The Texas Department of Insurance (Department) proposes amendments to §§21.101 - 21.103, 21.108, 21.112 - 21.114, and 21.116 - 21.122, concerning insurance advertising, certain insurance trade practices, and insurance solicitations, and new §§21.151 - 21.154, concerning discount health care program advertising. The proposed amendments and new sections implement (i) House Bill (HB) 4341, 81st Legislature, Regular Session, relating to the regulation of discount health care programs by the Department and (ii) Senate Bill (SB) 2423, 81st Legislature, Regular Session, relating to the transfer or sale of patient information or prescription drug history by discount health care programs. The proposed amendments are necessary to: (i) divide subchapter B of this chapter into Division 1 for insurance advertising and Division 2 for discount health care program advertising; (ii) update obsolete statutory citations to the Insurance Code; (iii) correct rule citation references; and (iv) make nonsubstantive revisions to internal references. Proposed new Division 2, consisting of §§21.151 - 21.154, is necessary to implement Chapter 562 of the Insurance Code, enacted by HB 4341, 81st Legislature, Regular Session, which regulates trade practices in the business of discount health care programs by: (1) defining or providing for the determination of trade practices in this state that are unfair methods of competition or unfair or deceptive acts or practices; and (2) prohibiting those unfair or deceptive trade practices.

HB 4341 transferred the regulation of discount health care programs from the Texas Department of Licensing and Regulation (TDLR) to the Department effective April 1, 2010. HB 4341 (i) amends the Insurance Code to add new Title 21, Chapter 7001, relating to the regulation of discount health care programs by the Department, effective September 1, 2009; (ii) amends the Insurance Code to add new Chapter 562, relating to unfair methods of competition and unfair or deceptive acts or practices regarding discount health care programs, effective September 1, 2009 with the exception of Subchapter E, relating to the enforcement by the Attorney General, which takes effect April 1, 2010; and (iii) repeals Chapter 76 of the Health and Safety Code, relating to the regulation of discount health care programs by the TDLR, effective April 1, 2010.

SB 2423, 81st Legislature, Regular Session, effective September 1, 2009, amends the Insurance Code to add new Chapter 7002, relating to supplemental provisions regarding discount health care operators. Under §7002.001, for purposes of the Insurance Code Chapter 562 and Chapter 7001, consideration provided to a discount health care program or a discount health care program operator includes patient information or patient prescription drug history provided by members, if the entity engages in the transfer or sale of such patient information, patient prescription drug history, or drug manufacturer rebates. Therefore, for example, such discount health care programs or program operators that do not charge fees for their programs, but that receive consideration in the form of access to patient information that is then transferred or sold, or that receive drug manufacturer rebates, that are then transferred or sold, are subject to the same regulation as those programs regulated under Chapter 7001 that do charge fees for their programs.

This proposal is a complement to three other Department proposals to implement new Insurance Code Chapters 562, 7001 and 7002. The other three proposals are: (i) proposed amendments to §§1.501 - 1.503, and 1.507, concerning fingerprint requirements for certain individuals related to the operation of discount health care programs; (ii) proposed new §19.1601 and §19.1602, relating to discount health care program registration and renewal requirements, and proposed amendments to §19.802, relating to amount of fees; and (iii) proposed new §§24.1 - 24.4, relating to discount health care program principles of regulation. These three proposals are also published in this issue of the Texas Register. On September 14, 2009, the Department posted on its website informal drafts of these four rules for public comment. The Department held a stakeholder meeting on September 18, 2009, to discuss the informal draft rules prior to the informal comment period ending on September 24, 2009. The Department received comments on all four draft rules, including discount health care program advertising requirements, which are addressed in this proposal. The Department has considered the comments in preparing this proposal.

Effective Dates. Pursuant to SECTION 5(b) of HB 4341, a discount health care program operator that is registered with the TDLR on January 1, 2010, as required by Chapter 76 of the Health and Safety Code, must file an application for renewal of registration with the Department under the Insurance Code Chapter 7001 not later than April 1, 2010. In order for any discount health care program regulated pursuant to the Insurance Code Chapters 7001 and 7002 to lawfully operate in Texas on or after April 1, 2010, the discount health care program operator must be registered with the Department.

Section-by-Section Summary. The following paragraphs provide a brief summary as well as an analysis of the reasons for the proposed amendments and new sections.

Chapter 21, Subchapter B Reorganization. Proposed amendments to this subchapter add new Division 1, Insurance Advertising, which includes existing §§21.101 - 21.122, and new Division 2, Discount Health Care Program Operator Advertising, which includes new §§21.151 - 21.154, to provide the advertising requirements for discount health care program operators. The proposed amendment to the title of this subchapter, deletes "Insurance" to better reflect the fact that Subchapter B is not limited to insurance advertising requirements. A division of Subchapter B is necessary to distinguish the advertising requirements for discount health care programs from the advertising requirements for insurance because regulatory requirements governing insurance and discount health care program advertisements and solicitations differ.

