. ’

December 21, 1990

Honorable Chet Brooks Chairman Health and Human Services Committee Texas State Senate P. 0. Box,12068 Austin, Texas 78711

Honorable BobMcFarland Chairman CriminalJustice Committee Texas State Senate P. 0. Box 12068 Austin, Texas 78711 OpinionNo. JM-1270

Re: Duty to cover care and treatment received for chemical dependency provided ' chemicaldependency treatme:: centers as defined in article 3.51-9,section 2A, of the Texas InsuranceCode (RQ-2083)

Dear Senators Brooks and McFarland:

You each ask the same two questions concerning the application of article 3.51-9 of the Texas Insurance Code. We are advised that these questions relate primarily to group health insurers subject to chapter 3 of the Texas Insurance Code. See Ins. Code arts. 3.50 to 3.51-13.

You ask firstwhether section 2A of article 3.51-9 prohibits the denial of coverage for treatment received for chemical dependency in a chemical dependency treatment center rather than in a generalhospital licensed by the Texas Department of Health.1 You also ask whether an

1. For purposes of article 3.51-9, the phrase "chemicaldependencyH includes psychological or physical dependence on or addiction to alcohol or a controlled substance. Ins. Code art. 3.51-9, 5 2(l). Section 2A defines a "chemical dependency treatment center" as a facility that provides a program for the treatment of chemical dependency according to a writtenplan approved and monitoredby a physician. The facilityproviding chemical dependency treatmentmust also be either: (FootnoteContinued)

P. 6792Honorable Chst Brooks

Honorable **Bob** McFarland Page 2 (JM-1270) , .

insurance company that issues group health insurance policies or contracts can define or interpret the term lVhospitalUin those policies or contracts to mean only a general hospital licensedby the Texas Departmentof Health and use that definition or interpretationto deny coverage for chemical dependency treatment provided in a chemical dependency treatmentcenter.

Based on the legislativehistory aswell as the current wording of article 3.51-9, we conclude that group health insurers issuingpolicies or contracts within the scope of article 3.51-9 cannotdeny coverage for chemical dependency treatment provided in a chemical dependency treatment center
as defined in section 2A because such treatment was not provided in a hospital licensed by the Texas Department of Health. We also conclude that such a denial of coverage is prohibited even if the insurerdefines or interprets the term "hospital" in itsgroup health insurancepolicies or contracts tomean only a general hospital licensedby the Texas Department of Health.

As originallyenacted in 1981, article 3.51-9 stated that certain providers of grouphealth insuranceor other health coverage in this state "shall offer andmake available" to their insureds "benefits for the necessary care and treatment of alcoholand other drug dependency that are not less favorable than for physical illnessgenerally." Acts

(FootnoteContinued)

(1) affiliatedwith a hospital under a contractual agreement with an established system forpatient referral:
(2) accreditedas a chemical dependency treatment facilityby the Joint Commission on Accreditation of Hospitals:

(3) licensedas a chemical dependency treatment program by the Texas Commission on Alcohol and Drug Abuse; or
(4) licensed,certified, or approved as a chemical dependency treatment program or center by another state agency having legal authority to so license, certify, or approve.

See Ins. Code art. 3.51-9, 5 2A.

p. 6793‘

. Honorable Chet Brooke

Honorable Bob McFarland Page 3 (JM-1270)

1981, 67th Leg., 1st C.S., ch. 7, 5 1, at 63. The 1981 act also required that "benefitsso provided shall be determined
as if necessary care and treatment in an alcohol or other drug dependency treatment centerwere care and treatment in
a hospital." Ig, at 64.

In Attorney General Opinion JM-5 (1983),we held that the 1981 act requireda provider of a group health insurance policy or contractwithin the scope of the act to offer and make available to their insuredsbenefits for alcohol and other drug dependency subject to their rejection. In addition, we construed the language of the 1981 act stating that benefits provided for treatment in an authorized alcohol or other drug dependencytreatment center constituted "care and treatment in a hospital"to mean that insurerswithin the scope of the act could not discriminate against authorized alcohol and other drug dependency centers and thus could not deny coverage for treatment provided by such centers
on the basis that they were not hospitals. Furthermore, relying on section 3 of article 3.51-6 of the code, which states that chapter 3 insurers may not require services to be rendered by a particularprovider, we also held that chapter 3 insurersmust provide coverage for drug dependency treatment provided in any authorized center.
Subsequent to our opinion, the legislature in 1985 passed Senate Bill 601 and thereby amended article 3.51-9. Acts 1985, 69th Leg., ch. 632, 5 12, at 2338. Section 12 of Senate Bill 601made the following two major changes to article 3.51-9:

