Prohibition of Mandatory Hospitalists
Hospital Due Process
Health Plan Colorectal Cancer Screening
Women's Health Payment Parity
Coverage of Nurse First Assistants
Coverage for Brain Injuries
Disclosure of Health Plan Contacts
Mandated Health Benefits
Reimbursement for Out-of-Network
Health Plan Due Process
Consumer Assistance Program
HB 2828, sponsored by Rep. John Smithee (R-Amarillo) and Sen.
Chris Harris (R-Arlington), sets forth provisions relating to the
complaint and reporting requirements of a written agreement between
a delegated entity and an HMO, provides penalties for failure to
comply with the agreement, establishes financial reserve
requirements in certain circumstances, and provides for related
consumer information and protections. The bill was a product of
extensive work by representatives from physician networks, consumer
groups, and health plans conducted before and during the session.
The rulemaking authority for this bill rests with the Texas
commissioner of insurance, and it takes effect Sept. 1, 2001.
HB 2828's roots originated when the 76th Texas Legislature set
standards for HMOs that delegate certain responsibilities to
physician networks. During the interim, it was determined that the
commissioner lacked needed authority to regulate physician
networks, and HMO network failures prompted a call for the
establishment of reserve requirements. Additionally, confusion and
concerns among consumers about the requirements for limited
provider networks needed to be addressed. HB 2828 amends
legislation passed in 1999 to further regulate those provider
networks that assume some financial risk and perform certain
functions of an HMO.
The bill does the following:
- Grants greater and more direct oversight, in part, by giving
the commissioner the ability to directly investigate and regulate
network activities without having to go through the HMOs to
obtain enforcement authority.
- Requires financial reserves when networks or health care
entities (e.g., hospitals) assume financial risks for services
other than those regularly provided by the applicable network or
entity. For example, the bill requires reserves when a network
accepts facility risk, but reserves are not required when the
network accepts financial risks involving its physicians.
- Requires financial reserves anytime a network or health care
entity accepts pharmacy risk.
- Requires that the reserves be held at a financial institution
- Requires that the reserves be held in trust for the benefit
of, or to provide health care services to, the HMO
- Increases the information required to be exchanged between
the HMO and the network. The bill establishes penalties for
failure to provide required information.
- Clarifies and increases patient protections that apply to
these networks and strengthens disclosure standards used to
explain the operation of delegated physician networks to
- Provides that contracts between a delegated entity and
physicians shall provide procedures for resolving disputes
regarding the necessity for continued medical treatment.
Currently, all contracts between HMOs and physicians or other
providers require credentialing. The initial credentialing process
includes an application, verification of information, and a site
visit. As originally introduced, this legislation was designated SB
1143 and HB 576 and was sponsored by Sen. John Carona (R-Dallas)
and Rep. Kyle Janek, MD (R-Houston). However, after these bills
stalled, their sponsors tacked the majority of their provisions
onto SB 544. In addition to the credentialing provisions, SB 544 by
Sen. J.E. "Buster" Brown (R-Lake Jackson) mandates that HMOs
include periodic health evaluations for each adult enrollee under
certain coverage. The rulemaking authority rests with the
commissioner of insurance, and the effective date of the bill is
Sept. 1, 2001.
The bill includes the following provisions:
- Compels the commissioner to require an HMO to verify that a
physician's license to practice medicine, and any other
certificate the physician is required to hold, is valid as of the
date of initial credentialing and on the date of each
- Requires the commissioner to compel an HMO that conducts a
site visit, for the purpose of initial credentialing, to evaluate
the site's accessibility, appearance, space, medical
record-keeping practices, availability of appointments, and
- States that the commissioner may not require that HMOs:
Evaluate the appropriateness of equipment during the
Formally recredential physicians more frequently than
once in any three-year period,
Verify the validity of a license or certificate held by
a physician other than as of the date of initial
credentialing or recredentialing of the physician,
Use clinical personnel to perform a site visit for
initial credentialing of physicians unless clinical review is
needed during the site visit, or
Require a site visit be performed for recredentialing of
- An HMO may perform a site visit of a physician at any time
- Requires the commissioner by rule to adopt a standardized
form for the verification of the credentials of a physician and
that a hospital, HMO, or PPO use the form for verification of
credentials. In adopting a standardized form, the bill requires
the commissioner to consider any credentialing application form
that is already widely used in this state.
