PART 4. OFFICE OF THE SECRETARY OF STATE

CHAPTER 102. HEALTH SPAS

The Office of the Secretary of State (Office) proposes changes to Chapter 102, concerning health spas. Amendments are proposed to §§102.1, 102.10, 102.13, 102.15, 102.18, 102.20, 102.30, 102.32, 102.35, 102.45, and 102.50. Sections 102.11, 102.12 and 102.21 are proposed as new.

These non-substantive changes are proposed in order to reorganize the rules for health spas; to specify the location of forms on the Office's web site; to clarify the procedures for amending registrations; and to conform the rules to existing practices and procedures related to health spas.

Changes to Subchapter A include adding a definition of equivalent facilities to §102.1.

Changes to Subchapter B include amendments to §102.10 deleting language from that repeats statutory language; reorganizing and expanding the ownership provisions; clarifying the procedure for amending the registration or renewal of a health spa; providing that renewals may be submitted within 90 days of expiration; and adding language about the nontransferability of a registration; explaining what may be considered a transfer in violation of the Act; and specifying the number and location of the form for application for registration. New §102.11 explains the procedure that registrants follow to amend registrations. New §102.12 explains the registration requirements for new owners of existing health spas. In addition, §102.13 was reworded to conform the language in the rules to the statutory language and to add a provision indicating that there is no fee assessed for amendment of a registration or renewal. Section 102.15 was revised to clarify that the statutory exemptions are exemptions from registration for activities and facilities that are not within the statutory definition of a health spa. Section 102.18 was reworded to clarify the procedures for requesting an exemption from the security requirements, the actions that the secretary of state will take in response to a request for exemption, the future obligations of an applicant following exemption, and to add language about the nontransferability of an exemption and what is considered a transfer.

Changes to Subchapter C include amending §102.20 to allow escrow accounts to be maintained at credit unions, to rearrange and clarify the contents of an escrow agreement and the circumstances under which the agreement is terminated and/or funds may be withdrawn. New §102.21 provides that a registrant shall submit a statement of escrow account to the secretary of state.

Changes to Subchapter D include amending §102.30 regarding acceptable forms of security to clarify that the secretary of state does not and has not accepted letters of credit as security since December 27, 2004, the effective date of the enactment of this rule. Amendments are proposed to §102.32 to clarify that the total amount paid for all prepaid memberships determines the amount of the security. Amendments are proposed to §102.35 to clarify the requirements regarding the posting of notice when a health spa closes and conform those requirements to current statutory requirements. Amendments are also proposed to this section to confirm that the secretary has no authority to accept claims after the statutory period, and to move language about the pro rata basis for claims exceeding the amount of security to follow the claims procedures and delete the duplicate language about pro rata distribution. Additional amendments are proposed to delete the duplicate definition of closed since that term is defined in the statute as well as in §102.1. Amendments are proposed to §102.45 to allow certificates of deposit provided as security to be maintained in credit unions and to incorporate the provisions related to assignment that are included in the prescribed assignment form.

Changes to Subchapter E include amending §102.50 to provide the web site location for forms.

FISCAL NOTE

Mike Powell, attorney, Business and Public Filings Division, has determined that there is no fiscal impact on state or local government if these rules are adopted.

PUBLIC BENEFIT COST NOTE

Mr. Powell has determined that the public benefit is to provide an accurate, more detailed, and clearer understanding of the policies and procedures for registering health spas with the office of the secretary of state.

There will be no additional cost to small business or individuals as a result of the adoption of these rules.

COMMENTS

Mike Powell has been designated to receive comments. Written comments should be addressed to Mr. Powell at Office of the Secretary of State, Business and Public Filings Division, P.O. Box 13297, Austin, Texas 78711-3697; or by email to mpowell@sos.state.tx.us. To be considered before the rules are adopted, comments must be received by the Office no later than 5:00 p.m., Monday, March 16, 2009.

SUBCHAPTER A. DEFINITIONS

1 TAC §102.1

STATUTORY AUTHORITY

These rules are proposed under the authority of §702.051 and §702.052 of the Texas Occupations Code which provides that the secretary may adopt rules necessary to administer the chapter and determine the disposition of a security claim.

Chapter 702 of the Texas Occupations Code is affected by these rules.

§102.1.Definitions.

Words and terms defined in the Health Spa Act (Texas Occupations Code, Chapter 702) shall have the same meaning in this chapter. In addition the following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Act--The Health Spa Act, Texas Occupations Code, Chapter 702.

