The House Committee on Insurance met on March 21st to take up bills on the notice here. This report covers the following bills in order: HB 1996 (Hull), HB 1074 (Hull), HB 998 (Paul), HB 2188 (Paul), HB 109 (Johnson, Julie), HB 1039 (Thompson, Ed), HB 1236 (Oliverson), and HB 2021 (Oliverson | et al.). HB 3098 (Johnson, Ann) was on the notice but was not taken up during the hearing. A video archive of the hearing can be found here.
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Vote Outs
- HB 1553 (Ashby) voted out to Local (8-0)
- HB 1901 (Smithee) voted out to Local (8-0)
- HB 1902 (Smithee) voted out to House (8-0)
- HB 1903 (Smithee) voted out to Local (8-0)
- HB 916 (Ordaz) voted out to House (7-0, Cain PNV)
- HB 1706 (Perez) voted out to Local (8-0)
- CS adopted, cleans up language by listing all policies this bill applies to, req for home state of Texas
- HB 1040 (Paul) voted out to House (8-0)
- CS adopted, fixes drafting error to make bill compliant with Chap. 322 of B&C Code, requires written & electronic notice of non-renewal
- HB 1337 (Hull) voted out to House (
- CS adopted, uses TDI suggestion to harmonize language between generic and pharmaceutical equivalent
Bills on Notice
HB 1996 (Hull) Relating to the regulation of group family leave insurance issued through an employer to pay for certain losses of income.
- Hull – Authorizes family leave using short-term disability framework for group policies
- Can be taken to provide care for a family member’s serious health condition, to bond with child, care of family member injured in line of duty, others outlined in the policy, etc.
- Chair Oliverson – Policy an employer can purchase, not a mandate?
- Hull – Not a mandate
Jennifer Cawley, Texas Association of Life & health Insurers – For
- Putting framework in Insurance Code for paid family leave policy, currently offered as a rider to disability policies & allows insurers to offer separately; other states have passed
- Chair Oliverson – Not a mandate; can you explain how it provides more uniformity around this type of policy?
- Spoke with TDI about if this was needed, TDI said it would be better to put it in statute so there are clear standards
- Paul – How does this work? How do they determine the risk & fee? Anyone can utilize?
- Disability is based on insured’s disability, but paid family leave is based on family members
- Usually large employers looking to offer this coverage, allows spouse to take time off for children, if spouse is deployed, domestic violence
HB 1996 left pending
HB 1074 (Hull) Relating to construction of certain laws prohibiting discrimination, distinctions, inducements, rebates, and certain other conduct related to property and casualty insurance.
- CS laid out
- Hull – Chap. 1806 of Insurance Code prohibits rebate payable on policy, intent was to prohibit providing insured with free cars, gadgets, etc.
- Unclear if this prohibits loss control or mitigation products, HB 1074 would clarify that loss control products are not prohibited, incl. water control, cybersecurity products, etc.
- Introduced version is identical to version passed last session
- Recommendation of the committee’s interim report
- CS includes consumer protection language preventing data sharing in relation to product or service offered, clarifies that insurer’s agents may give de minimis promotional items
- Chair Oliverson – Sorry we couldn’t get this done last session, seems like a no brainer to not classify things that lower likelihood of serious claims as an inducement
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – For
- Agree with layout and that this is a no-brainer
- Very difficult to do property insurance in Texas with variety of loss, this is one thing we can do to control loss; products can help homeowner or car owner know of problem quickly and try to manage
- Chair Oliverson – I think this could or should result in reduction of premiums over time
- Sure, as we get the data and we are able to reduce loss, we are bound to use actuarially sound rates and they would reflect that reduction in loss
Jon Schnautz, National Association of Mutual Insurance Companies – For
- Bill covers solvency and discrimination concerns; is a win-win for insurer and insured
- Bill is based on NAIC measure, about 19 state have adopted some form of this
CS withdrawn, HB 1074 left pending
HB 998 (Paul) Relating to the provision of property owners’ association insurance by the FAIR Plan Association in certain areas.
- CS laid out
- Paul – Insurance is available for individual condo units, but insurance for the overall building, roof, etc. has been difficult to acquire
- Concerns coastal properties, didn’t want to add them to TWIA, so one-time thing to put them in FAIR; only applies to within 10 miles of TWIA boundary
- CS allows TDI Commissioner to draw the 10 mile boundary using boundaries like roads, highways, etc.
- Chair Oliverson – Talking about a fairly circumscribed problem, risk of windstorm but you’re not inside TWIA boundaries; unable to get coverage?
- Unable to get coverage or it was extremely expensive
- Chair Oliverson – Not the individual condo but the association for the overall property?
