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AN ACT
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relating to the regulation of third-party administrators, |
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including administrators with delegated duties in the workers' |
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compensation system of this state; providing penalties. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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ARTICLE 1. THIRD-PARTY ADMINISTRATORS |
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SECTION 1.01. Section 4151.001, Insurance Code, is amended |
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by amending Subdivisions (1) and (2) and adding Subdivisions (6), |
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(7), and (8) to read as follows: |
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(1) "Administrator" means a person who, in connection |
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with annuities or life benefits, health benefits, [and] accident |
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benefits, [including] pharmacy benefits, or workers' compensation |
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benefits, collects premiums or contributions from or adjusts or |
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settles claims for residents of this state. The term includes a |
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delegated entity under Chapter 1272 and a workers' compensation |
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health care network authorized under Chapter 1305 that administers |
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a workers' compensation claim for an insurer, including an insurer |
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that establishes or contracts with the network to provide health |
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care services. The term does not include a person described by |
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Section 4151.002. |
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(2) "Insurer" means a person who engages in the |
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business of life, health, [or] accident, or workers' compensation |
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insurance under the law of this state. For purposes of this chapter |
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only, the term also includes an "insurance carrier," as defined by |
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Section 401.011(27), Labor Code, other than a governmental entity |
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or a workers' compensation self-insurance group subject to |
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regulation under Chapter 407A, Labor Code. |
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(6) "Workers' compensation benefits" means benefits |
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provided under Title 5, Labor Code, or services provided through a |
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certified workers' compensation health care network authorized |
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under Chapter 1305. |
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(7) "Workers' compensation insurance coverage" means |
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coverage subject to Subtitle E, Title 10. The term includes |
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coverage described by Sections 401.011(44)(A) and (B), Labor Code. |
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(8) "Workers' compensation self-insurer" means a legal |
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entity subject to regulation under Chapter 407, Labor Code. |
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SECTION 1.02. Section 4151.002, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.002. EXEMPTIONS. A person is not an |
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administrator if the person is: |
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(1) an employer, other than a certified workers' |
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compensation self-insurer, administering an employee benefit plan |
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or the plan of an affiliated employer under common management and |
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control [acting on behalf of its employees or the employees of one
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or more subsidiaries or affiliated corporations of the employer]; |
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(2) a union administering a benefit plan [acting] on |
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behalf of its members; |
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(3) an insurer or a group hospital service corporation |
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subject to Chapter 842 acting with respect to a policy lawfully |
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issued and delivered by the insurer or corporation in and under the |
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law of a state in which the insurer or corporation was authorized to |
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engage in the business of insurance; |
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(4) a health maintenance organization that is |
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authorized to operate in this state under Chapter 843 with respect |
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to any activity that is specifically regulated under that chapter, |
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Chapter 1271, 1272, or 1367, Subchapter A, Chapter 1452, or |
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Subchapter B, Chapter 1507; |
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(5) an agent licensed under Subchapter B, Chapter |
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4051, Subchapter B, Chapter 4053, or Subchapter B, Chapter 4054, |
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who receives commissions as an agent and is acting: |
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(A) under appointment on behalf of an insurer |
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authorized to engage in the business of insurance in this state; and |
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(B) in the customary scope and duties of the |
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person's authority as an agent; |
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(6) a creditor acting on behalf of its debtor with |
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respect to insurance that covers a debt between the creditor and its |
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debtor, if the creditor performs only the functions of a group |
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policyholder or a creditor; |
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(7) a trust established in conformity with 29 U.S.C. |
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Section 186 or a trustee or employee who is acting under the trust; |
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(8) a trust that is exempt from taxation under Section |
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501(a), Internal Revenue Code of 1986, or a trustee or employee |
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acting under the trust; |
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(9) a custodian or a custodian's agent or employee who |
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is acting under a custodian account that complies with Section |
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401(f), Internal Revenue Code of 1986; |
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(10) a bank, credit union, savings and loan |
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association, or other financial institution that is subject to |
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supervision or examination under federal or state law by a federal |
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or state regulatory authority, if the institution is performing |
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only those functions for which the institution holds a license |
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under federal or state law; |
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(11) a company that advances and collects a premium or |
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charge from its credit card holders on their authorization, if the |
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company does not adjust or settle claims and acts only in the |