(2) Equivalent Facilities--Facilities that have substantially similar hours of operation, physical structures, improvements, square footage, exercise equipment, and access to instructors, trainers and classes as the closed facility.

[(2) Closed, closes, or closing--A condition where:]

[(A) the facilities of a health spa are no longer available to its members and equivalent facilities within 10 miles of the closed facilities have not been made available to members of the closed facilities; or]

[(B) the registrant has sold a registered location and the security required by the Health Spa Act, §702.151, has either been canceled, withdrawn, or is otherwise unavailable for the use of members; or]

[(C) the registrant has sold a registered location and the new owner has neither adopted nor honored the contracts of existing members.]

[(3) Contract--An agreement by which one becomes a member of a health spa.]

(3) [(4)] Fully open or fully open for business--The date on which all services of the health spa that were advertised before the opening or promised to be made available are available for use by its members.

[(5) Location--The physical site or place where health spa facilities are located.]

[(6) Obligor--A person other than a surety who is obligated to perform in the event of a registrant's default.]

[(7) Prepayment--A payment for all services or the use of facilities made by members of a health spa before the services or facilities are made available to the members.]

(4) [(8)] Registrant--A person who has registered with the secretary and has been issued a health spa operator's certificate of registration.

(5) [(9)] Secretary--The Texas secretary of state.

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 January 27, 2009.

TRD-200900335

Lorna Wassdorf

Director, Business and Public Filings

Office of the Secretary of State

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 463-5562

1 TAC §§102.10 - 102.13, 102.15, 102.18

STATUTORY AUTHORITY

These rules are proposed under the authority of §702.051 and §702.052 of the Texas Occupations Code which provides that the secretary may adopt rules necessary to administer the chapter and determine the disposition of a security claim.

Chapter 702 of the Texas Occupations Code is affected by these rules.

§102.10.Procedure for Filing an Application for or Renewal of a Certificate of Registration [Statement].

(a) A separate application for a health spa operator's certificate of registration must be submitted for each location where the applicant operates a health spa.

[(a) Each health spa location shall file a registration statement containing the following information:]

(b) In addition to the information required by §702.102 of the Health Spa Act (Act), an applicant for a health spa operator's certificate of registration must include the following information on any application for registration or renewal of application for registration:

(1) the health spa's name [and physical location];

[(2) the name and address of any person who directly or indirectly owns or controls 10% or more of the issued and outstanding voting shares of a corporation, if the health spa is operated through that corporation;]

[(3) the name and address of all the partners if the health spa is operated as a general partnership;]

[(4) the name and address of each general partner if the health spa is operated by a limited partnership;]

[(5) the name and address of each person deemed to be an owner if the health spa is operated as a sole proprietorship;]

[(6) the name and address of any person or entity holding any direct or indirect ownership of the health spa, if that person or entity exercises direct control of the health spa;]

(2) [(7)] a detailed disclosure of the proposed facilities and services, including the hours of operation and the availability and access to instructors, trainers and classes;

(3) [(8)] the approximate square footage of the health spa;

(4) [(9)] a complete disclosure of any litigation, or any complaint filed with a governmental authority filed within two years preceding the application or currently pending relating to the failure to open or the closing of a health spa brought against the owners, officers, or directors of the applicant [ health spa filing the registration statement that was completed within the past two years or is currently pending]; or a [ notarized] statement signed and sworn to by or on behalf of the applicant stating that [which states that within the past two years ] there has been no litigation or [and no ] complaint filed with a governmental authority relating to the failure to open or the closing of a health spa brought against the [ health spa] owners, officers, or directors of the applicant [for which the registration statement is being filed]; and

(5) [(10)] the federal employer identification [tax] number of the applicant. [all owners and all operators of the health spa. If a corporation is the owner or the operator, the federal tax number of the corporation shall be provided.]

[(b) The registrant shall amend the registration statement not later than the 90th day after the day on which a change in the information provided in the statement occurs.]