- Requires the Texas State Board of Medical Examiners (TSBME)
to study the establishment of a program for standardized
credentials verification using a credentialing information
system. Requires the board, not later than Jan. 1, 2003, to
report on its study to the governor, lieutenant governor, and
speaker of the House of Representatives.
PROHIBITION OF MANDATORY HOSPITALISTS
During the 1999 legislative session, TMA and an array of
specialty societies, including the Texas Academy of Family
Physicians, Texas Pediatric Society, and Texas Academy of Internal
Medicine, advocated a bill prohibiting the mandatory use of
hospitalists by HMOs and PPOs. The legislation was filed in
response to a growing number of health plan policies requiring
physicians, particularly primary care physicians, to hand off their
patients' care to a hospitalist during an inpatient stay.
Aggressive lobbying by health insurance plans stalled the bill
in the House Calendars Committee, which determines which bills make
it to the House floor. As a result, the bill died. This year, the
legislature adopted HB 606, by Representative Smithee, achieving
the association's goal to prohibit health plans from requiring the
use of hospitalists. The legislation applies to HMOs and PPOs and
simply says that a health plan cannot compel a physician to use a
hospitalist for inpatient care. A hospitalist is defined as a
physician "who serves as physician of record at a hospital for a
hospitalized patient of another physician and who returns the care
of the patient to that other physician at the end of the patient's
The bill becomes effective Sept. 1, 2001 and applies to
contracts issued on or after the bill's effective date.
HOSPITAL DUE PROCESS
HB 3152 by Rep. Jaime Capelo (D-Corpus Christi) and Senator
Brown provides that the process for considering applications for
hospital staff privileges or renewing, modifying, or revoking such
privileges must meet the due process requirements of the federal
Healthcare Quality Improvement Act. This act sets the standards for
due process in Medicare and other federal programs. Standards
relate to such things as notice of proposed actions, conduct of
hearings and notices, evidence that can be presented, the right of
representation by an attorney, and the right to call and
cross-examine witnesses. The act also states that if the provider
wants mediation, the physician can require the hospital to
participate in mediation.
HEALTH PLAN COLORECTAL CANCER SCREENING
SB 1467 by Sen. Mike Moncrief (D-Fort Worth) directs insurance
companies to cover certain screening procedures for colon cancer.
The Texas Society for Gastroenterology and Endoscopy actively
promoted the bill, which is based on legislation in Virginia
requiring health plans to adhere to national cancer screening
guidelines published by the American College of Gastroenterology
and Endoscopy and the American Cancer Society. While SB 1467 does
not specifically reference the national guidelines, the bill does
say that insurance companies must offer (1) fecal occult of the
stool annually and flexible sigmoidoscopy every five years, or (2)
colonoscopy every 10 years to patients over age 50 who are at
normal risk for colon cancer. Health plans are required to notify
patients of this benefit.
The Texas Department of Insurance (TDI) is required to implement
rules for SB 1467. The act takes effect Sept. 1, 2001 but only
applies to health plan contracts issued or renewed on or after Jan.
(For more information about this bill, contact Laurie Reece,
executive director, Texas Society for Gastroenterology and
Endoscopy, at  370-1522.)
WOMEN'S HEALTH PAYMENT PARITY
SB 8 by Sen. David Cain (D-Dallas) requires HMOs and insurance
plans to pay physicians and hospitals equally for women-specific
surgeries as well as for other equivalent procedures. Specifically,
the bill states that when reimbursing a physician or provider for
reproductive and oncology services for women, the plan must pay an
amount not less than the annual average compensation per hour or
unit as would be paid to a physician or provider performing a
comparable service on a man.