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company's debtor-creditor relationship with its credit card |
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holders; |
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(12) a person who adjusts or settles claims in the |
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normal course of the person's practice or employment as a licensed |
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attorney and who does not collect any premium or charge in |
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connection with annuities or with life, health, [or] accident, |
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pharmacy, or workers' compensation benefits[, including pharmacy
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benefits]; |
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(13) an adjuster licensed under Subtitle C by the |
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department who is engaged in the performance of the individual's |
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[person's] powers and duties as an adjuster in the scope of the |
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individual's [person's] license; |
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(14) a person who provides technical, advisory, |
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utilization review, precertification, or consulting services to an |
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insurer, plan, or plan sponsor but does not make any management or |
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discretionary decisions on behalf of the insurer, plan, or plan |
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sponsor; |
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(15) an attorney in fact for a Lloyd's plan operating |
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under Chapter 941 or for a reciprocal or interinsurance exchange |
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operating under Chapter 942 who is acting in the capacity of |
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attorney in fact under the applicable chapter; |
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(16) a joint fund, risk management pool, or |
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self-insurance pool composed of political subdivisions of this |
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state that participate in a fund or pool through interlocal |
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agreements, any nonprofit administrative agency or governing body |
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or other nonprofit entity that acts solely on behalf of a fund, |
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pool, agency, or body, or any other fund, pool, agency, or body |
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established under or for the purpose of implementing an interlocal |
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governmental agreement; |
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(17) a self-insured political subdivision; |
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(18) a plan under which insurance benefits are |
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provided exclusively by an insurer authorized to engage in the |
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business of insurance in this state and the administrator of which |
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is: |
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(A) a full-time employee of the plan's organizing |
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or sponsoring association, trust, or other entity; or |
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(B) a trustee of the organizing or sponsoring |
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trust; [or] |
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(19) a parent of a wholly owned direct or indirect |
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subsidiary insurer authorized to engage in the business of |
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insurance in this state or a wholly owned direct or indirect |
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subsidiary insurer that is a part of the parent's holding company |
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system that, under an agreement regulated and approved under |
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Chapter 823 or a similar statute of the domiciliary state if the |
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parent or subsidiary insurer is a foreign insurer engaged in |
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business in this state, on behalf of only itself or an affiliated |
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insurer: |
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(A) collects premiums or contributions, if the |
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parent or subsidiary insurer: |
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(i) prepares only billing statements and |
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places those statements in the United States mail; and |
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(ii) causes all collected premiums to be |
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deposited directly in a depository account of the particular |
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affiliated insurer; or |
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(B) furnishes proof-of-loss forms, reviews |
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claims, determines the amount of the liability for those claims, |
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and negotiates settlements, if the parent or subsidiary insurer |
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pays claims only from the funds of the particular subsidiary by |
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checks or drafts of that subsidiary; or |
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(20) an affiliate, as described by Chapter 823.003, of |
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a self-insurer certified under Chapter 407, Labor Code, and who: |
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(A) is performing the acts of an administrator on |
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behalf of that certified self-insurer; and |
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(B) directly or indirectly through one or more |
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intermediaries, controls, is controlled by, or is under common |
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control with that certified self-insurer, as the term "control" is |
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described by Section 823.005. |
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SECTION 1.03. Subchapter A, Chapter 4151, Insurance Code, |
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is amended by adding Sections 4151.0021, 4151.0031, and 4151.0051 |
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to read as follows: |
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Sec. 4151.0021. APPLICABILITY TO CERTAIN PROCESSING |
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AGENTS. (a) In this section, "processing agent" means a person |
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described by Section 413.0111, Labor Code. |
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(b) A processing agent is not an administrator for purposes |
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of this chapter if the processing agent is acting as an assignee of |
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a pharmacy and if: |
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(1) the assignee has a written contract with the |
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pharmacy to: |
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(A) act as the provider of licensed pharmacy |
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services in lieu of the pharmacy; and |
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(B) purchase the pharmacy's claims at face value, |
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or at a value expressly stated in the contract; and |
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(2) the contract specifically prohibits the assignee |
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from performing any function of an administrator, as that term is |
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defined in this chapter, unless the assignee holds a certificate of |
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authority under this chapter. |