(c) For purposes of compliance with the requirement of §702.102(a)(3)(C) of the Act, that the registration specify the name and address of each person who directly or indirectly owns or controls the applicant's business:

(1) if the applicant is a corporation, the name and address of each person who directly or indirectly owns or controls 10% or more of the issued and outstanding voting shares of a corporation;

(2) if the applicant is a general partnership, the name and address of each partner who directly or indirectly owns or controls 10% or more of the partnership interests;

(3) if the applicant is a limited partnership, the name and address of each general partner;

(4) if the applicant is a limited liability company, the name and address of each member who directly or indirectly owns or controls 10% or more of the membership interests;

(5) if the applicant is a sole proprietorship, the name and address of the sole proprietor; and

(6) if the applicant is an entity not otherwise described in this rule, the name and address of each person who directly or indirectly owns or controls 10% or more of the ownership interests of the entity.

(d) [(c)] The registration [statement ] must be renewed one year from the original registration date and each year thereafter on or before the anniversary of the original registration date. Renewals may be submitted 90 days prior to expiration.

(e) [(d)] Each application for registration or renewal [statement] shall be signed [notarized] and sworn to before a notary public or other person authorized to administer oaths by or on behalf of the applicant [by the person submitting it].

(f) The secretary of state provides a form for the application for registration or renewal as a health spa. The form can be obtained from the Statutory Documents Section of the Office of the Secretary of State, P.O. Box 13550, Austin, Texas 78711-3550. The form is also available on the secretary of state web site at http://www.sos.state.tx.us/statdoc/statforms.shtml#HSF. See form 3001.

§102.11.Amendment.

(a) The registrant shall amend the registration or any renewal not later than the 90th day after the date on which a change in the information provided in the registration or renewal occurs.

(b) The amendment to the registration shall set forth the following information:

(1) the name of the registrant;

(2) the date of the last filed registration or renewal and any identification number assigned by the secretary to that registration or renewal; and

(3) an identification of the information that has changed and the manner in which the information has changed.

(c) The amendment shall be signed and sworn to by or on behalf of the registrant in the same manner as an original application for registration or any renewal thereof.

(d) If the amendment is filed to reflect a change in the address of the health spa, the amendment must be accompanied by a rider to any security bond reflecting the change in address.

§102.12.Transferability of Certificate of Registration.

The certificate of registration is not transferable. If a health spa is purchased or otherwise transferred to a new owner, the new owner or transferee must submit a new application for registration within five business days of the purchase or transfer. In addition, the new owner or transferee must submit a new surety bond, post other security or a new application for exemption within five business days after the ownership has been transferred. Transfer includes a sale of substantially all of the assets, a sale of a majority of the ownership interests, or a merger or consolidation of the registrant into a surviving or resulting entity. Transfer does not include the conversion of a business entity of one type into a business entity of another type or the redomestication of an entity from one jurisdiction to another jurisdiction.

§102.13.Fees.

(a) A fee of $100 will accompany the application for registration [statement].

(b) The fee for filing a renewal application [ statement] is $100.

(c) The fee for an initial or renewal application that is not completed before the 31st day after it is received is forfeited and the application or renewal abandoned.

[(c) If an initial or renewal application is not complete before the 31st day after it is received incomplete, the file will be closed and the registration fee forfeited.]

(d) There is no fee for filing an amendment to a registration or renewal.

§102.15. Excluded Activities [Exemptions].

The following facilities or activities are not included within the definition of "health spa" in §702.003 of the Health Spa Act and are not required to register [exempt from registration] with the secretary under Chapter 702:

(1) facilities owned by organizations that are tax exempt under 26 United States Code 501 et seq.;

(2) private clubs owned and operated by its [their ] members;

(3) entities exclusively operated for teaching dance or aerobic exercise;

(4) entities exclusively engaged in physical rehabilitation activity related to an individual's injury or disease;

(5) an individual or entity engaged in an activity authorized under a valid license issued by this state; or

(6) activities conducted or sanctioned by a school operating under the Education Code.

§102.18.Application for Exemption from the Security Requirements.

(a) A registrant meeting the requirements for exemption from the security requirements as set forth in §702.202 of the Health Spa Act (Act) must apply [applying] for an exemption from the security requirements of Subchapter D of Chapter 702 of the Act on [Texas Occupations Code must use] the application form prescribed by the secretary of state. The application for exemption must be signed and sworn to by or on behalf of the applicant.

(b) The application form may be obtained from the Statutory Documents Section of the Office of the Secretary of State, P.O. Box 13550 [12887], Austin, Texas 78711-3550 [ 2887, (512) 463-6906]. It is also available on the secretary of state web site [Internet ] at http://www.sos.state.tx.us/statdoc/forms/3006.doc. See form 3006.

(c) The application for exemption from the security requirements must be submitted with the application for registration.