SB 8 states that there has been widespread discrimination in
compensating providers of women's health care and that this
discrimination creates an economic disincentive to invest funds in
training doctors, in creating suitable hospital facilities, and in
conducting female-specific medical research, all of which further
result in unequal treatment of women in the health care field.
The bill allows TDI to impose penalties for health plans that
fail to comply. Within 90 days of the effective date of the act
(Sept. 1, 2001), the Texas Department of Health, Texas Department
of Human Services, and TDI must repeal any rules that are contrary
to this act and adopt new rules implementing SB 8 requirements.
SB 8 becomes effective Sept. 1, 2001, but applies only to health
plan policies issued or renewed on or after Jan. 1, 2002.
COVERAGE OF NURSE FIRST ASSISTANTS
HB 803 by Rep. Rob Junell (D-San Angelo) requires health
insurers, including HMOs, PPOs, and Medicaid, to provide coverage
and reimbursement for services by a nurse first assistant. A "nurse
first assistant" is defined as a registered nurse who is certified
in perioperative nursing by an organization recognized by the
nursing board and who has completed a nurse first assistant
educational program also approved by the nursing board. Services
that the nurse first assistant provides must be within the
practitioner's scope and requested by the physician whom the nurse
is assisting. A health insurer may provide for a different
reimbursement schedule for nurse first assistants so long as the
reimbursement methodology is the same as that used for
Insurers, HMOs, and PPOs cannot require via contract that a
physician use the services of a nurse first assistant.
HB 803 takes effect on Sept. 1, 2001, but applies only to health
insurance policies issued or renewed on or after Jan. 1, 2002.
COVERAGE FOR BRAIN INJURIES
HB 1676 by Rep. Lon Burnam (D-Fort Worth) and Sen. Leticia Van
de Putte (D-San Antonio) states that health plans may not exclude
coverage for cognitive and neurological services, including
rehabilitation and therapy, for patients with brain injuries or who
are diagnosed with a neurological disease. Insurers now frequently
exclude coverage of rehabilitation services as part of a health
benefit plan on the basis that these conditions are a mental rather
than physical illness. The bill also requires TDI to adopt rules
requiring health plans to provide training for personnel who
preauthorize services in order to prevent wrongful denial of
coverage when assessing what is a medical benefit versus a mental
By January 2007, the Texas Sunset Advisory Committee is required
to assess the results of HB 1676, including whether patients are
receiving services and whether the act increases health plan
HB 1676 takes effect on Sept. 1, 2001, but applies only to
health plan policies issued or renewed on or after Jan. 1,
DISCLOSURE OF HEALTH PLAN CONTACTS
SB 1181 by Sen. Eliot Shapleigh (D-El Paso) and Rep. Craig
Eiland (D-Galveston) requires that when a patient makes an oral or
written request for information about the health plan, the plan
must provide to that patient the name or employee identifier,
mailing address, business city and state location, and job title of
the health plan employee who is available to respond to patient
communications and questions about coverage and benefits that the
health plan offers.
SB 1181 took effect immediately.
MANDATED HEALTH BENEFITS
HB 1610 by Rep. Kip Averitt (R-Waco) requires health benefit
plans to collect and report cost and utilization data to TDI for
each mandated health benefit and mandated health offer designated
by the commissioner of insurance. TDI will develop
rules to implement the bill. TDI may utilize data obtained
under this act to determine the impact of mandated benefits on
Texas health plans, patients, and providers.
