TMA Questions TDI’s Proposed Network Adequacy Rules for Certain Health Plans
By Phil West

Though state legislation sought to strengthen network adequacy three years ago, newly proposed rules from the Texas Department of Insurance (TDI) run counter to the law’s intent and could threaten access to care, patient choice, and physician payment.

That was the message the Texas Medical Association wrote to the agency after TDI released proposed rule revisions. Those revisions followed a court order agreed upon by the Texas Association of Health Plans (TAHP) and TDI that directed the agency to reopen rulemaking.

Texas legislators passed House Bill 3359 in 2023, which in part requires state-regulated PPO and EPO health plans to demonstrate they made good-faith efforts to contract with physicians and others  to build an adequate network.

Under the law, if a health plan cannot meet the network adequacy standards despite its “good faith efforts” to contract with uncontracted physicians and others to fill out its network, TDI may, under certain circumstances, determine there is “good cause” for a waiver from certain network adequacy standards.

If a health plan requests a waiver for the same network adequacy standard in the same county for a third year in a row, it must demonstrate it made “multiple good faith attempts” to bring the plan into compliance, on top of TDI’s determination of whether “good cause” is shown. Under the law, if a health plan continues to be deficient after the third year, TDI must not approve it for the following year unless it meets the state’s minimum network adequacy standards. In its 2024 Biennial Report to the legislature, TDI estimated that “less than 1% of plans met TDI’s expectations to negotiate in good faith.”  

In January, TAHP sued TDI over certain parts of its rule implementing HB 3359, resulting in the agreed-upon court order prohibiting TDI from denying any waiver applications on the basis of a health plan’s failure to demonstrate “multiple good faith attempts” for PPO and EPO plan networks submitted to TDI in 2026 for consumer use in 2027. It also kept TDI from issuing any findings of failure to demonstrate “multiple good faith attempts” to bring plans into compliance. 

The court order also directed TDI to reopen rulemaking ahead of an Oct. 19 court date should TAHP’s and TDI’s differences over rulemaking remain unresolved. 

“We need to demand that [health plans] have adequate networks, because when they have … narrow networks, it hurts our ability to care for the patient, and the patient gets frustrated because then they are receiving out-of-network care,” TMA President Bradford W. Holland said.

Joined by 10 state specialty societies, TMA in its comment letter emphasized that some of the language in TDI’s proposed amendments strays from the underlying statutory text, lacks “meaningful enforcement language,” and could negatively affect patient access to care, patient choice, and physician practice viability. 

For instance, TMA expressed concerns with TDI’s proposal to allow up to 10% of insured consumers to have no freedom of choice of preferred providers. Despite rejecting that proposed standard in 2024 during the first round of rulemaking, TDI’s current proposal walks that back and would permit up to 10% of insured consumers to have no choice in preferred providers. Noting this change in direction, TMA asked TDI to explain its rationale given language in HB 3359, which requires sufficient choice, access, and quality for “all insureds within the insurer’s designated service area.”

Should such an interpretation be formally adopted by TDI over TMA’s objections, TMA says the agency should narrowly tailor such an allowance so it doesn’t apply across the board but instead only in areas where it aligns with physician shortage areas, rather than major metro areas where health plans have more physicians to choose from to build networks. 

In the context of network adequacy standards for facility-based physician specialties, TMA noted a multitude of concerns, including the proposed use of the term “provider” rather than “physician.”. TMA noted the proposed language could be used to count nonphysicians (who can’t offer the range of services that physicians can) toward that network adequacy standard and could introduce a risk for scope-of-practice infringement. 

TMA also raised concerns with the proposal to require “at least one preferred provider” of each applicable physician specialty at a preferred facility as the method to ensure all insured patients can receive covered benefits at that facility. TMA noted such an approach fails to ensure patient choice and ignores the realities of patient care: one facility-based physician cannot provide all “covered benefits, at that preferred location” to every insured who needs that physician’s specialty services at the same time.

TMA’s letter further interrogates TDI’s proposed “good cause” factors as well as the framework for determining a health plan’s “good faith efforts” to bring the plan into compliance, questioning whether TDI would be too reliant on insurers’ word. TMA also posited TDI’s proposal:

• Introduces “good cause” factors not authorized by the underlying statute that could be used to justify the grant of a waiver based on an insurer’s market share, potentially creating a "too big to fail” exception; and
• Allows TDI to evaluate a “good faith effort” based on whether an insurer offered “commercially reasonable rates and contract terms,” where the definition of “commercially reasonable” is in no way reflective of actual, commercially reasonable private insurer contract rates and contains no tie to private, commercial insurers in the state-regulated Texas market.

Regarding the latter, TMA is fearful of the negative downstream effects on both physicians and their patients if adopted. These offers of so-called “commercially reasonable rates” could further threaten practice viability and exacerbate access-to-care concerns.