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Sec. 4151.0031. MARKET ANALYSIS. The commissioner may |
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conduct market analyses and examinations of an administrator under |
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Chapter 751. |
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Sec. 4151.0051. REFERRAL TO ADJUSTER BY ADMINISTRATOR. (a) |
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An administrator may not knowingly refer a claim or loss for |
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adjustment in this state to an individual purporting to be or acting |
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as an adjuster unless the individual holds a license under Chapter |
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4101. |
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(b) Before first referring a claim or loss for adjustment, |
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an administrator must ascertain from the commissioner whether the |
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individual selected to perform the adjustment holds a license under |
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Chapter 4101. After receipt of information from the department |
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that the individual does hold an adjuster license, the |
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administrator may refer claims or losses to the individual for |
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adjustment until the administrator has actual knowledge or receives |
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information from the department that the individual no longer holds |
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an adjuster license under Chapter 4101. The department shall keep |
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an updated list of individuals who hold adjuster licenses. |
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SECTION 1.04. Section 4151.006, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.006. RULES. The commissioner may adopt, in the |
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manner prescribed by Subchapter A, Chapter 36, rules that are fair, |
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[and] reasonable, and appropriate [rules, minimum standards, or
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limitations as appropriate] to augment and implement this chapter, |
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including rules establishing financial standards, reporting |
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requirements, and required contract provisions. |
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SECTION 1.05. Section 4151.052, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.052. APPLICATION. (a) An application for a |
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certificate of authority to engage in business as an administrator |
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must be in a form prescribed by the commissioner and must include |
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the following: |
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(1) a copy of each basic organizational document of |
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the applicant, including the articles of incorporation, bylaws, |
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articles of association, trade name certificate, and any other |
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similar document and a copy of any amendment to any of those |
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documents; |
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(2) a description of the applicant and the applicant's |
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services, facilities, and personnel; |
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(3) if the applicant is not domiciled in this state, a |
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power of attorney executed by the applicant appointing the |
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commissioner, the commissioner's successors in office, or the |
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commissioner's appointed designee as the applicant's attorney in |
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this state on whom process may be served in any legal action or |
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proceeding based on a cause of action arising in this state against |
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the applicant; |
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(4) an audited financial statement of the applicant |
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covering the preceding three calendar years or any lesser period |
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that the applicant and any predecessors of the applicant have been |
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in existence, or if an audited financial statement is not |
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available, an unaudited financial statement as of a date not |
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earlier than the 120th day before the date the application is filed, |
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accompanied by an affidavit or certification of the applicant that: |
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(A) the unaudited financial statement is true and |
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correct, as of its date; and |
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(B) a material change in financial condition has |
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not occurred from the date of the financial statement to the |
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execution date of the affidavit or certification; and |
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(5) any other information the commissioner reasonably |
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requires. |
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(b) An applicant for a certificate of authority or a |
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certificate holder under this chapter shall notify the department |
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in the manner prescribed by commissioner rule of a change of control |
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in the applicant's or certificate holder's ownership not later than |
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the 30th day after the effective date of the change and shall notify |
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the department of any other fact or circumstance affecting the |
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applicant's or certificate holder's qualifications for a |
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certificate of authority in this state as required by commissioner |
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rule. |
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SECTION 1.06. Section 4151.056, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.056. DURATION OF CERTIFICATE OF AUTHORITY. A |
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certificate of authority issued to an administrator under this |
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chapter is effective until it is suspended, canceled, or revoked. |
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The issuance, denial, suspension, cancellation, or revocation of a |
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certificate of authority to act as an administrator is subject to: |
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(1) Subchapters B and C, Chapter 4005; [and] |
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(2) Chapter 82; and |
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(3) Subchapter G. |
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SECTION 1.07. The heading to Subchapter C, Chapter 4151, |
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Insurance Code, is amended to read as follows: |
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SUBCHAPTER C. POWERS AND DUTIES OF [THIRD-PARTY] ADMINISTRATORS AND |
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INSURERS |
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SECTION 1.08. Section 4151.101, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.101. WRITTEN AGREEMENT WITH INSURER OR PLAN |
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SPONSOR REQUIRED. (a) An administrator may provide services only |
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under a written agreement with an insurer or plan sponsor. |
