CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED

ENTITIES

CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 842.001. DEFINITIONS. In this chapter:

(1) "Group hospital service corporation" means a corporation

organized under this chapter to establish and operate a nonprofit

hospital service plan, under which hospital care may be provided

by the corporation through one or more hospitals and sanitariums

with which the corporation has contracted for the provision of

that care.

(2) "Health care provider" means a person, association,

partnership, corporation, or other entity that provides a service

or supplies to prevent, alleviate, cure, or heal human illness or

injury.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.002. APPLICABILITY OF OTHER LAWS. (a) Except as

otherwise required by this chapter, a state agency may not

require a group hospital service corporation to post a bond or

place a deposit with the agency or another agency of this state

to begin or maintain operations authorized under this chapter.

(b) The group hospital service corporation is exempt from a

provision of this code that is not expressly made applicable to

the corporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.003. CORPORATION SUBJECT TO REGULATION BY COMMISSIONER

AND DEPARTMENT. Each group hospital service corporation is

subject to regulation by the department and the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF GROUP HOSPITAL SERVICE

CORPORATION

Sec. 842.051. APPLICATION FOR CORPORATE CHARTER; NONPROFIT

STATUS REQUIRED. (a) Seven or more persons, a majority of whom

are superintendents of hospitals or physicians licensed by the

Texas State Board of Medical Examiners, may apply to the

secretary of state for a corporate charter to operate a group

hospital service corporation.

(b) A group hospital service corporation must be governed and

operated as a nonprofit organization.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.052. MINIMUM MEMBERSHIP REQUIREMENTS. (a) Before a

group hospital service corporation may be incorporated, the

corporation must have collected in advance from at least 500

applicants for membership:

(1) the application fee; and

(2) an amount at least equal to the amount charged by the

corporation for one month's premium for coverage.

(b) A group hospital service corporation must maintain a

membership of at least 500 as a condition of continued operation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 842.101. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) The

department shall issue to a group hospital service corporation a

certificate of authority that authorizes the corporation to

engage in the business of a group hospital service corporation if

the corporation:

(1) files a statement acceptable to the department showing

solvency; and

(2) complies with this chapter.

(b) The department shall charge the fee prescribed by law for

the issuance of the certificate of authority.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER D. BOARD OF DIRECTORS; PERSONNEL

Sec. 842.151. BOARD OF DIRECTORS. (a) Each group hospital

service corporation is governed by a board of directors that has

full control over its management affairs.

(b) A board of directors must be composed of at least 12 but not

more than 20 directors. A majority of the directors must be

persons who:

(1) are not health care providers or employees of health care

providers; and

(2) do not have a financial interest in a health care provider.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.152. COMPENSATION OF DIRECTORS. A director of a group

hospital service corporation may not receive compensation for the

director's services but is entitled to receive reimbursement for

reasonable and necessary expenses incurred in attending a meeting

called to manage or direct the affairs of the corporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.153. BOARD MEETINGS. The board of directors of a group

hospital service corporation may not meet more frequently than

once a month. A meeting may not last more than five days.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.154. BOND REQUIREMENTS FOR CERTAIN OFFICERS AND

EMPLOYEES. (a) Each group hospital service corporation shall

post a bond for the officer or employee responsible for the

handling of the corporation's money. The bond must be:

(1) issued by a surety company licensed by the department to do

business in this state; and

(2) at all times in an amount at least equal to $25,000.

(b) In addition to the bond required under Subsection (a), the

corporation shall post a separate bond or a blanket bond for all

employees who have access to the money of the corporation. The

bond must be in a reasonable amount set by the commissioner in

the amount of at least $500, not to exceed $10,000.

(c) A bond required by this section must be payable to the

commissioner for the use and benefit of the corporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.155. TREASURER'S BOND. The treasurer of each group

hospital service corporation shall post a fidelity bond with a

corporation surety. The bond must be in the amount determined by

the officers of the corporation as necessary to secure the

faithful handling of the corporation's money.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.156. COMPENSATION OF CERTAIN OFFICERS AND EMPLOYEES. A

paid officer or employee of a group hospital service corporation

may not receive more than $20,000 annually as compensation for

the officer's or employee's services unless a higher amount is

first authorized by a vote of:

(1) the board of directors of the corporation; or

(2) a committee of the board of directors that is charged with

the duty of authorizing that compensation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER E. REGULATION OF GROUP HOSPITAL SERVICE CORPORATIONS

Sec. 842.201. ANNUAL STATEMENT; FILING FEE. (a) Not later than

March 1 of each year, each group hospital service corporation

shall file with the department an annual statement that covers

the operations for the preceding calendar year.