Division 1. The proposed amendments to Division 1, §§21.101 - 21.103, 21.108, 21.112 - 21.114, and 21.116 - 21.122 (i) update obsolete statutory citations to the Insurance Code; (ii) correct rule citation references; and (iii) make nonsubstantive revisions to internal references.

The proposed amendment to §21.101 deletes "(t)hese sections define and state" to replace it with "(t)his division defines and states"; deletes "(t)hese sections prohibit" to replace it with "(t)his division prohibits," deletes "prevent" to replace it with "prevents," and deletes "(t)hese sections are" to replace it with "(t)his division is."

The proposed amendment to §21.102(4) deletes "these sections" to replace it with "this division." The proposed amendments to §21.102(6) - (7) delete "subchapter" to replace it with "division."

The proposed amendment to §21.103(c) deletes "these sections" to replace it with "this division." The proposed amendments to §21.103(c)(1) - (5) deletes "subchapter" to replace it with "division."

The proposed amendment to §21.108 deletes "subchapter" to replace it with "division." The proposed amendments to §21.112 delete "title" to replace it with "division"; delete "and Certain Trade Practices, and Solicitation" after "Advertising" to reflect the proposed amendment to the title of Subchapter B; and delete "these sections" to replace it with "this division."

The proposed amendment to §21.113(b) deletes the obsolete statutory reference of "Article 21.20-2 §1" to replace it with the correct statutory reference of "Chapter 1214." The proposed amendment to §21.113(d)(17) deletes "subchapter" to replace it with "division." The proposed amendments to §21.113(j) add a title to the subsection for conformity with Texas Register requirements; delete "these sections" to replace it with "this division"; and delete "sections" to replace it with "division." The proposed amendment to §21.113(k)(3)(A) deletes "subchapter" to replace it with "division." The proposed amendment to §21.114(6) deletes "these sections" to replace it with "this division." The proposed amendment to §21.114(6) deletes "title" to replace it with "division."

The proposed amendments to §21.116(b) delete "these sections" in two places to replace it with "this division." The proposed amendment to §21.117 deletes "(t)hese sections are" to replace it with "(t)his division" is." The proposed amendment to §21.117 further deletes the following sentences: "It is intended that these sections become effective at the exact time of the effective date of the repeal of existing Rules 059.21.21.001, .009, and .010. Therefore, the existing sections remain in effect until these sections become effective." This language is no longer necessary as the repeal of Rules 059.21.21.001, .009, and .010 occurred many years ago. The proposed amendment to §21.118 deletes "these sections" to replace it with "this division." The proposed amendments to §21.119 deletes "these sections become" to replace it with "this division becomes." The proposed amendment to §21.119 further deletes "these sections" in two places to replace it with "this division." The proposed amendment to §21.120(d) deletes "subchapter" to replace it with "division." The proposed amendment to §21.120(e)(4) is necessary to update an obsolete citation reference to §11.602 and replace it with §11.603.

The proposed amendment to §21.121 deletes "subchapter" to replace it with "division." The proposed amendment to §21.122 deletes "title" and replaces it with "division" in §21.122 (a)(1) - (4).

Division 2. Proposed new Division 2, §§21.151 - 21.154, is necessary to implement the Insurance Code Chapter 562 by establishing advertising requirements to assure that the public receives truthful and adequate information to facilitate informed purchasing decisions concerning discount health care programs. The stated purpose of the Insurance Code Chapter 562, as provided by the Insurance Code §562.001, is to regulate trade practices in the business of discount health care programs by defining or providing for the determination of trade practices in the State of Texas that are unfair methods of competition or unfair or deceptive acts or practices and prohibiting those unfair or deceptive trade practices by discount health care programs. Under the Insurance Code §562.052, it is an unfair method of competition or an unfair or deceptive act or practice in the business of discount health care programs to make, publish, disseminate, circulate, or place before the public or directly or indirectly cause to be made, published, disseminated, circulated, or placed before the public an advertisement, solicitation, or marketing material containing an untrue, deceptive, or misleading assertion, representation, or statement regarding the discount health care program. Further, the Insurance Code §562.005 provides that new Chapter 562 shall be liberally construed and applied to promote the underlying purposes of regulating trade practices in the business of discount health care programs as provided by the Insurance Code §562.001.

Further, proposed new §21.153(a), which requires that an advertisement identify the discount health care program operator offering the discount health care program that is the subject of the advertisement, is necessary for the Department to monitor discount health care program operator compliance with the Insurance Code Chapter 562. The Insurance Code §562.104 requires a discount health care program operator to approve in writing before their use all advertisements, solicitations, or other marketing materials and all discount cards used by marketers to market, promote, sell, or distribute the discount health care program. In addition, proposed new §21.153(a) is necessary to inform Texas consumers which discount health care program operator is responsible for the particular discount health care program being advertised. The Texas Department of Licensing and Regulation (TDLR), which regulated the discount health care program industry from September 1, 2008 through March 31, 2010, reported that Texas consumers are confused concerning the entity responsible for the discount health care program if the advertisement reveals no name or only the name of the discount health care program marketer.