HB 1562 by Rep. Senfronia Thompson (D-Houston) and Senator
Moncrief relates to the control of health insurance fraud. Because
insurance fraud costs our nation's health care system several
billion dollars annually, the bill sets forth requirements for the
investigation of such fraud, directs insurers to adopt fraud plans,
and coordinates enforcement efforts between the Office of the
Attorney General (OAG), Medicaid, and TDI. HB 1562 does not
expressly grant to a state officer or entity any rulemaking
authority not expressly stated in the bill. Specific provisions
include the following:
- Directs the Insurance Fraud Unit to receive, review, and
investigate insurer antifraud reports. The unit is to
report annually to the commissioner of insurance the number of
cases completed and any recommendations for new regulatory or
- Relieves a person from liability for providing information
regarding insurance fraud to certain governmental entities or a
special investigative unit of an insurer and protects such
information from public disclosure.
- Directs insurers to include a certain antifraud statement on
their claim forms and if the insurer collects direct written
premiums, to adopt an antifraud plan containing statutorily
- States that a physician commits unprofessional conduct if he
or she knowingly presents a false or fraudulent claim for the
payment of a loss under an insurance policy; or knowingly
prepares, makes, or subscribes to any writing, with intent to
present or use the writing, in support of a false or fraudulent
claim under an insurance policy. A violation of this provision
can constitute cause for the revocation or suspension of a
provider's license, permit, registration, or certificate, or may
result in other disciplinary action.
REIMBURSEMENT FOR OUT-OF-NETWORK PROVIDERS
HB 2831 by Representative Smithee and Sen. David Sibley (R-Waco)
requires a managed care entity to provide an out-of-network
physician with a written description of its reimbursement factors
if the physician requests such information. Current law does not
require a managed care entity to provide an out-of-network
physician with a description of the standards it uses to determine
the amount of his or her potential reimbursements for health care
provided to an enrollee in the entity's plan. Rulemaking authority
is granted to the commissioner of insurance, and the legislation
takes effect Sept. 1, 2001.
HB 2831 does not require a managed care entity to disclose
proprietary information that a contract between the managed care
entity and a vendor who supplies payment or statistical data to the
managed care entity prohibits from disclosure. The bill prohibits a
contract between the managed care entity and a vendor from
prohibiting the managed care entity from disclosing certain
information. Under some circumstances, the legislation also
requires a managed care entity that denies a request from an
out-of-network physician to send a copy of the request and the
information requested to TDI for review.
Market Fairness/Managed Care Near Misses
HB 1862, sponsored by Representative Eiland and Senator Van de
Putte, was vetoed by Gov. Rick Perry despite the fact that both the
Texas House of Representatives and the Texas Senate unanimously
passed the bill with overwhelming, bipartisan support. Because
current law is riddled with loopholes, which health plans routinely
exploit, the purpose of the legislation was to close the loopholes
and establish a "fair pay" set of rules for the compensation of
physicians and providers by HMOs and PPOs. TMA, along with an array
of other health professional and provider advocacy groups,
thoroughly supported the development and passage of HB 1862.
In vetoing the bill, the governor stated that HB 1862 "would
erode the ability of a health plan to agree, through contract or
otherwise, to settle contract disputes through alternative dispute
resolution or binding arbitration. By eliminating the ability to
include an alternative dispute resolution clause, this bill is
likely to send more disputes to the courthouse for resolution,
further delaying the payment of claims, driving up the cost of
health insurance premiums, and increasing the number of uninsured
Texans." Other reasons the governor gave for his veto included the
passage of prompt payment and physician joint negotiation laws
during the 1999 legislative session and the passage of the
delegated networks bill this session.
After explaining his reasons for the veto, Governor Perry stated
that "unless significant improvements are soon realized and health
plans demonstrate a strong commitment to prompt pay laws and to
honoring their contractual relationships with physicians and health
care providers, Texas may have to adopt stronger laws than those
proposed in House Bill No. 1862." He also said that he would direct
TDI to "be more aggressive in assisting physicians and health care
providers in claims disputes" and to "reopen and strengthen
existing prompt pay rules." Finally, the governor directed the
department to report on these efforts in addition to
recommendations for necessary action before the beginning of the
next legislative session.
