INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED ENTITIES

CHAPTER 842. GROUP HOSPITAL SERVICE CORPORATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 842.001.  DEFINITIONS.  In this chapter:
(1)  "Group hospital service corporation" means a corporation organized under this chapter to establish and operate a nonprofit hospital service plan, under which hospital care may be provided by the corporation through one or more hospitals and sanitariums with which the corporation has contracted for the provision of that care.
(2)  "Health care provider" means a person, association, partnership, corporation, or other entity that provides a service or supplies to prevent, alleviate, cure, or heal human illness or injury.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.002.  APPLICABILITY OF OTHER LAWS.  (a)  Except as otherwise required by this chapter, a state agency may not require a group hospital service corporation to post a bond or place a deposit with the agency or another agency of this state to begin or maintain operations authorized under this chapter.
(b)  The group hospital service corporation is exempt from a provision of this code that is not expressly made applicable to the corporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.003.  CORPORATION SUBJECT TO REGULATION BY COMMISSIONER AND DEPARTMENT.  Each group hospital service corporation is subject to regulation by the department and the commissioner.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF GROUP HOSPITAL SERVICE CORPORATION

Sec. 842.051.  APPLICATION FOR CORPORATE CHARTER;  NONPROFIT STATUS REQUIRED.  (a)  Seven or more persons, a majority of whom are superintendents of hospitals or physicians licensed by the Texas State Board of Medical Examiners, may apply to the secretary of state for a corporate charter to operate a group hospital service corporation.
(b)  A group hospital service corporation must be governed and operated as a nonprofit organization.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.052.  MINIMUM MEMBERSHIP REQUIREMENTS.  (a)  Before a group hospital service corporation may be incorporated, the corporation must have collected in advance from at least 500 applicants for membership:
(1)  the application fee;  and
(2)  an amount at least equal to the amount charged by the corporation for one month's premium for coverage.
(b)  A group hospital service corporation must maintain a membership of at least 500 as a condition of continued operation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 842.101.  ISSUANCE OF CERTIFICATE OF AUTHORITY.  (a)  The department shall issue to a group hospital service corporation a certificate of authority that authorizes the corporation to engage in the business of a group hospital service corporation if the corporation:
(1)  files a statement acceptable to the department showing solvency;  and
(2)  complies with this chapter.
(b)  The department shall charge the fee prescribed by law for the issuance of the certificate of authority.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

SUBCHAPTER D. BOARD OF DIRECTORS;  PERSONNEL

Sec. 842.151.  BOARD OF DIRECTORS.  (a)  Each group hospital service corporation is governed by a board of directors that has full control over its management affairs.
(b)  A board of directors must be composed of at least 12 but not more than 20 directors.  A majority of the directors must be persons who:
(1)  are not health care providers or employees of health care providers;  and
(2)  do not have a financial interest in a health care provider.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.152.  COMPENSATION OF DIRECTORS.  A director of a group hospital service corporation may not receive compensation for the director's services but is entitled to receive reimbursement for reasonable and necessary expenses incurred in attending a meeting called to manage or direct the affairs of the corporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.153.  BOARD MEETINGS.  The board of directors of a group hospital service corporation may not meet more frequently than once a month.  A meeting may not last more than five days.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.154.  BOND REQUIREMENTS FOR CERTAIN OFFICERS AND EMPLOYEES.  (a)  Each group hospital service corporation shall post a bond for the officer or employee responsible for the handling of the corporation's money.  The bond must be:
(1)  issued by a surety company licensed by the department to do business in this state;  and
(2)  at all times in an amount at least equal to $25,000.
(b)  In addition to the bond required under Subsection (a), the corporation shall post a separate bond or a blanket bond for all employees who have access to the money of the corporation.  The bond must be in a reasonable amount set by the commissioner in the amount of at least $500, not to exceed $10,000.
(c)  A bond required by this section must be payable to the commissioner for the use and benefit of the corporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.155.  TREASURER'S BOND.  The treasurer of each group hospital service corporation shall post a fidelity bond with a corporation surety.  The bond must be in the amount determined by the officers of the corporation as necessary to secure the faithful handling of the corporation's money.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.156.  COMPENSATION OF CERTAIN OFFICERS AND EMPLOYEES.  A paid officer or employee of a group hospital service corporation may not receive more than $20,000 annually as compensation for the officer's or employee's services unless a higher amount is first authorized by a vote of:
(1)  the board of directors of the corporation;  or
(2)  a committee of the board of directors that is charged with the duty of authorizing that compensation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

