Does the Texas Medicaid rule paying licensed counselors 70% of psychiatrist rates apply to managed-care plans?

Plain-English summary

Representative Richard Peña Raymond, then chair of the House Human Services Committee, asked the Attorney General about a Texas Medicaid reimbursement rule for mental-health counselors. The rule, adopted by the Health and Human Services Commission (HHSC) at 1 Texas Administrative Code section 355.8091, pays licensed professional counselors, certain clinical social workers, and licensed marriage and family therapists 70% of the Medicaid fee paid to psychiatrists and psychologists for similar services. Raymond explained that a Medicaid managed care organization (MCO) had been "recouping," or clawing back, behavioral-health payments it had already made, saying it was relying on this rule. He asked whether the rule conflicts with the Insurance Code, and which controls when an MCO's provider contract uses a fee schedule that does not follow the rule.

The AG first explained how Texas Medicaid pays for care. Under the traditional "fee-for-service" model, HHSC reimburses enrolled providers directly at rates HHSC sets. Under the more common managed care model, HHSC contracts with MCOs, which then negotiate their own reimbursement rates with providers. Texas courts had held that HHSC's duty to set reimbursement rules applies to fee-for-service, not to the rates MCOs negotiate.

On the first question, the AG concluded the rule does not conflict with section 1451.104 of the Insurance Code. That section bars an "insurer" from discriminating in payment between one type of licensed practitioner and another for the same covered services. But the section applies only to insurance companies, associations, and organizations engaged in the business of insurance, as listed in section 1451.102. HHSC is a state agency that administers Medicaid; it does not operate under the Insurance Code and is not an "insurer" of that kind. Because the anti-discrimination prohibition does not reach HHSC, its rule setting counselor reimbursement at 70% of the psychiatrist rate for fee-for-service Medicaid does not conflict with section 1451.104.

The AG did not reach the second question, which assumed a conflict existed. On the third question, the AG explained that HHSC applies rule 355.8091 only in the fee-for-service part of Medicaid, not to MCOs, which set their own rates with providers by contract. Because an agency's reasonable reading of its own regulation gets deference unless plainly erroneous, the AG found no reason to doubt HHSC's position that the rule does not govern a contract between an MCO and a provider. In short, the rule the MCO claimed to rely on does not, by its own terms, apply to managed care contracts.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Representative Raymond and the Human Services Committee (as the opinion described it): The opinion concluded the counselor-reimbursement rule was valid, did not conflict with the Insurance Code, and did not apply to managed care organizations. It did not resolve any specific dispute about the MCO's recoupment, but described the rule as inapplicable to MCO-provider contracts.

Licensed counselors, social workers, and therapists (as the opinion described it): The opinion described rule 355.8091 as setting their fee-for-service Medicaid reimbursement at 70% of the psychiatrist and psychologist rate, and described that rate-setting as not barred by the Insurance Code's anti-discrimination provision.

Managed care organizations (as the opinion described it): The opinion described MCOs as negotiating their own reimbursement rates with providers, and described rule 355.8091 as not governing an MCO's contract with a service provider.

Medicaid recipients and behavioral-health patients (as the opinion described it): The opinion described the two Medicaid models and the agency's authority over fee-for-service rates, without addressing any individual coverage decision.

Common questions

What does Texas Medicaid rule 355.8091 do?
The AG described it as reimbursing licensed professional counselors, certain clinical social workers, and licensed marriage and family therapists at 70% of the existing Medicaid fee for similar services provided by psychiatrists and psychologists.

Is it legal for Texas to pay counselors less than psychiatrists under Medicaid?
The AG concluded the rule is valid and does not conflict with section 1451.104 of the Insurance Code, because HHSC is a state Medicaid agency, not an "insurer" subject to that anti-discrimination provision.

Does the rule apply to Medicaid managed care plans (MCOs)?
No. The AG explained that HHSC applies the rule only to the fee-for-service part of Medicaid. MCOs negotiate their own reimbursement rates with providers, so the rule does not govern an MCO-provider contract.

Why does the Insurance Code not apply to HHSC?
The AG explained that section 1451.104 reaches only insurance companies, associations, and organizations in the business of insurance, as described in section 1451.102. HHSC administers Medicaid and is not that kind of insurer.

If an MCO's fee schedule ignores the rule, which controls?
The AG explained that the rule does not apply to MCOs at all, so it does not override an MCO's negotiated fee schedule. He deferred to HHSC's reasonable reading of its own regulation on that point.

