2007 Legislative Compendium: Managed Care/Insurance Reform

One of the most contentious issues of the 2005 legislative session was an effort by health insurers to pass laws that would have prevented out-of-network physicians from billing their patients, establishing government-imposed price controls based on arbitrary rates set solely by the plans, and refusing to honor an assignment of benefits.

TMA's goal leading up to and during the 2007 legislative session was to reframe the debate. Instead of focusing on Band-Aid solutions, such as physicians' balance billing their patients, TMA chose to focus on the root cause of the problem - health insurers' inadequate networks and their stranglehold on patient health care coverage information.

TMA started early in the session educating legislators that balance billing was merely a symptom of a much larger problem. Passing laws to prevent balance billing was side-stepping the real issue. TMA argued that patients need the ability to determine which physicians are participating in their plan's network and ultimate financial responsibility. Legislation was needed to empower patients so they can make informed health care decisions for themselves and their families.

TMA strongly advocated that legislation should offer incentives to health plans to improve the reliability and practicality of information they provide to patients and physicians, especially information on physician network adequacy and patient financial responsibility.


Senate Bill 1731 by Sen. Robert Duncan (R-Lubbock) and Rep. Carl Isett (R-Lubbock) was the broadly supported response to the concerns raised in 2005 as well as the work done during the interim. The primary goal of SB 1731 is to promote consumerism and transparency in health care. The bill takes important first steps to ensure patients and their physicians have access to meaningful information to use to make effective decisions about treatment options. The information also will aid patients in understanding their health plan benefits and financial obligation. To date, most if not all of this information has been maintained by health plans with limited access for patients.

Reps. Diane White Delisi (R-Temple), Patrick Rose (D-Dripping Springs), and John Zerwas, MD (R-Richmond), joined Senator Duncan as joint sponsors of the bill in the House. SB 1731 also received the support of these stakeholder groups: TMA, the Texas Hospital Association, the Texas Association of Health Plans, and numerous medical specialty societies, health care practitioner associations, and health care facility associations.

To ensure all stakeholder concerns were heard and addressed, Senator Duncan convened stakeholder meetings early in the session. The meetings also were attended by legislators interested in the issue; these included Representatives Isett, Rose, Larry Taylor (R-Friendswood), and Dan Gattis (R-Georgetown). After several meetings, stakeholders reached a compromise, and bill language was drafted to modify the bill as it was filed. Much of that compromise was included in the bill's final version.

Unlike its predecessor (Senate Bill 1738 from the previous session), SB 1731 navigated the legislative process without hitting any serious snags, and Gov. Rick Perry signed it into law.

The bill requires that the Department of State Health Services (DSHS) and the Texas Medical Board (TMB) create a "Consumer Guide to Health Care" on their respective Web sites. The guides must inform consumers how hospitals, physicians, and other health care facilities price their services and supplies. The guides must explain how average charges for inpatient stays, outpatient procedures, and physician medical services may vary from the actual, billed charge for a particular hospital stay, outpatient procedure, or medical service based on the patient's medical condition, diagnosis, and recommended treatments.

Consumers will be advised that they may be personally responsible for paying amounts not paid by their health plan depending on their specific coverage, deductibles, copayments, coinsurance, and whether the facility or physician is participating in their health plan's network. Consumers will be directed to contact their health plan for information related to their personal coverage and out-of-pocket costs.

SB 1731 charged health care facilities, health plans, and physicians with making available to patients more information about the cost of particular services, policies, and procedures on payment of services and notice of facility and physician participation in the patient's health plan network.

Health care facilities, including hospitals, birthing centers, and ambulatory surgical centers, must develop policies and procedures informing patients: (1) about possible patient discounts if the patient is uninsured or financially or medically indigent, (2) if late payments will incur interest, and (3) how to file a complaint about charges for medical services. Patients who are admitted for inpatient or outpatient services or receive emergency care will receive written notice that (1) the facility is in the patient's health plan, (2) the patient's health plan may not cover some physicians within the facility, and (3) these physicians may bill the patient directly for medical services.

A notice posted in the facility's waiting room will inform patients they may request the facility's billing polices. Patients choosing elective, inpatient services or non-emergency, outpatient surgery may request a cost estimate, due within 10 days. After receiving medical services, the patient may request up to two additional statements for free. The facility will refund a patient overpayment within 30 days. If the patient and the facility cannot resolve a billing disagreement, the facility must inform the patient how to file a complaint with DSHS.