- Association of people who own the whole building
- Forced to get commercial policy, specific case for a specific location to allow them to use FAIR
- Chair Oliverson – Sounds like a great solution
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – Against
- Opposed but interested in the issue, always interested in availability problems
- Understand idea to restrict this to a small footprint, but have structural concerns about offering commercial plans under FAIR, which was designed for residential
- Paul – If I had a rental property anywhere in Texas can I get FAIR?
- If it is deemed a residential risk
- Paul – If I own a duplex you can also get FAIR
- As long as it is deemed residential
- Paul – Some of these HOAs are only 20 people, nothing but residents; goal of FAIR was to make sure homeowners could insure homes
- Respectful of that and the gray area they are in, availability issue
- Paul – If you sold insurance to these people we wouldn’t have this problem
- Chair Oliverson – If majority of written coverage is surplus lines that’s a problem; associations are responsible for common area, similar to association health plan for property & casualty
- Chair Oliverson – What would you propose as the appropriate solution if no one is writing for them
- We think that before you made change we would need to look into availability problem and understand it
- Paul – We have looked into it, don’t do this lightly, best solution we could find & don’t want to wait another 2 years to get relief to these people with the same solution
David Muckerheide, Texas Department of Insurance – Resource
- Chair Oliverson – How many condo owners are in this area?
- Hard for us to penetrate this question, did reach out to brokers to see what market looks like; it is a mixture of surplus lines and admitted market in Tier II
- Does sound like market has shifted over last few years to get creative to pull coverage together, have to work with multiple insurers
- Chair Oliverson – Premiums same in Cypress as they would be in Seabrook?
- In terms of wind-based risk the further away you are there would be less catastrophic risk
- Chair Oliverson – My condo associations don’t have problems with this, but 50 miles northwest from Rep. Paul’s condo constituents, conceivable to have policies in my area that would be unavailable in his?
- Right, TDI doesn’t get commercial underwriting guidelines, but no requirement to write throughout Tier II
- Paul – If I have 50 rent houses in this area I could use FAIR and that would be commercial business, correct?
- If you were insuring them as standalone rental properties, yes, if you met other requirements
- Rental house is standalone house and insured as such, wouldn’t categorize as commercial
- Paul – It is commercial for the owner, not the owner’s home; but the condo HOA is these people’s home
- Chair Oliverson – Would be helpful to have as much granularity as you can provide on this issue; fairly unique problem with communities up against TWIA boundary
Scott Gibby, American Property Casualty Insurance Association – Against
- Appreciate attempt to keep bill limited, have concerns about allowing these properties in the FAIR plan, could result in substantial losses and ultimately policyholder would need to pay shortfall
- Chair Oliverson – So what are these folks supposed to do? Hearing that industry is unwilling to write coverage under a typical admitted policy, but also don’t want them under FAIR which limits their options to surplus lines; seems like they deserve better, should we put them in TWIA?
- Often HOAs and condo associations need to do more to mitigate
- Chair Oliverson – Issue is centered around location where they can’t mitigate, right on boundary where TWIA won’t write and is fairly high risk; not blaming industry on not want to write, but if FAIR plan is not right should we put them in TWIA
- Also a residual market and would be problematic
- Would recommend them hiring a broker and shopping around
- Paul – They have shopped around, basically industry is saying “we don’t want to insure you;” are you saying you’ll work with these people and give them a fair price?
- Can’t speak for others
- Paul – Market is moving away from this area, insurance companies are not writing; industry is expanding zone they don’t want to write in which is why TWIA was created int eh first place; don’t want to expand TWIA, which is why we came up with this, very small exposure
David Muckerheide, Texas Department of Insurance – Resource
- Perez – What is the percentage of admitted carriers versus surplus lines in these areas?
- Will have to go back and see what we can pull together on this market
- Reached out to brokers to try and get an idea of what is happening anecdotally
CS withdrawn, HB 998 left pending
HB 2188 (Paul) Relating to the qualifications of statistical agents for the commissioner of insurance.
- Paul – Strikes “five” years of experience in data management and replaces it with “two” years to qualify as statistical agent
- Five year requirement is anti-competitive
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – For
- Appreciate Rep. Paul taking up the cause of modernization, TDI still has authority to pick & choose statistical agents
- Chair Oliverson – Sort of a workforce shortage right now?
- Right
HB 2188 left pending
HB 109 (Johnson, Julie) Relating to health benefit coverage for hearing aids for children and adults.
