Part 1. TEXAS DEPARTMENT OF INSURANCE

Chapter 3. LIFE, ACCIDENT AND HEALTH INSURANCE AND ANNUITIES

Subchapter CC. STANDARDS FOR ACCELERATION-OF-LIFE-INSURANCE BENEFITS FOR INDIVIDUAL AND GROUP POLICIES AND RIDERS

28 TAC §§3.4302, 3.4303, 3.4307 - 3.4311, 3.4313

The Texas Department of Insurance proposes amendments to §§3.4302, 3.4303, 3.4307 - 3.4311, and 3.4313, relating to the standards for acceleration-of-life-insurance benefits for individual and group policies and riders. The proposed amendments are necessary to delete obsolete statutory and internal Texas Administrative Code references and to correct minor nonsubstantive errors in the existing rules. The proposal does not make any substantive changes.

Insurance Code Article 3.50-6, which is referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003. Article 3.50-6 was re-adopted as §§1111.051 - 1111.053 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.70-8, which is referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 3.70-8 was re-adopted as §§1201.003, 1201.059, 1201.105, 1351.002, and 1451.051 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.44a, which is referenced in §3.4307 and §3.3409, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003. Article 3.44a was re-adopted as Chapter 1105 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.28, which is referenced in §3.4310, was repealed in the nonsubstantive Insurance Code revision, Acts 2005, 79th Legislature, Chapter 727, §18(a)(3), effective April 1, 2007. Article 3.28 was re-adopted as §§425.051 - 425.070 in the same nonsubstantive Insurance Code revision. Insurance Code Article 21.21, which is referenced in §3.4311, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 21.21 was re-adopted as Chapter 541 in the same nonsubstantive Insurance Code revision. The proposal also amends in §3.4311(a) the reference to the title of Chapter 541 to correctly reflect its title as "Unfair Methods of Competition and Unfair or Deceptive Acts or Practices."

Amendments are also proposed to correct obsolete internal Texas Administrative Code references. Existing §3.4302(b)(2)(B) in the definition of the term "Long-term care illness" references home health care services "as defined and provided consistently with §3.3804(b)(13) and (14)." Amendments were adopted to §3.3804, effective January 6, 2002 (26 TexReg 10886), to move paragraphs (13) and (14) to paragraphs (15) and (16). The proposed amendment to §3.4302(b)(2)(B) deletes the obsolete references to paragraphs (13) and (14) and uses the agency's general citation style, which references Long-term care illness "as defined and provided consistently with §3.3804(b)." Existing §3.4313(a) references the definition of an "invitation to contract" as defined in 28 TAC §21.114. Amendments were adopted to §21.114, effective December 9, 2007 (32 TexReg 8830), to delete the definition of "invitation to contract" and to §21.102 to add the definition of "invitation to contract."

The proposal also makes changes to correct nonsubstantive errors in the existing rule. The title of the subchapter is amended to include hyphens in the phrase "Acceleration-of-Life-Insurance" to be consistent with the phrase as used throughout the subchapter. Existing §3.4302(b)(2)(A) in the definition of the term "Long-term care illness" references "§3.3812 of this title (relating to Policy Definition of Provider)." An amendment is proposed to the reference to the section title to correctly reflect its title as "Policy Standards for Provider." The proposal amends §3.4303(b) to include the word "the" before the phrase "Insurance Code" for consistency with agency style and makes changes to punctuation to correctly reflect the title of §3.4302 as "Acceleration-of-Life-Insurance: Scope of Benefits" in the reference to that section. The proposal amends §§3.4307, 3.4309, 3.4310, and 3.4311 to delete unnecessary commas. Existing §3.4308 does not include a reference to the complete title of §3.4306(3), and the proposal amends the reference to the §3.4306 title to correctly reflect its title as "Methods for Determining Benefits and Allowable Charges and Fees."

FISCAL NOTE. Jennifer Ahrens, Senior Associate Commissioner, Life, Health and Licensing Division, has determined that for each year of the first five years the proposal will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the proposal. There will be no measurable effect on local employment or the local economy as a result of the proposal.

PUBLIC BENEFIT/COST NOTE. Ms. Ahrens has determined that for each year of the first five years the proposal is in effect, the anticipated public benefit will be updated statutory and rule references and correction of other nonsubstantive errors in the existing rules that will result in increased clarity and readability of the rules. The proposed amendments are nonsubstantive and do not impose any additional requirements on any individual or entity, regardless of size, required to comply with the existing sections as amended by the proposal. Therefore, there are no costs required to comply with the proposal.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. As required by the Government Code §2006.002(c), the Department has determined that the proposal will not have an adverse economic effect on small or micro-businesses. The proposed amendments are nonsubstantive and do not impose any additional requirements on any individual or entity, including small and micro businesses, required to comply with the existing sections as amended by the proposal. Therefore, there are no costs required to comply with the proposal for any small or micro business. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.

TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

REQUEST FOR PUBLIC COMMENT. Because the proposed amendments do not make any substantive changes and relate only to deleting obsolete statutory and internal Texas Administrative Code references and correcting minor nonsubstantive errors, written comments on the proposal should be related only to the proposed amendments and not to any requested substantive changes to the sections. The Department will not consider comments requesting substantive changes to the sections. The Department, however, will be proposing substantive amendments to the standards for acceleration-of-life-insurance benefits for individual and group policies and riders later this year, and interested parties will have the opportunity to submit comments on proposed substantive changes at that time.