(1) restrictedarticle 3.51-9 to the care and treatment of alcohol dependency by deleting all references to care and treatment for other drug dependency: and
(2) requiredcoverage of the care and treatmentof alcohol dependency by stating that insurersand other health care providers within the scope of the act 'shall provide' benefits for the care and treatment of alcoholdependency and not just 'offer and make available' such coverage subject to rejectionby the insured.

id.: See see also Bill Analysis, C.S.S.B. 601, 69th Leg. (1985) (bill mandates coverage for alcohol dependency by

p. 6794Honorable Chet Brooks

Honorable Bob McFarland Page 4 (JM-1270)

amending existing languageto require the provision of such benefits).2

In 1989 the legislature passed Senate Bill 911 during the regular session and thereby expanded the application of article 3.51-9 to the care and treatment of chemical dependencies other than alcohol. **Acts 1989,**  71st Leg., ch. 1097, 5 1, at 4510. Section 2A, as amended by Senate Bill mandates that insurers,3 911, certain nonprofit hospital and medical service plan corporations, and health maintenance organizationsproviding group health coverage as well as various self-funded or self-insuredhealth insurance plans
or arrangements

Drovide. under such arouD insurance
es or con- and such plans or arrangementsproviding hospital and medical coverage or serviceson an expense incurred, service, or prepaid basis, benefits for the
nc e essa ca e deoendencv that are not less favorable th B for DhVSiCal illneSS CIenerally subject To the same durationallimits, d&lar limits, deductibles, and coinsurance factors. (Emphasisadded.)

2. Section 12 alsoamended article 3.51-9to expressly exclude certain types ofpolicies. Excluded in 1985 were various self-funded or self-insured plans or arrangements with 250 or lessmembers, individual insuranceand health maintenance organization policies, and health insurance policies only providing cash indemnity for confinement benefits, supplemental or limited benefit coverage, or coverage for specifieddiseases or accidents,or disability income coverage. See alsg Acts 1985, 69th Leg., ch. 805, § 1, at 2848 (alsoamendingarticle 3.51-9to affect changes indicated in text and this footnote). The current wording of article 3.51-9 excludesthe same small, individual, or limitedbenefits policies. Ins. Code art. 3.51-9, 8 2A.

3. Section 1 of article 3.51-9 states that one of the purposes of the statute is to provide consumers with benefits for the treatment of chemical dependency in group health insurancepoliciesor contracts. That **section** also provides that such benefitsare to be provided consumers of group health coverage provided by health maintenance organizations and certain self-fundedor self-insuredplans.

P. 6795~,,,

Honorable Chet Brook Honorable Bob McFarland Page 5 (JM-1270)

In accordancewith section **ZA,** "benefitsso provided shall be determined as if necessary care and treatment in a chemicaldependency treatment centerwere care and treatment in a hospital."

The legislativehistory availablewith regard to Senate Bill 911 and the House's companionbill, House Bill 954, establishes that the legislature intendedto require providerswithin the scope of article 3.51-9 to provide coverage for chemical dependency treatment similar to the coverage required in 1985 for treatment of alcohol dependency. See BillAnalysis, S.B. 911, 71st beg. (1989) (expands 1985 mandate "to includemandatory coverage of 'chemical dependencies"):House Research Organization'sDaily Floor Report, PartTwo, at 43 (May4, 1989) (HouseBill 954 amends article 3.51-9 to require coverage for the treatment of alcohol and other chemical dependencies).4

As mentioned above, the current language of section 2A of article 3.51-9 states thatproviderswithin the scope of the article "shallprovide

. . .benefits for the necessary care and treatment of chemical dependency that are not less favorablethan for physical illness generally" and that "benefitsso provided shallbe determined as if necessary care and treatment in a chemicaldependency treatment center
were care and treatment in a hospital.V0 This statutory language clearly indicates the legislature's intent to mandate provision of chemical dependencybenefits and also prohibit chapter 3 group insurersfrom denying coverage for treatmentprovided in a chemicaldependency treatment center
on the basis that such a center is not a general hospital licensedby the Texas Departmentof Health. See Attorney GeneralOpinion JM-5, at 3 (construing almost identical languageand reaching similar conclusion).