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(b) The commissioner by rule may prescribe provisions that |
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must be included in the written agreement. |
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SECTION 1.09. Section 4151.102, Insurance Code, is amended |
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by adding Subsection (a-1) to read as follows: |
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(a-1) The written agreement must include a statement of the |
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duties that the administrator is expected to perform on behalf of |
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the insurer, and the lines, classes, or types of insurance that the |
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administrator is authorized to administer. The agreement must |
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include, as applicable, provisions regarding claims handling and |
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other standards relating to the business underwritten by the |
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insurer. |
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SECTION 1.10. Section 4151.103, Insurance Code, is amended |
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by amending Subsection (a) and adding Subsection (d) to read as |
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follows: |
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(a) The [During the term of the written agreement, the] |
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administrator and the insurer, plan, or plan sponsor shall retain a |
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copy of the written agreement as part of their official records: |
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(1) during the term of the agreement; and |
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(2) until the fifth anniversary of the date on which |
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the agreement expires. |
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(d) The commissioner shall adopt rules to address the |
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transfer of records from one administrator to another. |
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SECTION 1.11. Section 4151.104, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.104. NOTICE OF USE OF ADMINISTRATOR'S SERVICES. |
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(a) If an insurer, plan, or plan sponsor uses the services of an |
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administrator, the administrator shall give written notice to each |
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insured and injured employee [or plan participant] of the |
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administrator's identity and the relationship among the |
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administrator and the insurer, plan, or plan sponsor and the |
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insured and injured employee [or plan participant]. The insurer, |
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plan, or plan sponsor must approve the notice before the notice is |
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distributed. |
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(b) An administrator administering workers' compensation |
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claims may satisfy the requirements of Subsection (a) by including |
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the notice as part of, or in conjunction with, the notice required |
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under Section 406.005(c), Labor Code. |
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(c) An administrator who fails to provide notice as required |
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by Subsection (a) is subject to an administrative penalty in the |
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manner provided by Chapter 84. |
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SECTION 1.12. Subchapter C, Chapter 4151, Insurance Code, |
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is amended by adding Sections 4151.1041 and 4151.1042 to read as |
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follows: |
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Sec. 4151.1041. REFERRAL BY INSURER. (a) An insurer may |
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not knowingly refer a claim or loss for administration in this state |
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to a person purporting to be or acting as an administrator unless |
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the person holds a certificate of authority under this chapter. |
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(b) Before first referring a claim or loss for |
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administration, an insurer must ascertain from the commissioner |
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whether the person performing the administration holds a |
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certificate of authority under this chapter. Once the insurer has |
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ascertained that the person holds a certificate of authority, the |
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insurer may refer a claim to the person for administration and may |
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continue to refer claims to the person until the insurer has |
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knowledge or receives information from the commissioner that the |
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person no longer holds a certificate of authority. |
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Sec. 4151.1042. RESPONSIBILITIES OF INSURER; SEMIANNUAL |
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AUDIT. (a) If an insurer uses the services of an administrator, |
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the insurer is responsible for determining the benefits, premium |
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rates, reimbursement procedures, and claims payment procedures |
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applicable to the coverage and for securing reinsurance, if any. |
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The insurer shall provide a copy of the written requirements |
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relating to those matters to the administrator. The |
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responsibilities of the administrator as to any of those matters |
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must be set forth in the written agreement between the |
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administrator and the insurer. |
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(b) An insurer shall ensure competent administration of its |
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programs. |
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(c) If an administrator administers benefits for more than |
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100 certificate holders, injured employees, plan participants, or |
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policyholders on behalf of an insurer, the insurer shall, at least |
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semiannually, conduct a review of the operations of the |
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administrator. At least biennially, the insurer shall conduct an |
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on-site audit of the operations of the administrator. |
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SECTION 1.13. Section 4151.111, Insurance Code, is amended |
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by adding Subsection (c) to read as follows: |
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(c) In the event of a conflict between this section and a |
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provision of the Labor Code relating to time periods for |
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adjudication and payment of workers' compensation claims, the Labor |
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Code provision prevails. |
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SECTION 1.14. Section 4151.113(b), Insurance Code, is |
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amended to read as follows: |
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(b) A trade secret, including the identity and address of a |
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policyholder, [or] certificate holder, or injured employee, is |