Proposed new §21.151(a) provides that the purpose of Division 2 is to establish advertising requirements necessary to assure that the public receives truthful and adequate information to facilitate informed purchasing decisions concerning discount health care programs. Proposed new §21.151(b) provides that a discount health care program operator, including the operator of a freestanding discount health care program or a discount health care program operated and marketed by an insurer or a health maintenance organization, is required to comply with Division 2. This proposed new section would require an insurer or a health maintenance organization to comply with this proposal and the applicable statutes in their capacity as a discount health care program operator.

Proposed new §21.152(a) provides that the definition of "advertisement" in Division 2 has the meaning assigned to the term "advertisement, solicitation, or marketing material" by the Insurance Code §562.002. The Insurance Code §562.002(1)(A) - (F) provides that "advertisement, solicitation, or marketing material" means material made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication; in a notice, circular, pamphlet, letter, or poster; over a radio or television station; through the Internet; in a telephone sales script; or in any other manner. Proposed new §21.152(b) provides that the meanings assigned by the Insurance Code §562.002 and §7001.001 define "discount health care program" and "discount health care program operator." The Insurance Code §562.002(2) and §7001.001(1) provide that "discount health care program" means a business arrangement or contract in which an entity, in exchange for fees, dues, charges, or other consideration, offers its members access to discounts on health care services provided by health care providers. The term does not include an insurance policy, certificate of coverage, or other product otherwise regulated by the Department or a self-funded or self-insured employee benefit plan. The Insurance Code §562.002(3) and §7001.001(2) provide that a "discount health care program operator" means a person, who, in exchange for fees, dues, charges, or other consideration, operates a discount health care program and contracts with providers, provider networks, or other discount health care program operators to offer access to health care services at a discount and determines the charges to members.

Proposed new §21.153 provides the requirements for the content of advertisements. Proposed new §21.153(a) provides that an advertisement is required to identify the discount health care program operator offering the discount health care program that is the subject of the advertisement. Proposed new §21.153(a) further provides that it is sufficient to state the full registered name of the discount health care program operator or an assumed name filed with the Department pursuant to §19.1601 of this title (relating to Registration). Proposed new §21.153(b) provides that the format and content of an advertisement of a discount health care program is required to be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive.

Proposed new §21.154 provides that if a court of competent jurisdiction holds that any provision of this division is inconsistent with any statutes of this state, is unconstitutional, or is invalid for any reason, the remaining provisions of this division shall remain in effect.

FISCAL NOTE. Jack Evins, Advertising Director, Consumer Protection Division, has determined that, for each year of the first five years the proposed amendments and new sections are in effect, there will be no fiscal impact on state or local government as a result of enforcing or administering the sections. Mr. Evins has also determined that there will be no measurable effect on local employment or the local economy as a result of enforcing or administering this proposal.

PUBLIC BENEFIT/COST NOTE. Mr. Evins also has determined that, for each year of the first five years the proposed amendments and new sections are in effect, the anticipated public benefit will be an ability of consumers and the Department to identify and confirm the proper registration of discount health care program operators that offer plans for purchase. Further, by being able to identify the discount health care program operator responsible for an advertisement, the Department will be better able to regulate and remedy compliance concerns. Promoting compliant advertising, in turn, supports a fair and competitive market for discount health care programs. Compliant advertising also enhances the ability of consumers to make informed decisions regarding possible purchases of discount health care program memberships.

There should be no new economic costs to persons required to comply with the proposed amendments who were subject to discount health care program advertising requirements prior to April 1, 2010. Proposed §21.153(a) requires that discount health care program advertising identify the discount health care discount program operator by its registered name or by any assumed name filed with the Department. Title 16 TAC §84.73(c), adopted pursuant to the Health and Safety Code Chapter 76, requires that all discount health care program advertising "clearly and conspicuously identify the program operator." Pursuant to HB 4341, 81st Legislature, Regular Session, the Health and Safety Code Chapter 76 was repealed effective April 1, 2010. Consequently, any discount health care program advertising required to comply with 16 TAC §84.73(c) prior to April 1, 2010, should remain compliant after the adoption of the proposed amendments and new sections.

The proposed new sections could impose costs on discount health care program operators introducing new advertising that incurs per-word or per-line charges, e.g., newspaper classified ads. Currently registered operators' names range from one to six words in length. Thus, inclusion of operators' names should add no more than two lines of text to a classified ad. The cost of adding an operator's name to such advertising is estimated to range from $0.30 (for appearance of a one-word operator name in a weekly rural community newspaper) to $14 (for a six-word operator name appearing on two lines of text in a Sunday metropolitan newspaper). This estimated cost range is based on information obtained by the Department by contacting a rural weekly newspaper service and a large daily metropolitan newspaper service.