The Commissioner of Insurance (Commissioner) adopts 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 amendments and new sections are adopted without changes to the proposed text published in the June 4, 2010, issue of the Texas Register (35 TexReg 4602).

REASONED JUSTIFICATION. The amendments and new sections are necessary to implement (i) House Bill (HB) 4341, 81st Legislature, Regular Session, relating to the regulation of discount health care programs by the Texas Department of Insurance (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 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. 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 took 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 adoption order is a complement to three other Department adoption orders to implement new Insurance Code Chapters 562, 7001 and 7002. The other three adoption orders are: (i) 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) new §19.1601 and §19.1602, relating to discount health care program registration and renewal requirements, and amendments to §19.802, relating to amount of fees; and (iii) new §§24.1 - 24.4, relating to discount health care program principles of regulation. Notice of these three adoption orders 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 the Department considered in preparing the proposal. The proposal was published in the June 4, 2010, issue of the Texas Register (35 TexReg 4602). The proposal comment period ended on July 5, 2010.

Effective Dates. Pursuant to SECTION 5(b) of HB 4341, a discount health care program operator that was 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 amendments and new sections.

Chapter 21, Subchapter B Reorganization. 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 Advertising, which includes new §§21.151 - 21.154. These amendments are necessary to provide the advertising requirements for discount health care programs. "Insurance" is deleted from the title of this subchapter 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 amendments to Division 1, §§21.101 - 21.103, 21.108, 21.112 - 21.114, and 21.116 - 21.122 are necessary to (i) update obsolete statutory citations to the Insurance Code; (ii) correct rule citation references; and (iii) make nonsubstantive revisions to internal references.

Division 2. 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.

New §21.151 is necessary to state the purpose and scope of Division 2 and to provide that an insurer or a health maintenance organization is required to comply with this adoption and the applicable statutes in its capacity as a discount health care program operator pursuant to the Insurance Code §562.004.

New §21.152 is necessary to provide the meaning of the terms "advertisement", "discount health care program", and "discount health care program operator" in accordance with meanings assigned by the Insurance Code.

Further, new §21.153 is necessary to provide the requirements for the content of advertisements. 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, 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.

HOW THE SECTIONS WILL FUNCTION.

Division 1. The 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.

§21.101. Purpose. Amendments to §21.101 delete "these sections define and state" to replace it with "this division defines and states"; delete "these sections prohibit" to replace it with "this division prohibits," delete "prevent" to replace it with "prevents," and delete "these sections are" to replace it with "this division is."

§21.102. Scope. An amendment to §21.102(4) deletes "these sections" to replace it with "this division." Amendments to §21.102(6) - (7) delete "subchapter" to replace it with "division."

§21.103. Required Form and Content of Advertisements. An amendment to §21.103(c) deletes "these sections" to replace it with "this division." Amendments to §21.103(c)(1) - (5) delete "subchapter" to replace it with "division."

§21.108. Use of Statistics and Citations. An amendment to §21.108 deletes "subchapter" to replace it with "division."

§21.112. General Prohibition. Amendments to §21.112 delete "title" to replace it with "division"; delete "and Certain Trade Practices, and Solicitation" after "Advertising" to reflect the amendment to the title of Subchapter B; and delete "these sections" to replace it with "this division."

§21.113. Rules Pertaining Specifically to Accident and Health Insurance Advertising and Health Maintenance Organization Advertising. An 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 amendment to §21.113(d)(17) deletes "subchapter" to replace it with "division." The 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 amendment to §21.113(k)(3)(A) deletes "subchapter" to replace it with "division."

§21.114. Rules Pertaining Specifically to Life Insurance and Annuity Advertising. The amendments to §21.114(6) delete "these sections" to replace it with "this division" and deletes "title" to replace it with "division."

§21.116. Special Enforcement Procedures for Rules Governing Advertising and Solicitation of Insurance. The amendments to §21.116(b) delete "these sections" in two places to replace it with "this division."

§21.117. Conflict with and Affect on Other Regulations. The amendment to §21.117 deletes "these sections are" to replace it with "this division" is." The 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."

§21.118. Severability. The amendment to §21.118 deletes "these sections" to replace it with "this division."

§21.119. Savings Clause. The amendments to §21.119 delete "these sections become" to replace it with "this division becomes." The amendments to §21.119 further deletes "these sections" in two places to replace it with "this division."

§21.120. Filing for Review. The amendment to §21.120(d) deletes "subchapter" to replace it with "division." The amendment to §21.120(e)(4) is necessary to update an obsolete citation reference to §11.602 and replace it with §11.603.

§21.121. Lead Solicitations. The amendment to §21.121 deletes "subchapter" to replace it with "division."

§21.122. System of Control and Home Office Approval of Advertising Material Naming an Insurer. The amendments to §21.122 delete "title" and replaces it with "division" in §21.122(a)(1) - (4).

Division 2. New Division 2, §§21.151 - 21.154, implements 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.

§21.151. Purpose and Scope. Section 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. Section 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.

§21.152. Definitions. Section 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. Section 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.

§21.153. Content of Advertisement. Section 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. Section §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 §19.1602 of this title (relating to Registration Requirement). Section 21.153(b) states 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.

§21.154. Severability. Section 21.154 provides that if a court of competent jurisdiction holds that any provision of Division 2 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.

SUMMARY OF COMMENTS. The Department did not receive any timely filed comments on the published proposal.