Does a Texas public university have to offer its employees every approved HMO, or can it choose which ones?

Texas AG Opinion JM-744: HMO Options for College and University Employees

Plain-English summary

The commissioner of the Coordinating Board asked how a public college or university should choose the health maintenance organizations (HMOs) it offered to employees and retirees under the Texas State College and University Employees Uniform Insurance Benefits Act, article 3.50-3 of the Insurance Code. That statute required institutions to offer employees the option of joining an HMO in lieu of traditional health insurance.

The Attorney General read the statute as unambiguous, so the plain language controlled without resort to the canons of construction. On the first question, an institution had to consider applications from every HMO approved by the state or federal government to offer services in the relevant area of Texas. An HMO did not also have to be approved to serve other state employees (those outside higher education) to be eligible to compete for the college and university business, though the statute plainly allowed such HMOs to apply as well. An institution could obtain a list of approved HMOs from the Insurance Board.

On the second question, the opinion concluded an institution did not have to contract with every approved HMO that applied. The statute directed the institution to "select and contract for" HMO services, and "select" meant to choose by fitness or other distinguishing characteristics. The act specified a competitive bidding process to decide which providers to choose. If every application had to be accepted, that competitive bidding requirement would be pointless.

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG 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.

Common questions

Did a public university have to consider every approved HMO?

Yes. The opinion concluded the institution had to consider applications from all HMOs approved by the state or federal government to offer services in its area of Texas.

Did an HMO have to already serve other state agencies to qualify?

No. The opinion said an HMO need not also be approved to serve state employees outside higher education in order to compete for a college or university's business.

Did the institution have to contract with all of them?

No. The opinion concluded the institution could select among the eligible HMOs. The statute told the institution to "select and contract for" services, which meant choosing rather than accepting everyone.

Why did the competitive bidding requirement matter?

The opinion reasoned that if the institution had to accept every approved applicant, the statute's competitive bidding process would serve no purpose. Reading the statute to allow selection gave that process meaning.

Background and statutory framework

Article 3.50-3 of the Insurance Code, the Texas State College and University Employees Uniform Insurance Benefits Act, governed health coverage for eligible public college and university employees and retirees. Section 4(b)(4)(D)(iv) required institutions to let employees choose an HMO instead of traditional insurance and directed the institution to select and contract with approved HMOs, with employer contributions under Section 13 paid to the selected HMO on the participant's behalf.

The opinion treated the statutory text as clear. Where a statute is unambiguous, a court reads the plain language rather than resorting to canons of construction. Two features of the text drove the result: the requirement that institutions consider HMOs "approved by the federal government, if available, or by the State of Texas, if available," which set the pool of eligible applicants, and the direction to "select and contract for" services, which, read with the act's competitive bidding provisions, gave the institution discretion to choose among those applicants.

Citations and references

Statutory authorities:

• Insurance Code article 3.50-3 (Texas State College and University Employees Uniform Insurance Benefits Act), including section 4(b)(4)(D)(iv), section 4(D)(i), and Section 13
• Insurance Code article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act)

Cases:

• Board of Insurance Commissioners of Texas v. Guardian Life Insurance Co., 180 S.W.2d 906 (Tex. 1944)
• Mrs. Tucker's Foods, Inc. v. Calvert, 296 S.W.2d 787 (Tex. Civ. App. - Austin 1956, writ ref'd n.r.e.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0744
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0744.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL
OF TEXAS

July 10, 1987

Mr. Kenneth H. Ashworth
Commissioner
Coordinating Board
Texas College and University System
P.O. Box 12788
Austin, Texas 78711

Opinion No. JM-744

Re: Whether an institution of higher education is required to consider applications from all health maintenance organizations in determining what coverage to offer its employees

Dear Mr. Ashworth:

You ask about the proper interpretation of certain language contained in provisions of the Texas State College and University Employees Uniform Insurance Benefits Act, codified as article 3.50-3 of the Insurance Code. Your request concerns the methods to be employed in selecting Health Maintenance Organizations (HMOs) to provide health-care services to eligible public college and university employees and retirees. Specifically, you note that section 4(b)(4)(D)(iv) of article 3.50-3 requires public colleges and universities to offer to their employees the option of participating in an HMO in lieu of the more traditional types of health insurance offered pursuant to the act.

The relevant section of the act states:

The institution shall select and contract for services performed by health maintenance organizations that are approved by the federal government, if available, or by the State of Texas, if available, to offer health-care services to eligible employees and retired persons in a specific area of the state. Eligible employees and retired persons may participate in a selected health maintenance organization in lieu of participation in the health insurance benefits under this Act, and the employer contributions provided by Section 13 of this Act for health-care coverage shall be paid to the selected health maintenance organizations on behalf of the participants. A health maintenance organization that has been approved to provide health-care services to employees and retired persons of the state under the Texas Employees Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code) is qualified upon proper application to the institution to provide similar services to eligible employees and retired persons of any institution or agency under this Act located in the same area of the state. More stringent requirements may not be imposed on health maintenance organizations under this Act than are imposed by the state or by the federal government. (Emphasis added).

Ins. Code art. 3.50-3, §4(b)(4)(D)(iv).

You ask whether the section requires an institution to consider applications from all HMOs approved by the state or federal governments rather than just those that have been approved to provide health-care services pursuant to the Texas Employees Group Insurance Benefits Act to state employees and retirees of agencies other than agencies of higher education. Ins. Code art. 3.50-2.

This statutory provision is unambiguous. In such a case, we do not refer to the canons of statutory construction to determine the intent of the legislature; rather, it is our duty merely to read the plain language of the statute. Board of Insurance Commissioners of Texas v. Guardian Life Insurance Co., 180 S.W.2d 906 (Tex. 1944); Mrs. Tucker's Foods, Inc. v. Calvert, 296 S.W.2d 787 (Tex. Civ. App. - Austin 1956, writ ref'd n.r.e.); 53 Tex. Jur. 2d Statutes §123 (1964). The only possible construction of section 4(b)(4)(D)(iv) requires an institution to consider applications from HMOs that are approved by state or federal governments to offer services in Texas. An institution may obtain a list of such approved HMOs from the Insurance Board. Ins. Code art. 3.50-3, §4(D)(i). An HMO need not also be approved to offer services to state employees, other than those who work for public colleges and universities, in order to be eligible to compete to offer services to public college and university employees, although the statute clearly contemplates that such HMOs may submit applications to offer services to public college and university employees.

You also ask whether an institution must contract with all approved HMOs that make application to provide service, or whether the institution can select from among the eligible applicants.

The plain meaning of the statute is evident on this point also: "The institution shall select and contract for services performed by health maintenance organizations that are approved. . . ." Ins. Code art. 3.50-3, §4(b)(4)(D)(iv). "Select" means to "choose from a number or group by fitness, excellence, or other distinguishing characteristics." Webster's Third New International Dictionary 2058 (1961). The statute specifies that a competitive bidding process will be used to determine which provider should be chosen to provide health care services. Ins. Code art. 3.50-3, §4(b)(4)(D)(i-iii) (with the exception of HMOs already approved to offer services to state employees outside of higher education). If the statute required that all applications from approved HMO providers be accepted, then the statutory specification of a competitive bidding process would be pointless.

SUMMARY

The Texas State College and University Employees Uniform Insurance Benefits Act, article 3.50-3 of the Insurance Code, requires an institution or agency subject to its provisions to consider applications to provide health care service from all health maintenance organizations approved by the state or federal governments.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Don Bustion
Assistant Attorney General