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 Commissioner of Insurance adopts 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 amendments are adopted without changes to the proposed text as published in the April 25, 2008, issue of the Texas Register (33 TexReg 3374).
REASONED JUSTIFICATION. The amendments are necessary to update obsolete statutory and internal Texas Administrative Code references and to correct minor nonsubstantive errors in the existing rule. The adopted amendments do not make any substantive changes.
The adopted amendments update obsolete statutory references in the Texas Insurance Code. Insurance Code Article 3.50-6, which was referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003.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 Insurance Code Article 3.70-8, which was referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005.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 Insurance Code Article 3.44a, which was referenced in §§3.4307 and 3.3409, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003.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 Insurance Code Article 3.28, which was referenced in §3.4310, was repealed in the nonsubstantive Insurance Code revision, Acts 2005, 79th Legislature, Chapter 727, §18(a)(3), effective April 1, 2007.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 Insurance Code Article 21.21, which was referenced in §3.4311, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005.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. Adopted §3.4311(a) correctly references the title of Chapter 541 as "Unfair Methods of Competition and Unfair or Deceptive Acts or Practices."
The adopted amendments also correct obsolete internal Texas Administrative Code references. Previously, §3.4302(b)(2)(B) in the definition of the term "Long-term care illness" referenced home health care services "as defined and provided consistently with §3.3804(b)(13) and (14)." Amendments were adopted to §3.3804 on January 6, 2002 (26 TexReg 10886) to move paragraphs (13) and (14) to paragraphs (15) and (16). Adopted §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)." Section 3.4313(a) referenced the definition of an "invitation to contract" as defined in §21.114 of Title 28 of the Texas Administrative Code. Amendments were adopted to §21.114 on 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." Adopted §3.4313(a) reflects these changes.
The adopted amendments also make changes to correct nonsubstantive errors. The adopted subchapter title includes hyphens in the phrase "Acceleration-of-Life-Insurance" to be consistent with the phrase as used throughout the subchapter. Section 3.4302(b)(2)(A) in the definition of the term "Long-term care illness" referenced "§3.3812 of this title (relating to Policy Definition of Provider)." Adopted §3.4302(b)(2)(A) references the section title of §3.3812 to correctly reflect its title as "Policy Standards for Provider." Adopted §3.4303(b) includes the word "the" before the phrase "Insurance Code" for consistency with agency style and makes changes in punctuation to correctly reflect the title of §3.4302 as "Acceleration-of-Life-Insurance: Scope of Benefits" in the reference to that section. Unnecessary commas are deleted in adopted §§3.4307, 3.4309, 3.4310, and 3.4311. Section 3.4308 did not include a reference to the complete title of §3.4306, and adopted §3.4308 correctly reflects the reference to the §3.4306 title as "Methods for Determining Benefits and Allowable Charges and Fees."
HOW THE SECTIONS WILL FUNCTION. The adopted sections update obsolete statutory and Texas Administrative Code references and correct other minor nonsubstantive errors and will result in increased clarity and readability of the rules. The adopted changes are nonsubstantive and do not affect the existing requirements of any sections.
SUMMARY OF COMMENTS. The Department did not receive any comments on the published proposal.
STATUTORY AUTHORITY. The amendments are adopted under the Insurance Code §§1111.053, 1701.002, 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 1701.002 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 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 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.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on June 3, 2008.
TRD-200802867
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: June 23, 2008
Proposal publication date: April 25, 2008
For further information, please call: (512) 463-6327
SUBCHAPTER D. RISK-BASED CAPITAL AND SURPLUS
The Commissioner of Insurance adopts amendments to §7.401, concerning risk-based capital and surplus requirements for insurers and health maintenance organizations. The section is adopted without changes to the proposal published in the February 1, 2008, issue of the Texas Register (33 TexReg 860).
