81R3612 PB-D
By: Shapleigh S.B. No. 373
A BILL TO BE ENTITLED
AN ACT
relating to administrative costs paid by health benefit plan
issuers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 8, Insurance Code, is amended
by adding Chapter 1219 to read as follows:
CHAPTER 1219. ADMINISTRATIVE COSTS AND HEALTH BENEFIT PLAN
PREMIUMS
Sec. 1219.001. DEFINITIONS. In this chapter:
(1) "Administrative costs" includes claims
processing costs, underwriting costs, advertising and marketing
costs, utilization review costs, home office and overhead costs,
and commissions and other acquisition costs.
(2) "Direct losses incurred" means the sum of direct
losses paid plus an estimate of losses to be paid in the future for
all claims arising from the current reporting period and all prior
periods, minus the corresponding estimate made at the close of
business for the preceding period. This amount does not include
taxes, capital costs, or administrative costs.
(3) "Direct losses paid" means the sum of all payments
made during the period for claimants under a health benefit plan
before reinsurance has been ceded or assumed. This amount does not
include taxes, capital costs, or administrative costs.
(4) "Direct premiums earned" means the amount of
premium attributable to the coverage already provided in a given
period before reinsurance has been ceded or assumed.
(5) "Medical loss ratio" means direct losses incurred
divided by direct premiums earned.
Sec. 1219.002. APPLICABILITY OF CHAPTER. (a) This chapter
applies to the issuer of a health benefit plan that provides
benefits for medical or surgical expenses incurred as a result of a
health condition, accident, or sickness, including an individual,
group, blanket, or franchise insurance policy or insurance
agreement, a group hospital service contract, or an individual or
group evidence of coverage or similar coverage document that is
offered by:
(1) an insurance company;
(2) a group hospital service corporation operating
under Chapter 842;
(3) a fraternal benefit society operating under
Chapter 885;
(4) a stipulated premium company operating under
Chapter 884;
(5) an exchange operating under Chapter 942;
(6) a health maintenance organization operating under
Chapter 843;
(7) a multiple employer welfare arrangement that holds
a certificate of authority under Chapter 846; or
(8) an approved nonprofit health corporation that
holds a certificate of authority under Chapter 844.
(b) Notwithstanding any provision in Chapter 1551, 1575,
1579, or 1601 or any other law, this chapter applies to a health
benefit plan issuer that contracts with the Employees Retirement
System of Texas, the Teacher Retirement System of Texas, The
University of Texas System, or The Texas A&M University System to
provide:
(1) a basic coverage plan under Chapter 1551;
(2) a basic plan under Chapter 1575;
(3) a primary care coverage plan under Chapter 1579;
and
(4) basic coverage under Chapter 1601.
(c) Notwithstanding any other law, this chapter applies to a
health benefit plan issuer with respect to a standard health
benefit plan provided under Chapter 1507.
(d) Notwithstanding Section 1501.251 or any other law, this
chapter applies to a health benefit plan issuer with respect to
coverage under a small employer health benefit plan subject to
Chapter 1501.
Sec. 1219.003. EXCEPTION. This chapter does not apply with
respect to:
(1) a plan that provides coverage:
(A) for wages or payments in lieu of wages for a
period during which an employee is absent from work because of
sickness or injury;
(B) as a supplement to a liability insurance
policy;
(C) for credit insurance;
(D) only for dental or vision care;
(E) only for hospital expenses; or
(F) only for indemnity for hospital confinement;
(2) a Medicare supplemental policy as defined by
Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss);
(3) a workers' compensation insurance policy; or
(4) medical payment insurance coverage provided under
a motor vehicle insurance policy.
Sec. 1219.004. MEDICAL LOSS RATIO REPORTING. The
commissioner by rule shall require each health benefit plan issuer
to report at least annually the health benefit plan issuer's
medical loss ratio for the preceding year for each health benefit
plan issued.
Sec. 1219.005. LIMITATION ON ADMINISTRATIVE COSTS. (a) A
health benefit plan issuer may not spend more than 25 percent of the
direct premiums earned for health benefit plan coverage on
administrative costs.
(b) If, based on the report submitted under Section
1219.004, the commissioner determines that a health benefit plan
issuer is not in compliance with Subsection (a), the commissioner
may order the health benefit plan issuer to:
(1) implement a premium rate adjustment;
(2) issue any appropriate rebates to enrollees or plan
sponsors; or
(3) take other remedial action as determined
appropriate by the commissioner.
(c) The commissioner shall adopt rules as necessary to
implement this section, including rules regarding the frequency and
form of reporting medical loss ratios.
SECTION 2. This Act takes effect September 1, 2009.