(d) If the secretary of state determines that the applicant meets the requirements for exemption, the secretary shall issue a certificate of exemption providing that the certificate holder is not required to file a surety bond or post other security for the location registered.

(e) If an applicant has been granted an exemption under §702.202(2) of the Act, the applicant must submit a statement signed by or on behalf of the applicant continues to comply with the requirements of §702.202(2), on the third anniversary of the initial registration and every three years thereafter.

(f) The certificate of exemption is not transferable. If a health spa is purchased or otherwise transferred to a new owner, the new owner must submit a surety bond, post other security or file a new application for exemption within five business days after the ownership has been transferred. Transfer includes a sale of substantially all of the assets, a sale of a majority of the ownership interests, or a merger or consolidation of the registrant into a surviving or resulting entity. Transfer does not include the conversion of a business entity of one type into a business entity of another type or the redomestication of an entity from one jurisdiction to another jurisdiction.

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 January 27, 2009.

TRD-200900336

Lorna Wassdorf

Director, Business and Public Filings

Office of the Secretary of State

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 463-5562

1 TAC §102.20, §102.21

STATUTORY AUTHORITY

These rules are proposed under the authority of §702.051 and §702.052 of the Texas Occupations Code which provides that the secretary may adopt rules necessary to administer the chapter and determine the disposition of a security claim.

Chapter 702 of the Texas Occupations Code is affected by these rules.

§102.20.Procedure for Establishing and Releasing Escrow Accounts.

(a) Unless exempted by the Health Spa Act, §702.353 a registrant or an [its] assignee or agent that accepts prepayments for [its] membership in a health spa before the date the health spa opens shall deposit all of the funds in an escrow account established with a financial institution whose accounts are insured by the Federal Deposit Insurance Corporation, [or] the Savings Association Insurance Fund, or the National Credit Union Administration which shall hold the funds as escrow agent for the benefit of the members that prepay.

(b) The following conditions apply to escrow accounts:

(1) Prepayments must be deposited at least biweekly and the first deposit must be made not later than the 14th day after the date on which the registrant or its agent accepts the first payment;

(2) The funds must remain in escrow and may not be withdrawn by the registrant unless the following conditions are met:

(A) The health spa remains open for not less than 30 days; and

(B) The registrant provides the escrow agent proof that the registrant has filed an affidavit with the secretary of state certifying that all obligations of the registrant for which a lien could be filed under Property Code, Chapter 53, have been paid and that no person is eligible to claim a lien under that chapter during the period the registrant, its agent or assignee accepts prepayments.

(3) The escrow account will terminate and the funds will be refunded to the members of the health spa under the following conditions:

(A) If the health spa does not fully open for business before the 181st day after the registrant first sells a membership in the health spa, or if the health spa does not remain open for 30 days, the escrow agreement shall terminate and all prepayment deposits shall be refunded to the members; or

(B) If another health spa is operated by the same seller and is located not more than 10 miles from the proposed location of the new health spa and the person purchasing the membership is authorized to use these other facilities, then the member of the new spa whose fees are held in escrow is entitled to receive a full refund of the membership fees from the escrow agent if the new health spa does not open before the 361st day after the date on which the new spa first sells a membership or if the new spa does not remain open for 30 days.

(4) The financial institution shall hold each prepayment as an escrow agent for the benefit of the member who made the prepayments.

(5) The financial institution will respond to each inquiry made by the secretary of state regarding the escrow account.

[(b) The registrant shall deposit prepayments received as often as biweekly and shall make the first deposit not later than the 14th day after the day on which the registrant or its agent accepts the first payment.]

[(c) Not later than the 14th day after the day on which the first prepayment is received, the registrant shall give the secretary a notarized statement that identifies the financial institution in which the prepayments are held in escrow and the name in which the account is held, together with a signed statement on a form approved by the secretary of state which authorizes the secretary of state to make inquiries of the financial institution regarding the funds in escrow.]

[(d) The escrow agreement must contain the following provisions.]

[(1) Prepayments must be deposited at least biweekly.]

[(2) The secretary must be named as fiduciary for the prepayment members.]

[(3) The prepayments shall remain in escrow until the 30th day after the date that the health spa fully opens for business.]

[(4) If the health spa does not fully open for business before the 181st day after the registrant first sells a membership in the health spa, or if the health spa does not remain open for 30 days, the escrow agreement shall terminate and all prepayment deposits shall be refunded to the members.]

