By Jeffrey H. Frost

HB 3359 amends Chapter 1301 of the Texas Insurance Code. Chapter 1301 sets forth the legal requirements and obligations of a “preferred provider benefit plan”. A “preferred provider benefit plan” is a benefit plan in which an insurer provides, through its health insurance policy, for the payment of a level of coverage that is different from the basic level of coverage provided by the health insurance policy if the insured person uses a preferred provider.

To whom does Chapter 1301 of the Texas Insurance Code apply?

• Chapter 1301 only applies to commercial health insurance benefit plans regulated by the Texas Department of Insurance (“TDI”).
• Chapter 1301 does not apply to (i) the Texas child health plan program; (ii) a Medicaid managed care program; (iii) an ERISA plan^[1] or (iv) a Qualified Health Plan under the ACA^[2].

What impact will this amendment have on patients and providers?

Patients insured by a preferred provider benefit plan:

• Are guaranteed coverage for out-of-network post-emergency stabilization services.
• Are ensured that a preferred provider network will provide sufficient choice, access and quality of physicians and health care providers, in number, size, and geographic distribution, to be capable of providing healthcare services to all its insured patients within a specified travel time.
• Have the option to receive care at various facilities, if available, including pediatric, for-profit, nonprofit, and tax-supported institution and teaching hospitals that specialize in providing care for rare and complex medical conditions and conducting clinical trials.

Preferred provider benefit plans will have to contract with additional providers for their network if not compliant with the new adequacy standards.

The amendment adds the following requirements of preferred provider benefit plans to Chapter 1301:

1. Post Emergency Stabilization – Adds “post emergency stabilization care” as a required preferred provider benefit plan benefit to the current obligation to provide emergency care.
2. Service Area – Allows a preferred provider benefit plan’s service area to include noncontiguous geographic areas, but prohibits a preferred provider benefit plan’s service area from dividing a county.
3. Out of Network Providers – Requires an exclusive provider benefit plan to reimburse an out-of-network provider for “post-emergency stabilization care” at the usual and customary rate, in addition to the previously existing emergency care requirement. This section does not apply to claims for post-emergency stabilization care if all of the conditions described by 42 U.S.C. Section 300gg-111(a)(3)(C)(ii)(II) are met.
4. Network Adequacy Standards – Requires a preferred provider benefit plan to:
   • Consider future health utilization projections by using actuarial projections to determine the number of physicians and health care providers needed within service areas to meet the needs of the number of projected insureds.
   • Monitor compliance with network adequacy standards on an ongoing basis, reporting any material deviation from network adequacy standards to TDI within 30 days of the date the material deviation occurred.
   • Promptly take any corrective action required to ensure that the network is compliant not later than the 90th day after the date the material deviation occurred unless: (i) there are no uncontracted licensed physicians or health care providers in the affected county; or (ii) the insurer requests a waiver under this subsection.
   • Have a sufficient number of preferred providers of emergency medicine, anesthesiology, pathology, radiology, neonatology, oncology (including medical, surgical, and radiation oncology), and surgery, and hospitalist, intensivist, and diagnostic services, including radiology and laboratory services, at each preferred hospital, ambulatory surgical center, or freestanding emergency medical care facility that credentials the particular specialty to ensure all insureds are able to receive covered benefits, including access to clinical trials covered by the health benefit plan, at that preferred location.
   • Have an adequate number of preferred provider physicians who have admitting privileges at one or more preferred provider hospitals located within the insurer’s designated service area to make any necessary hospital admissions.
   • Provide for necessary hospital services by contracting with general, pediatric, specialty, and psychiatric hospitals on a preferred benefit basis within the insurer’s designated service area, as applicable.
   • Provide insureds with the option of facilities, if available, of pediatric, for-profit, nonprofit, and tax-supported institutions, with special consideration to contracting with teaching hospitals that provide indigent care or care for uninsured individuals as a significant percentage of their overall patient load and teaching facilities that specialize in providing care for rare and complex medical conditions and conducting clinical trials.Ensure that emergency care is available and accessible 24 hours a day, seven days a week by preferred providers.
   • Ensure that covered urgent care is available and accessible from preferred providers within the insurer’s designated service area within 24 hours for medical and behavioral health conditions.
   • Have an adequate number of preferred providers to be available and accessible to insureds 24 hours a day, seven days a week within the insurer’s designated service area.

5. Maximum Travel Time and Distance – Sets maximum time in minutes and maximum distance in miles an insured can be required to travel under preferred provider benefit plans based on the provider specialty type or facility type for each county size classification (large metro, metro, micro, or rural county, or a county with extreme access considerations as determined by CMS).
6. Waiver – Sets forth a process to allow preferred provider benefit plans to request waiver for a departure from network adequacy standards for a period not to exceed one year.

[1] Chapter 1301 does not apply to a third-party administrator of self-funded ERISA. plans. Aetna Life Ins. Co. v. Methodist Hosps. of Dall. 640 F. App’x 314 (5th Cir. 2016), citing Health Care Serv. Corp. v. Methodist Hosps. of Dall., 814 F.3d 242 (5th Cir. 2016).

[2] According to the Texas Department of Insurance, CMS is responsible for enforcing the Affordable Care Act (ACA) individual and group market reforms — refer to 42 U.S. Code Chapter 6A, Subchapter XXV, Part A. As of 2023, TDI is only responsible for reviewing rates for compliance with state and federal law. See Affordable Care Act Resources for Health Carriers (texas.gov).

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For questions related to HB 3359, please contact Jeff H. Frost or a member of the Healthcare practice.

Meet Jeff

Jeffrey H. Frost draws on more than 20 years of experience as in-house counsel to advise clients on healthcare regulatory matters, hospital operations, and medical staff issues. As the former Deputy General Counsel at an integrated health network in Northern California, Jeff’s experience includes advising medical staffs, medical groups, and hospitals on a full range of credentialing, privileging, peer review, and quality assurance topics, as well as assisting hospital administration with governmental investigations, fraud and abuse claims, agency complaints, and medical staff hearings.