TMA is extremely disappointed by the governor's veto.
beginning immediately, the association will work with TDI, OAG,
and all other appropriate entities to pursue any means possible to
strengthen the substance and enforcement of the current law.
In this regard, the following highlights of HB 1862 demonstrate the
needed advancements that TMA will seek:
Elements of a Clean Claim
- A clean claim defined as a properly completed HCFA 1500 form
for physicians and other professionals, or a UB 92 form for
institutions and facilities.
- All claims filed using the defined form, which cannot be
altered by contract.
Submission of a Claim
- Proof of timely filing that is transferable from one plan to
- The claim is considered received by the plan three days after
the physician mails it first class.
- The claim is considered received by the plan within 24 hours
of the physician submitting it electronically.
Coordination of Benefits
- Physicians in no way are responsible for coordination of
- The investigation of eligibility for payment by a plan(s),
including any coordination of benefits, shall not extend the
period for determining if a claim is eligible for payment.
- Each plan pays the physician its respective estimated portion
of a claim by the 45th day of receipt of the clean claim.
- The plan has a maximum of 180 days after making payment to
provide the physician with written notice of overpayment;
otherwise, the plan loses the right to collect.
Coding Guidelines and Requirements
- A contract between a health plan and a physician must provide
that the physician may request and receive a description of the
coding guidelines and fee schedules applicable to specific
procedures the physician will perform under the contract.
- The plan must provide the coding guidelines and fee schedules
no later than the 30th day after the physician's request.
- The physician reserves the right to cancel the contract on or
before the 30th day after the date the physician receives coding
and fee schedule information without penalty or discrimination in
participating in other health care products or plans.
- The health plan is required to provide the name, edition, and
model version of the software that the plan uses to determine
bundling and unbundling of claims.
- Plans are required to pay claims according to nationally
recognized, generally accepted CPT codes, notes, and
- Plans are required to pay claims consistent with nationally
recognized, generally accepted bundling logic and edits.
Additional Information and Attachments
- Once a physician files a claim, a plan has only one
opportunity to request additional information.
- The requested attachments must be claim specific, related to
the episode of care, and clinical in nature.
- When a physician requests verification of the eligibility for
payment of a particular medical service, the plan is required to
inform the physician whether the service is eligible for
- Plans that require verification must ensure that the
appropriate staff are reachable at set times to provide such
- Within a specific time frame, plans are required to provide a
list of its preauthorization requirements and procedures.
- After receiving a request that requires preauthorization, the
plan must transmit its determination to the physician within a
set period of time.
- Prohibits a plan from circumventing the law through contract
- If a noncontracted physician is required to provide services
because of an emergency situation or because a contracted
physician was not reasonably available, the statutory prompt
payment requirements shall apply.
Penalty and Enforcement Provisions
- If a plan fails to correctly pay or deny a claim within the
legal time limit, the plan is required to pay a penalty
consisting of the lesser of billed charges plus 15-percent
interest per annum or double the contracted rate plus 15-percent
interest per annum.
- Prohibits a plan from unilaterally requiring that a physician
use binding arbitration.
- Extends to the Texas attorney general authority to seek
remedies and levy fines against health plans regarding certain
violations of the statute.
HEALTH PLAN DUE
HB 1913 by Representative Capelo and Senator Shapleigh was
vetoed by the governor because of concerns that the bill would
unduly limit the ability of a health plan to immediately suspend a
physician or provider for reasons related to quality or health care
fraud. Had HB 1913 passed, it would have established that a health
plan could not terminate a PPO or HMO contract with a provider for
quality of care reasons without first providing a hearing before a
review panel. Proceedings would have been obligated to adhere to
the due process requirements outlined under the federal Healthcare
Quality Improvement Act and to be conducted before the plan filed a
complaint with the TSBME or the National Practitioner Data Bank.
Additionally, the plan would have been required to show good cause
if it acted contrary to the decision of the review panel.