Background and statutory framework

HHSC administers the Texas Medicaid program, a joint federal-state program for low-income individuals (Tex. Gov't Code Ann. § 531.021(a) (West 2012); Tex. Hum. Res. Code Ann. § 32.021(a) (West 2013); see 42 U.S.C.A. §§ 1396-1396w (West 2012 & Supp. 2014)). Care is delivered through two models: traditional fee-for-service, in which HHSC reimburses enrolled providers at rates it sets, and managed care, in which HHSC contracts with managed care organizations to provide services (Tex. Gov't Code Ann. § 533.002 (West 2012); Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm'n, 408 S.W.3d 549 (Tex. App.-Austin 2013, pet. denied)). HHSC must adopt reasonable rules governing fees, charges, and rates for medical assistance payments (Tex. Gov't Code Ann. § 531.021(b)(2); Tex. Hum. Res. Code Ann. § 32.028(a)), a duty the courts had read to apply to fee-for-service, not to MCO-negotiated rates (Sw. Pharmacy, 408 S.W.3d at 560-62).

The rule at issue, 1 Texas Administrative Code section 355.8091, reimburses the specified counselors at 70% of the fee for similar services by psychiatrists and psychologists under the Texas Medicaid Reimbursement Methodology (1 Tex. Admin. Code §§ 355.8085, 355.8091 (2014)). The AG applied the presumption that agency rules are valid (McCarty v. Tex. Parks & Wildlife Dep't, 919 S.W.2d 853 (Tex. App.-Austin 1996, no writ)) and the rule that a rule is invalid only if contrary to its governing statutes or in conflict with other state law (R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679 (Tex. 1992); Lee v. Tex. Workers' Comp. Comm'n, 272 S.W.3d 806 (Tex. App.-Austin 2008, no pet.)).

Section 1451.104 of the Insurance Code bars an "insurer" from discriminating in payment among types of selected practitioners for the same covered services (Tex. Ins. Code Ann. § 1451.104(a) (West 2009)). "Insurer" is defined by reference to section 1451.102, which applies subchapter C only to insurance policies and contracts issued by insurance companies, associations, or organizations in the business of insurance (id. § 1451.102). The AG noted that the statute's list of covered entities is illustrative, not exhaustive (Tex. Gov't Code Ann. § 311.005(13) (West 2013); Samantar v. Yousuf, 560 U.S. 305 (2010) (U.S. Supreme Court, noting "include" can signal a non-exhaustive list)), but reasoned that all the listed entities are insurers, and HHSC is not. Because HHSC is not an insurer, section 1451.104 does not apply to its fee-for-service Medicaid rules, so rule 355.8091 does not conflict with it.

On the third question, the AG deferred to HHSC's interpretation that the rule applies only in fee-for-service and not to MCOs, which negotiate their own provider rates, because an agency's reading of its own regulation controls unless plainly erroneous or inconsistent with the regulation (Pub. Util. Comm'n of Tex. v. Gulf States Utils. Co., 809 S.W.2d 201 (Tex. 1991)).

Citations

Statutory and rule provisions:

• Tex. Gov't Code Ann. § 531.021(b)(2) (West 2012) (HHSC rate-rule duty)
• Tex. Gov't Code Ann. § 533.002 (West 2012) (Medicaid managed care program)
• Tex. Gov't Code Ann. § 311.005(13) (West 2013) ("including" as a term of enlargement)
• Tex. Hum. Res. Code Ann. § 32.028(a) (West 2013) (rate rules)
• Tex. Ins. Code Ann. § 1451.104(a) (West 2009) (anti-discrimination among practitioners)
• Tex. Ins. Code Ann. § 1451.102 (entities subject to subchapter C)
• 1 Tex. Admin. Code § 355.8091 (2014) (counselor reimbursement at 70%)
• 1 Tex. Admin. Code § 355.8085 (Texas Medicaid Reimbursement Methodology)
• 42 U.S.C.A. §§ 1396-1396w (West 2012 & Supp. 2014) (federal Medicaid)

Cases:

• Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm'n, 408 S.W.3d 549, 552 (Tex. App.-Austin 2013, pet. denied)
• Methodist Hosps. of Dallas v. Amerigroup Tex., Inc., 231 S.W.3d 483, 486 n.6 (Tex. App.-Dallas 2007, pet. denied)
• McCarty v. Tex. Parks & Wildlife Dep't, 919 S.W.2d 853, 854 (Tex. App.-Austin 1996, no writ)
• R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679, 685 (Tex. 1992)
• Lee v. Tex. Workers' Comp. Comm'n, 272 S.W.3d 806, 812-13 (Tex. App.-Austin 2008, no pet.)
• Samantar v. Yousuf, 560 U.S. 305, 317 (2010)
• Pub. Util. Comm'n of Tex. v. Gulf States Utils. Co., 809 S.W.2d 201, 207 (Tex. 1991)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1089
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1089.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