- Julie Johnson – Prohibits health plan from denying full benefit of a hearing aid if device is more than the benefit; many plans will deny improved hearing aid even if patient is willing to pay for difference
- Chair Oliverson – Not a new coverage requirement, simply allows someone to spend more money than allowed
- Correct, if you have a $1,500 benefit and you select a $1,300 hearing aid, the plan will pay; but will not pay any if you select a $2,000
- Chair Oliverson – Sounds like a good idea, Rep. Cain is nodding in agreement which is a good sign
Alexander Morris, Texas Academy of Audiology – For
- Win for patients and audiologists, no additional cost to the state for this
Dr. Michelle Pho, Texas Speech Language Association – For
- Many circumstances where certain features of hearing aids are not available in what families can pay for
HB 109 left pending
HB 1039 (Thompson, Ed) Relating to coverage of additional living expenses under a residential property insurance policy.
- CS laid out
- E Thompson – CS clarifies which additional living expense (ALE) is covered
- HB 109 provides for recovery of ALE with disruption of sewer, water, gas, electricity
- Inconsistency in how this is done, trying to give clarity to when ALE recovery would trigger; not requiring carriers to offer this if it is not included in policy
- Paul – Just an add on to policy if they want to pay for it?
- No, ALE is included in homeowner’s policies, included in most
- Gives consumer ability to know that if property is damaged and there is disruption it would trigger ALE within a 24 hour period; gives consistency across the market
- Perez – Is it the same as loss of use?
- Yes
- Perez – Not in addition to?
- No
Jon Schnautz, National Association of Mutual Insurance Companies – For
- Against bill as filed, spoke with Rep. Thompson about the direction of the CS
- Generally speaking you have three types of coverage under “loss of use,” ALE can extend for a long time, similar parallel coverage for landlords, and final coverage that is relevant is civil authority coverage
- Civil authority coverage can be invoked even with no or limited damage to property, triggers when civil authority bars residents from returning for a period of time
- Concern on bill last session is if it was trying to create coverage for utility outages, don’t think ALE can go there
- If bill is more about covered damage that causes utility outages, happy to continue conversation
- Other issue is interaction with deductibles, for first category if it is total loss policy holder will exceed deductible, not sure how minimal or no damage would interact with deductible
- Chair Oliverson – Heard Rep. Thompson talking about disruption of basic necessary utility service; I know this has happened where people have had to use ALE, makes sense that if utilities are disrupted and resident is unable to be there it is a legitimate use of ALE; are you opposed?
- Need to understand what the nature of the unavailability is, in some cases you can be back in the property within 24 hours
- Chair Oliverson – Not talking about community power outage, talking about burst water pipe in the home or major catastrophe specific to that property
- Happy to work with him, want to figure out how this fits into existing coverage
- Chair Oliverson – Like there to be clear expectations on when a certain feature becomes accessible
- Understand the desire, there is some variation already in loss of use coverage, in which case different results may be called for
- Chair Oliverson – Have heard that everyone thinks they have coverage for this until they try to use it and then experience varies widely
- Want to make sure bill doesn’t create expectation that there is coverage where there isn’t
- Chair Oliverson – Don’t think Rep. Thompson does either, but should be able to access in a reasonable way when they do
Rep. Thompson closes
- E Thompson – Does not expand any coverage, doesn’t add any coverage, only gives policy holder consistent understanding of how ALE would come into effect; sets forth consistent application across the market
HB 1039 left pending
The Committee recessed for the House floor
HB 1236 (Oliverson) Relating to the definition of emergency care for purposes of certain health benefit plans.
- CS laid out
- Chair Oliverson – CS clarifies prudent layperson standard, higher rate for emergency care under this standard
- Recently, insurance companies have been paying on diagnosis rather than report and perception of symptoms; prudent layperson is supposed to pay out on things a prudent layperson viewed as an emergency
- If it is classified as non-emergency, billing and cost sharing can change
- CS contains limited right of review, still working with stakeholders on this and feel like we’re 95% of the way there
- Julie Johnson – Have worked on this issue before, important piece of legislation to help consumers get health care
Blake Hutson, Texas Association of Health Plans – Against
- Opposed to filed bill, but do think we can get to a place where goal of bill is achieved without creating unintended consequences
- Federal rule said you can’t deny based on final diagnosis, but can go back to look case-by-case for fraud
- Support goal of bill to protect patients, but want to make sure we can look at fraud
- CS looks at freestanding ERs, but also need to look at hospitals
- Paul – Right now bill says freestanding ERs would be in, but hospitals are not
- Yes, our understanding is bill is focused on freestanding ERs, but not hospitals; want to look at fraud at both
- A Johnson – Can you explain the chart?