To be considered, any comments on this proposal must be submitted no later than 5:00 p.m. on May 27, 2008, to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Jennifer Ahrens, Senior Associate Commissioner, Life, Health and Licensing Division, Mail Code 107-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

STATUTORY AUTHORITY. The amendments are proposed under the Insurance Code §§1111.053, 1701.060, and 36.001. Section 1111.053 authorizes the Commissioner to adopt rules to implement Insurance Code Chapter 1111, Subchapter B, Accelerated Term Life Insurance Benefits. Section 1701.060 authorizes the Commissioner to adopt rules necessary to implement Chapter 1701, Policy Forms, including rules that establish procedures and criteria under which each type of form submitted to the department under Chapter 1701 will be reviewed and approved by the commissioner or exempted under §1701.005(b), and procedures and criteria under which particular types of forms designated by the commissioner may be given a summary review and approval, if considered appropriate by the commissioner, to expedite review and approval of those forms. Section 1701.002 specifies that Chapter 1701 is applicable to a policy, contract, or certificate of accident or health insurance, medical or surgical insurance, life or term insurance, including group life or term insurance, endowment insurance, industrial life insurance, fraternal benefit insurance, an annuity or endowment contract, an application attached or required to be attached to the policy, contract or certificate, or a rider or endorsement to be attached to, printed on, or used in connection with the policy, contract, or certificate. Section 36.001 authorizes the Commissioner of Insurance to adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code §§1111.053, 1701.060, 1111.053, 1701.060, and Chapter 541.

§3.4302.Acceleration-of-Life-Insurance: Scope of Benefits.

(a) (No change.)

(b) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) (No change.)

(2) Long-term care illness--An illness or physical condition that results in the inability to perform the activities of daily living or the substantial and material duties of any occupation. Evidence of a long-term care illness includes, but is not limited to, illnesses or conditions which require:

(A) confinement in a convalescent nursing home, residential care or intermediate nursing facility, defined consistently with the provisions of §3.3812 of this title (relating to Policy Standards for [Definition of] Provider); or

(B) adult day care services, as defined and provided consistently with §3.3804(b)[(3) and (4)] of this title (relating to Definitions), and home health care services, as defined and provided consistently with §3.3804(b)[ (13) and (14)] of this title.

(3) - (4) (No change.)

(c) - (f) (No change.)

§3.4303.Required Policy Definitions; Evidence of Total and Permanent Disability.

(a) (No change.)

(b) Such illness, condition, care, or confinement is evidence of total and permanent disability for purposes of meeting the standards for providing acceleration-of-life-insurance benefits set forth in the Insurance Code, §1111.052 [ Articles 3.50-6] and §1201.003 [3.70-8], and §3.4302 of this title (relating to Acceleration-of-Life-Insurance: [Acceleration of Life Insurance;] Scope of Benefits).

§3.4307.Limitations on Reduction of Cash Values.

Except as otherwise authorized under the Lien Method for determining benefits under §3.4306(3) of this title (relating to Methods for Determining Benefits and Allowable Charges and Fees), if the cash values are reduced by the acceleration-of-life-insurance benefit, related charges and interest, the reduction shall not be unjust and shall not exceed an amount equal to the pro rata portion of the cash value associated with the death benefit used in providing the acceleration-of-life-insurance benefit. Future cash values shall not be less than the minimum cash values required by the Insurance Code Chapter 1105[,Article 3.44a ], for the reduced future guaranteed death benefits. These minimum cash values are equal to the present value of the reduced future guaranteed benefits less the present value of future adjusted premiums, decreased by the amount of any indebtedness, including liens, under the life insurance contract. The mortality and interest used in calculating the minimum cash values will be as provided in the Insurance Code Chapter 1105[, Article 3.44a], for life insurance coverage, disregarding any acceleration-of-life-insurance benefits.

§3.4308.Pro Rata Reduction of Loan upon Acceleration of Benefits.

Unless the insurer is using the Lien Method for determining benefits under §3.4306(3) of this title (relating to Methods for Determining Benefits and Allowable Charges and Fees), if there is a loan on the life insurance contract, the insurer may deduct up to a pro rata portion of the loan from the amount of the acceleration-of-life-insurance benefit.

§3.4309.Effect of Acceleration of Benefits on Nonforfeiture Calculations.

An acceleration-of-life-insurance benefit provision or rider shall be disregarded in ascertaining nonforfeiture benefits under the Insurance Code Chapter 1105[, Article 3.44a].

§3.4310.Calculation of Reserves.

(a) Reserves for an acceleration-of-life-insurance benefit shall be based on tables of disablement, morbidity, or mortality appropriate for determining liability for the benefits provided. Such disablement or morbidity tables shall be certified as appropriate by a member of the American Academy of Actuaries and approved by the Texas Department of Insurance under the Insurance Code §425.058(k)[, Article 3.28, §§(3)(g)] and §425.069 [11]. Reserves for the death benefits or other supplementary benefits provided by a life insurance contract which includes an acceleration-of-life-insurance benefit shall be calculated disregarding such benefit, using mortality and interest rates as provided in the Insurance Code Chapter425[, Article 3.28 ]. The basis of reserves for any life insurance contract which contains an acceleration-of-life-insurance benefit provision shall accompany the filing of the contract with the Texas Department of Insurance.