**4.** To facilitate the transitionto expanded coverage, section 2 **of** Senate Bill 911 delayed the effective date of the 1989 amendments to January 1, 1990. In particular, section 2 provided that the amendments applied only to policies, contracts, or other arrangementswithin the scope of the article that were "deliveredor issued for delivery
or renewed in this state on or afterJanuary 1, 1990, or subjectto collectivebargaining agreements

. . . entered intoor renegotiated on or afterJanuary 1, 1990." Acts 1989, 71st Leg., ch. 1097, 5 2, at 4512;gee also fi 5 3(b) (forcertain exceptions regardingcurrent litigation).

P. 6796Honorable Chet Brooks

Honorable BobXcFarland Page **6 (JM-1270)** 

The legislative history of article 3.51-9 reinforces this conclusion. As summarized above, the legislature first changed article 3.51-9 from a.provision thatmerely mandated providersvithin the scope of the articleto offer coverage for certaindrug dependency treatment **even** if the treatment
was provided in alcohol and other drug dependency treatment centers to a provision in 1985 thatmandatedactual coverage of alcoholdependencytreatment even ifprovided in authorized treatment centers. Second, the legislature in 1989 expanded the coverage mandated in 1985 for alcohol dependency treatmentto include the care and treatmentof chemical dependenciesother than alcohol. At nopoint does the legislativehistory indicate any legislativeintent to allow
a chapter 3 group insurer to discriminateagainst chemical dependency treatmentcentersbecause they are not hospitals,
or in particular, not hospitals licensed by the Texas Departmentof Health. In fact,while amendingother **lan** guage in article 3.51-9 in 1985 and 1989,the legislature leftunchanged the statutory language referringto treatment in a dependencycenter as if itwere care and treatment in a hospital. Asmentioned in our earlier discussionof Attorney GeneralOpinionJM-5, this languagesupportsthe conclusions thereinthat the legislaturedid not intend insurers within the scope of article 3.51-9 to be freeto discriminate againstauthorized drug dependency treatment centers, and thus, that such insurers could not deny coverage for treatmentprovided in such centers on thebasis that they
were not hospitals.

In addition, section 2A of article 3.51-9 requires authorized treatmentcenters to be affiliatedwith certain hospitals or satisfy certain accreditation or licensing standards. s.eBm, note 1 at 1. Licensingby the Texas Departmentof Health is not one of those standards. While the legislature amended section 2A in 1989 to include provision for detailed regulatory standards for chemical dependency treatment, its amendatory language neither authorized the regulatory addition of a standard requiring authorized centers to be hospitals licensed by the Texas Departmentof Health nor the impositionof such a limiting standardby chapter 3 group insurers in theirgroup policies
or contracts. Acts 1989, 71st Leg., ch. 1097, 5 1, at 4511 (StateBoard of Insuranceand Texas Commissionon Alcohol and Drug Abuse shall adopt standards on benefit costs, treatmentperiods,and review procedures).

A brief filed in response to your requestaddresses the applicationof article 3.51-9 to chapter 3 insurersas well
as certain other health care providers. As a result, YOU have asked thatwe address generally the applicationof the

p. 6797Honorable Chet Brooks

Honorable BobMcFarland Page 7 (JM-1270)

article to othermajor group health oare providers. We provide the followingdiscussion to assist you in applying article 3.51-9.

As mentioned above, article 3.51-9 applies to nonprofit hospital and medical serviceplan corporations providing group health coveragethat are subject to chapter 20 of the Insurance Code. As stated inAttorney General Opinion JM-5, although those corporationsare statutorilyauthorized to contractvith specific providers, they still must treat authorized treatment centers like hospitals under their contracts unless those contracts are expressly excluded from article 3.51-9. Attorney General Opinion JN-5 at 4-5 (citing Ins. Code arts. 20.01, 20.11, 20.12);899 suora, note 2 at 4 for statutoryexclusions. Neither the 1989 amendments to article 3.51-9 nor the subsequent amendments to articles 20.11and 20.12 lead us to change this conclusion. m Acts 1989, 71st beg., ch. 7, 5 1, at 276.

