The Texas Workers' Compensation Commission (the Commission) proposes new §§165.1-165.7, concerning Rejected Risk Injury Prevention Services, and simultaneous repeal of §§165.6-165.9 concerning the same subject. The new rules and repeal of existing rules §§165.6, 165.7, 165.8, and 165.9, are proposed to incorporate the applicable provisions of the referenced Chapter 164 rules (relating to the extra-hazardous employer program), remove references to the Chapter 164 rules and renumber and update existing rules. These actions put in place a separate set of rules to administer the Rejected Risk Program.

The Texas Register published text shows the proposed language of the new rules and should be read to determine all proposed text.

The original Rejected Risk Program was established under the Texas Workers' Compensation Insurance Facility (the Facility) by House Bill 62, 2nd Called Session, 72nd Legislature, as an amendment to Article 5.76-2 of the Insurance Code, and as an integral part of the workers' compensation insurance reform in Texas. The amendment also established the Commission's authority and responsibility to administer portions of the program involving: access to the premises of identified policyholders; development of a program to target policyholders; approval of professional sources to conduct safety consultations under the program; investigation of accidents and monitoring of implementation of accident prevention plans for selected policyholders; adoption of rules; conducting follow-up inspections of identified policyholders; assessment of administrative penalties; and charging policyholders for services provided. The goal of the program was to assist employers that were unable to obtain workers' compensation insurance on the voluntary market with their injury prevention programs, thus reducing policyholder injuries, costs to the workers' compensation system, and the number of employers in the risk pool. House Bill 62 additionally established provisions to transfer the program to the Workers' Compensation Insurance Fund (the Fund) as the Facility ceased writing coverage. The initial Rejected Risk Program under the Facility was implemented by Commission rules §§165.1-165.5. With the transition of the program to the Fund as the insurer of last resort, §§165.6-165.9 were adopted by the Commission to allow initiation of the new program under the Fund and continuation of the original program under the Facility until all Facility policyholders had completed the program. Sections 165.1-165.5 were repealed effective May 1, 1996, to reflect completion of the program under the Facility. The Rejected Risk Program has helped achieve the goal of reducing the number of employers in the rejected risk pool who were identified for the injury prevention program from 2034 in 1992 to 350 in 1998. The success of the program is further indicated by the 37% reduction in injuries experienced by employers completing the program (measured by comparing the injury rate 12 months after completing the program to the injury rate 12 months prior to notification).

The proposed Chapter 165 rules (relating to the Rejected Risk Program), continue to make reference to the Extra-Hazardous Employer rules only to the extent of avoiding duplication of the Approved Professional Source Program which is required by both the Insurance Code and the Labor Code. The Commission proposes to repeal current §§165.6-165.9 and adopt new §§165.1-165.7 to provide continuity and logical rule numbering for the Rejected Risk Program rules and to separate these rules from the Extra-Hazardous Employer Program rules, except for references to §164.9 and §164.10 (relating to Approval of Professional Sources for Safety Consultations, and Removal From the List of Approved Professional Sources).

Proposed §165.1.

Proposed new §165.1(a), (b), and (c) retain the language of existing §165.6(a), (c) and (d), with an administrative correction to the mailing address. Subsection (b) of existing §165.6, addressing policyholders identified under both the Extra-Hazardous Employer Program and the Rejected Risk Program, is deleted. The proposed new Chapter 165 rules are designed to stand alone, except for references relating to the Approved Professional Source Program, as noted previously. The proposed new rule uses the word "policyholder" rather than "employer," where applicable, for consistency with the statute.

Proposed §165.2.

Proposed new §165.2 incorporates the safety consultation portions of existing §165.7(a) and (b). References to Chapter 164 have been removed and the language of those provisions have been incorporated into this section and §165.4 and §165.5. Proposed §165.2(a) only applies to policyholders that have not had an accident prevention plan developed and implemented in the last six months prior to notification. Proposed §165.2(b) provides instructions for those policyholders that have had a plan developed within the six month period described in subsection (a). Proposed §165.2(c) incorporates the provisions of existing §165.7(b). Section 165.2(d) incorporates the basic provisions of existing §165.7(c) but eliminates the option for the Fund to use Field Safety Representatives (FSR) that have not been qualified as Approved Professional Sources. This option was included in the current rule to ensure that the Fund had sufficient resources to conduct the free safety consultations being offered by the Fund. Because the Fund is now a well established entity, this provision is no longer necessary. Proposed §165.2(e) incorporates the basic requirements of existing §165.7(d), again eliminating reference to the FSR option. Additionally, rule terminology is updated to reflect current report titles and provisions referring to removal from the Approved Professional Source list are deleted because these criteria are included by reference to Chapter 164. Proposed §165.2(f) incorporates the provisions of existing §165.7(e), without those portions made unnecessary by elimination of the FSR provision. Proposed §165.2(g) incorporated the provisions of §165.7(a)(1) by reference to §164.3 and provides the authority for safety consultants to charge for their services if they elect to do so. The proposed new rule uses the word "policyholder" rather than "employer", where applicable, for consistency with the statute.

