HBA-TBM, CCH C.S.H.B. 3458 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3458 By: Brimer Business & Industry 4/11/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE In 1991, the legislature created the Texas Workers' Compensation Insurance Fund (fund) to serve as a competitive force in the marketplace, guarantee the availability of workers' compensation insurance in Texas, and serve as the insurer of last resort. In 1999, the fund's statute was amended to make the fund a member of the Texas Property and Casualty Insurance Guaranty Fund. The assets of the fund could be better protected by converting the fund to a mutual company where the assets are owned by the policyholders. C.S.H.B. 3458 converts the fund to the Texas Mutual Insurance Company to be operated as a domestic mutual insurance company. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.H.B. 3458 amends the Insurance and Labor codes relating to the Texas Workers' Compensation Insurance Fund. The bill amends the Insurance Code to require the Texas Workers' Compensation Insurance Fund (fund) on September 1, 2001 to operate as and exercise the powers of a domestic mutual insurance company called the Texas Mutual Insurance Company (company) (Sec. 2). The company is not a state agency (Sec. 21). The bill requires the commissioner of insurance to issue a certificate of authority to the company to write workers' compensation insurance (Sec. 2). The bill authorizes the company to exercise all the rights, privileges, powers, and authority of any other mutual corporation organized to transact workers' compensation insurance business in Texas and transfers the powers and duties of the fund to the company (Sec. 2 and SECTION 3.01). The bill prohibits the company from being dissolved except by action of the legislature (Sec. 2). C.S.H.B. 3458 provides that the company is governed by a board of nine directors (board) that serve staggered six-year terms. Five of the members are required to be appointed by the governor with the remaining four being elected by the company's policyholders. The bill authorizes the board to perform all necessary or convenient administrative and business functions of the company. The bill sets forth the qualifications for board members and requires the governor to designate a chairman. The board is required to elect annually any other officers necessary for the performance of its duties. The bill sets forth provisions regarding potential grounds for removal and the filling of a vacancy on the board. The bill requires the board to hire a president and provides for the president's qualifications and authorizes the board to form committees and subcommittees. Board members shall receive board fees commensurate with industry standards. The bill requires the board to maintain its principal office in Travis County (Secs. 3 and 4). The members of the fund's board will serve as directors until the company's board is established (SEC. 3.04). The bill requires the company to pay premium taxes, maintenance taxes, and the maintenance tax surcharge in the same manner as a domestic mutual insurance carrier authorized to write workers' compensation insurance (Sec. 11). The bill provides that all revenues, monies and assets are governed by the laws applicable to domestic mutual insurance companies (Sec. 12). The company is only liable for assessments by the Texas Property and Casualty Insurance Guaranty Association regarding, and that association with respect to an insolvency of the company is only liable for, a claim with a date of injury that occurs on or after January 1, 2000 (Sec. 11). The bill provides that the state has no liability to or responsibility to the policyholders, persons receiving workers' compensation benefits, or the creditors of the company if the company is placed in conservatorship or receivership or becomes insolvent. The bill authorizes funding for a grant issued to the Texas Workers' Compensation Commission to come only from the company's surplus (Sec. 12). The bill establishes the Texas Mutual Insurance Company stabilization fund (stabilization fund) to be used for the sole benefit of the company. The company is required to make a one-time deposit of $150 million to the stabilization fund, which is to be invested by the comptroller at the guidance of the company (Sec. 22). The bill provides that the State of Texas covenants with the policyholders of the company, persons receiving workers' compensation benefits, and the company's creditors that the state will not borrow, appropriate, or direct payments from the company from those revenues, monies, assets or from the stabilization fund for any purpose (Secs. 12 and 22). The bill prohibits the stabilization fund from being used by or for the benefit of the state or for the benefit of a creditor of the state and from being commingled with other assets (Sec. 22). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3458 differs from the original by conforming to Texas Legislative Council style and format. The substitute requires the governor to appoint five members of the board of directors (board) with the remaining members to be elected by the company's policy holders. The substitute sets forth provisions regarding potential grounds for removal and the filling of a vacancy on the board (Sec. 3). The substitute adds a provision regarding the liability of the Texas Mutual Insurance Company and the Texas Property and Casualty Insurance Guaranty Association and limits the liability of the state (Secs. 11 and 12). The substitute authorizes funding for a grant issued to the Texas Workers' Compensation Commission (Sec. 12). The substitute establishes the Texas Mutual Insurance Company stabilization fund and provides that the state will not borrow, appropriate, or direct payments from the stabilization fund (Sec. 22). The substitute also removes the severability clause contained in the original bill.