Health plans must report to the Texas Department of Insurance (TDI) aggregate reimbursement rates by region. Patients will have access to this information. Health plans, both HMOs and preferred provider benefit plans (PPBPs), must post this information on their Web site so patients can better compare health plans: (1) patient satisfaction; (2) quality of care; (3) coverage areas; (4) accreditation status; (5) cost of premiums and increases; (6) cost of different plans; (7) range of plan benefits; (8) amount of patient copayments and deductibles; (9) accuracy and speed of claims payment to patients; and (10) number of physicians and providers in the plan and their credentials. Much of this information previously has not been collected from PPBPs. As a result, patients did not have the ability to compare plans.

Patients will receive written notice that the health plan network may not include all physicians providing medical services in a facility, and that the physicians may bill the patient directly for the amount the health plan does not pay. The health plan's physician directory or Web site must identify clearly facility-based physicians not covered by the patient's health plan by health care facility.

Patients' explanation of benefits must identify when their health plan has paid a physician not in the health plan network, and inform patients they may contact TDI's Consumer Protection Division to file a complaint about their health plan's payment. Patients may request an estimate from their health plan, due within 10 days, detailing what the health plan will cover for proposed medical services and how much the patient will owe out of pocket. TDI may penalize health plans that violate these requirements.

Physicians will be required to implement billing policies and procedures that inform patients about possible patient discounts for medical services, if late payments will incur interest, and how to file a complaint about charges for medical services. A notice posted in the physician's waiting room will inform patients they may request a copy of the practice's billing policies.

Patients may request an estimate from the physician, due within 10 days, of the cost of proposed medical services and how much they will owe out of pocket (applies to out-of-network services and uninsured patients.) After receiving medical services, the patient may request up to two additional statements for free. The physician will refund a patient overpayment within 30 days. The bill from a physician who is not in the patient's health plan will state that (1) the physician is not in the patient's health plan, (2) the patient's health plan did not cover the physician's total charge for medical services, and (3) the patient can call to discuss alternative billing arrangements. It also will include the physician's billing phone number and information on how to file a complaint with TMB. The physician's office will not report to a collection agency a patient who makes payments to the physician according to an alternate arrangement. TMB may penalize physicians who violate the established billing procedure requirements.

Lastly, included at the strong urging of TMA, the bill directs TDI to appoint an advisory group to conduct a study of the adequacy of health plans' facility-based physician networks. The advisory committee will be composed of representatives for physicians, hospitals, health plans as well as the associations that represent those groups. The advisory group must report its findings to the Texas Legislature and other government officials no later than Dec. 1, 2008, in time for the beginning of the 2009 legislative session.

SB 1731 becomes effective Sept. 1, 2007. However, DSHS, TMB, and TDI have until May 1, 2008, to adopt rules implementing the bill's provisions with the exception of rules relating to TDI's collection of health plan data, which must be adopted no later than Dec. 31, 2007.

Other Bills Addressing Balance Billing

Early in the session, several legislators were concerned about physicians who choose not to contract with a health plan and balance bill their patients. Several of the bills filed - House Bill 139 by Rep. Jim Jackson (R-Dallas), House Bill 1905 by Rep. Todd Smith (R-Euless), and House Bill 2199 by Rep. Larry Taylor (R-Friendswood) - would either have created onerous administrative requirements on balance billing or implemented an outright prohibition of balance billing. Senate Bill 23 by Sen. Jane Nelson (R-Lewisville), which was amended, would have essentially created a state-sanctioned network of non-participating physicians. The amendment was removed from the bill in conference committee, but the angst about balance billing remains. TMA will continue to work during the interim to educate legislators on this issue.

Health Care Transparency Bills That Passed
One of TMA's top priorities for the 2007 session was to build upon current law to encourage real-time benefits and coverage inquiries, real-time claim adjudication, and payment of deductibles at the point medical services are provided. Legislation that was passed - House Bill 522 by Rep. Beverly Woolley (R-Houston) and Senator Duncan - is the right step toward that goal.

