SB 2388

By: Hinojosa of Hidalgo, et al.
relating to managed care contracts, including the procurement of
managed care contracts, under Medicaid and the child health plan
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Subtitle I, Title 4, Government Code, is amended
by adding Chapter 527 to read as follows:
CHAPTER 527.  MANAGED CARE CLIENT CHOICE PROGRAM
SUBCHAPTER A.  GENERAL PROVISIONS
Sec. 527.0001.  DEFINITIONS.  In this chapter:
(1)  "Client" means a recipient or an enrollee, as
(2)  Notwithstanding Section 521.0001(2), "commission"
means the Health and Human Services Commission or an agency
operating part of the Medicaid managed care program or the child
health plan program, as appropriate.
(3)  "Contracted managed care organization" means a
managed care organization that contracts with the commission to
provide health care services to clients under Medicaid or the child
health care program, as appropriate.
(4)  "Enrollee" means a child enrolled in the child
(5)  "Health care service region" or "region" means a
managed care service area under Medicaid or the child health plan
program, as delineated by the commission.
(6)  "Managed care contract" means a contract entered
into by the commission and a managed care organization under which
the organization agrees to provide comprehensive health care
services to clients under a managed care program.
(7)  "Managed care organization" means a person that is
authorized or otherwise permitted by law to arrange for or provide a
(8)  "Managed care plan" means a plan under which a
person undertakes to provide, arrange for, pay for, or reimburse
any part of the cost of any health care service.  A part of the plan
must consist of arranging for or providing health care services as
distinguished from indemnification against the cost of those
services on a prepaid basis through insurance or otherwise.  The
term includes a primary care case management provider network.  The
term does not include a plan that indemnifies a person for the cost
of health care services through insurance.
(9)  "Managed care program" means a managed care
program under Medicaid or the child health plan program, including
(A)  STAR Medicaid managed care program;
(B)  STAR+PLUS Medicaid managed care program;
(C)  STAR Kids managed care program established
under Subchapter R, Chapter 540; and
(10)  "Recipient" means a Medicaid recipient.
Sec. 527.0002.  APPLICABILITY OF CHAPTER.  This chapter
applies only to a managed care contract, including the procurement
of a managed care contract, under Medicaid and the child health plan
Sec. 527.0003.  APPLICABILITY OF OTHER LAW; CONFLICT.  (a)
The requirements of this chapter are in addition to the applicable
requirements of Chapter 540, including Subchapter F of that
chapter, Chapters 540A and 2155 of this code, Chapter 62, Health and
Safety Code, Chapter 32, Human Resources Code, and other law
relating to managed care contracts and the procurement of those
contracts under Medicaid and the child health plan program.
(b)  If a requirement of this chapter conflicts with a
requirement of other law relating to managed care contracts under
Medicaid or the child health plan program, as applicable, the
Sec. 527.0004.  MANAGED CARE CLIENT CHOICE PROGRAM.  (a)  In
accordance with the requirements of this chapter, the commission
shall implement a managed care client choice program under which
the commission shall contract with managed care organizations to
provide health care services to clients under Medicaid or the child
health plan program, as applicable, in a manner that emphasizes
strong client choice among multiple managed care plans in all
health care service regions of this state.
(b)  In implementing this chapter, the commission shall
ensure that each client, including a client residing in a rural
region, has a sufficient number of contracted managed care
organizations providing services in the region from which to
SUBCHAPTER B.  CONTRACT PROCUREMENT
Sec. 527.0051.  ANNUAL REQUEST FOR APPLICATIONS.  The
commission shall annually issue a request for applications for each
health care service region to solicit multiple managed care
organizations to contract with the commission to provide health
care services to clients under a managed care program in the region.
Sec. 527.0052.  CONTRACT ELIGIBILITY REQUIREMENTS.  A
managed care organization is eligible to be awarded a managed care
contract only if the commission has:
(1)  certified the organization is reasonably able to
fill the contract terms under Section 527.0053; and
(2)  made a written determination that the
(A)  is financially solvent based on the
commission's review of and satisfactory assurances made by the
(B)  meets the performance and quality standards
established under Section 527.0054.
Sec. 527.0053.  CERTIFICATION BY COMMISSION.  (a)  Before
the commission may award a managed care contract to a managed care
organization, the commission shall evaluate and certify that the
organization is reasonably able to fulfill the contract terms,
including all applicable federal and state law requirements.
