. ’ 

December 21, 1990 

Honorable Chet Brooks 

Chairman 

Health and Human Services 

Committee 

Texas State Senate 

P. 0. Box,12068 

Austin, Texas 78711 

Honorable Bob McFarland 

Chairman 

Criminal Justice Committee 

Texas State Senate 

P. 0. Box 12068 

Austin, Texas 78711 

Opinion No. JM-1270 

Re: Duty to cover care and 

treatment received for chemical dependency provided ' 

chemical dependency treatme:: 

centers as defined in article 3.51-9, section 2A, of the 

Texas Insurance Code 

(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 first whether 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 general hospital licensed by 

the Texas Department of Health.1 You also ask whether an 

1. For purposes of article 3.51-9, the phrase 

"chemical dependencyH 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 written plan approved and 

monitored by a physician. The facility providing chemical 

dependency treatment must also be either: 

(Footnote Continued) 

P. 6792 
Honorable 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 

lVhospitalU in those policies or contracts to mean only a 

general hospital licensed by the Texas Department of Health 

and use that definition or interpretation to deny coverage 

for chemical dependency treatment provided in a chemical 

dependency treatment center. 

Based on the legislative history as well as the current 

wording of article 3.51-9, we conclude that group health 

insurers issuing policies or contracts within the scope of 

article 3.51-9 cannot deny 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 insurer defines or interprets the 

term "hospital" in its group health insurance policies or 

contracts to mean only a general hospital licensed by the 

Texas Department of Health. 

As originally enacted in 1981, article 3.51-9 stated 

that certain providers of group health insurance or other 

health coverage in this state "shall offer and make available" to their insureds "benefits for the necessary care and 

treatment of alcohol and other drug dependency that are not 

less favorable than for physical illness generally." Acts 

(Footnote Continued) 

(1) affiliated with a hospital under a contractual 

agreement with an established system for patient referral: 

(2) accredited as a chemical dependency treatment 

facility by the Joint Commission on Accreditation of 

Hospitals: 

(3) licensed as 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 "benefits so provided shall be determined 

as if necessary care and treatment in an alcohol or other 

drug dependency treatment center were care and treatment in 

a hospital." Ig, at 64. 

In Attorney General Opinion JM-5 (1983), we held that 

the 1981 act required a provider of a group health insurance 

policy or contract within the scope of the act to offer and 

make available to their insureds benefits 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 dependency treatment center constituted "care and 

treatment in a hospital" to mean that insurers within 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 particular provider, we also held that 

chapter 3 insurers must 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 601 made the following two major changes to 

article 3.51-9: 

(1) restricted article 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) required coverage of the care and 

treatment of alcohol dependency by stating 

that insurers and other health care providers 

within the scope of the act 'shall provide' 

benefits for the care and treatment of 

alcohol dependency and not just 'offer and 

make available' such coverage subject to 

rejection by the insured. 

See id.: see also Bill Analysis, C.S.S.B. 601, 69th Leg. 

(1985) (bill mandates coverage for alcohol dependency by 

p. 6794 
Honorable Chet Brooks 

Honorable Bob McFarland 

Page 4 (JM-1270) 

amending existing language to 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 

organizations providing group health coverage as well as 

various self-funded or self-insured health insurance plans 

or arrangements 

Drovide. under such arouD insurance 

es or con- and such plans or 

arrangements providing hospital and medical 

coverage or services on 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 durational limits, d&lar limits, 

deductibles, and coinsurance factors. 

(Emphasis added.) 

2. Section 12 also amended article 3.51-9 to expressly 

exclude certain types of policies. Excluded in 1985 were 

various self-funded or self-insured plans or arrangements 

with 250 or less members, individual insurance and health 

maintenance organization policies, and health insurance 

policies only providing cash indemnity for confinement 

benefits, supplemental or limited benefit coverage, or 

coverage for specified diseases or accidents, or disability 

income coverage. See alsg Acts 1985, 69th Leg., ch. 805, 

§ 1, at 2848 (also amending article 3.51-9 to affect changes 

indicated in text and this footnote). The current wording 

of article 3.51-9 excludes the same small, individual, or 

limited benefits 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 insurance policies or contracts. That section also 

provides that such benefits are to be provided consumers of 

group health coverage provided by health maintenance 

organizations and certain self-funded or self-insured plans. 

P. 6795 
~,,, 

Honorable Chet Brook 

Honorable Bob McFarland 

Page 5 (JM-1270) 

In accordance with section ZA, "benefits so provided shall 

be determined as if necessary care and treatment in a 

chemical dependency treatment center were care and treatment 

in a hospital." 

The legislative history available with regard to Senate 

Bill 911 and the House's companion bill, House Bill 954, 

establishes that the legislature intended to require providers within 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 

Bill Analysis, S.B. 911, 71st beg. (1989) (expands 1985 

mandate "to include mandatory coverage of 'chemical dependencies"): House Research Organization's Daily Floor Report, 

Part Two, at 43 (May 4, 1989) (House Bill 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 that providers within the scope of 

the article "shall provide . . . benefits for the necessary 

care and treatment of chemical dependency that are not less 

favorable than for physical illness generally" and that 

"benefits so provided shall be determined as if necessary 

care and treatment in a chemical dependency treatment center 

were care and treatment in a hospital.V0 This statutory 

language clearly indicates the legislature's intent to 

mandate provision of chemical dependency benefits and also 

prohibit chapter 3 group insurers from denying coverage for 

treatment provided in a chemical dependency treatment center 

on the basis that such a center is not a general hospital 

licensed by the Texas Department of Health. See Attorney 

General Opinion JM-5, at 3 (construing almost identical 

language and reaching similar conclusion). 

