On June 1, 2015, Texas Governor Greg Abbott signed House Bill 574 into law protecting physicians and other providers from having their participating provider agreements terminated by an insurer solely because the provider’s patients use out-of-network providers. The law aims to address aggressive tactics employed by many insurers in recent years to curb physicians’ referrals to out-of-network providers. The law contains similar restrictions applicable to health maintenance organizations. However, the protections do not apply to CHIP plans or Medicaid managed care plans.

Specifically, the amendments to the Texas Insurance Code provide that insurers may not prohibit, penalize, terminate, or otherwise restrict a preferred provider from communicating with a patient about the availability of an out-of-network provider for medical services. However, the participating provider agreement may require that the provider make certain disclosures to the patient before making an out-of-network referral, including that the patient may incur higher out-of-pocket expenses and whether the provider has a financial interest in the out-of-network provider. Insurers often include provisions in their preferred provider agreements with physicians that prohibit the physicians from performing services at out-of-network facilities, and an argument could be made that such provisions are no longer permitted under this new law. Moreover, a provider facing termination is entitled to expedited review of the termination decision and may now request all of the information on which the insurer based the termination, including the provider’s economic profile.

The new law also prohibits insurers from conditioning payment to an out-of-network provider on the use of patient notification forms identifying the provider as out-of-network if the form contains additional information intended to discourage patients from using out-of-network providers. Insurers are also prohibited from terminating the insured’s participation in a preferred provider benefit plan solely because the insured uses an out-of-network provider. These changes are an important step in protecting the value of out-of-network benefits that individuals pay for in preferred provider benefit plans.

The new law will take effect on September 1, 2015.

*Tracey Toll contributed to this article