Mr. A. W. Pogue Opinion No. ~~-1167
Commissioner
State Board of Insurance Re: Status of insurance prog-
1110 San Jacinto rams in which applicants are
Austin, Texas 78701-1998 referred, for a fee, to a
single health care provider
(RQ-1867)
Dear Commissioner Pogue:
You ask "whether referral programs that 'arrange for'
services of health care providers to enrollees at a discount
in return for a referral fee are subject to regulation as a
health maintenance organization."
Insurance Code article 20A.03 provides in part that "no
person shall establish or operate a health maintenance orga-
c nization in this state . . . without obtaining a certificate
of authority under this Act," and that "any person may apply
to the commissioner [of insurance] for and obtain a certifi-
cate of authority to establish and operate a health main-
tenance organization in compliance with this Act." (The
"Actl' referred to in the quoted portions of article 20A.03
is the Health Maintenance Organization Act, codified as
chapter 20A of the Insurance Code. See Ins. Code art.
20A.01.)
You say that the referral programs about which you are
concerned
have 'arrangements' with single service
health care providers such as dentists,
optometrists, and chiropractors either
verbally or in writing which provide that
each participating provider will offer
discounted services to enrollees of the
programs. Thereafter, the referral programs
target and market prospective enrollees
through agents and literature.
The plans offered to prospective enrollees
are such that a referral fee is charged,
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Mr. A. W. POgue - Page 2 (JM-1167)
whether an initial amount up front, monthly,
quarterly or annually, and said enrollees
either receive an I.D. card and/or a listing
of participating providers which honor dis-
counts on services.
The referral fees are received by the re-
ferral programs from enrollees [but] do not
appear to be shared with the providers. The
incentive for providers to participate is the
potential for increased volume. Thus, en-
rollees make another payment to the providers
directly. often times, visits to providers
are not at any additional cost to enrollees.
You ask first whether a payment by an enrollee in such
a referral program in exchange for a list of single health
care service providers who offer services at a discount
constitutes BVprepaymentB1within the meaning of subpart (6)
of article 20A.02, which provision defines "single health
care service plan."
"Health maintenance organization" is defined in subpart
(j) of article 20A.02 as
any person who arranges for or provides a
health care plan or a $ i n
service plan to enrollees g n a D 1:
enaid basis.
(Emphasis added.)
"Single health care service" is defined in subpart (r) of
article 20A.02 as
a health care service that an enrolled popu-
lation may reasonably require in order to be
maintained in good health with respect to a
particular health care need for the purpose
of preventing, alleviating, curing, or
healing human illness or injury of a single
specified nature and that is to be provided
by one or more persons each of whom is li-
censed by the state to provide that specific
health care service.1
1. Also, "health care services8' is defined in subpart
(Footnote Continued)
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Mr. A. W. Pogue - Page 3 (JM-1167)
Yiingle health care service plan" is in turn defined in
subpart (s) of article 20A.02 as
a plan under which any person undertakes to
provide, arrange for, pay for, or reimburse
any part of the cost of a single health care
service, gEqvided, that a nart of the nlan
consists of arranaina for or the nrovision of
the sinale health care service, as distin-
guished from an indemnification against the
cost of that service, on a vreoaid basis
through insurance or otherwise and that no
part of that plan consists of arranging for
the provision of more than one health care
need of a single specified nature. (Emphasis
added.)
We think that the definition of "single health care
service plan" in subpart (6) indicates that under such a
plan the provision of single health care services is, at
least in part, paid for in advance. The referral programs
you describe charge a fee for "referring@' enrollees to a
list of single health care service providers, but do not, as
you describe them, pay any part of that fee to the providers
for the latter's provision of health care services to the
enrollees. Under this scenario, there is no prepayment for
the actual health care services eventually provided. Those
programs thus do not involve the "arranging for or the
provision of the single health care service . . . on a
prepaid basisl' under the definitional provisions of article
20A.02, subpart (s), and thus do not constitute "single
health care service plans."
We understand your second question to be essentially
the same question as the one described above. Our answer is
the same.
(Footnote Continued)
(i) of article 20A.02 as
any services, including the furnishing to any indivi-
dual of medical or dental care, or hospitalization or
incident to the furnishing of such care or hospitali-
zation, as well as the furnishing to any person of any
and all other services for the purpose of preventing,
alleviating, curing or healing human illness or injury
or a single health care service plan.
P
P. 6163
Mr. A. W. Pogue - Page 4 (JM-1167)
You ask finally: if the referral programs do not come
within the definition of "single health care service plans,"
and the programs are thus not "health maintenance organiza-
tions" under chapter 20A and subject to regulation as such
by the commissioner and the State Board of Insurance, which
agencies, if any, have regulatory authority or jurisdiction
over such programs? We cannot give an exhaustive answer to
this question; however, we can point out some relevant
provisions.
In addition to health maintenance organizations, the
State Board of Insurance has authority generally over the
business of insurance in this state. See. e-a., Ins. Code
arts. 1.10, 1.14, 1.14-1. However, the referral plans you
describe appear to lack the feature of "risk distribution."
&gg 45 Tex. Jur. 3d In ur ce Contracts and Coveraae § 1
(and authorities cited Sthzte) ; see also Attorney General
Opinions MW-455 (1982); H-344 (1974); WW-1475 (1962) ;
O-4986-A (1943) (and authorities cited in those opinions).
Having concluded that a referral program such as you
describe is not a health maintenance organization subject to
regulation by the State Board of Insurance under chapter
20A, we also conclude that neither does such a program
constitute an insurance business under the Insurance Code.
Such programs are thus not subject to regulation by the
State Board of Insurance.
Of course the programs would be generally subject to
state laws -- for example, the Deceptive Trade Practices and
Consumer Protection Act. BUS. & Corn. Code 5 17.41 et sea.
If they are corporations, they must comply with the laws
applicable thereto. See, e.a., Bus. Corp. Act art. 3.03
(filing of articles of incorporation with the secretary of
state). Also, the health care service providers to whom
the referral programs refer their enrollees would be subject
to regulation by their respective licensing agencies, and to
laws governing their professions. See, e.a., V.T.C.S. art.
4552-l-01 et sea. (the Texas Optometry Act).
Although you do not raise, and we consequently do not
address in detail here, any other issues with respect to the
lawfulness of such referral practices, we note finally that
provisions of law other than those in the Health Maintenance
Organization Act may, depending on the facts of the partic-
ular case, restrict such operations. See aenerally V.T.C.S.
art. 4505a (prohibits health care practitioners from employ-
ing any person to secure patients).
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Mr. A. W. Pogue - Page 5 (JM-1167)
SUMMARY
Referral programs that "arrange for?*
services of single health care service
providers at a discount to enrollees in
return for a referral fee are not "single
health care service plans" under the
Insurance Code article 20A.02, relating to
health maintenance organizations, where there
is no prepayment for the actual single health
care services provided.
- ,yxyti
MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
JUDGE ZOLLIE STEAXLEY
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by William Walker
Assistant Attorney General
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