Proposed §165.3.

Proposed new §165.3 adds provisions for the formulation of an accident prevention plan referred to in existing §165.7(f). Proposed new §163.3 incorporates the language of §164.4, deleting the references to the exception for Fund FSRs because it is no longer needed, and aligning timelines to the provisions established by the Insurance Code. The proposed §165.3 uses the word "policyholder" rather than "employer", where applicable, for consistency with the statute.

Proposed §165.4.

Proposed new §165.4 includes provisions currently incorporated by reference in existing §165.7(a)(1) to §164.11. The language of §164.11 has been included in proposed new §165.4, so no incorporation by reference is necessary. Proposed new §165.4 instructs the policyholder that it may request that the division perform its safety consultation, that the request will be in writing on a form prescribed by the commission and that the form may be delivered to the division by mail, in person, or by telephonic document transfer. It also states that the form shall include the policyholder's name, address, and telephone number, the name of the contact person at the policyholder's place of business and the date the policyholder received their notice of identification as a Rejected Risk employer. The division is instructed to notify the requesting policyholder, within three working days of receipt of their request to have the division perform their safety consultation, to inform them that they have accepted or rejected their request.

Proposed §165.5.

Proposed new §165.5 includes provisions currently incorporated by reference in §165.7(a)(1) to §164.12. The language of §164.12 has been included in proposed §165.5 so no incorporation by reference is necessary. Proposed §165.5 informs the policyholder that they shall be required to reimburse the division for the services it provides when the policyholder requests the services pursuant to proposed new §165.4 and the division provides the consultation and formulates the accident prevention plan, when the division conducts a follow-up inspection of the policyholder's premises under proposed new §165.6, or when the division conducts an accident investigation at the policyholder's work site. Proposed new §165.5 also provides for the commission to bill the policyholder in accordance with the commission's approved fee schedule and provide the policyholder with an itemized statement each month. The rule also and instructs the policyholder that the payment is due 30 days after the billing date.

Proposed §165.6.

Proposed new §165.6 contains the provisions for the follow-up inspection contained in existing §165.8 with some changes. The purpose of the inspection is expanded to include ensuring the effectiveness of the accident prevention plan to meet program objectives. The provision referencing the Extra-Hazardous Employer Program and requirement that the inspection follow Chapter 164 criteria, is removed. Proposed new Chapter 165 criteria will be applicable to all inspections conducted under this chapter. The reference to penalties and sanctions for failure to comply with a commission order is expanded to include the Insurance Code which requires the inspection.

Proposal §165.7.

Proposed new §165.7 contains the provisions in existing §165.9, with only minor word changes for clarity. The proposed rule outlines report submission guidelines of 30 days from date of inspection, requires a statement of policyholder compliance or non-compliance with the plan, requires a list of those elements of the plan that were not in compliance, and the conditions under which the Commission will pursue an administrative violation.

Ed Buchanan, Finance Manager, has determined that for the first five-year period the proposed rules are in effect there will be no fiscal implications for state or local governments as a result of enforcing or administering the rule. The state or local governments as entities subject to these rules will continue to be involved in the program with the same cost factors encountered as with the current rules. The fiscal impact is attributable to requirements already imposed by the statute and existing rules, rather than the proposed new rules.

Local government and state government as a covered regulated entity will be impacted in the same manner as described later in this preamble for persons required to comply with the rule as proposed.

Mr. Buchanan has also determined that for each year of the first five years the rule as proposed is in effect the public benefits anticipated as a result of enforcing the rules will be a safer and healthier workplace for employees because of employers' participating in the program. Historically, employers participating in the program as previously administered have seen reductions in injuries of up to 37%, measured by comparing the injury rate 12 months after completing the program to the 12 months prior to identification. A reduced number of injuries should also result in reduced experience modifiers for employers and be reflected in lower future premiums as an insured in the voluntary market, as opposed to obtaining insurance from the Fund as the insurer of last resort.

There will be no additional anticipated economic costs to persons who are required to comply with the rules as proposed. Policyholders involved in the Rejected Risk Program will experience the same cost factors under the proposed new rules as they currently experience under the existing rules. Program costs are expected to be offset by a reduction in injuries and the associated costs. The fiscal impact is attributable to requirements already imposed by the statute and existing rules, rather than the new rules.

The proposed new rules will have no adverse economic effect on small businesses. An analysis and comparison of the costs of compliance for small businesses with the cost of compliance for large businesses does not demonstrate any increase for either entity.

Comments on the proposal or requests for public hearing must be submitted to Donna Davila by March 22, 1999, at Office of the General Counsel, Mailstop #4-D, Texas Workers' Compensation Commission, Southfield Building, 4000 South IH-35, Austin, Texas, 78704-7491. The rule as adopted may be revised from the rule as proposed.