services covered by the rider.

Response. The 50% limit on coinsurance applies to each health care service provided to an enrollee, not the aggregate of all services received for the plan year. The purpose of the section is to ensure that indemnity coverage provided through a POS rider meets the minimum coinsurance requirements imposed upon any indemnity coverage.

Comment. A commenter suggests limiting coinsurance arrangements to no more than 30%. The commenter believes that allowing cost sharing of up to 50% does not provide a valid option to health plan enrollees.

Response. The department disagrees. The POS option is intended to provide an enrollee with the option to obtain services outside of the HMO network. The statute contemplates that the enrollee choosing this option must bear the additional cost involved. Nothing in the statute suggests that the indemnity coverage provided under a POS rider should be subject to requirements that are not imposed on other types of indemnity coverage.

The 50% coinsurance maximum does not deprive enrollees of a valid POS option. Fifty percent is the maximum coinsurance the department will permit a carrier to require an enrollee to provide for indemnity coverage. Nothing in the statute indicates that indemnity coverage provided under a POS rider must exceed coverage provided under any other type of indemnity coverage.

§11.2503(e)(1)(L). A commenter believes that allowing potential penalties of up to 50% for failure to comply with cost containment requirement provisions could result in no real coverage. The commenter recommends that penalty for failure to comply be no more than 10 or 15 percent and either removing the term or adding a more specific definition of "other cost containment requirements."

Response. The department disagrees that the 50% limit results in a lack of real coverage. The POS option is intended to provide an enrollee with the option to obtain services outside of the HMO network. It does not exempt such coverage from the standards generally applied to indemnity coverage. Removal of the phrase "other types of cost containment" or limitations on the penalty to no more than 10 or 15 percent would result in the imposition of limitations on the types of cost containment that can be applied to a POS rider that are not imposed on other indemnity coverage offered by carriers. As stated previously, this is not supported by the statute. A definition of cost containment requirements was added to §11.2501.

General. A commenter indicates that there are provisions in the proposed sections stating that certain other statutory provisions continue to apply to HMOs that should be stated in both Subchapter Z and Subchapter U. The commenter also believes that the phrase "all applicable laws, including" should be placed in front of the specific laws.

Response. The department disagrees that a rule must recite that other rules and laws apply to plans issued under this subchapter in order for those rules and laws to apply. It is axiomatic that an HMO must comply with all other applicable statutes and rules when issuing a plan under this subchapter, regardless of whether the subchapter specifically includes such a statement.

For with changes: Office of Public Insurance Counsel, PacifiCare of Texas, and Texas Association of Health Plans.

The sections are adopted under the Insurance Code, Article 20A.22 and §36.001. Article 20A.22(a) provides that the commissioner shall adopt rules as necessary to implement the Texas Health Maintenance Organization Act. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

§11.2501.Definitions.

The following words and terms, when used in this subchapter, shall have the following meaning.

(1)

Coinsurance--An amount in addition to the premium and copayments due from an enrollee who accesses out-of-plan covered benefits, for which the enrollee is not reimbursed.

(2)

Corresponding benefits--Benefits provided under a point-of-service (POS) rider or the indemnity portion of a point-of-service (POS) plan, as defined in Articles 3.64(a)(4) and 20A.02(bb) of the Code, that conform to the nature and kind of coverage provided to an enrollee under the HMO portion of a point-of-service plan.

(3)

Cost containment requirements--Provisions in a POS rider requiring a specific action, such as the provision of specified information to the HMO, that must be taken by an enrollee or by a physician or a provider on behalf of the enrollee to avoid the imposition of a specified penalty on the coverage provided under the rider for proposed service or treatment.

(4)

Coverage--Any benefits available to an enrollee through an indemnity contract or rider, any services available to an enrollee under an evidence of coverage, or combination of the benefits and services available to an enrollee under a POS plan.

(5)

Health plan products--Any health care plan issued by an HMO pursuant to the Code or a rule adopted by the commissioner.

(6)

In-plan covered services--Health care services, benefits, and supplies to which an enrollee is entitled under the evidence of coverage issued by an HMO, including emergency services, approved out-of-network services and other authorized referrals.

(7)

Non-participating physicians and providers--Physicians and providers that are not part of an HMO delivery network.

(8)

Out-of-plan covered benefits--All covered health care services, benefits, and supplies that are not in-plan covered services. Out-of-plan covered benefits include health care services, benefits and supplies obtained from participating physicians and providers under circumstances in which the enrollee fails to comply with the HMO's requirements for obtaining in-plan covered services.

(9)

Participating physicians and providers--Physicians and providers that are part of an HMO delivery network.

(10)

Point-of-service blended contract plan (POS blended contract plan)--A POS plan evidenced by a single contract, policy, certificate or evidence of coverage that provides a combination of indemnity benefits for which an indemnity carrier is at risk and services that are provided by an HMO under a POS plan.

(11)

Point-of-service dual contracts plan (POS dual contracts plan)--A POS plan providing a combination of indemnity benefits and HMO services through separate contracts, one being the contract, policy or certificate offered by an indemnity carrier for which the indemnity carrier is at risk and the other being the evidence of coverage offered by the HMO.

(12)

Point-of-service rider (POS rider)--A rider issued by an HMO that meets the solvency requirements of §11.2502 of this title (relating to Issuance of Point-of-service Riders) and that provides coverage for out-of-plan services, including services, benefits, and supplies obtained from participating physicians or providers under circumstances in which the enrollee fails to comply with the HMO's requirements for obtaining approval for in-plan covered services.

(13)

Point-of-service rider plan (POS rider plan)--A POS plan provided by an HMO pursuant to this subchapter under an evidence of coverage that includes a POS rider.