HB 522 creates a technical advisory committee on electronic data exchange that will consist of representatives for physicians, hospitals and other providers, higher education institutions, health plans, consumers, health care administrators of the Office of Public Insurance Council, the Texas Health Insurance Risk Pool, and the Department of Information Resources. The advisory committee is responsible for directing TDI on the technical aspects of using Health Insurance Portability and Accountability Act (HIPAA) transaction standards and the rules of the Council for Affordable Quality Healthcare Committee on Operating Rules for Information Exchange for requiring health plans to provide access to information that will enable physicians and other health care providers, at the point of service, to generate a request for eligibility information. (Specifically, the advisory committee will guide TDI on the data elements health plans should provide via real-time eligibility and coverage inquiries to patients and physicians.) The advisory committee must submit its recommendations by Dec. 1, 2008 for statewide implementation. The 2009 legislature will consider their recommendation.

Second, HB 522 requires that an identification card pilot program begin no later than May 1, 2008. The pilot will examine identification card information, technology, and the confidentiality and accuracy of the required identification card information. TDI will determine the location of the pilot and the participating health plans. The results of the pilot will be provided to the 2009 legislature.

The bill became effective immediately. TDI already has begun to solicit nominations for advisory committee members. TMA has responded to TDI's request.

Expedited Payment During Credentialing
House Bill 1594 by Rep. John Zerwas, MD (R-Richmond), and Sen. John Carona (R-Dallas) was one of the session's unexpected bills. Representative Zerwas, an anesthesiologist from the Houston area, had personal experience recruiting a new physician for his medical group then waiting months for the new physician to be added to the group's contracted health plans.

HB 1594 would allow a physician who joins a medical group already contracted with a health plan to be paid as if that physician were participating while his or her application is being processed.

Due to its caption relating to "expedited credentialing," the bill was opposed by the Texas Association of Health Plans (TAHP) early in the session, believing that the bill was an attempt to circumvent health plan credentialing requirements. However, after clarifying some of the bill's provisions to more clearly indicate the bill's intent, which was to address payments to physicians, TAHP withdrew its opposition.

The bill requires that the physician applying for credentialing must be licensed in Texas, be in good standing with TMB, and submit all documentation and information required by the health plan. The physician also must agree to the terms of the contract between the medical group and the health plan. Once the physician has provided the information required by the health plan, the physician will be paid as if he or she were in the health plan's network. The physician also will be allowed to collect in-network copay amounts from the patient.

If the physician does not meet the health plan's requirements for participation in its network, the health plan may recover from the physician or the medical group the difference between payments for in-network benefits and out-of-network benefits. The physician may keep any patient in-network copayments already collected or in the process of being collected as of the date of the health plan's determination. However, the patient is not responsible for the difference between in-network copayments paid during the credentialing process and out-of-network benefits if the physician does not meet the health plan's requirements.

Pending the physician's approval during the credentialing process, the health plan may exclude the physician from its directory and Web site listing of participating physicians. In the case of an HMO, the physician may not be selected by a patient as a primary care physician.

HB 1594 becomes effective Sept. 1, 2007.  [At this time, TDI has indicated that it will not do rulemaking for this bill.]   The law also applies to Medicaid and CHIP health plans, though the state had indicated these plans will not be required to adhere to the changes until the state implements a contract amendment effective in Spring 2008.

Billing for Anatomic Pathology Services
Senate Bill 1832 by Senator Duncan and Rep. Dan Gattis (R-Georgetown) addresses billing for anatomic pathology services. The bill provides for disciplinary action and penalties if a "person" (both individual and entity) that does not perform or directly supervise anatomic pathology services fails to disclose that information in the bill to the patient, the insurer, or other third-party payer, or in an itemized statement to the patient. Information that must be provided includes: the name and address of the physician or lab that provided the services and the net amount paid for the services. SB 1832 becomes effective Sept. 1, 2007. TMB is responsible for adopting rules to implement its provisions.

Modification of Prompt Pay Underpayment Penalty

Senate Bill 1884 by Sen. Tommy Williams (R-The Woodlands) and Rep. Senfronia Thompson (D-Houston) modifies the underpayment penalty calculation under the Texas prompt pay requirements. The bill was agreed to by TMA, the Texas Hospital Association, and the Texas Association of Health Plans. The bill caps the penalty that can be levied at the billed charge of the amount underpaid plus interest if the penalty is not paid within 90 days. Physicians gained an additional 90 days to report underpayments to health plans.

