HBA-MPM C.S.H.B. 1203 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1203 By: Brimer Business & Industry 4/2/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law authorizes a state agency or an institution of higher education (agency) to purchase its own insurance policies. As a result, a state agency may purchase an unnecessary or questionable policy which may pose an additional cost to the state. C.S.H.B. 1203 requires the State Office of Risk Management (office) to administer insurance services obtained by certain state agencies and operate as a full-service insurance and risk manager, and in administering insurance services, the office shall purchase insurance coverage for state agencies. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the risk management board in SECTION 1.02 (412.011, Labor Code), SECTION 1.04 (Section 412.0121, Labor Code), and SECTION 3.01, and to the State Office of Risk Management in SECTION 1.10 (Section 2, Article 21.49-15A, Insurance Code) of this bill. ANALYSIS C.S.H.B. 1203 amends the Labor Code to require the State Office of Risk Management (office) to administer insurance services obtained by state agencies and institutions of higher education (state agencies). The bill requires the office to operate as a full-service insurance and risk manager for state agencies, and to maintain and review records of property, casualty, or liability insurance coverages purchased by or for a state agency. The bill requires the office to perform risk management for each state agency, and to purchase insurance coverage for state agency employees, including those employees under the direction or control of the board of regents of Texas Tech University, under any line of insurance other than health or life insurance, including liability insurance. The office may perform risk management for any other state agency as well. The bill requires the risk management board (board) by rule to develop an implementation schedule for the purchase of insurance and requires the board to phase in, by line of insurance, the requirement that a state agency purchase coverage only through the office. The bill prohibits a state agency, including the board of regents of Texas Tech University from purchasing property, casualty, or liability insurance coverage without board approval (Secs. 412.001 and 412.011). The bill provides that The Texas A&M University System, The University of Texas System, and the Texas Department of Transportation must give the office 30 days written notice of the intent to purchase insurance coverage other than health or life insurance, including liability insurance. The office is required to submit bids to the above entities for the purchase of insurance coverage through the office, however, the entity is not required to purchase the coverage through the office. The entity must report the purchase to the office (Sec. 412.0112). The bill authorizes the board by rule to establish the formula for allocating the cost of purchasing insurance for state agencies and for performing risk management services in an interagency contract in a manner that gives proper consideration to relevant factors such as the site of an agency and the cost of insurance (Sec. 412.0121). C.S.H.B. 1203 provides that members of the board that govern the office must have demonstrated experience in the field of insurance and insurance regulation (Sec. 412.021). The bill requires the director to furnish copies of all rules adopted by the board to the commissioner of the Texas Department of Insurance (commissioner) (Sec. 412.041). In addition to a report from the executive director of the office (executive director) to the legislature regarding the services provided by the office to state agencies and Texas Tech University, the bill requires the executive director to report no later than February 1 of each odd-numbered year regarding insurance coverage purchased for state agencies, premium dollars spent to obtain the coverage, as well as losses incurred under the coverage (Sec. 412.042). C.S.H.B. 1203 amends the Insurance Code and further amends the Labor Code to require each state agency to actively manage the risks of that agency by cooperating with the office and the Texas Department of Insurance in the purchase of property, casualty, and liability lines of insurance coverage (Sec. 412.051, Labor Code). The bill requires each state agency that intends to purchase property, casualty, or liability insurance coverage in a manner other than through the services provided by the office and the insurer providing the coverage to report the intended purchase to the office within 30 days of the date on which the intended purchase is to occur. In addition to the information contained in the report, the office may require the state agency to submit copies of insurance forms, policies, and other relevant information (Sec. 412.051, Labor Code and Art. 21.49-15A, Insurance Code). The bill requires the office to adopt rules to implement these provisions and to consult with the commissioner in adopting the rules. The bill provides that failure by an insurer to comply with the reporting requirements constitutes grounds for the imposition of sanctions against the insurer (Art. 21.49-15A, Insurance Code). C.S.H.B. 1203 amends the Labor Code to repeal the provision that risk management does not apply to state agencies that have medical malpractice insurance coverage, workers' compensation insurance coverage, or other self-insurance coverage with associated risk management programs before January 1, 1989 (SECTION 1.12). The bill authorizes an employee of the Texas Department of Transportation to use accrued sick leave or annual leave before receiving workers' compensation income benefits. If the employee opts to use sick or annual leave, the employee is not entitled to the income benefits until the sick or annual leave has been exhausted (Sec. 505.060). The board is required to adopt rules to implement the changes in this bill no later than December 1, 2001. An insurer is not required to comply with the reporting requirements until January 1, 2002 (SECTION 3.01). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1203 modifies the original bill by removing the provision authorizing the State Office of Risk Management (office) to advise a state agency on available coverages and associated premium costs and otherwise assist the agency in purchasing the coverage. The substitute clarifies that the office is required, rather than authorized, to perform risk management for each state agency and to purchase insurance coverage and liability insurance for state agency employees, including those employees under the direction or control of the board of regents of Texas Tech University. The substitute authorizes the office to perform risk management for any other state agency as well. The substitute requires the risk management board (board) by rule to develop an implementation schedule for the purchase of insurance and requires the board to phase in, by line of insurance, the requirement that a state agency purchase coverage only through the office. The substitute prohibits a state agency, including the board of regents of Texas Tech University from purchasing property, casualty, or liability insurance coverage without board approval (Sec. 412.011, Labor Code). The substitute provides that The Texas A&M University System, The University of Texas System, and the Texas Department of Transportation must give the office written notice of the intent to purchase insurance coverage other than health or life insurance, including liability insurance. (Sec. 412.0112, Labor Code). The substitute authorizes the board by rule to establish the formula for allocating certain costs of provisions relating to the office (Sec. 412.0121, Labor Code). In addition to a report from the executive director of the office to the legislature regarding the services provided by the office to state agencies and Texas Tech University, the substitute requires the submission of a report regarding insurance coverage purchased for state agencies, premium dollars spent to obtain the coverage, and losses incurred under the coverage (Sec. 412.042, Labor Code). The substitute authorizes an employee of the Texas Department of Transportation to use accrued sick leave or annual leave before receiving workers' compensation income benefits, and does not entitle an employee who opts to use sick or annual leave to income benefits until that leave is exhausted (Sec. 505.060, Labor Code).