§11.2502.Issuance of Point-of-service Riders.

An HMO may issue a POS rider plan only if the HMO meets all of the applicable requirements set forth in this section.

(1)

Solvency of HMOs Issuing Point-of-service Rider Plans.

(A)

For HMOs that have been licensed for at least one calendar year, the HMO shall maintain a net worth of at least the sum of:

(i)

the greater of:

(I)

the minimum net worth required by the Code for that HMO; or

(II)

100% of the authorized control level of risk-based capital as set forth in §11.809 of this title (relating to Risk-Based Capital for HMOs); and

(ii)

twenty-five percent of total gross point-of-service premium revenue reported in the preceding calendar year.

(B)

For HMOs that have been licensed for less than one calendar year, the HMO shall maintain a net worth of at least the sum of:

(i)

the minimum net worth required by the Code for that HMO; and

(ii)

fifty percent of the yearly average of the two-year annual premium gross point-of-service premium revenue as projected in its application for a certificate of authority.

(C)

Assets of the HMO shall be of a sufficient amount to cover reserve liabilities for the POS riders and shall be limited to those allowable assets listed under §11.803(1) of this title (relating to Investments, Loans and Other Assets).

(D)

Reserves held by an HMO for POS riders shall be calculated in accordance with Chapter 3, Subchapter GG of this title (relating to Minimum Reserve Standards for Individual and Group Accident and Health Insurance).

(E)

An HMO that has issued a POS rider plan under this section and whose net worth or assets subsequently fall below the requirements of subparagraphs (A), (B) or (C) of this paragraph shall cease issuing additional new POS rider plans to groups or individuals, except as provided in paragraphs (4) and (5) of this section, until it comes into compliance with the requirements of this paragraph.

(2)

Limitations on POS Rider Expenses. An HMO's POS rider expenses must not exceed 10% of medical and hospital expenses on an annual basis for all health plan products sold by the HMO.

(A)

An HMO may issue a POS rider plan under this section only if the total medical and hospital expenses incurred by the HMO for the preceding four calendar quarters for all POS riders issued by the HMO under this section do not exceed 10% of the annual medical and hospital expenses incurred by the HMO for all health plan products sold during the preceding four calendar quarters.

(B)

An HMO that has issued any POS rider plans under this subchapter is responsible for compiling, maintaining, and reporting to the department the total medical and hospital expenses incurred by the HMO on an annual basis for all POS riders as well as the total medical and hospital expenses incurred by the HMO on an annual basis for all health plan products sold to ensure that the HMO is in compliance with the requirements of this subchapter.

(C)

An HMO that has issued any POS rider plans under this subchapter and whose total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this subchapter has exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters shall:

(i)

immediately cease issuance of additional new POS rider plans to groups or individuals, except as provided in paragraphs (4) and (5) of this section;

(ii)

offer all subsequent new POS plans through POS blended contracts or POS dual contracts in accordance with Chapter 21, Subchapter U of this title (relating to Arrangements between Indemnity Carriers and HMOs for Point-of-service Coverage); and

(iii)

not issue any additional new POS rider plans until it has either:

(I)

established to the satisfaction of the commissioner that:

(-a-)

its total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this section have not exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters; and

(-b-)

its total medical and hospital expenses incurred for all POS riders issued under this section for the next four calendar quarters will not exceed 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the next four calendar quarters; or

(II)

become an indemnity carrier licensed under the Code.

(D)

Notwithstanding subparagraph (C)(iii) of this subsection, an HMO that has issued POS riders for which the HMO's annual medical and hospital expenses incurred by the HMO for the POS riders have exceeded 10% of the HMO's total annual medical and hospital expenses incurred by the HMO for all health plan products that can establish, to the satisfaction of the commissioner, that its total medical and hospital expenses incurred on an annual basis for all POS riders issued under this section will not exceed 10% of the total annual medical and hospital expenses incurred by the HMO for all health plan products for the following one year period, may offer new POS rider plans under this section during that following year.

(3)

Renewability and discontinuance of POS rider plans.

(A)

POS rider plans issued under this subchapter are guaranteed renewable if the plan is:

(i)

a small employer plan, pursuant to Article 26.23 of the Code;

(ii)

a large employer plan, pursuant to Article 26.86 of the Code;

(iii)

an individual plan, pursuant to §11.506(3)(D) of this chapter (relating to Mandatory Contractual Provisions: Group, Individual and Conversion Agreement and Group Certificate); or

(iv)

an association plan, pursuant to §21.2704 of this title (relating to Mandatory Guaranteed Renewability Provisions for Health Benefit Plans Issued to Members of an Association or Bona Fide Association).

(B)

An HMO that discontinues a POS rider plan must comply with all laws and rules applicable to that plan.

(C)

An HMO that discontinues existing POS rider plans in order to bring the HMO into compliance with the 10% cap:

(i)

shall offer, if the discontinued plan is issued to:

(I)

a small employer group, to each employer, the option to purchase other small employer coverage offered by the small employer carrier at the time of the discontinuation, pursuant to Article 26.24(d) of the Code;

(II)

a large employer group, to each employer, the option to purchase any other large employer coverage offered by the large employer carrier at the time of the discontinuation, pursuant to Article 26.87(d) of the Code;

(III)

an individual, the option to purchase to each enrollee any other individual basic health care coverage offered by the HMO pursuant to §11.506(3)(D)(v) of this title;

(IV)

an association, the option to purchase any other health benefit plan being offered by the HMO pursuant to §21.2704(d)(1)(B) of this title.

