Does Texas law keep medical debt off your credit report if your employer's health plan uses reference-based pricing with no provider network?

Plain-English summary

The San Patricio County Attorney, Tamara Cochran-May, asked the Attorney General about a consumer-protection statute and a particular kind of health plan. Business and Commerce Code subsection 20.05(a)(5) keeps certain medical debts off consumer reports. Specifically, a consumer reporting agency may not furnish a report containing information about a collection account with a medical industry code if the consumer was covered by a health benefit plan when the underlying event happened and the collection is for an unpaid balance, after copays, deductibles, and coinsurance, owed to an emergency care provider or a facility-based provider for an "out-of-network benefit claim." The county attorney wanted to know whether the phrase "covered by a health benefit plan" includes self-funded plans that use reference-based pricing.

The AG focused on the words "out-of-network benefit claim." Reading the statute as a whole, the AG concluded that the protection is structured around a plan that uses a network of providers and distinguishes between what it pays in-network providers and out-of-network providers. To define a provider network, the AG borrowed the Insurance Code's definition (section 1456.001(6)), which describes a plan that delivers care through contracts with providers and requires enrollees to use participating providers, including networks run by HMOs, preferred provider plans, and other issuers. Because subsection 20.05(a)(5) reaches only out-of-network claims, the AG reasoned it applies only where there is a network to be in or out of.

That framing controlled the reference-based-pricing question. Neither the Business and Commerce Code nor the Insurance Code defines reference-based pricing, and the AG noted it can appear as a feature of many different programs. So the AG said it could not answer the question for all reference-based-pricing plans as a matter of law, because the answer depends on the particular facts of a given program, and resolving fact questions is outside the opinion process (citing KP-0309). But the county attorney asked specifically about a program that "does not have a network." For that case, the AG concluded a court would likely find subsection 20.05(a)(5) does not apply, because the statute's protection is tied to network-based out-of-network claims.

The AG then answered the follow-on question about hospitals' collection agencies. The subsection's bar applies to a "consumer reporting agency," defined as a person who regularly assembles or evaluates consumer information to furnish reports to third parties for fees. Even assuming a hospital's collection agency qualifies as a consumer reporting agency, the AG concluded subsection 20.05(a)(5) does not stop it from furnishing a credit bureau information about an individual's outstanding medical balance when the employer has adopted a reference-based-pricing program that does not use a provider network.

What this means for you

This describes what the 2021 opinion holds. It is the AG's reading, the answer it gives is limited to plans without a provider network, and statutes change, so confirm current law before relying on it. Note too that separate federal credit-reporting rules and industry practices on medical debt also apply and are not addressed here.

Patients and consumers

The opinion suggests that subsection 20.05(a)(5)'s shield against reporting certain out-of-network medical collections likely does not reach a self-funded reference-based-pricing plan that has no provider network. For other reference-based-pricing structures, the AG said the answer depends on the facts.

Hospitals and medical collection agencies

The opinion concludes that, for a no-network reference-based-pricing program, subsection 20.05(a)(5) does not bar reporting an outstanding medical balance to a credit bureau. It does not address other limits on furnishing medical information, such as the consent requirement in subsection 20.05(c).

Employers offering self-funded plans

The opinion turns on whether the plan uses a provider network. Employers weighing reference-based pricing should understand that the network feature, or its absence, is what the AG treated as decisive for this particular statute.

Common questions

Q: Does Texas law keep out-of-network medical debt off my credit report?
A: Subsection 20.05(a)(5) bars reporting certain out-of-network medical collection accounts, but the AG read that protection as built around plans that use a provider network.

Q: What if my employer's plan uses reference-based pricing with no network?
A: The AG concluded a court would likely find subsection 20.05(a)(5) does not apply to a self-funded plan that does not use a provider network, so the debt could be reported.

Q: Did the AG decide this for all reference-based-pricing plans?
A: No. Because reference-based pricing comes in many forms, the AG said the answer depends on the facts of each program and could not be resolved for all of them in an opinion.

Q: Can a hospital's collection agency report the balance to a credit bureau?
A: For a no-network reference-based-pricing program, yes. The AG concluded subsection 20.05(a)(5) does not preclude it, even assuming the collection agency is a consumer reporting agency.