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confidential, except the commissioner may use that information in a |
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proceeding against the administrator. |
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SECTION 1.15. Section 4151.117, Insurance Code, is amended |
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to read as follows: |
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Sec. 4151.117. COMPENSATION OF ADMINISTRATOR. (a) An |
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administrator's compensation may be determined: |
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(1) as a percentage of the premiums or charges the |
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administrator collects or the amount of claims the administrator |
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pays or processes; or |
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(2) except as provided by Subsection (b), on another |
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basis as specified in the written agreement. |
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(b) An insurer or plan sponsor may not permit or provide |
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compensation or another thing of value to an administrator that is |
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based on the savings accruing to the insurer or plan sponsor because |
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of adverse determinations regarding claims for benefits, |
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reductions of or limitations on benefits, or other analogous |
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actions inconsistent with this chapter, that are made or taken by |
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the administrator. |
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SECTION 1.16. The heading to Subchapter E, Chapter 4151, |
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Insurance Code, is amended to read as follows: |
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SUBCHAPTER E. DEPARTMENT REGULATION OF [THIRD-PARTY] |
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ADMINISTRATORS |
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SECTION 1.17. Section 4151.205, Insurance Code, is amended |
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by amending Subsection (a) and adding Subsections (c), (d), (e), |
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and (f) to read as follows: |
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(a) An administrator shall annually, not later than June 30 |
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[March 1], file with the commissioner a report on a form prescribed |
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by the commissioner. The report must contain any information |
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required by the commissioner and must be verified by at least two |
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officers of the administrator. |
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(c) Except as provided by Subsection (f), the annual report |
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must include an audited financial statement performed by an |
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independent certified public accountant. An audited financial |
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statement prepared on a consolidated basis must include a columnar |
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consolidating or combining worksheet that shall be filed with the |
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annual report and must comply with the following: |
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(1) amounts shown on the consolidated audited |
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financial report must be shown on the worksheet; |
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(2) amounts for each entity must be stated separately; |
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and |
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(3) explanations of consolidating and eliminating |
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entries must be included. |
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(d) The annual report must include notes to the financial |
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statement or attachments that reflect the complete name and address |
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of each insurer in this state with which the administrator had an |
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agreement during the preceding fiscal year. |
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(e) Information derived from an audited financial statement |
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contained in an annual report under this section is confidential |
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and is not subject to disclosure under Chapter 552, Government |
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Code. |
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(f) An administrator who receives less than $10 million |
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annually as compensation for performing administrative services |
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and operates under written agreements subject to this chapter with |
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insurers or plan sponsors in this state is not required to file an |
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audited financial statement under Subsection (c), but must file a |
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financial statement certified in the manner prescribed by |
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commissioner rule. |
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SECTION 1.18. Section 4151.206(a), Insurance Code, is |
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amended to read as follows: |
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(a) The commissioner shall collect and an applicant or |
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administrator shall pay to the commissioner fees in an amount to be |
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determined by the commissioner as follows: |
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(1) a filing fee not to exceed $1,000 for processing an |
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original application for a certificate of authority for an |
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administrator; |
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(2) a fee not to exceed $500 for an examination under |
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Section 4151.201 [4201.201]; and |
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(3) a filing fee not to exceed $200 for an annual |
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report. |
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SECTION 1.19. Subchapter E, Chapter 4151, Insurance Code, |
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is amended by adding Sections 4151.210, 4151.211, and 4151.212 to |
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read as follows: |
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Sec. 4151.210. EFFECT OF REVOCATION OF OTHER CERTIFICATES. |
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An officer or a director or a shareholder with a controlling |
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interest of an entity whose certificate of authority to engage in |
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the business of insurance or other analogous authorization has been |
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revoked in this state or in any other state may not act as an |
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officer, director, member, manager, or partner, or as a shareholder |
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with a controlling interest, of an entity that holds a certificate |
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of authority issued under this chapter unless the commissioner |
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determines, for good cause shown, that it is in the public interest |
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to permit the individual to act in that capacity. |
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Sec. 4151.211. RESTRICTIONS ON ACQUISITION OF OWNERSHIP |
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INTEREST. (a) A person may not acquire an ownership interest in an |
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entity that holds a certificate of authority under this chapter if |