[(5) If another health spa is operated by the same seller and is located not more than 10 miles from the proposed location of the new health spa and the person purchasing the membership is authorized to use these other facilities, then the member of the new spa whose fees are held in escrow is entitled to receive a full refund of the membership fees from the escrow agent if the new health spa does not open before the 361st day after the date on which the new spa first sells a membership or if the new spa does not remain open for 30 days.]

[(6) The registrant must provide the escrow agent proof that it has filed an affidavit with the secretary of state which certified that all obligations of the registrant for which a lien could be filed under the Property Code, Chapter 53, have been paid and whether any person is eligible to claim a lien under that chapter during the period the registrant or its agent accepts payments.]

[(e) The escrow agreement shall identify the escrow officer, style of the deposit account, the financial institution, and any other information which will identify the escrow account into which the prepayments have been deposited.]

[(f) The registrant shall file a copy of the escrow agreement with the secretary.]

§102.21.Statement Regarding Escrow Account.

The registrant shall submit a statement to the secretary of state that identifies the escrow agent, the style of the deposit account, the name and address of the financial institution, and any other information which will identify the escrow account into which the prepayments have been deposited. In addition, the statement must give authority to the secretary of state to direct inquiries to the financial institution regarding the escrow account. The statement shall be on a form prescribed by the secretary of state. The statement shall be signed and notarized by the registrant and signed by the escrow agent.

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 January 27, 2009.

TRD-200900337

Lorna Wassdorf

Director, Business and Public Filings

Office of the Secretary of State

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 463-5562

1 TAC §§102.30, 102.32, 102.35, 102.45

STATUTORY AUTHORITY

These rules are proposed under the authority of §702.051 and §702.052 of the Texas Occupations Code which provides that the secretary may adopt rules necessary to administer the chapter and determine the disposition of a security claim.

Chapter 702 of the Texas Occupations Code is affected by these rules.

§102.30.Acceptable Forms of Security [That May Be Filed or Posted under §702.151 of the Act].

(a) Unless exempted, a [A] health spa operator must [may] file a surety bond or post as other security:

(1) Cash or its equivalent; or

(2) a Certificate of Deposit as prescribed in §102.45 of this subchapter (relating to Procedure for Filing Certificates of Deposit as Security).

(b) The secretary of state will not accept Letters of Credit [shall not be posted ] as security under §702.151 of the Health Spa Act. Letters of Credit posted as security on December 27, 2004 [the effective date of this rule] may continue as security until the expiration date of the Letter of Credit. On or before such expiration date, the health spa operator shall replace the Letter of Credit with a form of security authorized by subsection (a) of this section.

§102.32.Amount of Security Required [under §702.151 of the Act].

(a) For purposes of this section, the term "total membership" in §702.151 and §702.158 of the Health Spa Act (Act) means the health spa's total prepaid memberships. The total amount paid for all prepaid memberships determines the amount of the security that must be filed or posted.

(b) "Prepaid membership" means any membership for which [that] a member pays consideration in advance for a term that exceeds 31 days [ for before the term of the membership is used by the member].

(c) An [A health spa registration] application for registration or any renewal from a health spa operator, not exempt under §702.202 of the Act, shall include a written statement from the health spa operator that specifies:

(1) the total number of prepaid memberships at the health spa location; and

(2) the total amount paid for all such prepaid memberships.

(d) The health spa operator shall file a security for each of the operator's health spa locations in the following amounts:

Figure: 1 TAC §102.32(d) (No change.)

§102.35.Adjudication of Claims and Posting of Notice of Closure.

(a) Within 10 days of receiving notice that a health spa which has posted a security with the secretary has ceased operations, the secretary shall notify the surety or obligor that:

(1) the health spa has ceased operations;

(2) the members of the health spa may have suffered financial losses within the meaning of the Health Spa Act (Act) and these rules; [and]

(3) the secretary may make a claim on the bond or other security or require that the surety or obligor holding funds compensate the members for any losses; and

(4) [(3)] the secretary intends to inform the registrant that the registrant must post a notice at the health spa location notifying the public of the fact that the health spa is closed and the procedures for and the timeframe in which documents must be submitted to the secretary [that a health spa member has 90 days from the date the notice is first posted] to perfect a claim under the security posted.