(b) (No change.)

§3.4311.Unfair, Discriminatory or Deceptive Practices Prohibited.

(a) Acceleration-of-life-insurance benefit provisions are subject to the Insurance Code Chapter 541[, Article 21.21] (concerning Unfair Methods of Competition and Unfair or Deceptive Acts or Practices) and rules promulgated under Chapter 541 [ Article 21.21].

(b) (No change.)

§3.4313.Notice and Disclosure Requirements for Marketing Materials.

(a) Any "invitation to contract," as defined in §21.102 [§21.114] of this title (relating to Scope [ Rules Pertaining Specifically to Life Insurance Advertising]), used in the marketing, solicitation or sale of a life insurance contract containing an acceleration-of-life-insurance provision shall clearly and concisely disclose the following:

(1) - (3) (No change.)

(b) (No change.)

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 14, 2008.

TRD-200801953

Gene C. Jarmon

General Counsel and Chief Clerk

Texas Department of Insurance

Earliest possible date of adoption: May 25, 2008

For further information, please call: (512) 463-6327

Chapter 140. DISPUTE RESOLUTION--GENERAL PROVISIONS

28 TAC §§140.6 - 140.8

The Texas Department of Insurance (Department), Division of Workers' Compensation (Division) proposes new §140.6 (relating to Subclaimant Status: Establishment, Rights, and Procedures), new §140.7 (relating to Health Care Insurer Reimbursement Under Labor Code §409.0091), and new §140.8 (relating to Procedures for Health Care Insurers to Pursue Subclaims).

The proposed sections are necessary to implement the statutory provisions of HB 724 enacted by the 80th Legislature, Regular Session, 2007. HB 724 created new Labor Code §409.0091, which authorizes "health care insurers" to seek reimbursement from a workers' compensation insurance carrier for health care paid by the health care insurer for work related, compensable injuries.

The proposed sections do not address the reimbursement provisions of certified workers' compensation health care networks. Generally, those provisions are addressed in Chapter 1305 of the Texas Insurance Code and related Department rules.

Labor Code §409.0091 specifies some procedures and requires the Commissioner of Insurance and the Commissioner of Workers' Compensation to adopt or modify rules as necessary to: (1) allow a "health care insurer" access as a subclaimant to the appropriate dispute resolution process; (2) recognize the status of a subclaimant as a party to a dispute; (3) ensure that a workers' compensation insurance carrier is not penalized for denying payment in order to get additional information; (4) specify the process by which an employee who has paid for health care services may seek reimbursement; and (5) clarify the processes required by, fulfill the purpose of, and assist the parties in the proper adjudication of subclaims under §409.0091.

Labor Code §409.009 is a general provision establishing the basic requirements for subclaim status and applies to all subclaimants. Prior to 2007, there were no distinctions among subclaimants or classes of subclaimants. House Bill 724, in 2007, created Labor Code §409.0091, which established specific rules and procedures for one class of subclaimants: Health care insurers who have claims based on data matches with the Division.

Proposed §140.6 establishes the procedures that apply to all subclaimants, including health care insurers. Proposed §140.6(a) specifies that proposed §140.6 applies to a subclaim under Labor Code §409.009. Proposed §140.6(b) defines the term "health care insurer." Proposed §140.6(c) specifies that a subclaimant is a party to a claim concerning workers' compensation benefits. Proposed §140.6(d) specifies a subclaimant's rights in relation to the employee and the circumstances in which a subclaimant may pursue a claim for reimbursement of a medical benefit without the participation of the employee. Proposed §140.6(e) provides that a health care insurer must pursue a claim for reimbursement of medical benefits and medical dispute resolution under proposed §140.8. All other subclaimants must pursue a claim for reimbursement of medical benefits and medical dispute resolution under Chapters 133 and 134 of this title (relating to General Medical Provisions and Benefits-Guidelines for Medical Services, Charges, and Payments). Proposed §140.6(f) provides for a subclaimant to pursue a contested case hearing under Chapters 140-143 of this title (relating to Dispute Resolution).

Proposed §140.7 establishes provisions that are specific to health care insurers when seeking reimbursement from a workers' compensation insurance carrier for health care paid by the health care insurer for work related, compensable injuries. Proposed §140.7(a) defines the term "health care insurer." Proposed §140.7(b) specifies that this section only applies to claims by a health care insurer based on information received under Labor Code §402.084(c-3). Proposed §140.7(c) provides for the reimbursement of health care insurers for medical benefits provided to or paid on behalf of an employee with a compensable workers' compensation claim in accordance with Labor Code §409.0091, and proposed §140.7, and §140.8. Proposed §140.7(d) specifies that it is not a defense to a subclaim by a health care insurer under Labor Code §409.0091 that: (1) the health care insurer has not sought reimbursement from a health care provider or the health care insurer's insured; (2) the health care insurer or the health care provider did not request preauthorization under §134.600 (relating to Preauthorization, Concurrent Review, and Voluntary Certification of Health Care) or Labor Code §413.014; or, (3) the health care provider did not bill the workers' compensation insurance carrier, as provided by §408.027, before the 95th day after the date the health care for which the health care insurer paid was provided.