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the person is, or after the acquisition would be, directly or |
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indirectly in control of the certificate holder, or otherwise |
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acquire control of or exercise any control over the certificate |
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holder, unless the person has filed with the department under oath: |
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(1) a biographical form for each person by whom or on |
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whose behalf the acquisition of control is to be effected; |
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(2) a statement certifying that no person who is |
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acquiring an ownership interest in or control of the certificate |
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holder has been the subject of a disciplinary action taken by a |
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financial or insurance regulator of this state, another state, or |
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the United States; |
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(3) a statement certifying that, immediately on the |
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change of control, the certificate holder will be able to satisfy |
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the requirements for the issuance of a certificate of authority; |
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and |
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(4) any additional information that the commissioner |
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by rule may prescribe as necessary or appropriate to the public |
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interest and the protection of the insurance consumers of this |
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state. |
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(b) The department may require a partnership, syndicate, or |
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other group that is required to file a statement under Subsection |
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(a) to provide the information required under that subsection for |
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each partner of the partnership, each member of the syndicate or |
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group, and each person who controls the partner or member. If the |
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partner, member, or person is a corporation or the person required |
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to file the statement under Subsection (a) is a corporation, the |
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department may require that the information required under that |
|
subsection be provided regarding: |
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(1) the corporation; |
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(2) each individual who is an executive officer or |
|
director of the corporation; and |
|
(3) each person who is directly or indirectly the |
|
beneficial owner of more than 10 percent of the outstanding voting |
|
securities of the corporation. |
|
(c) The department may disapprove an acquisition of control |
|
if, after notice and opportunity for hearing, the commissioner |
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determines that: |
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(1) immediately on the change of control the |
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certificate holder would not be able to satisfy the requirements |
|
for the certificate of authority; |
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(2) the competence, trustworthiness, experience, and |
|
integrity of the persons who would control the operation of the |
|
certificate holder are such that it would not be in the interest of |
|
the insurance consumers of this state to permit the acquisition of |
|
control; or |
|
(3) the acquisition of control would violate this code |
|
or another law of this state, another state, or the United States. |
|
(d) Notwithstanding Subsection (c), a change in control is |
|
considered approved if the commissioner has not proposed to deny |
|
the requested change before the 61st day after the date on which the |
|
department receives all information required by this section. |
|
Sec. 4151.212. MAINTENANCE OF QUALIFICATIONS REQUIRED. The |
|
department may, in the manner prescribed by Section 4151.056 and by |
|
Subchapter G, revoke, suspend, or refuse to renew the certificate |
|
of authority of a certificate holder who does not maintain the |
|
qualifications necessary to obtain a certificate of authority |
|
issued under this chapter. |
|
SECTION 1.20. Chapter 4151, Insurance Code, is amended by |
|
adding Subchapter F to read as follows: |
|
SUBCHAPTER F. WORKERS' COMPENSATION BENEFIT PLANS |
|
Sec. 4151.251. DEFINITION. For purposes of this subchapter |
|
only, "insurance carrier" means: |
|
(1) an insurance company; or |
|
(2) a certified self-insurer for workers' compensation |
|
insurance, other than a certified self-insurance group under |
|
Chapter 407A, Labor Code, or a governmental entity that |
|
self-insures. |
|
Sec. 4151.252. APPLICATION. (a) This subchapter applies |
|
to the administration of workers' compensation insurance coverage. |
|
(b) This subchapter does not apply to an employer that does |
|
not elect under Subchapter A, Chapter 406, Labor Code, to obtain |
|
workers' compensation insurance coverage. |
|
Sec. 4151.253. AGREEMENTS BETWEEN ADMINISTRATORS AND |
|
CARRIERS. (a) An administrator shall enter into a contract in |
|
connection with workers' compensation benefits for collecting |
|
premium or contributions, adjusting claims, or settling claims with |
|
the insurance carrier responsible for those claims, including the |
|
insurance carrier responsible for claims arising under policies |
|
authorized under Section 2053.202(b). A contract required by this |
|
subsection may be in the form of a master services agreement. |
|
(b) A contract required by Subsection (a) must provide that: |
|
(1) the contract does not limit in any way the |
|
insurance carrier's authority or responsibility, including |
|
financial responsibility, to comply with each statutory or |
|
regulatory requirement; and |
|
(2) the administrator shall comply with each statutory |
|
or regulatory requirement relating to a function assumed by or |
|
carried out by the administrator. |
|
Sec. 4151.254. AGREEMENTS BETWEEN ADMINISTRATORS AND |
|
EMPLOYERS. (a) In addition to the contract required by Section |
|
4151.253, an administrator may also enter into a contract with an |
|
employer in connection with workers' compensation benefits for |
|
collecting premium or contributions, adjusting claims, or settling |
|
claims, including an employer purchasing a policy authorized under |
|
Section 2053.202(b). |
|
(b) A contract entered into under Subsection (a) must |
|
provide that: |
|
(1) the contract does not limit or modify in any way: |
|
(A) the insurance carrier's authority or |
|
responsibility, including financial responsibility, to comply with |
|
each statutory or regulatory requirement; and |
|
(B) the provisions of the contract entered into |
|
between the administrator and the insurance carrier under Section |
|
4151.253; and |
|
(2) the administrator shall comply with each statutory |
|
or regulatory requirement relating to a function assumed by or |
|
carried out by the administrator. |
|
Sec. 4151.255. ADMINISTRATOR COMPENSATION. Except as |
|
provided by Section 4151.117, an administrator may accept |
|
compensation of any kind for the performance of administrative |
|
services in connection with workers' compensation claims from: |
|
(1) an insurance carrier responsible for those claims; |
|
(2) an employer with whom the administrator has |
|
entered into a contract; or |
|
(3) both the insurance carrier and the employer. |
|
Sec. 4151.256. LARGE DEDUCTIBLE POLICIES. An employer who |
|
enters into a contract with an insurance carrier under Section |
|
2053.202(b) may not use or contract with an administrator to |
|
perform administrative services in connection with workers' |
|
compensation benefits unless the administrator has entered into a |
|
written agreement with the insurance carrier that: |
|
(1) complies with all the provisions of this chapter; |
|
and |
|
(2) provides that the insurance carrier is responsible |
|
for: |
|
(A) setting standards used in the handling of |
|
claims; and |
|
(B) arranging for the payment of claims. |
|
Sec. 4151.257. RULES. The commissioner shall adopt rules |
|
to implement the requirements of this subchapter, including rules |
|
prescribing requirements for contracts and master services |
|