- Lays out fraud rates in levels 1-5, recently seeing more and more level 4 & 5 fraud, in review could see pattern of upcoding
- A Johnson – How do you determine when it is upcoding?
- Can make that determination based on medical guidelines
- A Johnson – Are people just getting sicker?
- Mix of higher acuity, but also seeing more upcoding
- Medicaid and Medicare have looked at and found this, but no resources on the commercial side
- Chair Oliverson – Why is utilization review not the appropriate mechanism? You want to be able to go back and look at multiple charts
- Utilization review is more to do with medical necessity rather than billing fraud, would only allow use of final diagnosis through the UR process
- Chair Oliverson – If UR is designed to look at medical necessity, part of prudent layperson is if it is presumed to be an emergency it is presumed necessary
- Can get you more info about how looking at fraud is done, but it’s not through UR
- Chair Oliverson – So we need a process, should be through something that already exists so people know the rules
- Would ask to be able to do this both on hospital side and freestanding ER side
Jennifer Sisson, Self – Against
- Opposed to bill as filed
- Highlights personal experience with upcoding and overcharging bill; want insurance companies to be able to look at final diagnosis for upcoding fraud
Carl Isett, Texas Association of Benefit Administrators – On
- One thing that exacerbates problem is prompt pay, don’t have ability to audit claim; when passed we didn’t have electronic billing, but now have auto-adjudication and you don’t see if it’s been upcoded until later
Cesar Lopez, Texas Hospital Association – For
- Have worked on this bill for the last two sessions, good bill
- Prudent layperson standard and presumption of necessity is important
- Julie Johnson – Bill is really about when a patient presents to an ER what they perceive their emergency to be
- Right
- Julie Johnson – Even if it is ultimately not an emergency, it is paid as an emergency; not about what medical providers bill or don’t bill, right?
- Yes, I agree
- Paul – And this is already law, just talking about additional billing issues on that
- Yes, bill is a clarification of that law
Doug Jeffrey, Texas College of Emergency Physicians, Texas Medical Association – For
- Bill protects patients by further clarifying that final diagnosis is not a factor in prudent layperson standard; even simple problems can require a significant amount of resources
- Chair Oliverson – You don’t have the benefit of the final diagnosis until after all the tests and care are done; you still cared for patient as if it were an emergency, sometimes the most important tests are the ones that are negative
- Chair Oliverson – Prudent layperson exists to set a good standard to obligate treatment as an emergency until you can prove otherwise; unfair and unreasonable to reimburse you based on an after action report; care in ERs is always a triage issue, those presenting with emergency issues will consume more health care resources
CS withdrawn, HB 1236 left pending
HB 2021 (Oliverson | et al.) Relating to applicability of certain insurance laws to pharmacy benefit managers.
- Chair Oliverson – Passed 2 bills last session on PBMs which contained patient and pharmacy protections, eliminated self-dealing, increased transparency, and prohibited unfair business practices; PBMs under TDI oversight
- Interim charge directed committee to look at Rutledge and implications for PBMs and ERISA plans; HB 2021 is designed to stay within confines of SC declaration on how states can regulate ERISA plans in respect to PBMs
- CS will be cleaning up language that led to consternation and high fiscal note, purpose of CS is to limit bill to areas under Rutledge; pretty much everything not in Subchapter L has been backed out
- Not interested in creating new mandate, interested in regulating anti-competitive business practices
Gregg Girvan, Foundation for Research on Equal Opportunity, Self – Against
- Speaking as myself because Foundation doesn’t take a position on bills
- Speaking in support of flexibility of self-funded plans; highlights experience of FREOPP going with small self-funded plan that uses SmithRx which passes refund savings onto members
- Will negatively impact plans’ ability to deal with rising cost of health care
David Dross, Mercer – Against
- Haven’t seen CS, but against bill as filed
- Mercer is paid by employers to be independent 3rd party advisor for benefits
- Important to retain flexibilities, changing rules in Texas makes it difficult for multi-state entities to navigate, increase in cost will either mean increasing employee contribution or reduced benefits
- Chair Oliverson – Portions weren’t intended to be in bill
- Look forward to looking at CS
- Julie Johnson – Can you explain how the bill would cost people more?
- In the original bill regarding network structure and plan design
- Paul – What kind of price increases have you seen with health plans?
- Typical trend is in mid-single digits
- Paul – Has been pretty consistent?