Proposed §140.8 establishes the process for health care insurers seeking reimbursement from a workers' compensation insurance carrier for health care paid by the health care insurer for work related, compensable injuries when pursuing a claim for reimbursement of medical benefits under Labor Code §409.009 or §409.0091. Proposed §140.8(a) defines the term "health care insurer." Proposed §140.8(b)(1) sets forth the procedure for filing a reimbursement request with the workers' compensation carrier. The form used for the reimbursement request must be the form prescribed by the Division and must contain all the required elements listed on the form. Proposed §140.8(b)(1) requires the health care insurer to provide a notice of the reimbursement request to the employee and the health care provider that performed the services that are the subject of the reimbursement request. Proposed §140.8(c) sets forth the deadlines for responding to the request for reimbursement and establishes criteria for the workers' compensation carrier when requesting additional information from the health care insurer for processing the reimbursement request. Any request by the workers' compensation carrier for additional information shall be in writing, be relevant and necessary for the resolution of the request, and be for information that is contained in or in the process of being incorporated into the employee's medical billing record maintained by the health care insurer. A workers' compensation carrier shall not be held responsible or otherwise penalized for the costs of obtaining additional information if the workers' compensation carrier denies payment in order to move to dispute resolution to obtain additional information to process the request. Proposed §140.8(c) also establishes that it is the health care insurer's obligation to furnish its agents with any information necessary for the resolution of a reimbursement request. The Division considers any medical billing information or documentation possessed by the health care insurer or one of its agents to be simultaneously possessed by the health care insurer and all of its agents.

Proposed §140.8(d) provides that a workers' compensation carrier must either accept, reduce, or deny a reimbursement request and provides the procedures to follow with each response. Proposed §140.8(e) requires a health care provider to refund to the employee all payments received from the employee for care relating to the claim within 45 days of receipt of the notice that the claim is compensable. Proposed §140.8(f) sets forth the procedures for filing notice of subclaimant status if the reimbursement request is not accepted in its entirety. Proposed §140.8(g) sets forth the procedures for filing a request for dispute resolution, based on the reasons for the denial of the reimbursement request. Proposed §140.8(h) sets forth the procedures when multiple entities seek reimbursement for the same services.

Bob Lang, Deputy Commissioner of Hearings, Division of Workers' Compensation, has determined that for each year of the first five years the proposed rules will be in effect there will be no fiscal impact on state or local government as a result of enforcing or administering the proposed rules. The cost of enforcing or administering these proposed rules is a result of legislative amendments to Labor Code §409.009 and §409.0091. These proposed rules do not impose any additional costs independently of the legislation. The Division may experience an increase in the number of dispute resolution proceedings. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Mr. Lang has also determined that for each year of the first five years the proposed rules will be in effect the public benefit anticipated as a result of enforcing the rules will be the clarification of procedures for a subclaimant to request reimbursement from a workers' compensation carrier pursuant to the Labor Code and procedures for resolving disputes that arise from a request for reimbursement. Also, employees will be refunded any money paid out of pocket (e.g., deductibles, co-pays) for health care services paid by the employee that should have been paid by a workers' compensation carrier.

There will be economic costs to health care insurers who choose to seek reimbursement. Proposed §140.8(b)(2) requires the health care insurer to give notice of the reimbursement request to the employee and the health care provider that performed the services that are subject to the reimbursement request.

There will be economic costs to workers' compensation carriers. Workers' compensation carriers will experience an increase in associated costs for evaluating and responding to claims from group health insurers for reimbursement. The Division anticipates that when the reimbursement request form is used as required by the proposed rule, the costs associated with evaluating and responding to claims will be consistent with the costs currently associated with processing a medical bill from health care providers. These costs will vary by individual workers' compensation carrier, based on their own operations and business practices.

Workers' compensation carriers will also experience costs associated with the notification requirements established by the proposed rules. Proposed §140.8(d)(1)(E) requires the workers' compensation carrier to give notice of its response to the reimbursement request to the employee and the health care provider that performed the services that are the subject of the reimbursement request. Section 140.8(d)(3) also requires the workers' compensation carrier to provide an explanation of benefits to the health care insurer and all health care provider(s) associated with the reimbursement request. The probable costs to workers' compensation carriers to comply with these requirements in the proposed rules will result from the printing and mailing of the notices specified in proposed §140.8(d)(1)(E) and mailing of the explanation of benefits in proposed §140.8(d)(3).

The Division has developed estimated costs for compliance with the proposed rules based on costs that have been previously used by the Division for similar requirements. In estimating the costs for health care insurers and workers' compensation carriers in complying with their respective duties under proposed §§140.8(b)(2), 140.8(d)(1)(E), and 140.8(d)(3), the Division assumes there will be: (i) a single printed page; (ii) a mailing envelope; and (iii) required mailing postage. The estimates used in the Division's analysis assume that a printed page costs $0.05, an envelope costs $0.05, and postage for one to three pages of paper is currently $0.41, but will increase to $.042 on May 12, 2008. Individual health care insurers and workers' compensation carriers that identify, based on their own operations, differing costs for those cost components will be able to calculate their particular costs using the Division's cost analysis approach.