(ii)

shall not issue any additional new POS rider plans:

(I)

for at least one calendar year after the date on which it last discontinued any of its existing POS rider business and then only if it can establish to the satisfaction of the commissioner that:

(-a-)

its total medical and hospital expenses incurred for the preceding four calendar quarters for all POS riders issued under this subchapter will not have exceeded 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the preceding four calendar quarters; and

(-b-)

its total medical and hospital expenses incurred for all POS riders issued under this subchapter for the next four calendar quarters will not exceed 10% of the total medical and hospital expenses incurred by the HMO for all health plan products for the next four calendar quarters; or

(II)

until it has become licensed as an indemnity carrier under the Code.

(4)

An HMO that ceases to issue a POS rider plan in order to comply with the 10% cap required under paragraph (2) of this section shall continue to offer the plan to each new member of a group to which the POS rider plan has been issued unless and until the HMO divests itself of the group's business by discontinuing the plan as set forth in paragraph (3) of this section.

(5)

An HMO that ceases to issue a POS rider plan in order to comply with the 10% cap required under paragraph (2) of this section must continue to offer the plan to each new individual entitled to coverage under an existing individual plan for which a POS rider has been issued unless and until the HMO divests itself of the individual plan by discontinuing the plan as set forth in paragraph (3) of this section.

§11.2503.Coverage Relating to POS Rider Plans.

(a)

An HMO may not consider an in-plan covered service to be a benefit provided under the POS rider.

(b)

An HMO shall not require an enrollee to use either the POS rider benefits or in-plan covered services first.

(c)

An HMO that includes limited provider networks:

(1)

shall not limit the access, under the POS rider, of an enrollee whose in-plan covered services are restricted to the limited provider network, either to participating physicians and providers or to non-participating physicians and providers;

(2)

shall not impose cost-sharing arrangements for an enrollee whose in-plan covered services are restricted to a limited provider network, and who, through the POS rider accesses a participating physician or provider outside the limited provider network, that differ from the cost-sharing arrangements for in-plan covered services obtained by the enrollee from a physician or provider in the limited provider network;

(3)

may provide for cost-sharing arrangements for benefits obtained from non-participating physicians and providers that are different from the cost sharing arrangements for in-plan covered services, provided that coinsurance required under a POS rider shall never exceed 50% of the total amount to be covered.

(d)

An HMO that issues or offers to issue a POS rider plan is subject, to the same extent as the HMO is subject in issuing any other health plan product, to all applicable provisions of Chapter 20A, and Articles 21.21, 21.21-A, 21.21-1, 21.21-2, 21.21-5 and 21.21-6 of the Code.

(e)

A POS rider plan offered under this subchapter must contain:

(1)

a POS rider that:

(A)

shall contain coverage that corresponds to all in-plan covered services provided in the evidence of coverage as well as coverage that is provided to an enrollee as part of the enrollee's in-plan coverage through separate riders attached to the evidence of coverage;

(B)

may include benefits in addition to in-plan covered services;

(C)

may limit or exclude coverage for benefits that do not correspond to in-plan covered services;

(D)

shall not limit coverage for benefits that correspond to in-plan covered services except as provided in subparagraphs (E), (F) and (G) of this paragraph;

(E)

may include reasonable out-of-pocket limits and annual and lifetime benefit allowances which differ from limits or allowances on in-plan covered services provided under other riders attached to the evidence of coverage so long as the allowances and limits comply with applicable federal and state laws;

(F)

may provide for cost-sharing arrangements that are different from the cost sharing arrangements for in-plan covered services, provided that coinsurance required under a POS rider shall never exceed 50% of the total amount to be covered;

(G)

may be reduced by benefits obtained as in-plan covered services;

(H)

shall not reduce or limit in-plan covered services in any way by coverage for benefits obtained by an enrollee under the POS rider;

(I)

if applicable, shall disclose how the POS rider cost-sharing arrangements differ from those in the evidence of coverage, any reduction of benefits as set forth in subparagraph (G) of this paragraph, any deductible that must be met by the enrollee under the POS rider, and whether copayments made for in-plan covered services apply toward the POS rider deductible;

(J)

shall provide coverage for services obtained without the HMO's authorization from a participating physician or provider. However, the enrollee must comply with any precertification requirements as set forth in subparagraph (L) of this paragraph that are applicable to the POS rider;

(K)

shall include a description of how an enrollee may access out-of-plan covered benefits under the POS rider, including coverage contained in other riders attached to the evidence of coverage;

(L)

shall disclose all precertification requirements for coverage under the POS rider including any penalties for failure to comply with any precertification or cost containment provisions, provided that any such penalties shall not reduce benefits more than 50% in the aggregate;

(M)

if it is issued to a group, shall contain provisions that comply with Article 3.51-6 Sec. 1(d)(2)(vii)-(xiii) of the Code; and

(N)

if it is issued to an individual, shall contain provisions that comply with Article 3.70-3(A)(5)-(11) of the Code;

(2)

an evidence of coverage that includes a description and reference to the POS rider sufficient to notify a prospective or current enrollee that the plan provides the option of accessing participating physicians and providers as well as non-participating physicians and providers for out-of-plan covered benefits and that accessing these benefits through the POS rider may involve greater costs than accessing corresponding in-plan covered services; and

(3)

a side-by-side summary of the schedule of the corresponding coverage for services, benefits, and supplies available under the POS rider and services, benefits, and supplies available in the evidence of coverage that together constitute the POS rider plan.

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 20, 2001.

TRD-200103503

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: July 10, 2001

Proposal publication date: January 5, 2001

For further information, please call: (512) 463-6327


Chapter 21. TRADE PRACTICES

Subchapter U. ARRANGEMENTS BETWEEN INDEMNITY CARRIERS AND HMOS FOR POINT-OF-SERVICE COVERAGE

28 TAC §21.2901, §21.2902

The Commissioner of Insurance adopts new Subchapter U, §21.2901 and §21.2902, concerning point-of-service plans. The sections are adopted with changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 77).