Background and statutory framework

Chapter 20 of the Business and Commerce Code (sections 20.01–.31) regulates consumer credit reporting agencies, including when they may furnish reports (section 20.02(a)). Subsection 20.05(a)(5) is the specific bar on reporting certain out-of-network medical collection accounts, with exceptions in subsection 20.05(a), (b), and (b-1), and a separate consent requirement for medical information in subsection 20.05(c). The definition of "consumer reporting agency" is in section 20.01(5). To give content to the network concept, the AG used the Insurance Code's definition of "provider network" in section 1456.001(6). The construction principles came from Sunstate Equip. Co., LLC v. Hegar and LTTS Charter Sch., Inc. v. C2 Constr., Inc., and the limit on resolving fact questions came from KP-0309.

Citations and references

Statutes:

• Tex. Bus. & Com. Code § 20.05 (limits on furnishing medical collection information), and §§ 20.01, 20.02
• Tex. Ins. Code § 1456.001 (definition of provider network)

Key cases:

• Sunstate Equip. Co., LLC v. Hegar, 601 S.W.3d 685 (Tex. 2020); LTTS Charter Sch., Inc. v. C2 Constr., Inc., 342 S.W.3d 73 (Tex. 2011) (plain-meaning, whole-statute construction)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0367
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2021/kp-0367.pdf

Original opinion text

April 13, 2021

The Honorable Tamara L. Cochran-May
San Patricio County Attorney
400 West Sinton, Room 108
Sinton, Texas 78387

Opinion No. KP-0367

Re: Whether subsection 20.05(a)(5) of the Business and Commerce Code prohibits a consumer reporting agency from reporting certain information if the consumer is covered by a self-funded plan with a reference-based-pricing program (RQ-0385-KP)

Dear Ms. Cochran-May:

You ask whether subsection 20.05(a)(5) of the Business and Commerce Code prohibits a consumer reporting agency from reporting certain information if the consumer is covered by a self-funded plan with a reference-based-pricing program.¹

Background

Chapter 20 of the Business and Commerce Code regulates consumer credit reporting agencies' authority to provide consumer reports to third parties. See TEX. BUS. & COM. CODE §§ 20.01–.31. When authorized, a consumer credit reporting agency may furnish a person's consumer report to third persons for credit, insurance, employment, and other potentially sensitive purposes.² Id. § 20.02(a). Subsection 20.05(a)(5) of the Business and Commerce Code provides as follows:

(a) [A] consumer reporting agency may not furnish a consumer report containing information related to:

...

(5) a collection account with a medical industry code, if the consumer was covered by a health benefit plan at the time of the event giving rise to the collection and the collection is for an outstanding balance, after copayments, deductibles, and coinsurance, owed to an emergency care provider or a facility-based provider for an out-of-network benefit claim[.]

Id. § 20.05(a)(5) (emphasis added).³ You tell us that some employers provide health care benefits using self-funded plans known as reference-based-pricing plans. See Request Letter at 1–2. You ask whether the phrase "covered by a health benefit plan" in subsection 20.05(a)(5) includes self-funded plans that have implemented reference-based pricing. Id. at 2.

Construction of Subsection 20.05(a)(5), Texas Business and Commerce Code

Courts construing a statute attempt to effectuate the Legislature's intent as expressed in the words of the statute. Sunstate Equip. Co., LLC v. Hegar, 601 S.W.3d 685, 689–90 (Tex. 2020). To do so, courts start with a statute's "text and the plain meaning of its words construed within the statute as a whole." Id. at 690. Furthermore, courts do not construe statutes in isolation but rather within the context of "the surrounding statutory landscape." LTTS Charter Sch., Inc. v. C2 Constr., Inc., 342 S.W.3d 73, 75 (Tex. 2011).