December 1, 2014

The Honorable Richard Peña Raymond Opinion No. GA-1089
Chair, Committee on Human Services
Texas House of Representatives Re: Questions relating to the validity of a
Post Office Box 2910 Health and Human Services rule that provides
Austin, Texas 78768-2910 for Medicaid reimbursement to specified
licensed counselors (RQ-1202-GA)

Dear Representative Raymond:

You ask three questions about the validity of a rule adopted by the Texas Health and Human Services Commission ("HHSC").[1] As background, HHSC is the state agency responsible for administering the state's Medicaid program, a federal-state program that provides health care services to low-income individuals. TEX. GOV'T CODE ANN. § 531.021(a) (West 2012); TEX. HUM. RES. CODE ANN. § 32.021(a) (West 2013); see generally 42 U.S.C.A. §§ 1396-1396w (West 2012 & Supp. 2014) (governing Medicaid). Currently, health care services covered by Medicaid are funded and provided through two different models. The first is a traditional model in which health care providers enrolled in the Medicaid program are reimbursed by HHSC on a "fee-for-service basis at rates set by HHSC." Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm'n, 408 S.W.3d 549, 552 (Tex. App.-Austin 2013, pet. denied). The second and more common model is a managed care model, under which HHSC contracts with managed care organizations[2] ("MCOs") "to provide Medicaid health services under a managed care plan." Id. at 553; see TEX. GOV'T CODE ANN. § 533.002 (West 2012) (establishing the purpose of the "Medicaid managed care program").

As the administrator of the Medicaid program, HHSC is required "to adopt reasonable rules and standards governing the determination of fees, charges, and rates for medical assistance payments." TEX. GOV'T CODE ANN. § 531.021(b)(2) (West 2012); TEX. HUM. RES. CODE ANN. § 32.028(a) (West 2013). According to a recent decision by the Third Court of Appeals,[3] HHSC's rulemaking duty applies only to medical assistance payments made under the "fee-for-service" model; HHSC is not required to adopt rules for the determination of fees, charges, and rates for medical assistance payments under the managed care program. Sw. Pharmacy, 408 S.W.3d at 560-62 ("To impose on HHSC the duty to regulate the rate the MCOs pay the provider pharmacies would contravene the 'full risk' nature and intent of the managed care model ... and call for state intervention into private contracts."). With this background in mind, we turn to your questions.

Your request concerns HHSC's rule 355.8091, which provides:

Counseling services provided by a licensed professional counselor, a licensed master social worker-advanced clinical practitioner, or a licensed marriage and family therapist ... are reimbursed at 70% of the existing fee for similar services provided by psychiatrists and psychologists as described in § 355.8085 of this title (relating to Texas Medicaid Reimbursement Methodology (TMRM)).

1 TEX. ADMIN. CODE § 355.8091 (2014) (HHSC). You state that a Medicaid MCO has been "recouping" previously paid reimbursement for behavioral health services, purportedly in reliance on rule 355.8091. Request Letter at 1. You question whether the rule conflicts with section 1451.104 of the Insurance Code. Id.

Courts presume that agency rules are valid. McCarty v. Tex. Parks & Wildlife Dep't, 919 S.W.2d 853, 854 (Tex. App.-Austin 1996, no writ). A rule is invalid if it is contrary to the relevant governing statutes or if it conflicts with other state law. R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679, 685 (Tex. 1992); Lee v. Tex. Workers' Comp. Comm'n, 272 S.W.3d 806, 812-13 (Tex. App.-Austin 2008, no pet.). Section 1451.104 is located in chapter 1451, subchapter C of the Insurance Code. See TEX. INS. CODE ANN. § 1451.104 (West 2009). Subchapter C generally authorizes a person who is a beneficiary under a health insurance policy to select certain health care practitioners for the provision of services or procedures scheduled in the insured's health insurance policy. See generally id. §§ 1451.101(2) (defining "insured"), 1451.105-.124 (West 2009 & Supp. 2014) (providing the types of practitioners that may be selected). Section 1451.104 provides in relevant part:

An insurer may not classify, differentiate, or discriminate between scheduled services or procedures provided by a health care practitioner selected under this subchapter and performed in the scope of that practitioner's license and the same services or procedures provided by another type of health care practitioner whose services or procedures are covered by a health insurance policy, in regard to:

(1) the payment schedule or payment provisions of the policy; or

(2) the amount or manner of payment or reimbursement under the policy.