The new sections are necessary to implement legislation enacted by the 76th Texas Legislature in House Bill (HB) 1498 which amended the Texas Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art. 26.09; Subchapter F, Chapter 3, was amended by adding Art. 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of these new sections are to develop provisions relating to point-of-service (POS) plans. A POS plan is a health care plan that combines HMO and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the HMO delivery system or from a physician or provider outside of the delivery system on a fee-for-service basis. Under the adopted rules, the POS plan can be created jointly by indemnity carriers and HMOs, either by a "blended contract point-of-service plan," in which one contract issued by either the HMO or indemnity carrier contains the terms of both the indemnity and HMO components of the plan or through a "dual contracts point-of service plan." A dual contracts point-of-service plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the HMO portion of the plan, and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan.

Contemporaneously with this adoption, the adoption of new 28 TAC §§11.2501-11.2503 and 26.312, and adoption of amendments to §26.4 and §26.14, are published elsewhere in this issue of the Texas Register. The separately published new sections of Chapter 11 implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO which contains an indemnity rider that is underwritten by the HMO. That adoption also sets forth the financial criteria an HMO must meet in order to issue these point-of-service rider plans. The separately adopted amendments and new section added to Chapter 26 clarify that small and large employer carriers may issue point of service plans provided the carrier complies with the standards relating to both the various types of POS plans set forth in this adoption as well as the amendments and new sections added to Chapter 11. The Chapter 26 adoption also creates standards for POS coverage options that large employer HMOs are required by HB 1498 to offer to eligible employees if the only coverage available to the employees is through a network-based HMO plan or plans.

New §21.2901 defines the terms used in the subchapter. New §21.2902 sets forth the respective requirements for blended contract POS plans and dual contracts POS plans, including the required terms of the written agreement that must be entered into between the HMO and indemnity carrier that are jointly issuing the plan, the basic requirements both for the contract or contracts that constitute the plan, as well as the plan itself, and the filing requirements for the plans.

For clarification, the department has made the following changes: The term "cost containment requirements" has been substituted for the word "precertification" in §21.2902(c)(8) and (d)(1)(E) and a definition of "cost containment requirements" has been added to §21.2901. This change has no substantive effect on these sections. Rather, "cost containment requirements" has been substituted for clarity because of inconsistencies in the way carriers use the word "precertification." Cost containment requirements may be used by carriers as a condition of indemnity coverage. As used in these sections, the term refers to a process in which a carrier requires, as a provision of the indemnity portion of a POS plan, that an enrollee planning to undergo certain medical procedures must first call and notify the carrier. The carrier will then review the proposed procedure to determine if it is being conducted in the most appropriate setting, and for some plans, whether it is a benefit provided by the plan. For example, a policy or contract might require this process before an enrollee undergoes inpatient surgery. Failure to comply with the requirements before receiving the treatment, assuming the treatment is found to be a covered benefit, will result in a lower level of coverage under the indemnity portion of the plan for the procedure.

§21.2901(5) & (11): A commenter believes that the inclusion of "health care services, benefits and supplies obtained from participating physicians and providers under circumstances in which the enrollee fails to comply with the HMO's requirements for obtaining in-plan covered services" in the definitions of "out-of-plan covered benefits" and "POS indemnity coverage" appears to be a departure in scope and focus from the provisions of HB 1498.

Response: The department disagrees that these sections are not consistent with the scope and focus of HB 1498. The definition is necessary to ensure that the HMO gatekeeping and network requirements are not imposed on the coverage obtained under the indemnity portion of the plan. The purpose of HB 1498 is to provide increased choice by allowing an enrollee that elects a POS plan the option to choose whether to: (1) obtain services through the HMO network with lower out-of-pocket costs but be required to utilize the network and its gatekeeping requirements to access services; or (2) utilize the indemnity benefits offered by the plan to receive the services from the provider of his or her choice without the gatekeeping requirements of the HMO, knowing that the out-of-pocket costs will be greater than the cost of obtaining services through the HMO coverage.

These sections fulfill the purpose of HB 1468 by permitting an enrollee to obtain covered services from his or her provider of choice without complying with the HMO's gatekeeper requirements. If coverage for services obtained from physicians and providers who are members of the HMO network were not included under the indemnity portion of the plan, an enrollee residing in an area dominated by one HMO that contracts with the majority of the providers in that area would have a restricted, rather than an enhanced, choice of physicians and providers.

An enrollee that purchases a POS plan pays a premium that includes both HMO and indemnity coverage. The enrollee is responsible for paying all excess out-of-pocket costs for indemnity benefits. The plan carriers consider the expense of reimbursing a physician or provider at a non-contracted rate in calculating the premium for the plan.

§21.2902(b)(2): A commenter feels that cancellation for non-payment of a portion of premium should not apply to both parts of the coverage unless they are billed as a single premium.

Response: The department disagrees. This provision clarifies that coverage under a plan that combines both HMO and indemnity coverage as a POS plan is a distinct plan from a plan providing coverage solely through an HMO or an indemnity carrier. Renewability requirements for the plan apply to both the HMO and indemnity coverage contained in the plan. Conversely, although the amount of premium charged for the plan to cover the costs of the HMO coverage and the indemnity coverage will be determined separately, the total premium paid goes toward the total coverage available under the plan. Neither the coverage nor the premium is severable. Therefore, the carriers issuing the plan cannot treat an enrollee's failure to pay the entire premium as an election to sever the HMO coverage from the indemnity coverage. The subsection specifically requires that this provision be included in all POS contracts offered or issued to an enrollee so enrollees will be on notice of this requirement.