(b) The notice must be:

(1) at least 8 1/2 by 11 inches in size;

(2) posted inside and outside each entrance to the health spa; and

[(2) posted in a place that is readily accessible to the general public during the former operating hours of the health spa; and]

(3) posted continuously for at least 30 [14] days and include the following information:[.]

(A) the date the health spa is scheduled to close or relocate;

(B) that a member of the health spa may file a claim with the secretary to recover actual financial loss within the time prescribed by the Act; and

(C) the procedures for perfecting a security claim.

(c) If, no later than 10 days from the date the secretary discovers a health spa is closed, the secretary determines that the registrant has not posted the required notice, the secretary will take action to post the notice. In all cases, the secretary of state will post a notice of closure on the secretary of state's web site at: http://www.sos.state.tx.us/statdoc/healthspas/index.shtml.

(d) All [Regardless of the method utilized for notice to the members, all] claims received by the secretary after 90 days following the date [of] the [ first] notice is first posted are barred and may [shall] not be considered by the secretary. The secretary has no discretion to waive the statutory time period for filing claims. [ If the total of claims evidencing actual financial loss exceed the amount of the security, the secretary shall adjudicate the claims on a pro rata basis by dividing the amount of the security by the total amount of the claims in order to ascertain a percentage to be applied to each claim.]

(e) In order to perfect a claim, a claimant must submit a copy of the contract that forms a basis of the claim together with documentation or a sworn affidavit indicating the total of payments made pursuant to the contract. In the event the claimant does not submit adequate documentation, the secretary shall promptly inform the claimant of this fact together with notice that adequate documentation must be received within 30 days [by the bar date] in order for the claim to be considered.

(f) If the total of claims evidencing actual financial loss exceeds the amount of the security, the secretary shall adjudicate the claims on a pro rata basis by dividing the amount of the security by the total amount of the claims in order to ascertain a percentage to be applied to each claim.

(g) [(f)] After the time for filing claims has lapsed, the [The] secretary shall timely present claims to the surety or obligor for payment together with an administrative order signed by the secretary or deputy secretary pursuant to §702.157 of the Act [for payment by the surety or obligor].

(h) [(g)] Actual financial loss shall mean and be limited to those sums which have been paid under a health spa contract to a registrant or a registrant's assignee and, which at the time the health spa is closed, are unearned. Actual financial losses shall be computed in accordance with §702.252 of the Act [calculated] by multiplying the gross monthly payment by the total of months or partial months remaining on a contract at the time of closing minus any payments not made. For the purposes of this section the following terms shall have the following meanings.

[(1) Closed--The condition wherein the facilities of a health spa are no longer available to its members and equivalent facilities within 10 miles of the closed facility have not been made available to the members of the closed facilities; or where a registrant has sold a registered location and the security required in section of the Act has not been transferred to the new owner or the new owner has neither adopted nor honored the contracts of existing members.]

(1) [(2)] Gross monthly payment--The gross monthly payment shall be calculated by determining the total of payments, including down payments and initiation fees required by the contract, divided by the total number of months in the term of the contract.

(2) [(3)] Calculation of dates--The date of closing and the date of the contract expiration shall be rounded to the nearest full month. The total months remaining on the contract shall be calculated by subtracting the date of closing from the expiration date of the contract. The result will be expressed in whole months.

[(h) If the members' claims do not exceed the amount of the security, the registrant shall arrange for the direct payment of the claims to the members.]

(i) The surety or obligor shall provide the secretary proof of payment of the members' claims.

[(j) In the event the total of claims exceed the amount of the security, the claims shall be paid on a pro rata basis by dividing the amount of the security by the total amount of the claims. This percentage shall be applied to each claim.]

§102.45.Procedure for Filing Certificates of Deposit as Security [ under the Health Spa Act, §702.151].

(a) If the registrant provides a certificate of deposit as security under the Health Spa Act, §702.151, the certificate of deposit must be issued by a financial institution in this state whose deposits are insured by the Federal Deposit Insurance Corporation, [or] the Savings Association Insurance Fund, or the National Credit Union Administration. The certificate of deposit must be assigned to the secretary of state, payable to the State of Texas for the use and benefit of each member of a health spa who suffers financial loss due to closure of a health spa. The assignment shall remain in full force and effect until expressly withdrawn by the assignor with the approval of the secretary of state.