Health care providers will experience costs associated with proposed §140.8(e) which requires health care providers to refund to the employee any amounts paid to the health care provider by the employee for the services that were reimbursed by the workers' compensation carrier. The costs a health care provider will experience as a result of this provision will be equal to the amount paid to the provider by the employee. This amount will vary based on the required enrollee deductibles or copays associated with the employee's health insurance plan. The administrative costs a health care provider will experience as a result of determining the refund amount and processing the refund will be consistent with the costs already being experienced by the health care provider when processing refunds to any of the health care provider's patients. These administrative costs will vary by individual health care provider, based on their own operations and business practices. The proposed rule will only be applicable to health care providers that are ultimately deemed to have provided services to workers pursuant to the Texas workers' compensation system. Thus, this proposed rule will have no adverse economic effect on small business health care providers that do not provide services to workers pursuant to the Texas workers' compensation system.

As required by the Government Code §2006.002(c), the Division has determined that the proposal may have an adverse economic effect on approximately 27,163 small or micro-businesses who may be required to comply with the proposed rules. This number includes approximately 27,000 health care providers, and 163 small business carriers. The number of small business health care providers comes from Texas Workforce Commission data for the second quarter of 2007. The number of small business carriers comes from current Division records.

Proposed §140.8(e) requires health care providers to refund to the employee any payments made by the employee to the health care provider for that care. The health care provider will incur costs associated with refunding the employee any payments made by the employee. If the amount reimbursed to the health care insurer by the workers' compensation carrier is less than the amount set by the applicable Division fee guideline, the health care provider may request reimbursement from the workers' compensation insurance carrier pursuant to §140.8(d)(1)(F) to offset any amounts refunded to the employee. The proposed rule will only be applicable to health care providers that are ultimately deemed to have provided services to workers pursuant to the Texas workers' compensation system. Thus, this proposed rule will have no adverse economic effect on small business health care providers that do not provide services to workers pursuant to the Texas workers' compensation system.

The cost of compliance with the proposal will not vary between large businesses and small or micro-businesses, and the Division's cost analysis and resulting estimated costs in the Public Benefit/Cost Note portion of this proposal is equally applicable to small or micro-businesses. The total cost of compliance to large businesses and small or micro-businesses is not dependent upon the size of the business, but rather is dependent upon the specific medical bills to be reimbursed and the businesses practices of the particular entity.

The probable cost to small or micro-business insurers required to comply with the proposed rules will result from the printing and mailing of the notices specified in the proposal. The cost of compliance with the proposal will not vary for each required notice between large business and small or micro-businesses, and the Division's cost analysis and resulting estimated costs for workers' compensation carriers in the Public Benefit/Cost Note portion of this proposal is equally applicable to small or micro-businesses. The total cost to large business and small or micro-business insurers for printing and mailing notices required by this proposal is not dependent upon the size of the insurer, but rather is dependent upon the individual insurer's particular costs for each cost component, the number of transactions requiring notices, the number of pages used in printing the notices, and whether the notices are printed one-sided or two-sided.

REGULATORY FLEXIBILITY ANALYSIS

Labor Code §409.0091 requires that the entire payment stream for medical treatment under health insurance be replaced with the payment stream for medical treatment under workers' compensation for the class of cases covered by the statute.

The statute requires workers' compensation carriers to adjust claims presented to them by health care insurers and to provide certain notices. The proposed rules also require workers' compensation carriers to provide additional notices to health care providers and employees.

The rule proposal requires health care insurers to provide notice to health care providers and employees who are the subject of the reimbursement request.

The statute provides for the employee to get reimbursed for health care services the employee paid for personally. The rule proposal provides for the health care provider to reimburse the employee for payments received for medical services.

In considering which party, the workers' compensation carrier, the health care insurer, or the health care provider, was to reimburse the employee and which parties were to provide the necessary notices, the other regulatory methods considered by the Division to accomplish the objectives of the proposal and to minimize any adverse impact on the small and micro businesses affected included (i) not adopting the proposed regulation, (ii) imposing the requirements on a party other than the one chosen, and (iii) exempting small and micro businesses from compliance with these provisions.

Not adopting the proposed regulation. The Division rejected this approach because it would not accomplish the objective of the statute or the rule proposal and would not be consistent with the intent of the Legislature. The primary objectives of the proposed rule were to comply with the recently enacted requirements of Labor Code §409.0091(o) which provides that the Commissioner of Workers' Compensation and the Commissioner of Insurance shall amend or adopt rules to specify the process by which an employee who has paid for health care services described by §408.027(d) may seek reimbursement and to clarify the billing and reimbursement processes for health care insurers.

Imposing the requirements on a party other than the one chosen. The Division rejected this approach because the requirements were either imposed by statute or were imposed on the most logical party to do them. The statute requires the workers' compensation carriers to process the reimbursement requests. The health care insurer is the most logical party to provide notification of the reimbursement request to the health care providers and employees that are the subject of the reimbursement request because the health care insurer knows who the provider(s) and employee are at the time the health care insurer submits the reimbursement request. The health care provider is the most logical party to reimburse the employee for any money paid out of pocket because the health care provider directly received the payment and is in the best position to know the amount the employee actually paid. In addition, workers' compensation carriers are the most logical party to provide health care providers and employees with copies of the response to the reimbursement request and copies of the explanation of benefits.

Exempting the small or micro business from compliance altogether. The Division rejected this approach because the statute requires compliance from all organizations regardless of size and does not authorize the Division to exempt anyone from compliance.