agreements and requirements for the payment of claims. The rules |
|
must provide for compliance with the requirements of this chapter |
|
for any contract that takes effect or has an annual anniversary date |
|
on or after January 1, 2008. |
|
SECTION 1.21. Chapter 4151, Insurance Code, is amended by |
|
adding Subchapter G to read as follows: |
|
SUBCHAPTER G. DISCIPLINARY ACTIONS; PENALTIES |
|
Sec. 4151.301. GROUNDS FOR DENIAL, SUSPENSION, OR |
|
REVOCATION OF CERTIFICATE OF AUTHORITY. The department may deny an |
|
application for a certificate of authority or discipline the holder |
|
of a certificate of authority under this subchapter if the |
|
department determines that the applicant or holder, individually, |
|
or through an officer, director, or shareholder: |
|
(1) has wilfully violated an insurance law of this |
|
state; |
|
(2) has intentionally made a material misstatement in |
|
the application for a certificate of authority; |
|
(3) has obtained or attempted to obtain a certificate |
|
of authority by fraud or misrepresentation; |
|
(4) has misappropriated, converted to the applicant's |
|
or holder's own use, or illegally withheld money belonging to: |
|
(A) an insurance carrier, as that term is |
|
defined by Section 401.011, Labor Code; |
|
(B) an insurer, as that term is defined by |
|
Section 4001.003; |
|
(C) a health maintenance organization; or |
|
(D) an insured, enrollee, injured employee, or |
|
beneficiary; |
|
(5) has engaged in fraudulent or dishonest acts or |
|
practices; |
|
(6) has materially misrepresented the terms and |
|
conditions of an insurance policy, certificate, evidence of |
|
coverage, or contract; |
|
(7) has been convicted of a felony; |
|
(8) is in a financial condition, or is operating or |
|
conducting business in a manner, that would render further |
|
transaction of business in this state hazardous or injurious to |
|
insured persons or the public; |
|
(9) has failed to comply with any judgment rendered |
|
against the applicant or holder before the 60th day after the date |
|
on which the judgment becomes final; |
|
(10) has wilfully violated a commissioner rule; |
|
(11) has refused to be examined or to produce |
|
accounts, records, and files for examination as required by this |
|
chapter or commissioner rule; |
|
(12) at any time fails to meet a qualification for |
|
which issuance of the certificate of authority could have been |
|
denied had the failure then existed and been known to the |
|
commissioner; |
|
(13) has had a certificate of authority, license, or |
|
other authority issued by this state, another state, or the United |
|
States suspended or revoked; or |
|
(14) has failed to timely file the annual report |
|
required by Section 4151.205. |
|
Sec. 4151.302. REMEDIES FOR VIOLATION OF INSURANCE LAWS OR |
|
COMMISSIONER RULES. In addition to any other remedy available |
|
under Chapter 82 for a violation of this code, another insurance law |
|
of this state, or a commissioner rule, the department may: |
|
(1) deny an application for a certificate of |
|
authority; |
|
(2) suspend or revoke a certificate of authority; |
|
(3) place on probation a person whose certificate of |
|
authority has been suspended; |
|
(4) assess an administrative penalty; or |
|
(5) reprimand a certificate of authority holder. |
|
Sec. 4151.303. PROBATED SUSPENSION. If the suspension of a |
|
certificate of authority is probated, the commissioner may require |
|
the holder to: |
|
(1) report regularly to the department on any matter |
|
that is the basis of the probation; or |
|
(2) limit the holder's practice to the areas |
|
prescribed by the department. |
|
Sec. 4151.304. HEARING. If the department proposes to deny |
|
an application for a certificate of authority, or to suspend or |
|
revoke a certificate of authority, the applicant or holder is |
|
entitled to notice and a hearing conducted by the State Office of |
|
Administrative Hearings as provided by Chapter 40. |
|
Sec. 4151.305. APPLICATION FOR CERTIFICATE OF AUTHORITY |
|
AFTER DENIAL OR REVOCATION. (a) A person, or officer, director, or |
|
shareholder of a person, whose application has been denied or whose |
|
certificate of authority has been revoked under this subchapter may |
|
not apply for a certificate of authority before the fifth |
|
anniversary of: |
|
(1) the effective date of the denial or revocation; or |
|
(2) the date of a final court order affirming the |
|
denial or revocation if judicial review was sought. |
|
(b) An application filed after the period required by |
|
Subsection (a) may be denied by the commissioner if the applicant |
|
fails to show good cause why the denial or revocation should not be |
|
a bar to the issuance of a new certificate. |
|
(c) Subsection (b) does not apply to an applicant whose |
|
application was denied for failure by the applicant to submit a |
|
properly completed application for a certificate of authority. |
|
Sec. 4151.306. DISCIPLINARY PROCEEDING FOR CONDUCT |
|
COMMITTED BEFORE SURRENDER OR FORFEITURE OF CERTIFICATE. (a) The |
|
department may institute a disciplinary proceeding against a former |
|
certificate holder, or officer, director, or shareholder of a |
|
former certificate holder, for conduct committed before the |
|
effective date of a voluntary surrender or automatic forfeiture of |
|
the certificate of authority. |
|
(b) In a proceeding under this section, the fact that the |
|
certificate holder, or officer, director, or shareholder of a |
|
certificate holder, has surrendered or forfeited the certificate |
|
does not affect the former certificate holder's, or officer, |
|
director, or shareholder of a former certificate holder's, |
|
culpability for the conduct that is the subject of the proceeding. |
|
Sec. 4151.307. EMERGENCY CERTIFICATE SUSPENSION. (a) The |
|
commissioner may suspend the certificate of an administrator |
|
without notice or hearing if the commissioner determines that: |
|
(1) the administrator is insolvent or impaired; |
|
(2) an order for receivership, conservatorship, |
|
rehabilitation, or any other delinquency regarding the |
|
administrator has been entered in any state; or |
|
(3) the financial condition or business practices of |
|
the administrator otherwise pose an imminent threat to the public |
|
health, safety, or welfare of the residents of this state. |
|
(b) On determining that grounds exist under Subsection (a) |
|
to suspend the administrator's certificate of authority, the |
|
commissioner may issue an order suspending the certificate. The |
|
commissioner shall immediately serve notice of the suspension on |
|
the holder. |
|
(c) The notice required by Subsection (b) must: |
|
(1) be personally served on the holder or be sent by |
|
registered or certified mail, return receipt requested, to the |
|
holder's last known address according to the department's records; |
|
(2) state the grounds for the suspension; and |
|
(3) inform the holder of the right to a hearing on the |
|
suspension order. |
|
(d) An administrator whose certificate of authority is |
|
suspended under this section is entitled to request a hearing on the |
|
suspension not later than the 30th day after the date of receipt of |
|
notice of the suspension. Not later than the 10th day after the |
|
date a hearing is requested, the commissioner shall issue a notice |
|
of hearing. |
|
(e) The hearing must be held not later than the 10th day |
|
after the date notice of hearing is issued, unless the parties agree |
|
to a later date. |
|
(f) A hearing on a suspension order under this section is |
|
subject to Chapter 2001, Government Code, and to Subchapter A, |
|
Chapter 40. After the hearing, the administrative law judge shall |
|
recommend to the commissioner whether to uphold, vacate, or modify |
|
the suspension order. |
|
(g) A suspension order issued under this section remains in |
|
effect until further action is taken by the commissioner. |
|
SECTION 1.22. Section 4151.207, Insurance Code, is |
|
transferred to Subchapter G, Chapter 4151, Insurance Code, as added |
|
by this Act, renumbered as Section 4151.308, and amended to read as |
|
follows: |
|
Sec. 4151.308 [4151.207]. GENERAL ADMINISTRATIVE SANCTIONS. |
|
An administrator or other person who violates this chapter is |
|
subject to the sanctions provided by Chapter 82. |
|
SECTION 1.23. Section 4151.208, Insurance Code, is |
|
transferred to Subchapter G, Chapter 4151, Insurance Code, as added |
|
by this Act, renumbered as Section 4151.309, and amended to read as |
|
follows: |
|
Sec. 4151.309 [4151.208]. CRIMINAL PENALTY [OFFENSE]. (a) |
|
An administrator commits an offense if the administrator knowingly |
|
violates this chapter or a rule of the commissioner adopted under |
|
this chapter. |
|
(b) An offense under this section is a misdemeanor |
|
punishable by a fine of not less than $500 or more than $5,000. |
|
ARTICLE 2. CONFORMING AMENDMENTS--INSURANCE CODE |
|
SECTION 2.01. Section 1305.004(a), Insurance Code, is |
|
amended by adding Subdivision (1-a) to read as follows: |
