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                               December 21, 1990


        Honorable Chet Brooks        Opinion No. JM-1270
        Chairman
        Health and Human Services    Re: Duty to cover care and
           Committee                 treatment received for chemi-
        Texas State Senate           cal dependency provided     '
        P. 0. Box,12068              chemical dependency treatme::
        Austin, Texas   78711        centers as defined in arti-
                                     cle 3.51-9, section 2A, of the
        Honorable Bob McFarland      Texas Insurance Code
        Chairman                     (RQ-2083)
        Criminal Justice Committee
        Texas State Senate
        P. 0. Box 12068
        Austin, Texas   78711
        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 treat-
        ment 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
lVhospitalUin 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 avail-
able" 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 re-
   ferral:
      (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 addi-
     tion, 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 depen-
dencies other than alcohol. Acts 1989, 71st Leg., ch. 1097,
5 1, at 4510. Section 2A, as amended by Senate Bill 911,
mandates that insurers,3 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
        nce 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 provid-
ers 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   depen-
dencies"): 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 author-
ized treatment centers. Second, the legislature in      1989
expanded the coverage mandated in 1985 for alcohol depen-
dency treatment to include the care and treatment of chemi-
cal 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 lan-
guage 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 Attor-
ney General Opinion JM-5, this language supports the conclu-
sions therein that the legislature did not intend insurers
within the scope of article 3.51-9 to be free to discrimi-
nate 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 conclu-
sion. m    Acts 1989, 71st beg., ch. 7, 5 1, at 276.
     Attorney General Opinion JM-5 reached a similar conclu-
sion with regard to health maintenance organizations provid-
ing group health coverage subject to article 3.51-9. Id. at
5. As noted in that opinion, health maintenance organiza-
tions are governed primarily by chapter 20A of the Insurance
Code. Id. Our conclusion with regard to those organiza-
tions 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 enti-
ties 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 organiza-
tion 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 treat-
ment 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 pro-
hibits 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 interpre-
tation   of the term "hospitalsn 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 cov-
erage 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 (Tex. App. -
Hiuston [14th Dist.] 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 rela-
tionship 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, 471 U.S. 724
(1985) (concluding state law 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
..                                   / 1
     Hoporable Chet Brooke
                     Brooks
     ,Ronorable Bob McFarland'
     Page 9 (JM-1270)




                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 pro-
             hibits 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