The Division has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on May 28, 2008. Comments may be submitted via the Internet through the Division's Internet website at http://www.tdi.state.tx.us/rules/proposed rules/toc.html or by mailing or delivering your comments to Victoria Ortega, Legal Services, MS-4D, Division of Workers' Compensation, Texas Department of Insurance, 7551 Metro Center Drive, Suite 100, Austin, Texas 78744.

The Commissioners will consider the proposed new sections in a public hearing at 1:30 p.m. on May 28, 2008, in Room 1.107A, 7551 Metro Center Drive, Austin, Texas 78744. Written and oral comments presented at the hearing will be considered.

These proposed rules are proposed under the Labor Code §§402.00111, 402.061, 402.084, 408.027, 409.009, 409.0091, 410.025, 413.031, 413.0311, 413.032 and 413.053. Section 402.00111 provides that the Commissioner of Workers' Compensation shall exercise all executive authority, including rulemaking authority, under the Labor Code and other laws of this state. Section 402.061 provides the Commissioner of Workers' Compensation the authority to adopt rules as necessary to implement and enforce the Texas Workers' Compensation Act. Section 402.084 provides for the release of employee claim information to specified persons. Section 408.027 provides for the payment of claims of a health care provider. Section 409.009 sets forth the qualifications to file as a subclaimant. Section 409.0091 authorizes the Commissioner of Insurance and the Commissioner of Workers' Compensation to adopt rules to clarify the processes required by, fulfill the purpose of, and assist the parties in the proper adjudication of subclaims under §409.0091. Section 410.025 authorizes the Commissioner of Workers' Compensation to establish the time frame in which a benefit review conference must be scheduled. Section 413.031 provides for medical dispute resolution and authorizes the Commissioner of Workers' Compensation to adopt rules to notify claimants of their rights and the process for disputes in which an employee has paid for medical services and seeks reimbursement. Section 413.0311 provides for the review of certain medical disputes. Section 413.032 sets forth the elements of a decision of an independent review organization. Section 413.053 authorizes the Commissioner of Workers' Compensation to establish form and content standards of reporting and billing. The following statutes are affected by this proposal: Labor Code §§409.009, 409.0091, 402.084, 413.014 and 408.027; Labor Code Chapters 133, 134, 140, 141, 142, and 143, and Labor Code Title 5.

§140.6.Subclaimant Status: Establishment, Rights, and Procedures.

(a) Applicability. This section is applicable to a subclaim pursued under Labor Code §409.009, including a subclaim pursued by a health care insurer.

(b) Health care insurer. "Health care insurer" means an insurance carrier, as defined in Labor Code §402.084(c-1), and an authorized representative of an insurance carrier.

(c) Party status. A subclaimant is a party to a claim concerning workers' compensation benefits.

(d) Rights in Relation to Employee.

(1) A subclaimant may file and pursue a claim for reimbursement of a medical benefit that has been provided to an injured employee, and is entitled to appropriate dispute resolution in accordance with the Texas Workers' Compensation Act (Act) and Division of Workers' Compensation (Division) rules.

(2) A subclaimant may pursue a claim for reimbursement of a medical benefit that has been provided to an injured employee and participate in the dispute resolution process without the participation of the employee if:

(A) there is no prior written agreement between the employee and the workers' compensation carrier or no final decision by the Division on the issue in dispute;

(B) the workers' compensation carrier has denied the entitlement to benefits under the Act and Division rules; and

(C) the employee is not pursuing dispute resolution to establish the employee's entitlement to benefits with reasonable diligence,

(3) At a contested case hearing without the participation of the employee, the subclaimant must show, in addition to other facts:

(A) it has contacted the employee and the employee is not pursuing the dispute with reasonable diligence, or

(B) it has been unable to contact the employee through the exercise of reasonable diligence.

(e) Claims for Reimbursement of Medical Benefits.

(1) Subclaimants, except for health care insurers, must pursue a claim for reimbursement of medical benefits and participate in medical dispute resolution in the same manner as an employee or in the same manner as a health care provider, as appropriate, under Chapters 133 and 134 of this title (relating to General Medical Provisions and Benefits-Guidelines for Medical Services, Charges and Payments).

(2) A health care insurer subclaimant must pursue a claim for reimbursement of medical benefits in accordance with the provisions of §140.8 of this title (relating to Procedures for Health Care Insurers to Pursue Subclaims). If medical dispute resolution is necessary, a health care insurer subclaimant must pursue medical dispute resolution in accordance with the provisions of §140.8 of this title.

(f) Contested Case Hearing. A subclaimant may pursue a contested case hearing under the provisions of Chapters 140 - 143 of this title (relating to Dispute Resolution).

§140.7.Health Care Insurer Reimbursement under Labor Code §409.0091.

(a) Health Care Insurer. "Health care insurer" means an insurance carrier, as defined in Labor Code §402.084(c-1), and an authorized representative of an insurance carrier.

(b) This section applies only to claims by a health care insurer based on information received under Labor Code §402.084(c-3).

(c) Reimbursement of Health Care Insurers. A health care insurer may be reimbursed for medical benefits provided to or paid on behalf of an employee with a compensable workers' compensation claim in accordance with Labor Code §409.0091, the procedures of §140.8 of this title (relating to Procedures for Health Care Insurers to Pursue Subclaims), and this section.