Id. § 1451.104(a) (West 2009). In section 1451.104, an "insurer" means "an insurer, association, or organization described by Section 1451.102." Id. § 1451.101(3); see also id. § 1451.101(1) (defining a "health insurance policy" as "a policy, contract, or agreement described by Section 1451.102"). Section 1451.102 provides that subchapter C applies "only to an individual, group, blanket, or franchise insurance policy, insurance agreement, or group hospital service contract that provides health benefits ... and that is delivered, issued for delivery, or renewed in this state by any incorporated or unincorporated insurance company, association, or organization, including" a list of ten entities, all of which operate in the business of insurance under specific chapters of the Insurance Code. Id. § 1451.102. Though the list is non-exhaustive, it is illustrative of the types of entities that the Legislature intended to be subject to subchapter C. See TEX. GOV'T CODE ANN. § 311.005(13) (West 2013) (Code Construction Act provision defining "including" as a term of enlargement and not limitation); see also Samantar v. Yousuf, 560 U.S. 305, 317 (2010) (observing that "use of the word 'include' can signal that the list that follows is meant to be illustrative rather than exhaustive"). Thus, to the extent that section 1451.104 prohibits differentiating among reimbursement rates, it does so only with respect to those of an "insurance company, association, or organization" that engages in the business of insurance. TEX. INS. CODE ANN. §§ 1451.102, .104 (West 2009).

HHSC is a state agency that administers the state's Medicaid program for individuals that cannot afford insurance. See Sw. Pharmacy, 408 S.W.3d at 552. HHSC does not operate under the Insurance Code, nor is it akin to the entities defined in section 1451.102 as "insurers." Thus, HHSC is not an insurer for purposes of section 1451.104, and the prohibition against differentiated reimbursement rates does not apply to its rules governing "fee-for-service" Medicaid reimbursement payments. Therefore, rule 355.8091 is not contrary to, nor does it conflict with, section 1451.104 of the Insurance Code.

Your second question is premised on a conclusion that a conflict does exist, so we do not address it. Your third question asks, assuming a conflict does not exist and rule 355.8091 is valid, "if the MCO's contracts with providers incorporate by reference a fee schedule that fails to apply the rule, which governs-the fee schedule or the rule?" Request Letter at 2. HHSC applies rule 355.8091 "only in the fee for service component of the Medicaid program."[4] Consistent with the Third Court of Appeals' decision in Southwest Pharmacy Solutions, HHSC does not apply the rule to MCOs, which, under the managed care model, negotiate their own reimbursement rates with service providers. See Sw. Pharmacy, 408 S.W.3d at 560-62 (explaining that MCOs negotiate terms of reimbursement with provider pharmacies). As the agency charged with administration of the Medicaid program, HHSC's interpretation of its own regulations is entitled to deference unless that interpretation is "plainly erroneous or inconsistent with the regulation." Pub. Util. Comm'n of Tex. v. Gulf States Utils. Co., 809 S.W.2d 201, 207 (Tex. 1991) (citations omitted). HHSC's interpretation of its rule is not plainly erroneous. Therefore, we find no reason to doubt HHSC's position that rule 355.8091 does not govern a contract for services between an MCO and a health service provider.

SUMMARY

The Texas Health and Human Services Commission's rule at 1 Texas Administrative Code section 355.8091 does not apply to managed care organizations in the Texas Medicaid program. Nor does the rule conflict with section 1451.104 of the Insurance Code.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Stephen L. Tatum, Jr.
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Richard Peña Raymond, House Comm. on Human Servs., to Honorable Greg Abbott, Tex. Att'y Gen. at 1-2 (May 20, 2014), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] An MCO "is a type of health maintenance organization (HMO) 'in which the over-all care of a patient is coordinated by or through a single organization.'" Methodist Hosps. of Dallas v. Amerigroup Tex., Inc., 231 S.W.3d 483, 486 n.6 (Tex. App.-Dallas 2007, pet. denied) (citation omitted); see also 1 TEX. ADMIN. CODE § 353.2(41), (51) (2014) (HHSC) (defining an MCO for purposes of the managed care program).

[3] "Medical assistance" means "a medical or health care related service, item, or supply that is delivered to a Medicaid recipient and is approved and authorized for payment or reimbursement by [HHSC] or a health and human services agency pursuant to state and federal law." 1 TEX. ADMIN. CODE § 355.201(a)(2) (2014) (HHSC).

[4] Brief from Jack Stick, Chief Counsel, Texas Health & Human Servs. Comm'n, at 6 (July 18, 2014) (on file with Op. Comm.).