(b) The statement must be in the form prescribed by and provide

the information required by the commissioner.

(c) The department shall charge a fee in an amount determined

under Chapter 202 for filing the statement.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.025, eff. April 1, 2009.

Sec. 842.202. RESERVE REQUIREMENTS. (a) Each group hospital

service corporation shall maintain reserves sufficient to cover

liability for claims incurred but not yet paid and the expenses

incurred in settling those claims.

(b) A group hospital service corporation shall estimate the

amount necessary to satisfy the reserve requirements using a

method submitted to the commissioner for approval. The estimate

method used by the corporation is considered approved on the 30th

day after the date filed with the commissioner unless the

commissioner affirmatively approves or disapproves the method

before that date.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.203. FINAL JUDGMENT DEPOSIT. (a) For each 1,000

members and fraction of 1,000 members, a group hospital service

corporation shall deposit $100 with the comptroller through the

commissioner. The total deposit required under this subsection

may not exceed $2,000.

(b) The deposit required under Subsection (a) shall be used to

pay any judgment entered against the group hospital service

corporation and is subject to garnishment after a final judgment

is entered.

(c) The group hospital service corporation shall immediately

replenish the amount on deposit if the amount is impounded or

impaired. If the amount is not replenished immediately on the

demand of the commissioner, the corporation may be regarded as

insolvent and treated accordingly.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.204. INVESTMENT LIMITATIONS. The investment

limitations that apply to a life, health, and accident insurance

company apply to the investments of a group hospital service

corporation.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.205. INCURRED EXPENSES. (a) In this section, "general

expenses" means expenses incurred by a group hospital service

corporation in the operation of its business other than:

(1) a tax;

(2) a license fee;

(3) a commission; or

(4) an expense incurred in the performance of a contract:

(A) made directly or indirectly with this state or the United

States; and

(B) under which the corporation does not assume an insurance

risk.

(b) Subject to Subsection (c), a group hospital service

corporation may not incur during a calendar year general expenses

that exceed 20 percent of the premiums earned in that calendar

year.

(c) For a group hospital service corporation earning $500

million or more in premiums in a calendar year, the maximum

percentage of general expenses that may be incurred during a

calendar year is reduced by one-half percent for each $50 million

of premiums earned to a maximum percentage of 15 percent.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.206. MINIMUM SURPLUS REQUIREMENT. Each group hospital

service corporation shall maintain a surplus of at least $100,000

to meet adverse contingencies.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.207. CONTRACTS; REINSURANCE; OTHER AGREEMENTS. (a)

Subject to Subsection (b), a group hospital service corporation

may:

(1) contract with another organization similar in character for

joint participation through:

(A) a mutualization contract agreement;

(B) a reinsurance treaty; or

(C) another arrangement; and

(2) cede or accept risks from an insurer on all or part of a

risk.

(b) Each document used for a purpose described by Subsection (a)

must be filed with the department and approved by the

commissioner for use in that purpose.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.208. BOOKS AND RECORDS. Each group hospital service

corporation shall keep complete books and records.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.209. EXAMINATIONS. The following laws apply to a group

hospital service corporation:

(1) Subchapter A, Chapter 86; and

(2) Sections 401.051, 401.052, 401.054-401.062, 401.151,

401.152, 401.155, and 401.156.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.026, eff. April 1, 2009.

Sec. 842.210. LIQUIDATION, REHABILITATION, OR CONSERVATION OF

GROUP HOSPITAL SERVICE CORPORATION. The dissolution,

liquidation, rehabilitation, or conservation of a group hospital

service corporation is subject to Chapters 441 and 443.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.027, eff. April 1, 2009.

SUBCHAPTER F. PLAN OF OPERATION; PROVISION OF BENEFITS TO MEMBERS

Sec. 842.251. PLAN OF OPERATION. (a) Before accepting

applications for membership in its hospital service plan, a group

hospital service corporation must submit to the commissioner a

plan of operation. The plan of operation must be accompanied by a

schedule of the dues to be charged to members and a statement of

the amount of hospital services that the corporation contracts to

provide.

