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Mr. A. W. Pogue Opinion No. ~~-1167 

Commissioner 

State Board of Insurance Re: Status of insurance prog1110 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 organization 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 certificate of authority to establish and operate a health maintenance 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, 

p. 6161 
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 discounts on services. 

The referral fees are received by the referral 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, enrollees 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 BVprepaymentB1 within 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 $ in 

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 population 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 licensed by the state to provide that specific 

health care service.1 

1. Also, "health care services8' is defined in subpart 

(Footnote Continued) 

p. 6162 
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 distinguished 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 individual of medical or dental care, or hospitalization or 

incident to the furnishing of such care or hospitalization, 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 organizations" 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 particular case, restrict such operations. See aenerally V.T.C.S. 

art. 4505a (prohibits health care practitioners from employing any person to secure patients). 

p. 6164 
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 

P. 6165