Health Insurance Reform Bill Near Misses

The following are bills that TMA strongly supported but that did not muster sufficient legislative support to progress this session.

Standardized Contracts
TMA has actively pursued legislation to create physician contract standards with health plans for the last several sessions. The 2007 session was no different. House Bill 2016 by Rep. John Smithee (R-Amarillo) was this session's standardized contracts bill. Referred to as the "Fair Contracting Bill," HB 2016 would have ensured that a physician was properly notified before health care contractors gave access to the physician's discounts. Additionally, the bill would have required contracts to include a summary disclosure of selected important contract terms the bill's provisions would have applied to contracts issued after the bill's compliance date of Jan. 1, 2008.

As expected, TAHP, the Texas Association of Business, the American Association of PPOs, and several individual health plans opposed the bill. Although HB 2016 was strongly supported by TMA, the Texas Academy of Family Physicians, and other physician groups, the bill was left pending after receiving a hearing in the House Insurance Committee. 

Regulation of Secondary Physician Discount Market
Physician frustration with the unauthorized leasing or selling of discounts for their services, also referred to as "rental networks" or "silent PPOs," has surfaced in the past two years. Statutory language currently exists in the Texas books (Senate Bill 130 by Senator Nelson passed in 1999) to regulate rental network and silent PPOs. However, TDI believes they do not have the authority to regulate such arrangements. Rental networks often sell or broker access to the physician discount without providing any consideration to the physician, such as patient steerage. AMA also has been pursuing solutions to this growing problem at the national level with the National Conference of Insurance Legislators and the National Association of Insurance Commissioners.

House Bill 839 authored by Rep. Craig Eiland (D-Galveston) was seen by TMA and the AMA as a test balloon. The bill would have provided clear direction for TDI to regulate the secondary discount market. Any brokering of physician discounts would have required the physician's express permission and would have protected patients from paying more when their health plan paid less as the result of taking a secondary discount. The bill was approved by the House Insurance Committee but died in House Calendars. The House subsequently amended the bill's provisions to a Senate bill, but the language was later removed in Conference.

Health Plan Report Cards
One of the essential elements to health care transparency for employers and patient is to have more information on health plans' business practices. House Bill 2329 authored by Rep. Todd Smith (R-Euless) would have defined the following terms for both PPBPs and HMOs: "direct losses incurred," "direct losses paid," "direct premiums earned," "premium to direct patient care score," "network adequacy score," "claims paid score," "allowable cap score," "expected profit score," and "justified complaint." The bill directed TDI to develop and issue an annual consumer report card that publicized these scores in a format that would have permitted direct comparison of health plans. Even though the bill itself was left pending on the General State Calendar, selected elements of HB 2329 were included in SB 1731.

Tiered networks and economic credentialing
All major health plans in Texas have, or are implementing, tiered physician networks. Those who score high in the health plans' evaluation scheme are placed in a preferred network tier that offers employers lower premiums and/or patients lower copays. Those physicians scoring lower are shunted into a less-desirable tier with higher premiums and/or copays. The criteria used by health plans are based solely on bills and claims data.

Sen. Robert Deuell, MD (R-Greenville), who had a negative personal experience with a health plan tiered networking scheme, authored Senate Bill 1143. The bill would have required health plans that rank physicians based on "quality" and/or "efficiency" to notify physicians of its criteria for evaluating physician performance prior to the beginning of the evaluation period. It also would require that physicians who identify errors or inaccuracies have the right to due process. SB 1143 passed the Senate, but was left pending in the House Insurance Committee without receiving a hearing.

Repeal of Uniform Policy Provision Law (UPPL)
Currently, when a person is injured while intoxicated or under the influence of narcotics (not prescribed by a physician or health care practitioner), a health plan may deny coverage for medical services.  The denial of services is allowed by Texas' Uniform Policy Provision Law (UPPL). House Bill 634 by Rep. Craig Eiland (D-Galveston) would have prohibited health plans from excluding coverage for injuries acquired while intoxicated or under the influence. After a hearing by the House Insurance Committee, the bill was left pending. This is the third session Representative Eiland has authored legislation to repeal the Texas UPPL.

Managed Care/Insurance TMA Staff Team

Legislative: Patricia Kolodzey
Policy: Teresa Devine and Rich Johnson
Legal: Lee Spangler

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