- Yes
Carl Isett, Texas Association of Benefit Administrators, Self – Against
- ERISA plans aren’t regulated by states because they aren’t insurance, trust system for employees; reason being that there wouldn’t be different regulations across all states
- Hard to find ERISA attorney because ERISA is not regulated
- Concerned about provision that seems to restrict ability to advise employees on possible savings
Glenn Hamer, Texas Association of Business – Against
- Have delivered letters to legislature outlining opposition to bills that would pierce ERISA
- HB 2021 will take away options employers use to lower cost of drugs, will lead to higher premiums
- Growing list of brand name employers concerned about piercing ERISA, Rutledge noted states are still restricted from influencing plan design
- Julie Johnson – How would bill decrease bill and increase premiums?
- When you’re interfering with network structure and plan design you can interfere with costs of the plan, fiscal note of $80m/biennium suggests cost for the bill
- Any time you limit tools for an employer to manage health care cost will create dynamic making it more difficult for employers to offer
- Julie Johnson – Bill doesn’t apply to state plans, Medicaid, or Medicare
- No, applies to plans offered by employers covered by ERISA
Mia McCord, Texans for Affordable Health Care – Against
- Applying TX Rx drug regulations to self-funded plans could have drastic effects, could potentially increase employee premiums, cost sharing, could reduce Rx benefits, some employers may decide to not offer coverage
- Recent poll found 57% of Texans thought priority should be lowering health care cost, increase access, and lower Rx prices
- Health care costs have gone up 13%
- Chair Oliverson – Can you give me a list of members?
- Try to keep donor info private, an initiative of American Institute for Affordable Health Care
- Paul – You said health care cost in TX has gone up 13% in last year, how does it compare to national average
- Can get this to you
Miguel Rodriguez, Texas Pharmacy Business Council – For
- Bill is not a new mandate, focused on provisions enacted last year passed by a majority
- CS addresses concerns about cost increases
- HB 2021 will apply balanced approach to PBM regulation to health plans in Texas, will help enforce law passed last session and define avenue on what is and isn’t allowed; sets uniform standard for everyone providing coverage in TX
- HB 1919 from the 87th was targeted legislation to avoid conflict but did not prohibit preferred networks, mail order, etc.; lower copays can still be offered, preferred networks can still be offered, only regulates conflicts
- Chair Oliverson – In your opinion, this bill is in compliance with Rutledge?
- Yes, unanimous decision of the SC which set bright line for what states can do
- Chair Oliverson – TDI has tested the waters on some of these issues already regarding ERISA, is that right?
- Privy to some of the public info requests, enforcement actions, etc.; from what I’ve seen TDI has found laws to be enforceable against ERISA plans
- Chair Oliverson – To a large extent there’s nothing we’re doing in this bill that TDI doesn’t believe they have authority to do
- Correct in my understanding
- Chair Oliverson – Not a brand new thing, happening right now with enforcement actions
- Paul – Does Rutledge say you can’t mess with plan design?
- Yes
- Paul – Isn’t it messing with plan design to influence pharmacy choices?
- No, other recent cases speak to this
Shannon Meroney, Texas Association of Health Underwriters – Against
- Opposed to bill as filed, neutral on CS
- Understand CS is a work in progress, hope to be part of the conversation moving forward
Rannon Ching, Tarrytown Pharmacy, Texas Pharmacy Association – For
- Support broadening application of bills last session so all PBMs have to follow the same regulations
- Prohibits specialty accreditations; accreditations would be within purview of TSBP if about patient safety, accreditations are more about forcing expensive prescriptions
Debbie Garza, Texas Pharmacy Association – For
- 3 largest PBMs use market power to self-deal and put up obstacles for competition
- Last session bills were good, but only applied to TDI plans, HB 2021 would put same standards in place for all PBMs operating in Texas
- HB 2021 would not require any pharmacies to be paid more, but would ensure fair competition in the market
- Julie Johnson – Why do you feel like you need this bill and how do you know it won’t cost employer plans more money?
- If anything will reduce cost because HB 2021 prohibits paying affiliated pharmacies more
- Policies steering patients to PBM pharmacies is reducing competition and likely increases costs
- Julie Johnson – So PBMs not giving you a fair shot & PBMs are arguing they have negotiated lower rates
- Wouldn’t agree with the second part, argue that they have lower rates, but not always the case; others are willing to agree to same T&Cs, but aren’t allowed to
- Julie Johnson – So TPA is saying they understand PBMs have negotiated a lower rate, but TPA wants to offer the Rx at a higher cost?
- In many cases PBMs actually charge more and pay their pharmacies more
- Independent pharmacists are not able to be part of the network
- Julie Johnson – Many have registered for and against, both claiming they will save the consumer money & up to us to decide
- We think we have data showing bills won’t drive up the cost; bills are asking the question and leveling the playing field versus having PBMs set rules and drive business to their own pharmacies
CS withdrawn, HB 2021 left pending