|
(1-a) "Administrator" has the meaning assigned by |
|
Section 4151.001. |
|
SECTION 2.02. Subchapter A, Chapter 1305, Insurance Code, |
|
is amended by adding Section 1305.008 to read as follows: |
|
Sec. 1305.008. ADMINISTRATOR CERTIFICATE OF AUTHORITY |
|
REQUIRED. A person that performs the functions of an administrator |
|
under Chapter 4151 must hold a certificate of authority issued |
|
under that chapter to provide those functions under this chapter |
|
for an insurance carrier. |
|
SECTION 2.03. Sections 1305.1545(a) and (c), Insurance |
|
Code, are amended to read as follows: |
|
(a) An insurance carrier or [third-party] administrator may |
|
not reimburse a doctor or other health care provider, an |
|
institutional provider, or an organization of doctors and health |
|
care providers on a discounted fee basis for services that are |
|
provided to an injured employee unless: |
|
(1) the carrier or [third-party] administrator has |
|
contracted with either: |
|
(A) the doctor or other health care provider, |
|
institutional provider, or organization of doctors and health care |
|
providers; or |
|
(B) a network that has contracted with the doctor |
|
or other health care provider, institutional provider, or |
|
organization of doctors and health care providers; and |
|
(2) the doctor or other health care provider, |
|
institutional provider, or organization of doctors and health care |
|
providers has agreed to the contract and has agreed to provide |
|
health care services under the terms of the contract. |
|
(c) An insurance carrier or [third-party] administrator who |
|
violates this section: |
|
(1) commits an unfair claim settlement practice in |
|
violation of Subchapter A, Chapter 542, Insurance Code; and |
|
(2) is subject to administrative penalties under |
|
Chapters 82 and 84, Insurance Code. |
|
SECTION 2.04. Section 4101.001(a), Insurance Code, is |
|
amended to read as follows: |
|
(a) In this chapter, "adjuster" means an individual who: |
|
(1) investigates or adjusts losses on behalf of an |
|
insurer as an independent contractor or as an employee of: |
|
(A) an adjustment bureau; |
|
(B) an association; |
|
(C) a general property and casualty agent; |
|
(D) an independent contractor; |
|
(E) an insurer; or |
|
(F) a managing general agent; [or] |
|
(2) supervises the handling of claims; or |
|
(3) investigates, adjusts, supervises the handling |
|
of, or settles workers' compensation claims, including claims |
|
arising from services provided through a certified workers' |
|
compensation health care network as authorized under Chapter 1305, |
|
on behalf of an administrator, as defined by Chapter 4151, or on |
|
behalf of an insurance carrier, as defined by Section 401.011, |
|
Labor Code. |
|
SECTION 2.05. Section 4101.002, Insurance Code, is amended |
|
by adding Subsection (c) to read as follows: |
|
(c) For purposes of Subsection (a)(6), claims arising under |
|
workers' compensation insurance policies, including claims |
|
relating to services provided through a certified workers' |
|
compensation health care network authorized under Chapter 1305, do |
|
not constitute claims arising under life, accident, or health |
|
insurance policies. |
|
ARTICLE 3. CONFORMING AMENDMENTS--LABOR CODE |
|
SECTION 3.01. Section 406.010(b), Labor Code, is amended to |
|
read as follows: |
|
(b) Each insurance carrier shall designate persons to |
|
provide claims service in sufficient numbers and at appropriate |
|
locations to reasonably service policies written by the carrier. |
|
If an insurance carrier uses the services of a person required to |
|
hold a certificate of authority under Chapter 4151, Insurance Code, |
|
the carrier must comply with the requirements of that chapter. |
|
SECTION 3.02. Section 407.001(5), Labor Code, is amended to |
|
read as follows: |
|
(5) "Qualified claims servicing contractor" means a |
|
person who provides claims service for a certified self-insurer, |
|
who is a separate business entity from the affected certified |
|
self-insurer, and who holds a certificate of authority under |
|
Chapter 4151 [is:
|
|
[(A)
an insurance company authorized by the Texas
|
|
Department of Insurance to write workers' compensation insurance;
|
|
[(B)
a subsidiary of an insurance company that
|
|
provides claims service under contract; or
|
|
[(C)
a third-party administrator that has on its
|
|
staff an individual licensed under Chapter 4101, Insurance Code]. |
|
SECTION 3.03. Section 407.061(c), Labor Code, is amended to |
|
read as follows: |
|
(c) The applicant must present a plan for claims |
|
administration that: |
|
(1) is acceptable to the commissioner; |
|
(2) [and that] designates a qualified claims servicing |
|
contractor; and |
|
(3) complies with Chapter 4151, Insurance Code. |
|
SECTION 3.04. Section 407A.001(a), Labor Code, is amended |
|
by adding Subdivision (5-a) and amending Subdivision (8) to read as |
|
follows: |
|
(5-a) "Managing company" means an individual, |
|
partnership, or corporation engaged by the board of trustees of a |
|
group to implement the policies established by the board of |
|
trustees and to provide day-to-day management of the group. |
|
(8) "Service company" means a person that provides |
|
services to the group other than services provided by the managing |
|
company [administrator], including: |
|
(A) claims adjustment; |
|
(B) safety engineering; |
|
(C) compilation of statistics and the |
|
preparation of premium, loss, and tax reports; |
|
(D) preparation of other required self-insurance |
|
reports; |
|
(E) development of members' assessments and |
|
fees; and |
|
(F) administration of a claim fund. |
|
SECTION 3.05. Subchapter A, Chapter 407A, Labor Code, is |
|
amended by adding Section 407A.009 to read as follows: |
|
Sec. 407A.009. CERTIFICATE OF AUTHORITY REQUIRED FOR |
|
CERTAIN ADMINISTRATORS AND SERVICE COMPANIES. (a) An |
|
administrator or service company under this chapter that performs |
|
the acts of an administrator as defined in Chapter 4151, Insurance |
|
Code, must hold a certificate of authority under that chapter. |
|
(b) An entity is required to hold only one certificate of |
|
authority under Chapter 4151, Insurance Code, if: |
|
(1) the entity acts as an administrator and a service |
|
company as defined in this chapter; and |
|
(2) performs the acts of an administrator as that term |
|
is defined in Chapter 4151, Insurance Code. |
|
(c) Exemptions in Chapter 4151, Insurance Code, as provided |
|
in Sections 4151.002(18), (19), and (20), apply to an administrator |
|
or service company under this section. |
|
ARTICLE 4. TRANSITION; EFFECTIVE DATE |
|
SECTION 4.01. A person is not required to hold a certificate |
|
of authority under Chapter 4151, Insurance Code, as amended by this |
|
Act, to comply with Section 1305.008, Insurance Code, as added by |
|
this Act, before January 1, 2008. |
|
SECTION 4.02. A service company that adjusts or settles |
|
claims for a workers' compensation self-insurance group under |
|
Chapter 407A, Labor Code, is not required to hold a certificate of |
|
authority under Chapter 4151, Insurance Code, as amended by this |
|
Act, to comply with Section 407A.009, Labor Code, as added by this |
|
Act, before January 1, 2008. |
|
SECTION 4.03. The Texas Department of Insurance shall issue |
|
certificates of authority to applicants under Section 4151.052, |
|
Insurance Code, as amended by this Act, beginning September 1, |
|
2007. |
|
SECTION 4.04. (a) Except as provided by Subsections (b) and |
|
(c) of this section, this Act takes effect September 1, 2007. |
|
(b) A person is not required to hold a certificate of |
|
authority under Chapter 4151, Insurance Code, as amended by this |
|
Act, to administer workers' compensation benefits for an insurer |
|
before January 1, 2008. |
|
(c) Subchapter G, Chapter 4151, Insurance Code, as added by |
|
this Act, applies to a disciplinary action commenced on or after |
|
January 1, 2008. |
|
|
|
______________________________ |
______________________________ |
|
President of the Senate |
Speaker of the House |
|
|
|
I certify that H.B. No. 472 was passed by the House on April |
|
18, 2007, by the following vote: Yeas 144, Nays 0, 1 present, not |
|
voting; and that the House concurred in Senate amendments to H.B. |
|
No. 472 on May 25, 2007, by the following vote: Yeas 135, Nays 0, 2 |
|
present, not voting; and that the House adopted H.C.R. No. 282 |
|
authorizing certain corrections in H.B. No. 472 on May 28, 2007, by |
|
a non-record vote. |
|
|
|
______________________________ |
|
Chief Clerk of the House |
|
|
I certify that H.B. No. 472 was passed by the Senate, with |
|
amendments, on May 22, 2007, by the following vote: Yeas 29, Nays |
|
1; and that the Senate adopted H.C.R. No. 282 authorizing certain |
|
corrections in H.B. No. 472 on May 28, 2007, by a viva-voce vote. |
|
|
|
______________________________ |
|
Secretary of the Senate |
|
APPROVED: __________________ |
|
Date |
|
|
|
__________________ |
|
Governor |