REASONED JUSTIFICATION. The amendments, which are necessary to regulate the 2006 risk-based capital and surplus requirements for insurers and health maintenance organizations (HMOs), adopt by reference the 2006 National Association of Insurance Commissioners (NAIC) Life Risk-Based Capital Report Including Overview and Instructions for Companies, the 2006 NAIC Fraternal Risk-Based Capital Report Including Overview and Instructions for Companies, the 2006 NAIC Property and Casualty Risk-Based Capital Report Including Overview and Instructions for Companies, and the 2006 NAIC Health Risk-Based Capital Report including Overview and Instructions for Companies. The adoption in §7.401(b)(3) clarifies that the health Risk Based Capital rule applies to insurers that file the Annual Statement Health Blank. This is necessary because life companies and property and casualty companies may also be authorized to write health insurance, and if such business constitutes 95 percent or more of their total business then the carriers are required to file the Health Blank. The section applies to property and casualty insurers, life insurance companies, fraternal benefit societies, stipulated premium companies that do business in other states, HMOs, and insurers filing the National Association of Commissioners (NAIC) Health Blank. These insurers and HMOs are referred to collectively as "carriers" in this adoption. The risk-based capital requirement is a method of ensuring that an insurer has an appropriate level of policyholders' surplus after taking into account the underwriting, financial, and investment risks of an insurer. The adopted section will provide the Department with a widely used regulatory tool to identify the minimum amount of capital and surplus appropriate for an insurance company to support its overall business operations in consideration of its size and risk exposure and provide for specific actions by the Commissioner or the reporting entity when the total adjusted capital of the reporting entity falls to certain levels. The adopted section also provides for specific actions by the Commissioner or the reporting entity when the total adjusted capital of the reporting entity falls to certain levels specified in the section. Finally, the adopted section is necessary to effect the consolidation of the existing risk-based capital rules.
HOW THE SECTION WILL FUNCTION. Adopted §7.401(b)(1) deletes fraternal benefit societies because they are subject to their own separate risk-based capital instructions as provided in §7.401(d)(2). Adopted §7.401(b)(2) deletes monoline financial guaranty insurers, monoline mortgage guaranty insurers and title insurers because the Risk Based Capital guidelines specifically exclude these types of insurers. Adopted §7.401(b)(3) clarifies that the health Risk Based Capital rule applies to insurers that file the Annual Statement Health Blank. Adopted §7.401(d) adopts by reference the 2006 formulas, including the 2006 NAIC Life Risk-Based Capital Report including Overview and Instructions for Companies, the 2006 NAIC Fraternal Risk-Based Capital Report Including Overview and Instructions for Companies, the 2006 NAIC Property and Casualty Risk-Based Capital Report Including Overview and Instructions for Companies, and the 2006 NAIC Health Risk-Based Capital Report Including Overview and Instructions for Companies. Adopted §7.401(g)(5) clarifies that the calculation of the trend test is in the RBC formula itself, not any other. Adopted §7.401(g)(4)(B) and (C) and (h) update the Insurance Code references for consistency with the revised Insurance Code enacted by the Texas Legislature.
SUMMARY OF COMMENTS. The Department did not receive any comments on the published proposal.
STATUTORY AUTHORITY. The amendments are adopted under the Insurance Code Chapters 404 and 441 and §§441.051, 541.401, 822.210, 841.205, 884.206, 843.404, 885.401, 982.105, 982.106, and 36.001. Chapters 404 and 441 address the duties of the Department when an insurer's solvency is impaired. Chapter 404 authorizes the Commissioner to set standards for evaluating the financial condition of an insurer. Chapter 441 addresses the prevention of insurer delinquencies and in 441.051 specifies, "the circumstances in which an insurer is considered insolvent, delinquent, or threatened with delinquency" and includes certain statutorily specified conditions, including if a insurer's required surplus, capital, or capital stock is impaired to an extent prohibited by law. Under §441.005, the Commissioner may adopt reasonable rules as necessary to implement and supplement the purposes of Chapter 441. Section 541.401 authorizes the Commissioner to adopt reasonable rules necessary to accomplish the purposes of trade practices regulation in Chapter 541. Sections 822.210, 841.205, and 884.206 authorize the Commissioner to adopt rules to require an insurer to maintain capital and surplus levels in excess of statutory minimum levels to ensure financial solvency of insurers for the protection of policyholders and insurers. Section 843.404 authorizes the Commissioner to adopt rules to require a health maintenance organization to maintain capital and surplus levels in excess of statutory minimum levels to assure financial solvency of health maintenance organizations for the protection of enrollees. Section 885.401 requires each fraternal benefit society to file an annual report on the society's financial condition, including any information the Commissioner considers necessary to demonstrate the society's business and method of operation, and authorizes the Department to use the annual report in determining a society's financial solvency. Section 982.105 specifies the capital, stock, and surplus requirements for foreign or alien life, health, or accident insurance companies. Section 982.106 specifies the capital, stock, and surplus requirements for foreign or alien insurance companies other than life, health, or accident insurance companies. 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.
This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on June 4, 2008.
TRD-200802875
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: June 24, 2008
Proposal publication date: February 1, 2008
For further information, please call: (512) 463-6327