HBA-ATS H.B. 3697 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3697 By: Siebert Business & Industry 9/16/1999 Enrolled BACKGROUND AND PURPOSE Created in 1991 by the 72nd Texas Legislature, the Texas Workers' Compensation Insurance Fund (fund) provides workers' compensation insurance to Texas businesses and their employees and to Texas employers that operate in other states. Although the fund operates as a workers' compensation insurance company in the private sector, its purpose is to serve as a competitive force in the marketplace, guarantee the availability of workers' compensation insurance in this state, and serve as an insurer of last resort. Since January 1, 1992, the fund has written over 250,253 policies that provide coverage to more than 35,000 businesses. Consequently, the fund has become the largest workers' compensation insurer in the state. H.B. 3697 authorizes the fund to establish multitiered premium systems to price workers' compensation insurance to insureds in the fund's competitive programs, as well as to insureds to whom policies are offered by the fund under existing Article 5.76-4 (Fund as Insurer of Last Resort). In addition, this bill authorizes the systems to provide for higher or lower premium payments by insureds based on the fund's evaluation of the underwriting characteristics of the individual risk and the appropriate premium to be charged for the policy coverages. This bill deletes the provision in the Insurance Code that grants to the fund a tax credit equal to two percent of the gross workers' compensation premiums written by the fund during the period for which taxes are assessed. Under this bill, the fund is a member of and is protected by the Texas Property and Casualty Insurance Guaranty Association. This bill requires the comptroller of public accounts (comptroller) and the Texas Department of Insurance (department) to cooperate in preparing a list, by year, of the insurers and certified selfinsurers who paid the maintenance tax surcharges (surcharge) for calendar years 1991-1996. The fund is required to issue separate checks to each insurer and certified self-insurer for each year in which the maintenance tax surcharge was paid. The fund must make the payments from the surplus of the fund. Each policyholder is entitled to receive a proportionate share of the amount of maintenance tax surcharge paid by the workers' compensation insurer that provided coverage during each 12-month recoupment period beginning June 1, 1992, and ending May 31, 1998. Each insurer must issue a refund check to the policyholder for the amount of the refund for each policy written during the applicable recoupment period. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 3 (Section 10A, Article 5.76-5, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 9(c), Article 5.76-3, Insurance Code, as follows: (c) Authorizes the Texas Workers' Compensation Insurance Fund (fund) to establish multitiered premium systems to price, rather than provide, workers' compensation insurance to insureds in, rather than who would not otherwise meet, the fund's competitive programs, as well as to insureds to whom policies are offered by the fund under existing Article 5.76-4 (Fund as Insurer of Last Resort), rather than the fund's underwriting standards, notwithstanding any other provision of the Insurance Code or any other state insurance law, rather than any other provision of this article. Authorizes the systems to provide for higher or lower premium payments by insureds based on the fund's evaluation of the underwriting characteristics of the individual risk and the appropriate premium to be charged for the policy coverages, rather than by insureds who present higher than normal risks within a class. SECTION 2. Amends Section 12, Article 5.76-3, Insurance Code, by deleting Subsection (b), which grants to the fund a tax credit equal to two percent of the gross workers' compensation premiums written by the fund during the period for which taxes are assessed. Provides that the fund is a member of and is protected by the Texas Property and Casualty Insurance Guaranty Association, rather than prohibits the fund from being a member of or being protected by the Texas Property and Casualty Insurance Guaranty Association. Redesignates existing Subsections (c) and (d) to Subsections (b) and (c). Makes conforming changes in existing Subsections (a) and redesignated Subsection (b). SECTION 3. Amends Article 5.76-5, Insurance Code, by adding Section 10A, as follows: Sec. 10A. REIMBURSEMENT OF MAINTENANCE TAX SURCHARGE. (a) Requires the comptroller of public accounts (comptroller) and the Texas Department of Insurance (department) to cooperate in preparing a list, by year, of the insurers and certified selfinsurers who paid the maintenance tax surcharges (surcharge) for calendar years 1991-1996. Provides that the list must include the amount by year of the surcharge paid by each insurance company and by each certified-self insurer. Sets forth that the fund paid the surcharge only for calendar years 1993 and 1994. Requires the fund to be included in the list only for those years. Requires that the list be given to the fund within 60 days after the effective date of this section. Provides that a reference to an insurance company includes the fund. (b) Requires the fund to issue separate checks, in the amount determined under Subsection (a), to each insurer and certified self-insurer for each year in which the surcharge was paid. Requires the fund to make the payments from the surplus of the fund. (c) Describes the date on which the surcharge is paid and defines the calendar years for which the surcharge was paid and the corresponding recoupment periods. (d) Entitles each policyholder not insured by the fund to receive a proportionate share of the amount of the surcharge paid by the workers' compensation insurer that provided coverage with a policy effective date during each 12-month recoupment period beginning