c 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 ofhealth care providers to enrollees at adiscount inreturn fora referral feeare subject to regulation as a health maintenance organization."

Insurance Code article 20A.03 provides inpart that "no person shall establish or operate ahealth maintenance organization in this state . . .without obtaining acertificate of authority under thisAct," and that "anyperson may apply to the commissioner [ofinsurance] forand obtain a certificate of authority to establish and operate ahealth maintenance organization incompliance with this Act." (The "Actl'referred to inthe quoted portions ofarticle 20A.03 isthe 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 toprospective enrollees are such that a referral fee is charged,

p. 6161Mr. 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 ofparticipating providers which honor discounts on services.

The referral fees are received by the referral programs from enrollees [but]do not appear to be sharedwith the providers. The incentive forproviders toparticipate is the potential for increased volume. Thus, enrollees make another payment to the providers directly. often times, visits to providers
are not atany additional cost to enrollees.

You ask firstwhether apayment by an enrollee in such a referral program inexchange fora 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" isdefined in subpart (j)of article 20A.02 as

any person who arranges for or provides a health care plan or a $ n i service plan to enrollees gn aD enaid basis. 1: (Emphasis added.) "Single health care service" isdefined in subpart (r) of article 20A.02 as

ahealth care service that an enrolled population may reasonably require inorder to be maintained ingood 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 tobe provided by one or more persons each ofwhom is licensed by the state toprovide that specific health care service.1

1. Also, "health care services8'isdefined in subpart (Footnote Continued)

p. 6162Mr. A.W. Pogue -Page 3 (JM-1167)

Yiingle health care service plan" is inturn defined in subpart (s)of article 20A.02 as

aplan under which anyperson undertakes to provide, arrange for, pay for, or reimburse anypart of the cost of a single health care service, gEqvided, that anart of the nlan consists ofarranaina foror the nrovision of the sinale health care service, as distinguished froman indemnification against the cost of that service, on a vreoaid basis through insurance orotherwise and that no part of that plan consists of arranging for the provision of more than onehealth 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 inpart, paid for inadvance. 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 anypart of that fee to the providers forthe latter's provision ofhealth care services to the enrollees. Under this scenario, there isnoprepayment 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 donot constitute "single health care service plans."

We understand your second question tobe 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 ofmedical ordental care, orhospitalization or incident to the furnishing of such care or hospitalization, aswell as the furnishing to anyperson of any and all other services forthe purpose of preventing, alleviating, curing orhealing human illness or injury or a single health care service plan.

P

P. 6163Mr.A. W. Pogue -Page 4 (JM-1167)

You ask finally: ifthe referral programs do not come within the definition of "single health care service plans," and the programs are thus not "healthmaintenance organizations" under chapter 20Aand subject to regulation as such by the commissioner and the State Board of Insurance, which agencies, ifany, have regulatory authority or jurisdiction
over suchprograms? We cannot give an exhaustive answer to this question; however, we canpoint out some relevant provisions.

Inaddition tohealth 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 45Tex. Jur. 3d Inur ceContracts and Coveraae § 1 (andauthorities cited Sthzte);see also Attorney General Opinions MW-455 (1982); H-344 (1974); WW-1475 (1962); O-4986-A (1943) (andauthorities cited inthose opinions). Having concluded that a referral program such as you describe isnot ahealth 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 (filingof 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. (theTexas Optometry Act).
Although you donot raise, andwe consequently do not address indetail here, any other issueswith respect to the lawfulness of such referral practices, we note finally that provisions of law other than those inthe 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 carepractitioners from employinganyperson to secure patients).

p. 6164Mr.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 areferral feeare not "single health care service plans" under the Insurance Code article 20A.02, relating to health maintenance organizations, where there isnoprepayment forthe actual single health care services provided.

- ,yxyti

MATTOX

Attorney General of Texas

MARY KELLER FirstAssistant Attorney General

JUDGE ZOLLIE STEAXLEY Special Assistant Attorney General

RENEA HICKS Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared byWilliam Walker Assistant Attorney General

P. 6165