: Texas Register Preamble (2024)

The contractual coverage period will also direct an insurer's actions regarding billing and initiation of COBRA coverage. If the contract between the carrier and the employer already provides coverage through the end of the month, as is the case in the great majority of situations according to testimony at the hearing on this rule, Senate Bill 51 will have no bearing if the group policyholder or contract holder provides timely notification. If coverage terminates on the date employment terminates, carriers and employers will have to determine how to allocate premium between the employer and the ex-employee. To illustrate this principle, assume a company has coverage that terminates at the end of employment, a coverage contract based on a calendar month, and an employee that leaves employment on May 15. Senate Bill 51 would obligate the employer to pay premium for this individual through the end of May. If the individual then elects COBRA on June 9, the employer could begin COBRA coverage either at the end of May or as of the earlier QE. If COBRA begins May 15, the employer would be entitled to recoup its premium payment for the remainder of May from the first COBRA payment made by the employee.

§21.4003(f): A commenter requests that this provision either be entirely deleted or limited to situations where the policy is converted from a group policy to an individual policy as permitted by Insurance Code §§1251.256 - 1251.259. The commenter states that if this exception is limited to the group policies, subsection (e), which clarifies that any new coverage should be effective immediately upon coverage termination under the group health plan, should mirror that language. According to the commenter, while employees who elect COBRA are obligated to pay the premiums, Insurance Code §1251.252 states that an individual is entitled to continuation of group coverage under certain circ*mstances and would not be terminated from group eligibility in those instances. With COBRA elections, the commenter suggests that the group policyholder or contract holder must still transmit the premium to the carrier and notify the carrier of the termination.

Agency Response: The Department disagrees with the suggested change to delete the entire subsection or limit it to situations where the policy is converted from a group policy to an individual policy. This subsection is necessary to implement and clarify Senate Bill 51. While COBRA and other continuation provisions may entitle an individual to continue group coverage for a statutorily-specified period under special eligibility laws, the individual is no longer part of the group eligible for coverage. The Department agrees that a group policyholder or contract holder may retain an obligation to transmit premium and enrollment data to a health carrier; however group policyholders or contract holders had this obligation prior to the enactment of Senate Bill 51. Neither the statute nor this rule in any way affects a carrier's rights and remedies against a group policyholder or contract holder that fails to meet its obligations of this nature. The Department has, however, changed the lead-in sentence language of this subsection in response to comments and for clarification. Subsection (f) as adopted contains the following lead-in sentence language: "[a] group policyholder or contract holder is not liable for an individual insured's or an enrollee's premiums, and a health carrier is not obligated to continue coverage, under subsection (a) of this section under coverage a health carrier extends to an individual in compliance. . . ."

§21.4003(f): A commenter recommends the addition of a new paragraph in this subsection to clarify that subsection (a) of this section does not apply to coverage a health carrier extends to an individual "that is immediately followed by continuation coverage elected by or on behalf of an individual insured or enrollee."

Agency Response: The Department disagrees with the commenter's suggested change because subsection (e) allows an employer to end its premium payment obligation under Senate Bill 51 when its ex-employee obtains successor coverage, including continuation coverage. The Department has, however, changed the proposed term "new" to "successor" in subsection (e) to clarify this right. Additionally, the Department has made a technical change to the lead-in sentence language of this section for clarification.

§21.4003(f): The commenter interprets the rule to exempt all groups subject to continuation of coverage laws from the effect of Senate Bill 51 but expresses understanding that the Department's interpretation is solely to end a group policyholder's or contract holder's obligation once an individual has begun continuation coverage. The commenter states enforcement of Senate Bill 51 on employers subject to COBRA, and to a lesser degree Uniformed Services Employment and Reemployment Rights Act (USERRA) and State Continuation, would effectively block an employer's rights granted in U.S. Treasury Department regulation 26 C.F.R. §54.4989B-8, which allows for both retroactive termination and reinstatement of coverage. The commenter urges that Senate Bill 51 should only apply to employer groups of less than 20 lives not subject to the USERRA when employees have been on the plan for less than the statutory 90 days to be eligible for state continuation.