(b) A copy of the document, issued by the financial institution evidencing[, that evidences] the existence of the certificate of deposit must be filed along with an executed assignment form. The assignment form can be obtained from the Statutory Documents Section of the Office of the Secretary of State, P.O. Box 13550 [12887], Austin, Texas 78711-3550 [2887, (512) 463-6906]. The assignment form [It] is also available on the secretary of state web site [Internet] at http://www.sos.state.tx.us/statdoc/statforms.shtml#HSF [ http://www.sos.state.tx.us]. See form 3004.

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 January 27, 2009.

TRD-200900338

Lorna Wassdorf

Director, Business and Public Filings

Office of the Secretary of State

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 463-5562

1 TAC §102.50

STATUTORY AUTHORITY

These rules are proposed under the authority of §702.051 and §702.052 of the Texas Occupations Code which provides that the secretary may adopt rules necessary to administer the chapter and determine the disposition of a security claim.

Chapter 702 of the Texas Occupations Code is affected by these rules.

§102.50.Forms.

Forms shall be provided by the Office of the Secretary of State for the purposes of complying with the Health Spa Act, Chapter 702, and this chapter. The forms [ are hereby adopted by reference and ] may be obtained from the Office of the Secretary of State, Statutory Documents Section, P.O. Box 13550 [ 12887], Austin, Texas 78711-3550 [2887]. Forms are also available on the secretary of state web site at: http://www.sos.state.tx.us/statdoc/statforms.shtml#HSF.

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 January 27, 2009.

TRD-200900339

Lorna Wassdorf

Director, Business and Public Filings

Office of the Secretary of State

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 463-5562

CHAPTER 355. REIMBURSEMENT RATES

SUBCHAPTER C. REIMBURSEMENT METHODOLOGY FOR NURSING FACILITIES

1 TAC §355.307

The Texas Health and Human Services Commission (HHSC) proposes an amendment to §355.307, Reimbursement Setting Methodology, under Title 1 of the Texas Administrative Code (TAC), Part 15, Chapter 355, Subchapter C.

Background and Justification

This rule establishes the reimbursement methodology for the Nursing Facility (NF) program, including Medicaid reimbursement rates for pediatric care facilities. HHSC, under its authority and responsibility to administer and implement rates, is updating these rules to allow a limited number of adults who were admitted to the facility as children but who are no longer children (i.e., individuals who have "aged in place") to be counted as children for purposes of determining if a facility meets the requirements for remaining a pediatric care facility. This change will apply only when the pediatric care facility is the entire facility; it will not apply to pediatric care facilities that are distinct units within a larger facility. In addition, the change will apply only to determining if an already existing pediatric care facility meets the requirements to remain a pediatric care facility. It will not apply to determining if a non-pediatric care facility meets the requirements to become a pediatric care facility. In these specific instances the proposal amends the current rule language requiring a pediatric care facility to maintain an average daily census of 80% children, to allow a limited number of adults who were admitted to the facility as children but who are no longer children to be counted as children for purposes of determining if the facility meets the requirements for remaining a pediatric care facility. The number of such individuals who may be counted as children for this purpose is limited to 15% of the facility's average daily census.

This amendment is being proposed to allow pediatric care facilities with a limited number of individuals who have "aged in place" to remain pediatric facilities. Once the number of individuals who have "aged in place" exceeds the percentage defined in the rule, the entire facility will no longer qualify as a pediatric care facility. At that point, the facility will have to create a pediatric care distinct unit if it wishes to continue receiving the pediatric reimbursement rate for its residents who are children.

Section-by-Section Summary

The proposed amendment revises §55.307 to add new clauses (i) and (ii) under subsection (c)(2)(C), to allow a limited number of adults who were admitted to a pediatric care facility as children but who are no longer children to be counted as children for purposes of determining if a facility meets the requirements for remaining a pediatric care facility.

Fiscal Note

Gordon E. Taylor, Chief Financial Officer for the Department of Aging and Disability Services, has determined that during the first five-year period the amended rule is in effect there will be no fiscal impact to state government. The proposed rule will not result in any fiscal implications for local health and human services agencies. There are no fiscal implications for local governments as a result of enforcing or administering the section.

Small Business and Micro-business Impact Analysis

HHSC has determined that there is no adverse economic effect on small businesses or micro-businesses as a result of enforcing or administering the amendment. The implementation of these proposed rule amendments does not require any changes in practice or any additional cost to the contracted provider.

HHSC does not anticipate that there will be any economic cost to persons who are required to comply with this amendment. The amendment will not affect local employment.