§21.2902(b)(4)(B) & (b)(4)(C): A commenter supports provisions prohibiting HMOs and insurers from requiring enrollees to use either HMO or indemnity coverage before using other coverage, but expressed concern about provisions allowing a reduction in the amount of coverage in the indemnity portion if HMO coverage is used first. The commenter believes enrollees should be allowed to use coverage in whatever order they want without penalty.

Response: Section 21.2902(b)(4)(B) prohibits coverage under the HMO from being reduced by benefits the enrollee obtains through the indemnity portion of the plan. Section 21.2902(b)(4)(C) allows the plan to reduce the annual limits in the indemnity portion of the plan by services accessed by the enrollee under the HMO coverage. For example, an enrollee who always utilizes the indemnity coverage first during each plan year could utilize all coverage up to an annual limit imposed on the indemnity benefits and then switch to HMO coverage for the remainder of the plan year. An enrollee that begins the plan year by using HMO coverage, which is then charged against the coverage available under the indemnity portion of the plan, could conceivably exhaust that plan year's annual indemnity benefits and be left with only HMO coverage for the remainder of the plan year.

The department disagrees that this constitutes a penalty. The rule is not designed to require an enrollee to utilize coverage in a particular order. Federal law mandates §21.2902(b)(4)(B). Section 21.2902(b)(4)(C) is necessary because otherwise carriers, in order to provide POS plan benefits, would be required to charge a premium that would be prohibitively high, possibly depriving all but the most affluent consumers of the ability to obtain this type of coverage. Rather than acting as a penalty, §21.2902(b)(4)(C) benefits consumers by keeping the POS option more affordable.

§21.2902(c)(8) & (d)(1)(C): A commenter suggests limiting coinsurance to no more than 30%. The commenter believes that allowing cost-sharing of up to 50% does not provide a valid option to health plan enrollees.

Response: The department disagrees. The POS option is intended to provide an enrollee with the option to obtain services outside of the HMO network. The statute contemplates that the enrollee choosing this option must bear the additional cost involved. Nothing in the statute suggests that the indemnity coverage provided under a POS plan should be subject to requirements that are not imposed on other types of indemnity coverage.

The 50% coinsurance maximum does not deprive enrollees of a valid POS option. Fifty percent is the maximum coinsurance the department will permit a carrier to require an enrollee to provide for indemnity coverage. Nothing in the statute indicates that indemnity coverage provided under a POS plan must exceed coverage provided under any other type of indemnity coverage.

§21.2902(c)(8) & (d)(1)(E): A commenter believes that allowing potential penalties of up to 50% for failure to comply with cost containment requirement provisions could result in no real coverage. The commenter recommends that the penalty for failure to comply be no more than 10 or 15 percent and either removing the term or adding a more specific definition of "other cost containment."

Response: The department disagrees that the 50% limit results in a lack of real coverage. The POS plan is intended to provide an enrollee with the option to obtain services both in and outside of the HMO network. It does not exempt the indemnity portion of the coverage from the standards generally applied to indemnity coverage. Removal of the phrase "other types of cost containment" or limitations on the penalty to no more than 10 or 15 percent would result in the imposition of limitations on the types of cost containment that can be applied to a POS plan that is not imposed on other indemnity coverage offered by carriers. As stated previously, this is not supported by the statute. A definition of cost containment requirements was added to §21.2501.

General: A commenter indicates that there are provisions in the proposed rules stating that certain other statutory provisions continue to apply to HMOs that should be stated in both Subchapter Z and Subchapter U. The commenter also believes that the phrase "all applicable laws, including" should be placed in front of the specific laws since specific provisions of the Code still apply.

Response: The department disagrees that a section must recite that other rules and laws apply to plans issued under this subchapter in order for those rules and laws to apply. It is axiomatic that a carrier must comply with all other applicable statutes and rules when issuing a plan under this subchapter, regardless of whether the subchapter specifically includes such a statement.

For with changes: Office of Public Insurance Counsel and PacifiCare of Texas.

The new sections are adopted under the Insurance Code, Articles 3.64 and 20A.22 and §36.001. Article 3.64(f) provides that the Commissioner of Insurance may adopt rules to implement Article 3.64 of the Insurance Code. Article 20A.22(a) provides that the commissioner shall adopt rules as necessary to implement the Texas Health Maintenance Organization Act. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

§21.2901.Definitions.

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

(1)

Corresponding benefits--Benefits provided under the indemnity portion of a point-of-service (POS) plan, as defined in Articles 3.64(a)(4) and 20A.02(bb) of the Code, that conform to the nature and kind of coverage provided to an enrollee under the HMO portion of a point-of-service plan.

(2)

Cost containment requirements--Provisions in POS indemnity coverage requiring a specific action, such as the provision of specified information to the plan, that must be taken by an enrollee or by a physician or a provider on behalf of the enrollee in order to avoid the imposition of a specified penalty on the coverage provided under the plan for a proposed service or treatment.

(3)

In-plan covered services--Health care services, benefits, and supplies to which an enrollee is entitled under the evidence of coverage issued by an HMO, including emergency services, approved out-of-network services and other authorized referrals.

(4)

Non-participating physicians and providers--Physicians and providers that are not part of an HMO delivery network.

(5)

Out-of-plan covered benefits--All covered health care services, benefits, and supplies that are not in-plan covered services. Out-of-plan covered benefits include health care services, benefits and supplies obtained from participating physicians and providers under circumstances in which the enrollee fails to comply with the HMO's requirements for obtaining in-plan covered services.

(6)

Participating physicians and providers--Physicians and providers that are part of an HMO delivery network.