Agency Response: The Department disagrees with the suggested change because Senate Bill 51 applies to group policyholders and group contract holders regardless of the size of the employer. The commenter's suggestion is over-inclusive in that it would affect even individuals that do not elect continuation coverage. Subsection (f) provides relief to a group policyholder or contract holder when an individual elects continuation of coverage, but not in all circ*mstances. Additionally, the cited Treasury Department regulation applies only after inception of COBRA or similar federal continuation of coverage. The rule simply clarifies that the employer no longer has responsibility after the inception of continuation coverage; therefore, the statute and the rule do not conflict with the federal regulations.

§21.4003(f): A commenter requests additional language listing federal health plans not covered by Senate Bill 51 (e.g., Medicare, Medicaid, FMLA) and other plans covering federal employees exclusively.

Agency Response: The Department disagrees that this listing is necessary. Senate Bill 51 applies to coverage plans issued pursuant to the Insurance Code Chapters 843 and 1301. If a federal employee health plan is not issued pursuant to the authority of one of these two chapters, then Senate Bill 51 does not apply to it. The reason the rule specifically addresses continuation coverage is because carriers frequently provide such coverage through Insurance Code Chapter 843 or 1301 plans.

§21.4003(f) - (g): A commenter recommends that these subsections remain as proposed because they relieve the employer from continuing coverage if they do not contribute premium.

Agency Response: The Department agrees with the commenter that the subsections should remain substantively unchanged as proposed. The Department, however, has made a clarifying change to the lead-in sentence language in each of these two subsections as adopted, which reads "[a] group policyholder or group contract holder is not liable for an individual insured's or an enrollee's premiums, and a health carrier is not obligated to continue coverage, under subsection (a) of this section if . . . ."

§21.4003(g): A commenter states that this subsection is a desirable provision and specifically requests it remain in the rule.

Agency Response: The Department has retained this subsection in the adoption.

§21.4003(g): A commenter questions the statutory authority for this subsection and states that it would be helpful if the rule included examples. The commenter states that, while some employers make employees fully responsible for premium payments, these employers have established a group plan and will have contracts with health carriers that obligate them to transmit the paid premiums to the carrier and comply with the notice requirements of the law. Another commenter requests that the Department add the following examples to this subsection for clarification of the intent to exempt group policyholders or contract holders who do not have employer relationships or contribute no funds for any covered individual: (1) an association who has no employer-employee relationship and contributes no premium, but provides association dues-paying members the opportunity for coverage and agrees to bill 100% premium to members and remit this to the carrier; (2) an association that contributes to the cost of premium for six full-time employees of the association; and (3) an employer that contributes to the cost of employee premium but not for dependent premium under its group plan.

Agency Response: The statutory authority for this subsection is the plain language of §843.210 and §1301.0061 of the Insurance Code which provides that in addition to other premiums for which the group policyholder or contract holder is liable, group policyholders or contract holders are responsible for the obligation to continue premium payments and coverage, as well as the rulemaking authority granted to the Commissioner in Insurance Code §§843.151, 1301.007, and 36.001. The Department agrees that a group policyholder or contract holder may retain an obligation to transmit premium and enrollment data to a health carrier; however, group policyholders or contract holders had this obligation prior to the enactment of Senate Bill 51. Neither the statute nor this rule in any way affects a carrier's rights and remedies against a group policyholder or contract holder that fails to meet its obligations of this nature. This rule provision operates simply to provide exemption from liability for premium payment imposed by subsection (a) for a group policyholder or contract holder that does not contribute to the premium payment for any individual covered by the policy or contract. If the group policyholder or contract holder does contribute, then the group policyholder or contract holder is not exempt. While the Department does not agree that it is necessary to add the suggested examples to the rule text, the Department will discuss the suggested examples in this response to enhance compliance as entities conform their practices to the adopted regulation. Association group members are eligible for group insurance based upon their membership in a group formed for a purpose other than to obtain insurance coverage (e.g., teachers' or physicians' associations). Under the adopted rule, the group contract holder in example one would be exempt from the premium payment requirements of Senate Bill 51, and the issuing carrier would be exempt from the coverage requirement. In examples two and three, the premium contributions would make Senate Bill 51 requirements apply. In addition, the plan described in example two, covering employees of the association, would be subject to Chapter 1501 of the Insurance Code and the uniform contribution requirements of Insurance Code §1501.153, so it would not appear that a single plan could cover both employees and association members.

