1. (a) Health maintenance organizations.

   1. (1) The board may approve a health maintenance organization (HMO) to offer a health benefits plan to participants in the Program. The board may:

      1. (A) utilize a bidding process to approve one or more HMOs in areas of the state determined by the board to be regional bidding areas (RBAs);
      2. (B) utilize an application process to approve one or more HMOs in areas of the state determined by the board to be non-bidding areas;
      3. (C) determine the criteria to be used to approve the HMOs for the RBAs and non-bidding areas;
      4. (D) determine the number of HMOs to approve in each RBA and non-bidding area; and
      5. (E) determine the length of the contracts with the approved HMOs.

   2. (2) In order to seek approval, an HMO must:

      1. (A) submit an application to provide health benefits in the areas within the state of Texas determined by the board to be non-bidding areas;
      2. (B) submit a proposal, in response to a request for bid, in the format determined by the system for one or more of the designated RBAs; or
      3. (C) submit application(s) and bid(s).

   3. (3) An HMO seeking board approval in response to a request for bid in one or more of the RBAs, must satisfy the following conditions:

      1. (A) The HMO must be licensed by the Texas Department of Insurance to operate in the state of Texas.
      2. (B) The HMO must have been providing services in the RBA for at least 6 months prior to September 1 of the fiscal year in which the bid response is due to be filed with the system. Also, the HMO must demonstrate the capacity to provide adequate services, as determined by the system, to the program participants.
      3. (C) The HMO must submit the bid, with rates, to the board at the time and in the format prescribed by the system. Once adopted by the board, the rates may not be modified without the approval of the board. A request for expansion of a non-contiguous service area, as described in this section, shall require a separate application.
      4. (D) The HMO agrees to the provisions contained in the contract between the system and the HMO as adopted for the entire time specified in the contract.
      5. (E) The HMO must provide standardized benefits as described in the contract between the system and the HMO. This document, which is to be considered a part of this section for all purposes, may be obtained from the Executive Director of the system.
      6. (F) If an HMO, approved by the board, fails to maintain compliance with the contract, the board has the right to cancel the existing contract with that HMO upon proper notice as specified in the contract.
      7. (G) An HMO that loses its state license will automatically become ineligible to offer its health benefits plan to participants in the Program.

   4. (4) An HMO, seeking board approval in response to an application in one or more of the non-bidding areas, must satisfy the following conditions:

      1. (A) The HMO must be licensed by the Texas Department of Insurance to operate in the state of Texas.
      2. (B) The HMO must have been providing managed care services in the area for which the application is made for at least 6 months prior to September 1 of the fiscal year in which the application is due to be filed with the system. Also, the HMO must demonstrate the capacity to provide adequate services, as determined by the system, to the program participants.
      3. (C) The HMO must submit the application, with rates, to the board at the time and in the format prescribed by the system. Once adopted by the board, the rates may not be modified without the approval of the board.
      4. (D) The HMO agrees to the provisions contained in the contract between the system and the HMO as adopted for the entire time specified in the contract.
      5. (E) The HMO must provide standardized benefits as described in the contract between the system and the HMO. This document, which is to be considered a part of this section for all purposes, may be obtained from the Executive Director of the system.
      6. (F) If an HMO, approved by the board, fails to maintain compliance with the contract, the board has the right to cancel the existing contract with that HMO upon proper notice as specified in the contract.
      7. (G) An HMO that loses its state license will automatically become ineligible to offer its health benefits plan to participants in the insurance program.

2. (b) Payment of Premiums.

   1. (1) Premiums for coverage provided under the Program are funded from three sources: state contributions, system contributions, and participant contributions. The Legislature appropriates monies to fund group insurance benefits for all employees as defined in the Act. Monies for employees compensated from funds other than the General Appropriations Act are appropriated from the official operating budget of the respective department. In addition, the system may contribute an additional amount, as determined by the trustee, for payment of premiums for participants. A participant who applies for coverage for which the monthly premium exceeds the state's or employing department's and the system's contribution must pay the excess amount.

   2. (2) A participant's share of premiums shall be paid through deductions from monthly compensation or annuities or by direct payment, as provided in this paragraph.

      1. (A) An employee or annuitant who applies for coverage for which the monthly premium exceeds the state or employing department and the system contributions must authorize on a form prescribed by the system a deduction from his or her monthly compensation or annuity to pay the difference. If the compensation or annuity is insufficient to provide for the appropriate deduction, the participant must pay premiums directly as provided in subparagraph (B)(i) of this paragraph. Failure to make the required payment of premiums by the due date will result in the cancellation of all coverages not fully funded by the state contribution. A participant entitled to the state contribution will retain member only health and basic life coverage provided the state contribution is sufficient to cover the premium for such coverage. If the state contribution is not sufficient for member only coverage in the health plan selected, the participant will be enrolled in the basic plan except as provided for in §81.7(l)(2)(B) of this chapter.

      2. (B) A participant shall pay premiums directly, as provided in this subparagraph, if the participant is not on a payroll or is in a leave without pay status, is not receiving an annuity from a state retirement system from which the appropriate premiums may be deducted, or is not receiving a salary or annuity sufficient to allow for a full required premium deduction.

         1. (i) An employee whose salary is insufficient, or who is a non-salaried board member, shall pay monthly premiums in advance through the employing department. Any other participant to whom this subparagraph applies shall pay monthly premiums in advance to the system. Premium payments are due on the first day of the month covered and must be postmarked or received by the system or the employing department, whichever is appropriate, within 30 days of the due date to avoid cancellation of coverage. Failure to make the required premium payment by the due date will result in cancellation of all coverages not fully funded by the state contribution, if applicable. A person entitled to the state contribution will retain member only health and basic life coverage provided the state contribution is sufficient to cover the premium for such coverage. If the state contribution is not sufficient for member only coverage in the health plan selected by the employee or retiree, the employee or retiree will be enrolled in the basic plan except as provided for in §81.7(l)(2)(B) of this chapter.
         2. (ii) A person who continues group health and dental benefits as provided in §81.5(k) of this chapter (relating to Eligibility) must pay premiums in advance on a monthly basis. Premiums for such a person will be 102% of the rates charged for other participants in the same coverage category and with the same plan. All premiums due for the election/enrollment period must be postmarked or received by the Employees Retirement System of Texas on or before the date indicated on the continuation of coverage enrollment form. Subsequent premiums are due on the first day of the month covered and must be postmarked or received by the Employees Retirement System of Texas within 30 days of the due date to avoid cancellation of coverage.
         3. (iii) A person who continues group health and dental benefits as provided in §81.5(k)(3) of this chapter (relating to Eligibility) must pay premiums in advance on a monthly basis. Premiums for such a person for each month of coverage after the 18th month of coverage will be 150% of the rates charged for other participants in the same coverage category and with the same plan. All premiums are due on the first day of the coverage month and must be postmarked or received by the Employees Retirement System of Texas within 30 days of the due date to avoid cancellation of coverage.

   3. (3) An employee whose dependent child is eligible for coverage under Section 1551.159 of the Act is eligible for the supplemental state contribution as authorized by that section and provided in the paragraph.

      1. (A) An employee becomes eligible for the supplemental contribution on the first day of the month following the date on which the system receives certification of the dependent child's eligibility for coverage under that section. Eligibility for the supplemental contribution terminates on the last day of the contract year. An employee may apply for the supplemental contribution for an additional period of coverage during the annual enrollment period applicable to that period of coverage.
      2. (B) A dependent child of an employee who is eligible for the supplemental contribution is not required to provide evidence of insurability.
3. (c) TRICARE Supplement. In accordance with §1551.221 of the Act, the Board may contract for one or more Carriers as that term is defined under §1551.007 of the Act to offer a TRICARE supplemental health coverage plan to eligible program participants who waive health coverage as described in §81.8 of this chapter.

Source Note:The provisions of this §81.3 adopted to be effective September 1, 1985, 10 TexReg 2321; amended to be effective September 1, 1986, 11 TexReg 3862; amended to be effective October 14, 1986, 11 TexReg 4114; amended to be effective December 19, 1986, 11 TexReg 5133; amended to be effective November 1, 1987, 12 TexReg 3480; amended to be effective February 16, 1988, 13 TexReg 625; amended to be effective March 28, 1989, 14 TexReg 1371; amended to be effective March 27, 1990, 15 TexReg 1411; amended to be effective August 21, 1990, 15 TexReg 4504; amended to be effective May 19, 1992, 17 TexReg 3252; amended to be effective September 2, 1993, 18 TexReg 5594; amended to be effectiveFebruary21,1994,19TexReg 806; amended to be effective January 25, 1995, 20 TexReg 151; amended to be effective February 16, 1998, 23 TexReg 1099; amended to be effective March 26, 2000, 25 TexReg 2400; amended to be effective July 10, 2000, 25 TexReg 6557; amended to be effective September 13, 2001, 26 TexReg 6962; amended to be effective December 31, 2003, 28 TexReg 11612; amended to be effective May 3, 2006, 31 TexReg 3588.