4. To facilitate the transition to 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 arrangements within the scope 

of the article that were "delivered or issued for delivery 

or renewed in this state on or after January 1, 1990, or 

subject to collective bargaining agreements . . . entered 

into or renegotiated on or after January 1, 1990." Acts 

1989, 71st Leg., ch. 1097, 5 2, at 4512; gee also fi 5 3(b) 

(for certain exceptions regarding current litigation). 

P. 6796 
Honorable Chet Brooks 

Honorable Bob XcFarland 

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 that merely mandated 

providers vithin the scope of the article to offer coverage 

for certain drug dependency treatment even if the treatment 

was provided in alcohol and other drug dependency treatment 

centers to a provision in 1985 that mandated actual coverage 

of alcohol dependency treatment even if provided in authorized treatment centers. Second, the legislature in 1989 

expanded the coverage mandated in 1985 for alcohol dependency treatment to include the care and treatment of chemical dependencies other than alcohol. At no point does the 

legislative history indicate any legislative intent to allow 

a chapter 3 group insurer to discriminate against chemical 

dependency treatment centers because they are not hospitals, 

or in particular, not hospitals licensed by the Texas 

Department of Health. In fact, while amending other language in article 3.51-9 in 1985 and 1989, the legislature 

left unchanged the statutory language referring to treatment 

in a dependency center as if it were care and treatment in a 

hospital. As mentioned in our earlier discussion of Attorney General Opinion JM-5, this language supports the conclusions therein that the legislature did not intend insurers 

within the scope of article 3.51-9 to be free to discriminate against authorized drug dependency treatment centers, 

and thus, that such insurers could not deny coverage for 

treatment provided in such centers on the basis that they 

were not hospitals. 

In addition, section 2A of article 3.51-9 requires 

authorized treatment centers to be affiliated with certain 

hospitals or satisfy certain accreditation or licensing 

standards. s.eBm, note 1 at 1. Licensing by the Texas 

Department of 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 

Department of Health nor the imposition of such a limiting 

standard by chapter 3 group insurers in their group policies 

or contracts. Acts 1989, 71st Leg., ch. 1097, 5 1, at 4511 

(State Board of Insurance and Texas Commission on Alcohol 

and Drug Abuse shall adopt standards on benefit costs, 

treatment periods, and review procedures). 

A brief filed in response to your request addresses the 

application of article 3.51-9 to chapter 3 insurers as well 

as certain other health care providers. As a result, YOU 

have asked that we address generally the application of the 

p. 6797 
Honorable Chet Brooks 

Honorable Bob McFarland 

Page 7 (JM-1270) 

article to other major group health oare providers. We 

provide the following discussion to assist you in applying 

article 3.51-9. 

As mentioned above, article 3.51-9 applies to nonprofit 

hospital and medical service plan corporations providing 

group health coverage that are subject to chapter 20 of the 

Insurance Code. As stated in Attorney General Opinion JM-5, 

although those corporations are statutorily authorized to 

contract vith 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 statutory exclusions. Neither the 1989 

amendments to article 3.51-9 nor the subsequent amendments 

to articles 20.11 and 20.12 lead us to change this conclusion. m Acts 1989, 71st beg., ch. 7, 5 1, at 276. 

Attorney General Opinion JM-5 reached a similar conclusion with regard to health maintenance organizations providing group health coverage subject to article 3.51-9. Id. at 

5. As noted in that opinion, health maintenance organizations are governed primarily by chapter 20A of the Insurance 

Code. Id. Our conclusion with regard to those organizations relied in particular on article 2OA.O6(a)(3). The 

current vording of that article is substantially the same 

today and still authorizes health maintenance organizations 

to arrange for required services through health care entities that contract with 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 state may be denied the opportunity to participate 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 3.51-9 may provide treatment required by 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 chemical dependency treatment 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 health maintenance organizations other than those 

P. 6798 
Honorable 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 from denying coverage for treatment 

received in an authorized center under policies or contracts 

subject to #at article based on the definition or interpretation of the term "hospitals n in such policies or contracts 

to mean only a general hospital licensed by the Texas 

Department of Health. Contractual terms or conditions 

cannot frustrate insurance benefits that statutes guarantee, 

and any contractual attempt to 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 [14th Dist.] 

(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 [lst Dist.] 1473, writ ref*d n.r.e.). 

To summarize, article 3.51-9 mandates the provision of 

chemical dependency benefits in group policies and contracts 

subject to that article. It also prohibits chapter 3 group 

insurers issuing policies or 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 

nhospitaln in those group policies 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 3.51-9 and the federal laws governing 

self-funded and self-insured health care plans such as the 

federal Employee Retirement Income Security Act of 1974, we 

decline to address that relationship in this opinion given 

the focus of your questions. See aenerally PC Core 

Holliday, 59 USLW 4009 (U.S. Nov. 27, 1990) (No. 89-1;)487; 

Metrooolitan Life Ins Co. v. Massachusettes, 

(1985) (concluding state law 

471 U.S. 724 

not preempted by ERISA with 

regard to insured plans, but not deciding issue with regard 

to plans that self-fund or self-insure against risks).' 

p. 6799 
. . 

Hoporable Chet Brookse 

,Ronorable Bob 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 insurers subject to chapter 

3 of the code and prohibits those insurers 

who issue policies or 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 licensed by the Texas 

Department of Health. 

JIK MATTOX 

Attorney General of Texas 

MARYKELLER 

First Assistant Attorney General 

mu MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Celeste A. Baker 

Assistant Attorney General 

P. 6800