(b)  Notwithstanding any other law, the commission may not
award a managed care contract to an organization that does not
receive the certification required under this section.
(c)  A managed care organization may appeal the commission's
denial of certification by the commission under this section.
(d)  After a managed care organization is certified by the
commission to provide health care services in a health care service
region, the organization is not required to obtain a separate
certification to be awarded another contract to provide health care
Sec. 527.0054.  PERFORMANCE AND QUALITY STANDARDS.  (a)  The
(1)  subject to Subsection (b), adopt performance and
quality standards each managed care organization must meet to be
awarded a managed care contract; and
(2)  evaluate each managed care organization that
submits an application in response to a request for applications
under Section 527.0051 to verify that the organization meets the
standards adopted under Subdivision (1).
(b)  Performance and quality standards adopted by the
commission under this section must be designed to evaluate and
(1)  if applicable, a managed care organization's past
performance under Medicaid and the child health plan program, based
on reviews conducted under Section 527.0103, and the organization's
experience in a given Medicaid or child health plan program market
(2)  the quality-of-care provided by the organization;
(3)  the organization's cost-efficiency;
(4)  the results of customer satisfaction surveys
completed by clients who have received health care services under a
managed care plan offered by the organization; and
(5)  the results of satisfaction surveys completed by
providers participating in the provider network under the
organization's managed care plan.
Sec. 527.0055.  REQUIRED CONTRACT AWARDS.  If a managed care
organization submits a complete application in response to a
request for applications under Section 527.0051 and the
organization meets the requirements of Section 527.0052, the
commission shall award a contract to the organization to provide
health care services to clients under the managed care program in
the health care service region for which the application was
submitted, provided the contract substantially complies with the
terms contained in the written solicitation for the contract and
applicable state and federal law.
Sec. 527.0056.  CONTRACT AWARDS NOT LIMITED.  The commission
may not limit the number of managed care organizations awarded a
managed care contract in a health care service region of this state.
SUBCHAPTER C.  CONTRACT ADMINISTRATION
Sec. 527.0101.  INITIAL CONTRACT READINESS REVIEW.  (a)  The
commission shall review each managed care organization awarded a
managed care contract to determine whether the organization is
prepared to meet the organization's contractual obligations.
(b)  A managed care organization may not begin providing
health care services under a managed care contract and the
commission may not issue a payment to the organization under the
contract until the commission conducts the review required under
this section and other applicable state or federal law.
Sec. 527.0102.  MINIMUM CRITERIA FOR EVALUATING MANAGED CARE
CONTRACT PERFORMANCE.  (a)  The executive commissioner by rule
shall adopt criteria for measuring the performance of a contracted
managed care organization.  The criteria must include:
(1)  the same performance measures developed by the
commission under Section 540.0504(3);
(2)  the same quality-of-care and cost-efficiency
benchmarks developed under Section 543A.0052(b);
(3)  if applicable, the results of the organization's
performance under the most recent quality care and consumer
satisfaction measures included in the Consumer Assessment of
Healthcare Providers and Systems survey required under federal law;
(4)  not more than six additional criteria for
measuring a managed care organization's performance, as determined
(b)  A managed care organization shall provide to the
commission all data and information necessary for the commission to
measure the organization's performance under this section.
Sec. 527.0103.  CONTRACT PERFORMANCE EVALUATION: ANNUAL
REVIEW.  (a)  Using the minimum criteria developed under Section
527.0102, the commission shall annually conduct a review to
evaluate each managed care organization's performance in the health
care service region in which the organization provides health care
(b)  The commission shall post on the commission's Internet
website the results of each managed care organization's annual
evaluation conducted under this section in a format that is easily
accessible to and understandable by the public.
Sec. 527.0104.  DURATION OF CONTRACT.  An initial managed
care contract entered into in accordance with this chapter between
the commission and a managed care organization in a health care
service region may have an initial term of six years with an option
to annually extend the contract based on the organization's
performance under the preceding annual performance review
conducted under Section 527.0103.