(b) The commissioner must approve the plan of operation as fair

and reasonable before the corporation may engage in business.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.252. MEMBERSHIP CERTIFICATE; CONTRACT. (a) A group

hospital service corporation shall issue to each member a

membership certificate that states the benefits to which the

member is or may become entitled.

(b) The department must approve the form of:

(1) the membership certificate; and

(2) any contract made between the group hospital service

corporation and the member's employer or group representative.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.253. POLICY, CERTIFICATE, AND APPLICATION FORMS. A

policy, certificate, or application form used by a group hospital

service corporation is subject to Chapter 1701.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.028, eff. April 1, 2009.

Sec. 842.254. DEPOSIT REQUIREMENTS. A group hospital service

corporation shall deposit in the account of the corporation in a

bank money collected by the corporation from a member or

subscriber. The bank must be a state depository.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.255. ADVANCE PAYMENTS TO HOSPITAL PROHIBITED. A group

hospital service corporation may not pay to a hospital any money

collected by the corporation from a member or subscriber before

the hospital provides necessary care to that member or

subscriber.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.256. CONTRACTS WITH HEALTH CARE PROVIDERS. (a) A

group hospital service corporation may contract with health care

providers as necessary to ensure to each member or subscriber the

provision of services and supplies covered by the membership

certificate or policy of the corporation.

(b) A group hospital service corporation may not be required to

contract with any particular health care provider.

(c) This section does not authorize a group hospital service

corporation to contract with a health care provider in a manner

prohibited by a licensing law of this state under which that

health care provider operates.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.257. MAY LIMIT BENEFITS. A policy or certificate

issued by a group hospital service corporation may limit the

types of disease for which benefits are provided.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.258. LIMITATIONS ON CONTRACTS FOR MEDICAL SERVICES.

(a) A group hospital service corporation may not:

(1) contract to provide to a member a physician or any medical

services;

(2) contract to practice medicine in any manner;

(3) control or attempt to control the relations existing between

a member and the member's physician; or

(4) restrict the right of a patient to obtain the services of

any licensed physician.

(b) This section does not prohibit a group hospital service

corporation from contracting with:

(1) a health organization certified under Chapter 162,

Occupations Code; or

(2) a physician or other health care provider under rules

adopted for preferred provider plans.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.259. USE OF INDEMNITY PLAN AUTHORIZED. A group

hospital service corporation may provide benefits for medical

care, surgical care, or both medical and surgical care on the

basis of indemnity payments for incurred expenses.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.260. PAYMENT OF CLAIM; PROOF OF CLAIM. (a) After

receipt of due proof of claim, a group hospital service

corporation shall pay each claim presented under a membership

certificate in full not later than the 60th day after the date on

which the applicable services prescribed in the certificate have

been provided.

(b) Written notice of a claim given to a group hospital service

corporation is considered due proof of claim under this section

if the corporation does not provide the claimant with the forms

usually provided by the corporation for filing a claim before the

16th day after the date notice is received.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 842.261. INFORMATION AVAILABLE THROUGH INTERNET SITE. (a)

A group hospital service corporation that maintains an Internet

site shall list on the Internet site the physicians and health

care providers, including, if appropriate, mental health

providers and substance abuse treatment providers, that may be

used by members in accordance with the terms of the policy or

certificate applicable to the member. The listing must identify

those physicians and health care providers who continue to be

available to provide services to new patients or clients.

(b) The group hospital service corporation shall update at least

quarterly an Internet site subject to this section.

(c) The commissioner may adopt rules as necessary to implement

this section. The rules may govern the form and content of the

information required to be provided under Subsection (a).

Acts 2003, 78th Leg., ch. 1177, Sec. 2, eff. Sept. 1, 2003.

SUBCHAPTER G. DISCIPLINARY PROCEDURES

Sec. 842.301. REVOCATION OF CERTIFICATE OF AUTHORITY. The

commissioner shall revoke the certificate of authority of a group

hospital service corporation that:

(1) is determined to be:

(A) operating fraudulently; or

(B) improperly contesting claims; or

(2) fails to pay valid claims in accordance with this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.