§21.4003(g): Commenters state that this subsection is unfair, could burden business, and adversely impacts access to health coverage because it requires employers to pay all premiums for a former employee and a former employee's dependents if the employer tenders notification outside the "grace period," given that employers voluntarily offer health benefits to employees and often do not contribute any amount to dependent premium. Another commenter recommends substituting the words "to any dependent coverage where the" in place of "a health benefit plan for which a." Another commenter states that the proposal does not address the employer's responsibility for premium payments for the contribution requirement of 50% for terminated employees and 100% for dependents and asks whether they can recoup these contribution amounts by payroll deduction or billing.

Agency Response: The statute requires group policyholders or contract holders to pay premium and carriers to provide coverage. It does not place any obligations on individuals losing group eligibility. Neither does it provide a basis for treating dependents differently than primary group members, such as employees. The Department does not regulate, except in certain specified circ*mstances, the activities of employers. Accordingly, the Department does not agree with the recommended changes.

§21.4003(g): Another commenter asks that the rule clarify that an employer is not responsible for premium payment for any amounts other than what the employer would have paid for active employees because Senate Bill 51 does not require coverage and payment of such amounts.

Agency Response: The Department disagrees with the commenter's assertion that an employer is not responsible for premium payment for any amounts other than what the employer would have paid for active employees because Insurance Code §843.210(2) and §1301.0061(2), as added by Senate Bill 51, require that group policyholders and contract holders contractually assume liability for premiums until the end of the month in which an enrollee's or individual insured's coverage terminates and the carrier is notified. Senate Bill 51 is intended to prevent retroactive recovery of payments for medical services provided in good faith prior to the retroactive disenrollment of the employee by encouraging timely notification by employers. Therefore, the Department does not agree with the requested clarification.

§21.4003(h): A commenter questions the need for the language in this subsection that protects payment for covered services performed after a patient's death.

Agency Response: The Department disagrees with the commenter's suggestion that this subsection is unnecessary. A physician or provider may perform services after a patient's death. For example, a radiologist could interpret an x-ray taken prior to a patient's death before learning that the patient had died.

§21.4003(h): A commenter requests that this subsection be adopted as proposed because in certain instances employers may not immediately learn of the employee's death and should not be responsible for those premiums.

Agency Response: The Department agrees with the commenter and adopts the subsection as proposed with only minor changes for clarification.

§21.4003(h): A commenter requests that the Department consider clarifying the status of dependents left behind by a deceased member. Another commenter notes that the death of an employee does not terminate coverage of dependents.

Agency Response: The subsection affects the obligation to pay premium for and provide coverage to only the deceased individual. An individual's demise does not affect coverage obligations owed to dependents. Senate Bill 51 would continue to affect a group policyholder's or contract holder's and carrier's obligation toward any other individuals losing eligibility for group coverage. Therefore, the Department does not agree with the requested clarification.

§21.4003(h): A commenter states that the premium under a group policy is usually payable for an entire contract month. The commenter remarks that mid-month terminations due to death, divorce, or other circ*mstances would thus not result in unearned premium as the rate is based on the entire month.