Public Benefit

Carolyn Pratt, Director of Rate Analysis, has determined that, for each of the first five years the amendment is in effect, the expected public benefit is that pediatric care nursing facilities with "aging out populations" will be able to remain pediatric care facilities for a limited period of time before having to create a pediatric care distinct unit.

Takings Impact Assessment

HHSC has determined that this proposal does not restrict or limit an owner's right to his or her property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking under Texas Government Code §2007.043.

Regulatory Analysis

HHSC has determined that this proposal is not a "major environmental rule" as defined by §2001.0225 of the Texas Government Code. "Major environmental rule" is defined to mean a rule the specific intent of which is to protect the environment or reduce risk to human health from environmental exposure and that may adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment or the public health and safety of a state or a sector of the state. This proposal is not specifically intended to protect the environment or reduce risks to human health from environmental exposure.

Public Comment

Questions about the content of this proposal may be directed to Cheryl Jablonski in the HHSC Rate Analysis Department by telephone at (512) 491-1764. Written comments on the proposal may be submitted to Ms. Jablonski by facsimile at (512) 491-1998, by e-mail to cheryl.jablonski@hhsc.state.tx.us, or by mail to HHSC Rate Analysis, Mail Code H-400, P.O. Box 85200, Austin, Texas 78708-5200, within 30 days of publication of this proposal in the Texas Register.

Statutory Authority

The amendment is proposed under the Texas Government Code, §531.033, which provides the Executive Commissioner of HHSC to with broad rulemaking authority; and the Human Resource Code §32.021 and Texas Government Code §531.021(a), which provide HHSC with the authority to administer the federal medical assistance (Medicaid) program in Texas.

The proposed amendment affects the Human Resources Code Chapter 32, and the Texas Government Code Chapter 531. No other statutes, articles, or codes are affected by this proposal.

§355.307.Reimbursement Setting Methodology.

(a) - (b) (No change.)

(c) Special reimbursement class. HHSC may define special reimbursement classes, including experimental reimbursement classes of service to be used in research and demonstration projects on new reimbursement methods and reimbursement classes of service, to address the cost differences of a select group of recipients. Special classes may be implemented on a statewide basis, may be limited to a specific region of the state, or may be limited to a selected group of providers.

(1) (No change.)

(2) Definitions.

(A) Pediatric care facility--Except as provided for in subparagraph (C) of this paragraph, a [A] pediatric care facility is an entire facility that has maintained an average daily census of 80% or more children for the six-month period prior to its entry into the pediatric care facility class based on the entire licensed facility. A pediatric care facility can also be a distinct unit of a facility that has maintained an average daily census of 85% or more children for the six-month period prior to its entry into the pediatric care facility class based on the distinct unit of the facility. To remain a pediatric care facility, the pediatric care facility must maintain an average daily census of 80% or more children if the pediatric care facility is an entire facility and 85% or more children if the pediatric care facility is a distinct unit of the facility. The contracted provider must request in writing by certified mail or by special mail delivery where the delivery can be verified to become a member of the pediatric care facility special reimbursement class. The request must be sent to the Texas Health and Human Services Commission.

(B) Distinct unit--A portion of a nursing facility that is physically separate from (beds are not commingled with) other units of the facility. The distinct unit can be an entire wing, a separate building, an entire floor, or an entire hallway. The distinct unit consists of all beds within the designated area. A distinct unit must consist of 28 or more Medicaid-contracted beds.

(C) Children--For the purposes of this pediatric care facility class, children are defined as being at or below 22 years of age.

(i) Only for a pediatric care facility that is designated in its entirety as a pediatric care facility, a limited number of adults who were admitted to the facility as children but who are no longer children (i.e., individuals who have "aged in place") may be counted as children for purposes of determining if the facility meets the requirements for remaining a pediatric care facility described in subparagraph (A) of this paragraph. The number of such individuals who may be counted as children for purposes of determining if the facility continues to meet the requirements for remaining a pediatric care facility is limited to 15% of the average daily census of the facility.

(ii) Individuals who have "aged in place" as described in clause (i) of this subparagraph may not be counted toward meeting the requirements for a facility to initially become a pediatric care facility nor can they be counted toward meeting the requirements for a distinct unit to remain a pediatric care facility.

(3) (No change.)

(d) - (f) (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 February 2, 2009.

TRD-200900378

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Earliest possible date of adoption: March 15, 2009

For further information, please call: (512) 424-6900