Sec. 527.0105.  EFFECT OF NONCOMPLIANCE.  If the executive
commissioner determines a contracted managed care organization has
failed to comply with this chapter or other applicable law or a
material requirement of the organization's contract with the
commission, the commission may:
(1)  pursue any remedy available under the contract,
including recovery of actual or liquidated damages;
(2)  require the organization to submit to the
commission and comply with a corrective action plan approved by the
(3)  suspend the organization's enrollment of clients
in one or more regions where the organization provides health care
services under a managed care program; or
(4)  under the terms of the contract, terminate the
Sec. 527.0106.  RULES.  The executive commissioner shall
adopt rules necessary to implement this chapter.
SECTION 2.  The heading to Section 540.0206, Government
Code, as effective April 1, 2025, is amended to read as follows:
Sec. 540.0206.  MANAGED CARE ORGANIZATIONS: CERTIFICATE OF
AUTHORITY REQUIRED [MANDATORY CONTRACTS].
SECTION 3.  Section 540.0206(a), Government Code, as
effective April 1, 2025, is amended to read as follows:
[(a)]  The [Subject to the certification required under
Section 540.0203 and the considerations required under Section
540.0204, in providing health care services through Medicaid
managed care to recipients in a health care service region, the]
commission shall contract with [a] managed care organizations in
accordance with Chapter 527.  A managed care organization, other
than a state administered primary care case management network, in
a health care service [that] region must hold [that holds] a
certificate of authority issued under Chapter 843, Insurance Code,
to provide health care in that region [and that is:
[(1)  wholly owned and operated by a hospital district
[(2)  created by a nonprofit corporation that:
[(A)  has a contract, agreement, or other
arrangement with a hospital district in that region or with a
municipality in that region that owns a hospital licensed under
Chapter 241, Health and Safety Code, and has an obligation to
provide health care to indigent patients; and
[(B)  under the contract, agreement, or other
arrangement, assumes the obligation to provide health care to
indigent patients and leases, manages, or operates a hospital
facility the hospital district or municipality owns; or
[(3)  created by a nonprofit corporation that has a
contract, agreement, or other arrangement with a hospital district
in that region under which the nonprofit corporation acts as an
agent of the district and assumes the district's obligation to
arrange for services under the Medicaid expansion for children as
authorized by Chapter 444 (S.B. 10), Acts of the 74th Legislature,
SECTION 4.  Section 540.0502, Government Code, as effective
April 1, 2025, is amended to read as follows:
Sec. 540.0502.  AUTOMATIC ENROLLMENT IN MEDICAID MANAGED
CARE PLAN.  (a)  The [If the] commission shall [determines that it
is feasible and notwithstanding any other law, the commission may]
implement an automatic enrollment process under which an applicant
determined eligible for Medicaid is automatically enrolled in a
Medicaid managed care plan the applicant chooses.
(b)  The commission shall ensure recipients are allowed to
change the managed care plan in which the recipient enrolls as
frequently as is permitted under federal law.  A Medicaid managed
care organization may not prohibit, limit, or interfere with a
recipient's selection of a managed care plan [may elect to
implement the automatic enrollment process for certain recipient
SECTION 5.  Section 540A.0101(b), Government Code, as
effective April 1, 2025, is amended to read as follows:
(b)  The commission may temporarily waive the applicability
of Subsection (a) to a Medicaid managed care organization as
necessary based on the results of a review conducted under Sections
527.0103 [540.0207] and 540.0209 and until enrollment of recipients
in a Medicaid managed care plan offered by the organization is
SECTION 6.  Section 540A.0151(d), Government Code, as
effective April 1, 2025, is amended to read as follows:
(d)  The commission may waive the applicability of
Subsection (a) to a Medicaid managed care organization for not more
than three months as necessary based on the results of a review
conducted under Sections 527.0103 [540.0207] and 540.0209 and until
enrollment of recipients in a Medicaid managed care plan offered by
the organization is permitted under that section.
SECTION 7.  Section 543A.0052(d), Government Code, as
effective April 1, 2025, is amended to read as follows:
(d)  In awarding contracts to managed care organizations
under the child health plan program and Medicaid, the commission
shall, in addition to considerations under Chapter 527 [Section
540.0204] of this code and Section 62.155, Health and Safety Code,
give preference to an organization that offers a managed care plan
(1)  successfully implements quality initiatives under
Subsection (a) as the commission determines based on data or other
evidence the organization provides; or
(2)  meets quality-of-care and cost-efficiency
benchmarks under Subsection (b).