(7)

Point-of-service blended contract plan (POS blended contract plan)--A POS plan evidenced by a single contract, policy, certificate or evidence of coverage that provides a combination of indemnity benefits for which an indemnity carrier is at risk and services are provided by an HMO under a POS plan.

(8)

Point-of-service coverage (POS coverage)--Coverage provided under a POS plan.

(9)

Point-of-service dual contracts plan (POS dual contracts plan)--A POS plan providing a combination of indemnity benefits and HMO services through separate contracts, one being the contract, policy or certificate offered by an indemnity carrier for which the indemnity carrier is at risk and the other being the evidence of coverage offered by the HMO.

(10)

Point-of-service HMO coverage (POS HMO coverage)--Services provided by an HMO in an evidence of coverage under a POS plan.

(11)

Point-of-service indemnity coverage (POS indemnity coverage)--Coverage for which an indemnity carrier is at risk under a POS plan for self-referred health care services, benefits and supplies, other than emergency services, selected at the option of the enrollee, from non-participating physicians or providers, as well as services, benefits and supplies from participating physicians or providers under circumstances in which the enrollee fails to comply with the requirements of the HMO providing the POS HMO coverage under a POS plan for obtaining in-plan covered services.

§21.2902.Arrangements between Indemnity Carriers and HMOs to Provide Coverage.

(a)

Written agreement between the HMO and the indemnity carrier. A POS plan offered under this subchapter must be evidenced by a written agreement between the HMO and indemnity carrier that must be filed with the department as a plan document and shall provide the following:

(1)

the identity of each entity, including the HMO, the indemnity carrier, or any third party administrator (TPA) that will administer the coverages offered under the POS plan;

(2)

all duties of the HMO and indemnity carrier to each other relating to the POS plan issued under this subchapter;

(3)

all costs allocable to the HMO or the indemnity carrier relating to the POS plan;

(4)

the HMO's network of providers and, if the POS indemnity coverage includes preferred provider benefits, as allowed by Article 3.70-3C of the Code and applicable rules, the indemnity carrier's list of preferred providers, which shall not be identical and;

(5)

the respective premium rates for the POS HMO coverage and for the POS indemnity coverage shall be derived separately by the HMO and the indemnity carrier and shall be separately identified in each POS plan contract; however, the agreement may provide that for a POS plan offered by the entities under this subchapter:

(A)

the HMO, the indemnity carrier or a TPA may collect the premiums for both coverages;

(B)

the purchaser may issue one payment for both coverages; and

(C)

the entity delegated to collect the premium shall then disburse the appropriate premium to the other party or parties;

(6)

premium rates charged by the HMO must be based on the actuarial value of the POS HMO coverage and may be different from the premium rates charged by the indemnity carrier, which must be based on the actuarial value of the POS indemnity coverage offered by the indemnity carrier;

(7)

the HMO and indemnity carrier must maintain separate books and records for the POS plan, including but not limited to information regarding premiums, lists of covered persons, claim payment data, complaint records, maintenance tax records, and all other books and records required to be maintained by law or rule;

(8)

neither entity shall use the other to perform functions or duties that are its own responsibility by law or rule, including but not limited to, making all reports and filings required by law or rule;

(9)

the entities may delegate those functions or duties permitted by law or rule to be delegated to another party to perform, including but not limited to contracting with providers, administering claims, and conducting grievance procedures, provided that the delegating entity shall remain responsible for ensuring that all delegated functions shall be conducted in compliance with all applicable laws and rules;

(10)

the agreement between the indemnity carrier and the HMO may not be canceled or terminated until the coverage for each enrollee in a POS plan issued by both the indemnity carrier and HMO is terminated or canceled pursuant to the provisions of this subchapter; and

(11)

the arrangements to be made in the event of insolvency, loss of certification or any other circumstances affecting the ability of the indemnity carrier, the HMO, or both to comply with this subchapter.

(b)

Basic requirements. In addition to complying with all of the requirements listed in subsection (a) of this section, a contract creating a POS blended contract plan and contracts that together create a POS dual contracts plan must provide the following:

(1)

enrollees shall not be required to first use either the POS indemnity coverage or POS HMO coverage;

(2)

if the premiums necessary to maintain both the POS HMO coverage and the POS indemnity coverage are not paid, both coverages shall be cancelled simultaneously, and any premium the enrollee has remitted to maintain coverage shall be returned to the enrollee;

(3)

the POS HMO evidence of coverage must include all mandatory HMO coverages and the POS indemnity coverage must contain all mandatory indemnity coverages;

(4)

corresponding coverage for a POS plan must include the following:

(A)

all mandatory benefit offers required by the Code that are accepted or rejected by the purchaser must also be accepted or rejected in the same manner with respect to both the POS HMO and the POS indemnity coverage;

(B)

benefits under the POS HMO coverage may not be reduced by the benefits received under the POS indemnity coverage; and

(C)

benefits for POS indemnity coverage under the plan may be reduced by benefits received under the POS HMO coverage.

(5)

if medically necessary covered services, benefits and supplies are not available through the HMO's participating physicians or providers, the HMO is not relieved of its obligation to provide out-of-network services under Article 20A.09 of the Code on the basis that the same services are available to an enrollee through POS indemnity coverage; and

(6)

each POS contract must identify the respective premium rates for the POS HMO coverage and for the POS indemnity coverage, as well as the name and address of the entity to whom the premiums must be paid.