June 1, 1992, and ending May 31, 1998. Entitles only those policyholders with coverage provided by the fund with policy effective dates during the recoupment periods beginning June 1, 1994, and ending May 31, 1995, and beginning June 1, 1995, and ending May 31, 1996, respectively, to receive a refund of the proportionate share of the surcharge from the fund. Entitles only those policyholders with coverage provided through the Texas workers' compensation insurance facility with policy effective dates during the recoupment periods beginning June 1, 1992, and ending May 31, 1993, and beginning June 1, 1993, and ending May 31, 1994, respectively, to receive a refund of the proportionate share of the surcharge. Specifies the procedure required to determine the proportionate share. (e) Requires each insurer to issue a refund check to the policyholder for the amount of the refund for each policy written during the applicable recoupment period, except as provided by Subsection (f). Authorizes the insurer, in the case of a policyholder with a balance due for premiums earned during any recoupment period, to apply that refund as a credit against the amount owed, except as provided by Subsection (f). Provides that refunds or credits must be made or applied by September 1, 2000. (f) Provides that an insurer is not required to issue a refund if the amount of that refund is less than $25. (g) Requires each insurer to make a diligent effort to locate each policyholder due a refund. (h) Requires each insurer to file with the department, by January 1, 2001, a report that covers each applicable recoupment period. Enumerates the information required in the report. (i) Requires an insurer, if it is unable to locate a policyholder due a refund, to notify the department. (j) Requires the department to furnish a report to the fund by March 1, 2001. Provides that the report is to be used to publish notices in a newspaper of general circulation in each county with a population of 100,000 or more. Requires the fund to publish the notices by April 1, 2001, and to pay these costs from the surplus of the fund. Provides that each notice must have a statement describing the reason for the publication. Enumerates the information required in the statement. (k) Sets forth that an eligible policyholder must provide a current mailing address by the later of the 180th day after publication of the notice or October 1, 2001, to receive a refund. (l) Requires the insurer to remit the refund to an eligible policyholder within 45 days after the insurer receives the policyholder's required address. Provides that all refunds must be remitted by November 15, 2001. (m) Requires each insurer to file a report by December 31, 2001. Enumerates the information required in the report. (n) Requires an insurer that cannot locate a policyholder eligible for a refund to return the amount of the remaining surcharge to the fund for deposit in the fund's surplus by December 31, 2001. (o) Establishes December 31, 2001, as the date all rights to a refund expire. (p) Prohibits an insurer from being required to refund an amount greater, in the aggregate, than that received from the fund. (q) Sets forth that each report filed with the department by an insurer that identifies a policyholder by name is confidential. Requires the department to maintain the confidentiality of the information and of the report. Provides that a report made by an insurer is not subject to disclosure under Chapter 552 (Public Information), Government Code (r) Requires the commissioner to adopt rules as necessary to implement this section. (s) Establishes September 1, 2002, as the expiration date. SECTION 4. Amends Subchapter G, Chapter 5, Insurance Code, by adding Article 5.76-6, as follows: Art. 5.76-6. INTERIM STUDIES. (a) Requires the fund to enter into a joint venture with the Research and Oversight Council on Workers' Compensation (council) by providing data for interim studies. Requires funding for the studies to come from the surplus of the fund. Provides that the purpose of the studies is to improve worker safety and reduce the cost and improve the quality of health care delivered to injured workers. (b) Enumerates the examinations required to be included in the studies. (c) Requires the council to submit requests for proposals for contracts with private vendors to perform the studies. Requires the comptroller to assist the council in bidding, evaluating, and securing the contracts. (d) Requires the Texas Workers' Compensation Commission to assist the council by providing computer data and other information. (e) Authorizes the council to enter into contracts, memoranda of understanding, and interagency agreements as necessary to implement this article. (f) Requires the council to report the result of the studies and recommendations for proposed legislation to the 77th Legislature by February 1, 2001. Requires the council to provide written copies of the report to the governor, the lieutenant governor, and the speaker of the house of representatives. (g) Establishes March 1, 2001, as the expiration date of this article. SECTION 5. Amends Section 3, Article 21.28-C, Insurance Code, as follows: (a) Creates this subsection from existing text. (b) Provides that the Property and Casualty Insurance Guaranty Act applies to insurance written through the fund. Sets forth that the application of this article (Property and Casualty Insurance Guaranty Act) to the fund is prospective, beginning January 1, 2000. Provides that the fund is only liable for assessments for a claim and for claims of insolvency of the fund with a date of injury that occurs on or after January 1, 2001. SECTION 6. Amends Section 5(10), Article 21.28-C, Insurance Code, by including a stock, mutual, Lloyds insurer, reciprocal or inter-insurance exchange, or county mutual insurance company, among the insurers, rather than persons, defined as "member insurers." SECTION 7.Emergency clause. Effective date: upon passage.