SECTION 8.  Section 62.055(f), Health and Safety Code, is
(1)  procure all contracts with a third party
administrator through a competitive procurement process in
compliance with all applicable federal and state laws or
(2)  ensure that all contracts with child health plan
providers under Section 62.155 are procured through a [competitive]
procurement process in accordance with this chapter, Chapter 527,
Government Code, and other [compliance with all] applicable federal
SECTION 9.  Subchapter C, Chapter 62, Health and Safety
Code, is amended by adding Section 62.1041 to read as follows:
Sec. 62.1041.  AUTOMATIC ENROLLMENT WITH HEALTH PLAN
PROVIDER.  (a)  The commission shall implement an automatic
enrollment process under which an applicant determined eligible for
the child health plan is automatically enrolled with a child health
plan provider the applicant chooses.
(b)  The commission shall ensure enrollees under the child
health plan are allowed to change the managed care plan in which
enrolled as frequently as is permitted under federal law.  A health
plan provider may not prohibit, limit, or interfere with an
enrollee's choice of health plan providers.
SECTION 10.  Section 62.155(a), Health and Safety Code, is
(a)  The commission shall contract with [select the] health
plan providers under the program in accordance with Chapter 527,
Government Code [through a competitive procurement process].  A
health plan provider, other than a state administered primary care
case management network, must hold a certificate of authority or
other appropriate license issued by the Texas Department of
Insurance that authorizes the health plan provider to provide the
type of child health plan offered and must satisfy, except as
provided by this chapter, any applicable requirement of the
Insurance Code or another insurance law of this state.
SECTION 11.  The following provisions are repealed:
(1)  Sections 540.0203, 540.0204, and 540.0207,
Government Code, as effective April 1, 2025;
(2)  Sections 540.0206(b), (c), (d), and (e),
Government Code, as effective April 1, 2025;
(3)  Sections 62.155(c) and (d), Health and Safety
(4)  Section 32.049(a), Human Resources Code.
SECTION 12.  The Health and Human Services Commission shall
conduct public hearings for purposes of determining the six
additional criteria required under Section 527.0102(a)(4),
Government Code, as added by this Act, for measuring the
performance of managed care organizations described by that
SECTION 13.  (a)  In this section:
(1)  "Child health plan program" and "Medicaid" have
the meanings assigned by Section 521.0001, Government Code.
(2)  "Client," "health care service region," "managed
care contract," "managed care organization," and "managed care
program" have the meanings assigned by Section 527.0001, Government
(b)  Subject to this section, the changes in law made by this
Act apply only to a managed care contract entered into on or after
the effective date of this Act.  A contract entered into before the
effective date of this Act is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
(c)  The procurement of a managed care contract that was
initiated before the effective date of this Act and that is pending
on the effective date of this Act is terminated on that date.
(d)  As soon as practicable after the effective date of this
Act, the Health and Human Services Commission shall seek to extend
the effective date of termination of a managed care contract in
effect on the effective date of this Act until the date a managed
care organization is authorized to provide health care services to
clients under the managed care program in the health care service
region under a contract entered into in accordance with Subsection
(e)  The Health and Human Services Commission shall issue a
request for applications to enter into a managed care contract with
the commission procured in accordance with Chapter 527, Government
Code, as added by this Act, and other applicable law as follows:
(1)  subject to Subsection (f) of this section, a
contract to provide health care services to clients under the STAR
Medicaid managed care program, the STAR Kids Medicaid managed care
program established under Subchapter R, Chapter 540, Government
Code, and the child health plan program, must have an anticipated
operational start date on or after September 1, 2027; or
(2)  a contract to provide health care services to
clients under the STAR Health program or the STAR+PLUS Medicaid
managed care program must have an anticipated operational start
date on or after September 1, 2030.
(f)  The commission shall issue a request for applications
under Subsection (e)(1) of this section as soon as practicable
after the effective date of this Act, but not later than September
SECTION 14.  If before implementing any provision of this
Act a state agency determines that a waiver or authorization from a
federal agency is necessary for implementation of that provision,
the agency affected by the provision shall request the waiver or
authorization and may delay implementing that provision until the
waiver or authorization is granted.
SECTION 15.  This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2025.