SUBCHAPTER E. REGULATION OF GROUP HOSPITAL SERVICE CORPORATIONS

Sec. 842.201.  ANNUAL STATEMENT;  FILING FEE.  (a)  Not later than March 1 of each year, each group hospital service corporation shall file with the department an annual statement that covers the operations for the preceding calendar year.
(b)  The statement must be in the form prescribed by and provide the information required by the commissioner.
(c)  The department shall charge a fee in an amount determined under Chapter 202 for filing the statement.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.
Amended by: 
Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.025, eff. April 1, 2009.

Sec. 842.202.  RESERVE REQUIREMENTS.  (a)  Each group hospital service corporation shall maintain reserves sufficient to cover liability for claims incurred but not yet paid and the expenses incurred in settling those claims. 
(b)  A group hospital service corporation shall estimate the amount necessary to satisfy the reserve requirements using a method submitted to the commissioner for approval.  The estimate method used by the corporation is considered approved on the 30th day after the date filed with the commissioner unless the commissioner affirmatively approves or disapproves the method before that date.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.203.  FINAL JUDGMENT DEPOSIT.  (a)  For each 1,000 members and fraction of 1,000 members, a group hospital service corporation shall deposit $100 with the comptroller through the commissioner.  The total deposit required under this subsection may not exceed $2,000.
(b)  The deposit required under Subsection (a) shall be used to pay any judgment entered against the group hospital service corporation and is subject to garnishment after a final judgment is entered.
(c)  The group hospital service corporation shall immediately replenish the amount on deposit if the amount is impounded or impaired.  If the amount is not replenished immediately on the demand of the commissioner, the corporation may be regarded as insolvent and treated accordingly.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.204.  INVESTMENT LIMITATIONS.  The investment limitations that apply to a life, health, and accident insurance company apply to the investments of a group hospital service corporation.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.205.  INCURRED EXPENSES.  (a)  In this section, "general expenses" means expenses incurred by a group hospital service corporation in the operation of its business other than:
(1)  a tax;
(2)  a license fee;
(3)  a commission;  or
(4)  an expense incurred in the performance of a contract:
(A)  made directly or indirectly with this state or the United States;  and
(B)  under which the corporation does not assume an insurance risk.
(b)  Subject to Subsection (c), a group hospital service corporation may not incur during a calendar year general expenses that exceed 20 percent of the premiums earned in that calendar year.
(c)  For a group hospital service corporation earning $500 million or more in premiums in a calendar year, the maximum percentage of general expenses that may be incurred during a calendar year is reduced by one-half percent for each $50 million of premiums earned to a maximum percentage of 15 percent.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.206.  MINIMUM SURPLUS REQUIREMENT.  Each group hospital service corporation shall maintain a surplus of at least $100,000 to meet adverse contingencies.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.207.  CONTRACTS;  REINSURANCE;  OTHER AGREEMENTS.  (a)  Subject to Subsection (b), a group hospital service corporation may:
(1)  contract with another organization similar in character for joint participation through:
(A)  a mutualization contract agreement;
(B)  a reinsurance treaty;  or
(C)  another arrangement;  and
(2)  cede or accept risks from an insurer on all or part of a risk.
(b)  Each document used for a purpose described by Subsection (a) must be filed with the department and approved by the commissioner for use in that purpose.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.208.  BOOKS AND RECORDS.  Each group hospital service corporation shall keep complete books and records.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.209.  EXAMINATIONS.  The following laws apply to a group hospital service corporation:
(1)  Subchapter A, Chapter 86; and
(2)  Sections 401.051, 401.052, 401.054-401.062, 401.151, 401.152, 401.155, and 401.156.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.
Amended by: 
Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.026, eff. April 1, 2009.

Sec. 842.210.  LIQUIDATION, REHABILITATION, OR CONSERVATION OF GROUP HOSPITAL SERVICE CORPORATION.  The dissolution, liquidation, rehabilitation, or conservation of a group hospital service corporation is subject to Chapters 441 and 443.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.
Amended by: 
Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.027, eff. April 1, 2009.

SUBCHAPTER F. PLAN OF OPERATION;  PROVISION OF BENEFITS TO MEMBERS

Sec. 842.251.  PLAN OF OPERATION.  (a)  Before accepting applications for membership in its hospital service plan, a group hospital service corporation must submit to the commissioner a plan of operation.  The plan of operation must be accompanied by a schedule of the dues to be charged to members and a statement of the amount of hospital services that the corporation contracts to provide.
(b)  The commissioner must approve the plan of operation as fair and reasonable before the corporation may engage in business.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.252.  MEMBERSHIP CERTIFICATE;  CONTRACT.  (a)  A group hospital service corporation shall issue to each member a membership certificate that states the benefits to which the member is or may become entitled.
(b)  The department must approve the form of:
(1)  the membership certificate;  and
(2)  any contract made between the group hospital service corporation and the member's employer or group representative.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.253.  POLICY, CERTIFICATE, AND APPLICATION FORMS.  A policy, certificate, or application form used by a group hospital service corporation is subject to Chapter 1701.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.
Amended by: 
Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2E.028, eff. April 1, 2009.

Sec. 842.254.  DEPOSIT REQUIREMENTS.  A group hospital service corporation shall deposit in the account of the corporation in a bank money collected by the corporation from a member or subscriber.  The bank must be a state depository.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.255.  ADVANCE PAYMENTS TO HOSPITAL PROHIBITED.  A group hospital service corporation may not pay to a hospital any money collected by the corporation from a member or subscriber before the hospital provides necessary care to that member or subscriber.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.256.  CONTRACTS WITH HEALTH CARE PROVIDERS.  (a)  A group hospital service corporation may contract with health care providers as necessary to ensure to each member or subscriber the provision of services and supplies covered by the membership certificate or policy of the corporation.
(b)  A group hospital service corporation may not be required to contract with any particular health care provider.
(c)  This section does not authorize a group hospital service corporation to contract with a health care provider in a manner prohibited by a licensing law of this state under which that health care provider operates.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.257.  MAY LIMIT BENEFITS.  A policy or certificate issued by a group hospital service corporation may limit the types of disease for which benefits are provided.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.258.  LIMITATIONS ON CONTRACTS FOR MEDICAL SERVICES.  (a)  A group hospital service corporation may not:
(1)  contract to provide to a member a physician or any medical services;
(2)  contract to practice medicine in any manner;
(3)  control or attempt to control the relations existing between a member and the member's physician;  or
(4)  restrict the right of a patient to obtain the services of any licensed physician.
(b)  This section does not prohibit a group hospital service corporation from contracting with:
(1)  a health organization certified under Chapter 162, Occupations Code;  or
(2)  a physician or other health care provider under rules adopted for preferred provider plans.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.259.  USE OF INDEMNITY PLAN AUTHORIZED.  A group hospital service corporation may provide benefits for medical care, surgical care, or both medical and surgical care on the basis of indemnity payments for incurred expenses.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.260.  PAYMENT OF CLAIM;  PROOF OF CLAIM.  (a)  After receipt of due proof of claim, a group hospital service corporation shall pay each claim presented under a membership certificate in full not later than the 60th day after the date on which the applicable services prescribed in the certificate have been provided.
(b)  Written notice of a claim given to a group hospital service corporation is considered due proof of claim under this section if the corporation does not provide the claimant with the forms usually provided by the corporation for filing a claim before the 16th day after the date notice is received.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.

Sec. 842.261.  INFORMATION AVAILABLE THROUGH INTERNET SITE.  (a)  A group hospital service corporation that maintains an Internet site shall list on the Internet site the physicians and health care providers, including, if appropriate, mental health providers and substance abuse treatment providers, that may be used by members in accordance with the terms of the policy or certificate applicable to the member.  The listing must identify those physicians and health care providers who continue to be available to provide services to new patients or clients.
(b)  The group hospital service corporation shall update at least quarterly an Internet site subject to this section.
(c)  The commissioner may adopt rules as necessary to implement this section.  The rules may govern the form and content of the information required to be provided under Subsection (a).
Acts 2003, 78th Leg., ch. 1177, Sec. 2, eff. Sept. 1, 2003.

SUBCHAPTER G. DISCIPLINARY PROCEDURES

Sec. 842.301.  REVOCATION OF CERTIFICATE OF AUTHORITY.  The commissioner shall revoke the certificate of authority of a group hospital service corporation that:
(1)  is determined to be:
(A)  operating fraudulently;  or
(B)  improperly contesting claims;  or
(2)  fails to pay valid claims in accordance with this chapter.
Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1, 2003.