**Attorney** General OpinionJM-5 reached a similar conclusion with regardto healthmaintenance organizationsproviding group health coverage subject to article 3.51-9. Id. at 5. As noted in that opinion,health maintenance organizations are governedprimarily **by** chapter 20A of the Insurance Code. Id. Our conclusionwith regard to those organizations relied inparticular on article 2OA.O6(a)(3). The current vording of that article is substantiallythe same today and still authorizeshealth maintenance organizations to arrange forrequired services through health care entities that contractwith them. Article 20A.l4(g),which was added in 1987,also states that no type of health care provider licensed or otherwise authorized to practice in this statemay be denied the opportunity toparticipate in the provision of health care services to such an organization solely on the basis of type of license or authorization held by the provider if the organization is providing services within the provider's license or authorization. Given these two articles, we affirm our conclusion in Attorney General Opinion JM-5 that health maintenance organizations subject to article 3.51-9may provide treatment requiredby that article solely through entities with whom they contract provided that authorized treatment centers are treated the same as hospitals. Furthermore,
we add that those organizations may not discriminate against chemicaldependencytreatment centers in violation of article 20A.l4(g). See alsQ Ins. Code arts. ZOA.OZ(r), 20A.O9(f) added and amended, respectively,by Acts 1985, 69th Leg., ch. 906, 58 1, 5, at 3033, 3035 (article 3.51-9 applies to healthmaintenance organizationsother than those

P. 6798Honorable Chat Brooke

Honorable Bob McFarland Page 8 (JM-1270)

offering only coverage of specific single illnesses or injuries).5

In answer to your second question,article 3.51-9 prohibits group insurers fromdenying coverage for treatment received in an authorizedcenter underpolicies or contracts subject to #at articlebased on the definition or interpre**tation** of the term "hospitals n in suchpolicies or **contracts** to mean only a generalhospital licensed by the Texas Department of Health. Contractual terms or conditions cannot frustrate insurancebenefits that statutes guarantee, and **any** contractual attemptto void or narrow required coverage is ineffective. American Libertv Ins. Co. v. Ranzau, 481 S.W.2d 793, 796-7 (Tex. 1972):McCalla v. State **Farm** M t. Auto. Ins. Cot, 704 S.W.Zd 518, 519 Hiuston [14thDist.] (Tex. App. - 1986,writ ref'd n.r.e.); Hamaker v. American States Ins. Co. of Texas 493 S.W.Zd 893, 895 (Tex. Civ. App. - Houston [lstDist.] 1473,writ ref*d n.r.e.).

To summarize, article 3.51-9mandates the provision of chemical dependency benefits in grouppolicies and contracts subject to that article. It also prohibits chapter 3 group insurers issuingpolicies or contracts subject to article 3.51-9 from denying coverage fortreatment received in a chemical dependency treatment center rather than in a general hospital licensedby the Texas Department of Health. Furthermore, article 3.51-9 prohibits such a denial of coverage even if the insurerdefines or interprets the term nhospitaln in those grouppolicies or contracts to mean only certain hospitals such as those licensed **by** the Texas Department of Health.

**5.** Since we have not in the past addressed the relationship of article 3.51-9and the federal laws governing self-funded and self-insuredhealth **care** plans such as the federal Employee Retirement Income SecurityAct of 1974, we decline to address that relationship in this opinion given the focus of your questions. See aenerally PC Core Holliday, 59USLW 4009 (U.S. Nov. **27,** 1990) (No. 89-1;)487; Metrooolitan Life Ins Co. v. Massachusettes, (1985) (concluding state law 471 U.S. **724** notpreempted by ERISA with regard to insuredplans,but not deciding issuewith regard to plans that self-fundor self-insureagainst risks).'

p. 6799.. Hoporable Chet Brooks e ,RonorableBob McFarland' Page 9 (JM-1270) / 1

Article 3.51-9 of the Texas Insurance Code mandates the provision of chemical dependency benefits in group policies and contracts subject to that article. Article 3.51-9 applies to group insurerssubject to chapter 3 of the code and prohibits those insurers who issue policiesor contracts subject to article 3.51-9 from denying coverage for treatment received in a chemical dependency treatment center rather than in a general hospital licensed by the Texas Department of Health. Furthermore,article 3.51-9 prohibits such a denial of coverage even if the insurer defines or interprets the term "hospital" in group policies or contracts subject to the article to mean only certain hospitals such as those licensedby the Texas Department of Health.

JIK MATTOX Attorney General of Texas

MARYKELLER FirstAssistant Attorney General

mu MCCREARY Executive Assistant AttorneyGeneral

JUDGE ZOLLIE STEAKLEY SpecialAssistant AttorneyGeneral

RENEA HICKS Special Assistant AttorneyGeneral

RICK GILPIN Chairman, Opinion Committee
Prepared by CelesteA. Baker Assistant Attorney General

P. 6800