(d) A workers' compensation carrier shall not deny a reimbursement request under Labor Code §409.0091 from a health care insurer because:

(1) the health care insurer has not sought reimbursement from the health care provider or the health care insurer's insured;

(2) the health care insurer or the health care provider did not request preauthorization under §134.600 (relating to Preauthorization, Concurrent Review, and Voluntary Certification of Health Care) or Labor Code §413.014; or

(3) the health care provider did not bill the workers' compensation carrier, as provided by Labor Code §408.027, before the 95th day after the date the health care for which the health care insurer paid was provided.

§140.8Procedures for Health Care Insurers to Pursue Reimbursement of Medical Benefits.

(a) Health Care Insurer. "Health care insurer" means an insurance carrier, as defined in Labor Code §402.084(c-1), and an authorized representative of an insurance carrier.

(b) Request to Workers' Compensation Carrier. A health care insurer seeking reimbursement must first file a reimbursement request with the workers' compensation carrier.

(1) Form. The request must be in the form/format and manner prescribed by the Division of Workers' Compensation (Division) and must contain all the required elements listed on the form.

(2) Notice. The health care insurer must give notice of the request to the employee and the health care provider that performed the services that are the subject of the reimbursement request. The notice shall include a copy of the reimbursement request and an explanation that the health care insurer is seeking reimbursement for medical care costs.

(c) Deadlines for Response to Reimbursement Request to the Workers' Compensation Carrier.

(1) 90 Day Response Deadline. The workers' compensation carrier must respond to a reimbursement request under this section in writing not later than the 90th day after the date the reimbursement request was first received, unless additional information is requested, pursuant to paragraph (2) of this subsection.

(2) Request for Additional Information. The workers' compensation carrier may request additional information from the health care insurer if there is not sufficient information to substantiate the claim. The health care insurer has 30 days after receiving the request for more information to provide the information requested to the workers' compensation carrier. Any request for additional information shall be in writing, be relevant and necessary for the resolution of the request. A request for medical information must be for information that is contained in or in the process of being incorporated into the employee's medical billing record maintained by the health care insurer. A workers' compensation carrier shall not be held responsible or otherwise penalized for the costs of obtaining additional information if the workers' compensation carrier denies payment in order to move to dispute resolution to obtain additional information to process the request. It is the health care insurer's obligation to furnish its agents with any information necessary for the resolution of a reimbursement request. The Division considers any medical billing information or documentation possessed by the health care insurer or one of its agents to be simultaneously possessed by the health care insurer and all of its agents.

(3) 120 Day Response Deadline. If the workers' compensation carrier has requested additional information from the health care insurer pursuant to paragraph (2) of this subsection, the workers' compensation carrier must respond in writing to the health care insurer's reimbursement request not later than the 120th day after the date the reimbursement request was first received, unless otherwise provided by mutual agreement.

(d) Response to a Reimbursement Request. The workers' compensation carrier must respond to a reimbursement request by either paying, reducing or denying payment.

(1) Paying or Reducing Payment.

(A) The workers' compensation carrier shall pay the health care insurer the lesser of:

(i) the amount payable under the applicable Division fee guideline as of the date of service; or

(ii) the actual amount paid by the health care insurer.

(B) If No Fee Guideline. In the absence of a Division fee guideline for a specific service paid, the amount per service paid by the health care insurer shall be considered in determining a fair and reasonable payment pursuant to §134.1 of this title (relating to Medical Reimbursement).

(C) Interest. The health care insurer may not recover interest as a part of the payable amount.

(D) Previous Payments. The workers' compensation carrier shall reduce any reimbursable amount by any payments the workers' compensation carrier previously made to the same health care provider for the provision of the same health care on the same dates of service. In making such a reduction in reimbursement, the workers' compensation carrier shall provide evidence of the previous payments made to the health care provider.

(E) Notice to Employee and Health Care Provider. The workers' compensation carrier must give notice of its response to the reimbursement request to the employee and the health care provider that performed the services that are the subject of the reimbursement request. The notice shall include an explanation that the claim is compensable and that the health care provider must reimburse the employee for any amounts paid to the health care provider by the employee.

(F) The health care provider may submit a reimbursement request to the workers' compensation carrier for any money owed under Division fee guidelines for the medical services rendered on a compensable claim and is entitled to dispute resolution under §133.307 of this title (relating to MDR of Fee Disputes). The workers' compensation carrier is liable for full payment in accordance with Division fee guidelines and applicable rules for the medical services rendered on a compensable claim.

(2) Denial of the Reimbursement Request. The workers' compensation carrier must provide sufficient explanation regarding the basis for a denial of the reimbursement request.

(3) Explanation of Benefits. The workers' compensation carrier must provide the health care insurer, all health care providers, and the employee an explanation of benefits (EOB) in the form and manner prescribed by the Division;

(e) Reimbursement of Employee. If the employee's medical care costs are reimbursable under Title 5 of the Labor Code, a health care provider must refund to the employee any payments made by the employee to the health care provider, including but not limited to, copays and deductibles. Reimbursement must be made within 45 days of receipt of the notice that the claim is compensable.

(f) Filing Notice of Subclaimant Status.