In 1999, the legislature established a consumer assistance
program to help consumers with questions and concerns about HMOs
regulated by TDI. However, it is estimated that half of privately
insured Texans are enrolled in a self-funded health plan outside
the purview of state regulation. Patients within these plans often
misunderstand their health care options or are unaware of their
rights and responsibilities when insurance approvals or payments
are delayed or denied. HB 2430 by Rep. Elliott Naishtat (D-Austin)
and Senator Carona created a consumer assistance program within the
Office of the Public Insurance Counsel to provide information to
all health insurance consumers who have questions about insurance
options and to assist persons who are experiencing problems with
their insurance coverage.
SB 1 appropriated $200,000 to establish the program. In
vetoing the bill, Governor Perry indicated the ombudsman program
was not adequately funded. TMA strongly supported the bill.
In the final days of the session, HB 2620, sponsored by Rep.
Toby Goodman (R-Arlington) and Sen. Jane Nelson (R-Flower Mound),
was left stranded in the House Calendars Committee, the committee
responsible for setting House floor debate. The legislation
instructed TDI to convene a work group, with representation from
physicians, consumers, and health plans, to develop the contents
and criteria for a uniform, standardized contract. The goal of HB
2620 was to allow physicians to easily compare the contracts of
multiple plans. Also, these contracts would reduce costs by
minimizing the administrative burdens of the physician and would
protect patients from provisions that place physicians in positions
of conflict. TMA strongly supported the bill.
TMA helped develop the bill because almost 60 percent of
physicians have more than 25 percent of their patients in managed
care plans. This equates to nearly 40 percent of their practice
revenue. Managed care organizations require physicians and patients
to complete large amounts of paperwork. Increasing administrative
costs are a possible factor in rising health care costs, and
administrative duties detract from the time physicians are able to
spend with their patients. Most managed care organizations ask for
the same information in their contracts, but these contracts are in
different formats. Additionally, contracts often contain provisions
that nullify statutory protections provided to physicians by the
legislature. It was intended that HB 2620 accomplish the
- Establish a nine-member contract advisory panel to advise and
make recommendations regarding the adoption of standard contract
- Authorize the commissioner to suspend or revoke a managed
care entity's license or other authority to engage in the
business of insurance in this state if the commissioner
determines that the managed care entity failed to use the
requisite contract form.
- Allow for modification of the contract but limit and
standardize any addenda.
During the legislative interim, TMA will work with managed
care plans and other provider groups to try to craft a model,
HB 3012, sponsored by Representative Smithee, died while pending
in the Senate Business and Commerce Committee. The bill would have
extended the physician joint negotiation law for four more years
and provided confidentiality protections for certain business and
financial information physicians provide to the OAG as part of
their application to negotiate. Just like its predecessor during
the last session, this bill received considerable resistance from
business and insurance groups. TMA helped to develop and strongly
backed this legislation.
The association's disappointment regarding the loss of HB 3012
is somewhat mitigated by a recent attorney general open records
ruling pertaining to an application to negotiate under the current
physician joint negotiation law. The ruling stated that the
physician's business and financial information constituted trade
secrets, and therefore, was protected from distribution to the
At the time it was stranded, HB 3012 had passed the House and
was set for a hearing in the Senate Business and Commerce
Committee. However, the committee adjourned for lack of a quorum
without voting on the legislation by its deadline to do so. HB 3012
was among dozens of bills that failed to clear senate committees by
The statute enabling physician negotiations will expire on Sept.
1, 2003. TMA again will seek to reauthorize the statute during the
next legislative session.
Market Fairness TMA Staff Contacts
Rich Johnson, Director, Division of Medical Economics,
C.J. Francisco, JD, Senior Counsel, Office of the General
Counsel, (512) 370-1339
Health Care Funding
Long-Term Care and End-of-Life
Medical Licensure and
Public Health and Science
Scope of Practice
Tort Reform/Medical Liability