(c)

POS blended contracts. Contracts for POS blended contract plans must:

(1)

list all POS HMO coverage;

(2)

specify how services, benefits and supplies under the POS HMO coverage are accessed;

(3)

list all POS indemnity coverage;

(4)

specify how claims are made for POS indemnity coverage;

(5)

disclose all copayments required;

(6)

disclose all coinsurance required for POS indemnity coverage, which shall never exceed 50% of the total amount to be covered;

(7)

disclose all deductibles required;

(8)

disclose all precertification requirements for POS indemnity coverage under the plan including any penalties for failing to comply with any precertification or cost containment provisions, provided that any such penalties shall not reduce benefits more than 50% in the aggregate;

(9)

disclose how the enrollee may complain about a denial of coverage and appeal an adverse determination rendered concerning the coverage under the POS plan and disclose any rights the enrollee may have to an independent review of an adverse determination under Article 21.58A of the Code;

(10)

POS indemnity coverage issued to a group shall contain provisions that comply with Article 3.51-6 Sec. (1)(d)(2)(vii) - (xiii) of the Code; and

(11)

POS indemnity coverage issued to an individual shall contain provisions that comply with Article 3.70-3(A)(5) - (11) of the Code.

(d)

POS dual contracts. Contracts comprising a POS dual contract plan must comply with the following:

(1)

The contract issued by the indemnity carrier shall comply with all applicable requirements for indemnity carriers and shall:

(A)

list all indemnity coverage;

(B)

specify how claims are made;

(C)

disclose all applicable copayments and coinsurance, which shall never exceed 50% of the total amount to be covered;

(D)

disclose all applicable deductibles;

(E)

disclose all precertification requirements for POS indemnity coverage under the plan including any penalties for failing to comply with any precertification or cost containment provisions, provided that any such penalties shall not reduce benefits more than 50% in the aggregate;

(F)

disclose how the enrollee may complain about a denial of coverage and appeal an adverse determination rendered concerning the coverage under the POS indemnity coverage and disclose any rights the enrollee may have to an independent review of an adverse determination under Article 21.58A of the Code, if applicable;

(G)

POS indemnity coverage issued to a group, shall contain provisions that comply with Article 3.51-6 Sec (1)(d)(2)(vii) - (xiii) of the Code;

(H)

POS indemnity coverage issued to an individual shall contain provisions that comply with Article 3.70-3(A)(5) - (11) of the Code.

(2)

The contract issued by the HMO shall comply with all requirements for an HMO evidence of coverage and shall:

(A)

list all covered services, benefits and supplies;

(B)

specify how covered services, benefits and supplies are accessed by the enrollee; and

(C)

disclose all applicable copayments.

(e)

Filings. All plan documents for a POS plan offered under this subchapter shall be submitted to the Filings Intake Division in accordance with:

(1)

Article 20A.09 of the Code and Chapter 11 of this title (relating to Health Maintenance Organizations) including the filing fee requirements; and

(2)

Article 3.42 of the Code and Chapter 3, Subchapter A of this title (relating to Requirements for Filing of Policy Forms, Riders, Amendments, Endorsements for Life, Accident, and Health Insurance and Annuities) including the filing fee requirements.

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 20, 2001.

TRD-200103504

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: July 10, 2001

Proposal publication date: January 5, 2001

For further information, please call: (512) 463-6327


Chapter 26. SMALL EMPLOYER HEALTH INSURANCE REGULATIONS

Subchapter A. SMALL EMPLOYER HEALTH INSURANCE PORTABILITY AND AVAILABILITY ACT REGULATIONS

28 TAC §26.4, §26.14

The Commissioner of Insurance adopts amendments to §26.4 and §26.14 and new §26.312, concerning point-of-service plans. The sections are adopted without changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 80) and will not be republished.

These amendments and new section are necessary to implement legislation enacted by the 76th Texas Legislature in House Bill (HB) 1498 which amended the Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art. 26.09; Subchapter F, Chapter 3, was amended by adding Art. 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of the new section and amendments are to develop provisions relating to point-of-service plans offered by small and large employer carriers pursuant to Chapter 26 of the Texas Administrative Code (TAC). A point-of-service (POS) plan is a health care plan that combines HMO and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the HMO delivery system or from a physician or provider outside of the delivery system on a fee-for-service basis.

Contemporaneously with this adoption, the adoption of new §§11.2501-11.2503, 21.2901, and 21.2902 are published elsewhere in this issue of the Texas Register. The separately published new sections added to Chapter 11 implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO which contains an indemnity rider that is underwritten by the HMO. That adoption also sets forth the financial criteria an HMO must meet in order to issue these point-of-service rider plans. The separately adopted new sections added to Chapter 21 implement HB 1497 provisions that an indemnity carrier and an HMO can jointly create a POS plan, either by issuing "a blended contract point-of-service plan," in which one contract is issued by either the HMO or indemnity carrier that contains the terms of both the indemnity and HMO components of the plan; or through a "dual contracts point-of-service plan." A dual contracts point-of-service plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the HMO portion of the plan; and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan.

Amendments to §26.04(35) replace the former definition of a "point-of-service contract" with a new definition of "point-of-service coverage" which reflects the expansion of the types of point-of-service plans authorized by HB 1498 that can now be issued by large and small employer carriers under Texas Insurance Code Chapter 26. The amendment to §26.14 clarifies that a small employer carrier may issue POS plans provided that the carrier complies with applicable provisions of TAC Chapters 11 and 21 that are also being adopted elsewhere in this issue of the Texas Register. New §26.312 makes the same clarification for large employer carriers. New §26.312 also creates standards for POS coverage options that large employer carriers issuing HMO coverage to large employers are required by HB 1498 to offer to eligible employees if the only coverage available to the employees is through a network-based HMO plan or plans.

GENERAL: A commenter generally supports the rule and fully supports the intent to expand insurance coverage by providing at least one non-network option to employees who wish to purchase such coverage.