(1) 120 Day Deadline. A health care insurer must file a written notice of subclaimant status with the Division not later than the 120th day after a workers' compensation carrier fails to respond to a health care insurer's reimbursement request or reduces or denies the requested reimbursement amount.

(2) Location for Filing Notice. The notice may be filed with the Division of Workers' Compensation at any local Division field office or at the Division's central office in Austin, Texas.

(3) One Employee Per Notice. A health care insurer must file separate notices for each individual employee in which the health care insurer seeks subclaimant status.

(4) One Notice Per Employee Date of Injury. If an individual employee has multiple claims based on different dates of injury, the health care insurer must file a separate notice for each date of injury for which medical benefits were provided.

(5) Form. The notice of subclaimant status must be in the form and manner prescribed by the Division.

(g) Request for Dispute Resolution. The rules applicable to dispute resolution vary according to the reason for denial of reimbursement. Disputes regarding extent of injury, liability, or medical necessity must be resolved prior to pursuing a medical fee dispute. A request for medical dispute resolution may be filed in lieu of a request for subclaimant status, and shall be considered a request for subclaimant status for purposes of this section.

(1) Claim or Treatment Not Compensable.

(A) A health care insurer must file a request for a benefit review conference pursuant to §141.1 of this title (relating to Requesting and Setting a Benefit Review Conference) with the Division not later than the 120th day after a workers' compensation carrier reduces or denies the requested reimbursement amount based on compensability or extent of injury issues.

(B) The health care insurer may pursue dispute resolution to establish that the injury claim is compensable under Labor Code §409.009 and §140.6 of this title (relating to Subclaimant Status: Establishment, Rights, and Procedures).

(C) A subclaim dispute based on a denial of reimbursement due to compensability or extent of injury is subject to dispute resolution pursuant to Chapters 140 - 143 of this title (relating to Dispute Resolution).

(2) Lack of Medical Necessity.

(A) A health care insurer must file a request for medical dispute resolution with the workers' compensation carrier or the carrier's utilization review agent not later than the 120th day after a workers' compensation carrier reduces or denies the requested reimbursement amount due to lack of medical necessity.

(B) A medical dispute based on the workers' compensation carrier's denial of a health care insurer's reimbursement request due to lack of medical necessity is subject to dispute resolution pursuant to §133.308 of this title (relating to MDR by Independent Review Organizations).

(C) A subclaimant shall follow the independent review process allowed for a non-network health care provider seeking retrospective review of a service under that section, with any modifications specified by this subsection.

(D) A request for reconsideration is not required prior to a request for independent review, notwithstanding the requirements for requesting independent review under §133.308 of this title.

(E) A request for independent review may be filed, notwithstanding the timeliness requirements for filing a request for independent review under §133.308 of this title.

(F) Notwithstanding the provisions of §133.308 of this title, regarding independent review organization requests for additional information, if a health care provider is requested to submit records, the health care insurer shall reimburse the health care provider copy expenses for the requested records.

(3) Reduction, Denial or Failure to Respond.

(A) A health care insurer must file a request for medical dispute resolution with the Division not later than:

(i) the 120th day after a workers' compensation carrier fails to respond to a health care insurer's reimbursement request or reduces or denies the requested reimbursement amount for reasons other than lack of medical necessity, or

(ii) 60 days after the date the requestor receives the final decision, inclusive of all appeals, on compensability or extent of injury issues raised in accordance with this subsection.

(B) A medical dispute based on the workers' compensation carrier's failure to respond to a health care insurer's reimbursement request or the result of a reduction or denial of the requested reimbursement amount for reasons other than those listed in paragraphs (1) or (2) of this subsection is subject to medical dispute resolution pursuant to §133.307 of this title, notwithstanding the definition of medical fee dispute in §133.305 of this title (relating to MDR - General), and the health care insurer must follow the medical fee dispute resolution process allowed for a health care provider under that section, with any modifications specified by this subsection.

(C) Notwithstanding the requirements of §133.307(c)(2) of this title, a health care insurer shall only be required to include with a request for medical fee dispute resolution, a copy of the health care insurer reimbursement request as originally submitted to the workers' compensation carrier, a copy of the EOB relevant to the fee dispute received from the workers' compensation carrier, and sufficient information to substantiate the claim.

(D) A request for reconsideration is not required prior to a request for medical fee dispute resolution, notwithstanding the requirements for requesting medical fee dispute resolution under §133.307 of this title.

(E) A request for medical fee dispute resolution may be filed, notwithstanding the timeliness requirements for filing a request for medical fee dispute resolution under §133.307 of this title.

(h) Multiple Entities Seeking Reimbursement for Same Services. If there are multiple entities seeking reimbursement for the same services and dates of services for the same health care insurer for the same employee, the following apply:

(1) When the workers' compensation carrier obtains a release from the health care insurer indicating that those specific services have been paid in full, no other entity may collect for those specific services.

(2) If a dispute remains over the fees to be paid for those specific services, the first in time to file a dispute with the Division is the only subclaimant that has a right to dispute resolution, and reimbursement, for that employee's claim and those specific services rendered unless that subclaimant abandons the dispute resolution process prior to a final adjudication of the issues.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 14, 2008.

TRD-200801946

Norma Garcia

General Counsel

Texas Department of Insurance, Division of Workers' Compensation

Earliest possible date of adoption: May 25, 2008

For further information, please call: (512) 804-4715