Agency Response: As the commenter states, monthly premium arrangements are customary, but they are not exclusive. This subsection does not address or alter contractual premium payment arrangements but rather addresses only a party's obligations under Senate Bill 51. If an employer, for example, had contracted with a carrier for coverage that terminates when an employee loses group eligibility (in this instance due to death), this subsection would provide that the premium payment obligation under Senate Bill 51 would cease prior to the end of the month of notification. If the contracted coverage terminates only at the end of a month, then the employee's death would have no effect on premium payment or coverage obligations.

Miscellaneous: A commenter requests the addition of a new section to the proposed rule to allow carriers to use current contract amendments until a "reasonable time," to file new amendments. The commenter suggests 60 days after the Commissioner approves these rules. Some contract amendments were effective January 1, 2006, and carriers will need to file new amendments once these rules are adopted.

Agency Response: Insurance Code §843.210 and §1301.0061 as added by Senate Bill 51 became effective September 1, 2005. The Department understands, however, that carriers will need time to effect the changes needed as a result of the adoption of these rules that implement Senate Bill 51. The Department disagrees that adding a new section to the rule to specify a particular date for implementing changes is necessary because implementation time may necessarily vary. The Department, however, urges and expects carriers to act expeditiously in updating forms and procedures.

Miscellaneous: Another commenter asks whether the rules apply to eligibility termination events that occurred in 2005, but were not reported until 2006.

Agency Response: According to §5 of Senate Bill 51, Insurance Code §843.210 and §1301.0061 apply only to a contract between an insurer or health maintenance organization and a group policy or contract holder that is entered into or renewed on or after January 1, 2006. A contract entered into or renewed before January 1, 2006, is governed by the law in effect immediately before the Senate Bill 51 effective date of September 1, 2005. The rule only applies to eligibility termination events that are governed by Senate Bill 51, and no event in 2005 would have occurred under a contract subject to Senate Bill 51.

Miscellaneous: A commenter asks whether Insurance Code Chapters 843 and 1301 and Senate Bill 51 apply to dental insurance products and vision insurance products that provide access to network providers for eye exams and network retail suppliers.

Agency Response: The scope of Senate Bill 51 is expressed by type of plan, not by type of benefits or services. Health care coverage plans issued pursuant to the authority of Insurance Code Chapters 843 and 1301 are subject to Senate Bill 51. If a carrier issues a vision or dental coverage contract pursuant to one of these chapters, then the contract is subject to Senate Bill 51. Insurance Code §1301.002, however, states that Chapter 1301 does not apply to a provision for dental care benefits in a health insurance policy.

NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS. For with changes: Administaff, Inc.; Aetna; BlueCross BlueShield of Texas; Humana; Infinisource, Inc.; Insurance Network of Texas; Office of Public Insurance Counsel; The Benefits Office; Texas Association of Business; Texas Association of Health Plans; Texas Association of Health Underwriters; Texas Association of Life and Health Insurers; Texas Hospital Association; Texas Medical Association; Texas & Southwestern Cattle Raisers Association; and Unicare.

Against: None.

The new sections are adopted under Insurance Code §§843.210,1301.0061, 843.151, 1301.007, and 36.001. Section 843.210 and §1301.0061address the obligation of certain group health coverage policyholders andcontract holders to continue premium payment, and a carrier's correspondingobligation to continue coverage, after notice of an individual's lost groupeligibility. Section 843.151 provides that the Commissioner may adopt reasonablerules as necessary and proper to fully implement the Insurance Code Chapter843 and Article 20A(non-substantive revision of Article 20A enacted by the78th Legislature as Chapter 1271, effective April 1, 2005). Section 1301.007provides that the Commissioner shall adopt rules as necessary to implementChapter 1301 and to ensure reasonable accessibility and availability of preferredprovider benefits and basic level of benefits to residents of this state.Section 36.001 provides that the Commissioner of Insurance may adopt any rulesnecessary and appropriate to implement the powers and duties of the TexasDepartment of Insurance under the Insurance Code and other laws of this state.