Response: The department appreciates this support. However, the department does wish to clarify that the provision of Art. 26.09 amended by HB 1498 as well as the section implementing that provision applies only to carriers providing coverage to eligible employees of large employers. Small employer carriers are not subject to the requirement.

Comment: A commenter believes the proposed sections expand the requirements of HB 1498 and exceed its statutory intent and authority. The commenter recommends that the department re-visit these sections of the rules.

Response: The department disagrees that the sections exceed the authority of HB 1498. The Commissioner has the authority to adopt rules as necessary to implement Chapter 26 of the Texas Insurance Code (Code). While HB 1498 does specifically exclude small employer plans from the applicability of Art. 26.09 of the Code, nothing in Chapters 3 or 20A of the Code as amended by the bill excludes small employers from applicability of those sections. Art. 26.48(a)(3) of the Code permits an HMO to offer a point-of-service contract in connection with an indemnity carrier. Article 26.42(c) of the Code permits HMOs to offer small employers any other health plan authorized under the Code. Art. 20A.06 of the Code, which authorizes an HMO to issue a point-of-service rider, does not exclude small employer carriers.

Adoption of the sections required to implement HB 1498 provides the department the opportunity to consider the general requirements that any plan incorporating a point-of-service component should meet. These sections incorporate these general requirements. They do not transfer to small employer carriers any of the statutory requirements of HB 1498 that are not applicable to small employer carriers. Just as a small employer HMO must comply, as applicable, with the general requirements for HMO plans in 28 TAC Chapters 11 and 21, and a small employer indemnity carrier must comply, as applicable, with the general requirements for group indemnity health plans under 28 TAC Chapters 3 and 21, these sections clarify that a small employer carrier issuing a plan that contains a point-of-service component must comply, as applicable, with the general requirements established in the new sections and amendments to 28 TAC Chapter 11 and 21 published elsewhere in this issue of the Texas Register relating to point-of-service coverage.

For: Office of Public Insurance Counsel.

For with changes: PacifiCare of Texas.

The amendments and new section are adopted under the Insurance Code, Article 26.04 and §36.001. Article 26.04 provides that the commissioner shall adopt rules as necessary to implement Chapter 26 of the Insurance Code. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

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 20, 2001.

TRD-200103505

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: July 10, 2001

Proposal publication date: January 5, 2001

For further information, please call: (512) 463-6327


Subchapter C. LARGE EMPLOYER HEALTH INSURANCE PORTABILITY AND AVAILABILITY ACT REGULATION

28 TAC §26.312

The Commissioner of Insurance adopts amendments to §26.4 and §26.14 and new §26.312, concerning point-of-service plans. The sections are adopted without changes to the proposed text as published in the January 5, 2001 issue of the Texas Register (26 TexReg 80) and will not be republished.

These amendments and new section are necessary to implement legislation enacted by the 76th Texas Legislature in House Bill (HB) 1498 which amended the Insurance Code as follows: Subchapter A, Chapter 26 was amended by adding Art. 26.09; Subchapter F, Chapter 3, was amended by adding Art. 3.64; Section 2, Art. 20A.02 was amended by amending Subsection (i) and adding Subsections (aa) and (bb); and Section 6, Art. 20A.06 was amended by amending Subsection (a) and adding Subsection (c).

The purpose and objective of the new section and amendments are to develop provisions relating to point-of-service plans offered by small and large employer carriers pursuant to Chapter 26 of the Texas Administrative Code (TAC). A point-of-service (POS) plan is a health care plan that combines HMO and indemnity coverage. An enrollee in a POS plan can choose to obtain health care through the HMO delivery system or from a physician or provider outside of the delivery system on a fee-for-service basis.

Contemporaneously with this adoption, the adoption of new §§11.2501-11.2503, 21.2901, and 21.2902 are published elsewhere in this issue of the Texas Register. The separately published new sections added to Chapter 11 implement provisions of HB 1498 relating to the issuance of a "point-of-service rider plan" by an HMO which contains an indemnity rider that is underwritten by the HMO. That adoption also sets forth the financial criteria an HMO must meet in order to issue these point-of-service rider plans. The separately adopted new sections added to Chapter 21 implement HB 1497 provisions that an indemnity carrier and an HMO can jointly create a POS plan, either by issuing "a blended contract point-of-service plan," in which one contract is issued by either the HMO or indemnity carrier that contains the terms of both the indemnity and HMO components of the plan; or through a "dual contracts point-of-service plan." A dual contracts point-of-service plan is composed of two separate contracts, one of which is issued by the HMO to the enrollee and contains the terms of the HMO portion of the plan; and the other which is issued by the indemnity carrier to the enrollee and contains the terms of the indemnity portion of the plan.

Amendments to §26.04(35) replace the former definition of a "point-of-service contract" with a new definition of "point-of-service coverage" which reflects the expansion of the types of point-of-service plans authorized by HB 1498 that can now be issued by large and small employer carriers under Texas Insurance Code Chapter 26. The amendment to §26.14 clarifies that a small employer carrier may issue POS plans provided that the carrier complies with applicable provisions of TAC Chapters 11 and 21 that are also being adopted elsewhere in this issue of the Texas Register. New §26.312 makes the same clarification for large employer carriers. New §26.312 also creates standards for POS coverage options that large employer carriers issuing HMO coverage to large employers are required by HB 1498 to offer to eligible employees if the only coverage available to the employees is through a network-based HMO plan or plans.

The amendments and new section are adopted under the Insurance Code, Article 26.04 and §36.001. Article 26.04 provides that the commissioner shall adopt rules as necessary to implement Chapter 26 of the Insurance Code. Section 36.001 provides that the commissioner may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

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 20, 2001.

TRD-200103506

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: July 10, 2001

Proposal publication date: January 5, 2001

For further information, please call: (512) 463-6327