    Mr. A. W. Pogue                Opinion No.   ~~-1167
    Commissioner
    State Board of Insurance       Re: Status of insurance prog-
    1110 San Jacinto               rams in which applicants  are
    Austin, Texas 78701-1998       referred, for a fee, to a
                                   single health  care provider
                                   (RQ-1867)
    Dear Commissioner   Pogue:

         You ask "whether referral programs that 'arrange for'
    services of health care providers to enrollees at a discount
    in return for a referral fee are subject to regulation as a
    health maintenance organization."

         Insurance Code article 20A.03 provides in part that "no
    person shall establish or operate a health maintenance orga-
c   nization in this state . . . without obtaining a certificate
    of authority under this Act," and that "any person may apply
    to the commissioner [of insurance] for and obtain a certifi-
    cate of authority   to establish and operate a health main-
    tenance organization   in compliance with this Act."     (The
    "Actl' referred to in the quoted portions of article  20A.03
    is the Health Maintenance Organization    Act, codified    as
    chapter 20A of the Insurance Code.      See Ins. Code art.
    20A.01.)

         You say that the referral programs about which you    are
    concerned

            have   'arrangements'   with single     service
            health care providers     such as    dentists,
            optometrists,    and   chiropractors      either
            verbally or in writing which provide that
            each participating     provider   will     offer
            discounted   services to enrollees     of    the
            programs.   Thereafter, the referral programs
            target and     market prospective    enrollees
            through agents and literature.

               The plans offered to prospective enrollees
            are such that a referral    fee is charged,




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Mr.   A. W. POgue - Page 2      (JM-1167)




            whether an initial amount up front, monthly,
            quarterly or annually,   and said enrollees
            either receive an I.D. card and/or a listing
            of participating providers  which honor dis-
            counts on services.

               The referral fees are received by the re-
            ferral programs from enrollees [but] do not
            appear to be shared with the providers.   The
            incentive for providers to participate is the
            potential for increased volume.    Thus, en-
            rollees make another payment to the providers
            directly.  often times, visits to providers
            are not at any additional cost to enrollees.

     You ask first whether a payment by an enrollee in such
a referral program  in exchange for a list of single health
care service providers who offer services at a discount
constitutes BVprepaymentB1within the meaning of subpart  (6)
of article 20A.02, which provision   defines "single health
care service plan."

     "Health maintenance organization"       is defined in subpart
(j) of article 20A.02 as

            any person who arranges   for or provides     a
            health care plan or a $  i n
            service plan to enrollees g n a D 1:
                                               enaid basis.
            (Emphasis added.)

"Single health care      service" is defined    in subpart    (r)   of
article 20A.02 as

            a health care service that an enrolled popu-
            lation may reasonably require in order to be
            maintained in good health with respect to a
            particular health care need for the purpose
            of preventing,    alleviating,   curing,  or
            healing human illness or injury of a single
            specified nature and that is to be provided
            by one or more persons each of whom is li-
            censed by the state to provide that specific
            health care service.1



       1.    Also, "health care services8' is defined in subpart
                                             (Footnote Continued)




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    Mr. A. W. Pogue - Page 3    (JM-1167)




    Yiingle health care service plan" is    in turn   defined   in
    subpart (s) of article 20A.02 as

            a plan under which any person undertakes   to
            provide, arrange for, pay for, or reimburse
            any part of the cost of a single health care
            service, gEqvided, that a nart of the nlan
            consists of arranaina for or the nrovision of
            the sinale health care service, as distin-
            guished from an indemnification against the
            cost of that service, on a vreoaid basis
            through insurance or otherwise   and that no
            part of that plan consists of arranging   for
            the provision of more than one health    care
            need of a single specified nature.  (Emphasis
            added.)

         We think that the definition of "single health      care
    service plan" in subpart (6) indicates that under such a
    plan the provision   of single health care services is, at
    least in part, paid for in advance. The referral programs
    you describe charge a fee for "referring@' enrollees to a
    list of single health care service providers, but do not, as
    you describe them, pay any part of that fee to the providers
    for the latter's provision of health care services to the
    enrollees.  Under this scenario, there is no prepayment   for
    the actual health care services eventually provided.    Those
    programs thus do not involve the "arranging      for or the
    provision of the single health care service . . . on a
    prepaid basisl' under the definitional provisions of article
    20A.02, subpart   (s), and thus do not constitute     "single
    health care service plans."

         We understand your second question to be essentially
    the same question as the one described above. Our answer is
    the same.


    (Footnote Continued)
    (i) of article 20A.02 as

       any services, including the furnishing to any indivi-
       dual of medical or dental care, or hospitalization  or
       incident to the furnishing of such care or hospitali-
       zation, as well as the furnishing to any person of any
       and all other services for the purpose of preventing,
       alleviating, curing or healing human illness or injury
       or a single health care service plan.

P




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Mr. A. W. Pogue - Page 4    (JM-1167)




     You ask finally:   if the referral programs do not come
within the definition of "single health care service plans,"
and the programs are thus not "health maintenance   organiza-
tions" under chapter 20A and subject to regulation as such
by the commissioner and the State Board of Insurance,   which
agencies, if any, have regulatory authority or jurisdiction
over such programs?   We cannot give an exhaustive answer to
this question;  however, we can point out some relevant
provisions.

     In addition to health maintenance organizations,       the
State Board of Insurance has authority     generally over the
business of insurance in this state. See. e-a., Ins. Code
arts. 1.10, 1.14, 1.14-1.    However, the referral plans you
describe appear to lack the feature of "risk distribution."
&gg 45 Tex. Jur. 3d In ur ce Contracts       and Coveraae   § 1
(and authorities   cited Sthzte) ; see also Attorney   General
Opinions MW-455    (1982); H-344    (1974); WW-1475     (1962) ;
O-4986-A (1943) (and authorities    cited in those opinions).
Having concluded    that a referral program      such as you
describe is not a health maintenance organization subject to
regulation by the State Board of Insurance under chapter
20A, we also conclude that neither does such a program
constitute an insurance business under the Insurance      Code.
Such programs   are thus not subject to regulation     by the
State Board of Insurance.

     Of course the programs would be generally subject    to
state laws -- for example, the Deceptive Trade Practices and
Consumer Protection Act. BUS. & Corn.  Code 5 17.41 et sea.
If they are corporations, they must comply with the laws
applicable thereto.   See, e.a., Bus. Corp. Act art. 3.03
(filing of articles of incorporation with the secretary   of
state). Also, the    health care service providers to whom
the referral programs refer their enrollees would be subject
to regulation by their respective licensing agencies, and to
laws governing their professions.  See, e.a., V.T.C.S.  art.
4552-l-01 et sea. (the Texas Optometry Act).

     Although you do not raise, and we consequently do not
address in detail here, any other issues with respect to the
lawfulness of such referral practices, we note finally that
provisions of law other than those in the Health Maintenance
Organization Act may, depending on the facts of the partic-
ular case, restrict such operations.  See aenerally V.T.C.S.
art. 4505a (prohibits health care practitioners from employ-
ing any person to secure patients).




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Mr. A. W. Pogue - Page 5      (JM-1167)




                          SUMMARY

           Referral programs     that "arrange    for?*
        services of single      health care    service
        providers  at a discount to enrollees       in
        return for a referral    fee are not "single
        health care     service   plans"  under    the
        Insurance Code article 20A.02, relating to
        health maintenance organizations, where there
        is no prepayment for the actual single health
        care services provided.

                      -               ,yxyti


                                                 MATTOX
                                         Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAXLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General




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