While the Business and Commerce Code does not specifically define "health benefit plan," the remainder of subsection 20.05(a)(5) provides the context from which the scope of the prohibition can be determined. See TEX. BUS. & COM. CODE § 20.05(a)(5). The prohibition in subsection 20.05(a)(5) on reporting is limited to information related to a collection account for an outstanding balance "owed to an emergency care provider or a facility-based provider for an out-of-network benefit claim." Id. (emphasis added). Thus, the subsection contemplates a health benefit plan utilizing a network of providers. A "provider network" generally means

a health benefit plan under which health care services are provided to enrollees through contracts with health care providers and that requires those enrollees to use health care providers participating in the plan and procedures covered by the plan. The term includes a network operated by:

(A) a health maintenance organization;

(B) a preferred provider benefit plan issuer; or

(C) another entity that issues a health benefit plan, including an insurance company.

TEX. INS. CODE § 1456.001(6). Thus, subsection 20.05(a)(5) applies only to information concerning a collection account for a plan utilizing a network of providers and that distinguishes between payment to network providers and out-of-network providers. See TEX. BUS. & COM. CODE § 20.05(a)(5).

Application of Subsection 20.05(a)(5) to Reference-Based-Pricing Plans

Neither the Business and Commerce Code nor the Insurance Code specifically address reference-based-pricing plans. Reference-based pricing may be a feature of a variety of different programs or plans. See Terry Humo, Employer's Guide to Self-Insuring Health Benefits ¶¶ 250, 252, 1993 WL 13550442 (Sept. 2015 Supp.). Because the applicability of the statute will depend on the particular facts concerning a reference-based program or plan, we cannot answer your question as a matter of law. See Tex. Att'y Gen. Op. No. KP-0309 (2020) at 4 (stating that the opinion process cannot resolve issues requiring the consideration of specific facts). You ask specifically about a program that "does not have a network." Request Letter at 1–2. A court would likely conclude that subsection 20.05(a)(5) does not apply to a self-funded plan that does not utilize a network of providers.

Application of Subsection 20.05(a)(5) to Hospitals' Collection Agencies

You also ask whether the statute prohibits Texas hospitals' collection agencies from furnishing to a credit bureau information about an individual's "outstanding balance for medical bills other than copayments, deductibles and coinsurance whose employer has adopted" a reference-based-pricing program. Id. at 2. The prohibition in subsection 20.05(a)(5) applies to a "consumer reporting agency," which is "a person that regularly engages wholly or partly in the practice of assembling or evaluating consumer credit information or other information on consumers to furnish consumer reports to third parties for monetary fees, for dues, or on a cooperative nonprofit basis." TEX. BUS. & COM. CODE §§ 20.01(5), .05(a). Even assuming a hospital's collection agency qualifies as a consumer reporting agency, subsection 20.05(a)(5) does not preclude it from furnishing to a credit bureau information about an individual's outstanding balance for medical bills when the individual's employer has adopted a reference-based-pricing program that does not utilize a provider network. See id. § 20.05(a)(5).

¹ See Letter from Honorable Tamara L. Cochran-May, San Patricio Cnty. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen. at 2 (Oct. 20, 2020), https://www2.texasattorneygeneral.gov/opinions/opinions/51paxton/rq/2020/pdf/RQ0385KP.pdf ("Request Letter").

² But see TEX. BUS. & COM. CODE § 20.05(c) ("A consumer reporting agency may not furnish medical information about a consumer in a consumer report that is being obtained for employment purposes or in connection with a credit, insurance, or direct marketing transaction unless the consumer consents to the furnishing of the medical information.").

³ Subsection 20.05(a) has exceptions for information provided in certain specified circumstances not pertinent to your question. See id. § 20.05(a), (b), (b-1).

S U M M A R Y

Subsection 20.05(a)(5) of the Business and Commerce Code prohibits a consumer reporting agency from furnishing a consumer report containing information about certain collection accounts for an outstanding balance owed to an emergency care provider or a facility-based provider for an out-of-network benefit claim. A court would likely conclude that subsection 20.05(a)(5) does not apply to a self-funded plan that does not utilize a network of providers. The subsection does not preclude Texas hospitals' collection agencies from furnishing to a credit bureau information about an individual's outstanding balance for medical bills when the employer has adopted a reference-based-pricing program that does not utilize a provider network.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT E. WEBSTER
First Assistant Attorney General

LESLEY FRENCH
Chief of Staff

MURTAZA F. SUTARWALLA
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee