Proposed Sections
Before an agency may permanently adopt a new or amended section, or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before any action may be taken. The 30-day time period 
gives interested persons an opportunity to review and make oral or written 
comments on the section. Also, in the case of substantive sections, a public 
hearing must be granted if requested by at least 25 persons, a governmental 
subdivision or agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of bold text. [Brackets] indicate deletion of existing 
material within a section.
TITLE 1. ADMINISTRATION
Part V. General Services Commission
Chapter 113. Central Purchasing Division
Purchasing
1 TAC sec.sec.113.2, 113.13, 113.16
The General Services Commission proposes amendments to  s113.2 and sec.113.13, 
and new sec.113.16, concerning definitions and central purchasing. Section 
113.13 deletes a requirement for reporting school bus purchase information to 
the Texas Education Agency, and new sec.113.16 provides guideline for processing 
unsolicited proposals.
Ron Arnett, director for purchasing, has determined that there will be fiscal 
implications as a result of enforcing or administering this sections. The effect 
on state government for the first five-year period the sections are in effect 
will be an estimated cost of $125 in 1992; $250 in 1993; $258 in 1994; $266 in 
1995 and $274 in 1996. The effect on local government for the first five-year 
period the sections are in effect will be an estimated cost of $30 in 1992; $60 
in 1993; $62 in 1994; $64 in 1995; and $66 in 1996.
Mr. Arnett also has determined that for each of the first five years the 
sections are in effect the public benefit will be a more efficient reporting 
system of school bus purchases, enhanced statutory compliance, and improved 
efficiency in acquiring unique, necessary goods or services. There will be no 
cost of compliance with the sections for small businesses. There is no 
anticipated economic cost to persons who are required to comply with the 
sections.
Comments on the proposal may be submitted to Judith M. Porras, General Counsel, 
General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments 
must be received no later than 30 days from the date of publication of the 
proposal in the Texas Register.
The amendments are proposed under Texas Civil Statutes, Article 601b, sec.3.01, 
which provide the General Service Commission with the authority to promulgate 
rules to accomplish the purpose of Article 3.
sec.113.2. Definitions.  The following words and terms when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
<nl>   Unsolicited offer -An offer other than one submitted in response to a 
solicitation.
sec.113.13. Purchases for School Districts. Texas Civil Statutes, Article 601b, 
sec.3.03 and the Texas Education Code, sec.sec.21.161-21.169, require all motor 
vehicles used for transporting school children, including buses, bus chassis, 
and bus bodies, tires, and tubes, purchased for or by any school district 
participating in the foundation school program, to be purchased by and through 
the commission.
(1) (No change.)
(2) School bus disposition. Any school district desiring to dispose of a used 
school bus should first advise the commission, and the commission will determine 
whether or not the bus is to be transferred to another school district or state 
agency, or the school district given permission by the commission to sell the 
bus through the competitive bidding process. When sold by bids, the school 
district must comply with the following:
(A)-(C) (No change.)
(D) furnish the commission [and the Texas Education Agency] a copy of the 
newspaper advertisement and a tabulation of all bids received and indicate to 
whom the bus was sold.
(3)-(6) (No change.)
sec.113.16. Unsolicited Offers.
(a) Processing of unsolicited offers. The director for Purchasing (director) of 
the General Services Commission (GSC) or the head of another state agency, or 
his designee, who receives an unsolicited offer shall consider and act on the 
offer as provided in this section. A state agency that does not have the 
authority to enter into a contract for the products or services described in the 
unsolicited offer shall forward the offer to the director for consideration. An 
unsolicited offer that does not meet the conditions of subsection (b) of this 
section shall be returned without further consideration.
(b) Conditions. To be considered for evaluation an unsolicited offer must:
(1) be in writing;
(2) describe products or services that are unique, innovative and suitable for 
state government use;
(3) demonstrate that the proprietary character of the offer merits 
consideration;
(4) provide sufficient information to assess the usefulness of the offer to the 
state; and
(5) permit testing under the conditions specified by the state.
(c) Evaluation. The unsolicited offer shall be evaluated by the director, the 
head of another agency, or the designee of either as applicable. If it is 
determined that the offer is useful and advantageous to the state, the offer may 
be accepted as a proprietary purchaser under the authority of Texas Civil 
Statutes, Article 601b, sec.3.09.
(d) Confidentiality. A written request that the information contained in an 
unsolicited offer for confidentiality will be honored, subject to the 
requirements of Texas Civil Statutes, Article 6252-17a (the Texas Open Records 
Act).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201484
Judith M. Porras
General Counsel
General Services Commission
Earliest possible date of adoption: March 3, 1992
For further information, please call: (512) 463-3446
       
Surplus Property Sales
1 TAC sec.113.73
The General Services Commission proposes an amendment to  s113.73, concerning 
surplus property sales. The amendment will allow state agencies to maintain all 
files associated with the delegation of authority to sell surplus or salvage 
property.
Ron Arnett, director for purchasing, has determined that there will be fiscal 
implications as a result of enforcing or administering the section. The effect 
of state government for the fist five-year period the section is in effect will 
be an estimated cost of $900 in 1992; $1,800 in 1993; $1,850 in 1994; $1,900 in 
1995; and $1,950 in 1996. There will be no effect on local government.
Mr. Arnett also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be a reduction in duplication of file maintenance resulting in a 
more efficient and economical process. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Judith Porras, General Counsel, 
General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments 
must be received no later than 30 days from the date of publication of the 
proposal in the Texas Register.
The amendment is proposed under Texas Civil Statutes, Article 601b, sec.3.01, 
which provide the General Services Commission with the authority to promulgate 
rules to accomplish the purpose of Article 3.
sec.113.73. Sale and Disposition of Surplus and Salvage.
(a)-(d) (No change.)
(e) Methods of disposing of surplus or salvage property. If no entity described 
in subsection (c) of this section desires to receive any property reported as 
surplus or salvage, the commission may dispose of the property by sealed bids or 
auction, or delegate to the state agency having possession of the property the 
authority to sell the property on a competitive bid basis. The commission will 
maintain a mailing list of companies or individuals who have indicated a desire 
to bid on surplus or salvage property and have made application. Names may be 
deleted from the mailing list for: failure to bid, failure to make payment for 
or remove from state property in a timely manner, items on which they were the 
successful bidder, or failure to renew the mailing list application. Once a 
bidder has been removed, he may not be reinstated to the bid list except after 
presentation of a formal request for reinstatement to the director for 
Purchasing which results in a favorable recommendation for reinstatement. The 
commission or the agency shall assess and collect from the purchaser a 2.5% fee 
over and above the proceeds from the sale of the property to recover the costs 
associated with the sale of the property. The purchaser of a surplus firearm 
other than a shotgun or rifle, must not be less than 21 years of age.
(1)-(2) (No change.)
(3) Delegation of authority to state agency. If the commission determines that 
it in the best interest of the state for an agency to dispose of its own surplus 
or salvage property, it may authorize the agency to do so; however, an agency 
authorized to sell its own property shall always seek competitive bids. <nl>The 
agency shall follow procedures provided by the commission at the time the 
delegation is granted and shall provide a report of the proceeds by assigned 
sale number no lager than September 10 of each year for the prior fiscal year.
(4)-(6) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201485
Judith M. Porras
General Counsel
General Services Commission
Earliest possible date of adoption: March 3, 1992
For further information, please call: (512) 463-3446
       
Chapter 121. Telecommunications Services Division
1 TAC sec.121.6
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the General Services 
Commission or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The General Services Commission proposes the repeal of  s121.6 concerning usage 
of the statewide telecommunications system and requests for additional services 
on the system.
Carl Stringfellow, director for Telecommunications Services Division, has 
determined that for the first five-year period the repeal is in effect there 
will be no fiscal implications for state or local government as a result of 
enforcing or administering the repeal.
Mr. Stringfellow also has determined that for each year of the first five years 
the proposed repeal is in effect the public benefit anticipated as a result of 
enforcing the repeal will be improved efficiency in implementing the mandatory 
use of TEX-AN by state agencies. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the repeal as proposed.
Comments on the proposal may be submitted to Judith Monaco Porras, General 
Counsel, General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. 
Comments must be received no later than 30 days from the date of publication of 
the proposed rule in the Texas Register.
The repeal is proposed under Texas Civil Statutes, Article 601b, sec.10.03, 
which provides the General Services Commission with the authority to promulgate 
guidelines to accomplish the purpose Article 601b, sec.10.
sec.121.6. TEX-AN Usage Requirements; Waiver; TEX-AN Services.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 31, 1992.
TRD-9201527
Judith M. Porras
General Counsel
General Services Commission
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 463-3446
       
The General Services Commission proposes new sec.121.6 to clarify and expand the 
procedures state agencies as defined in Texas Civil Statues, Article 601b, 
sec.1.02(2) must use in order to obtain a waiver from mandatory use of the state 
telecommunication system (TEX-AN). The proposed section also reorganizes and 
clarifies the remaining subsections of sec.121.6 without making substantive 
changes.
Carl Stringfellow, director for Telecommunications Services Division, has 
determined that for the first five-year period the proposed section is in 
effect, there will be no fiscal implications for state or local government or 
small businesses as a result of enforcing or administering the section.
Mr. Stringfellow also has determined that for each year of the first five years 
the proposed section is in effect the public benefit anticipated as a result of 
enforcing the section will be the establishment of orderly procedures by which 
state agencies subject to the mandatory use of TEX-AN may obtain a waiver from 
the Telecommunications Services Division Service Commission. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the section as proposed.
Comments on the proposed rule may be submitted to Judith Monaco Porras, General 
Counsel, Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments must be 
received no later than 30 days from the date of publication of the proposed rule 
in the Texas Register.
The new section is proposed under Texas Civil Statutes, Article 601b, sec.10. 
03, which provides the General Services Commission with the authority to 
promulgate guidelines to accomplish the purpose of Article 10, Article 601b.
sec.121.6. TEX-AN Usage Requirement; Waiver; TEX-AN Services.
(a) TEX-AN usage requirement.
(1) All state agencies, as defined in Texas Civil Statutes, Article 601b, 
sec.1.02(2), shall utilize TEX-AN services and facilities to the fullest extent 
possible unless granted a separate waiver from both the Telecommunications 
Services Division (TSD) of the General Services Commission TGSC) and the 
Department of Information Resources (DIR).
(b) Waiver Requirements and Duration.
(1) A waiver is a written authorization issued by the TSD or the DIR for an 
agency to contract for non-TEX-AN intercity telecommunications facilitie or 
services. The waiver from TSD will be on a form prescribed by the TSD.
(2) An agency requesting a waiver shall not procure or renew non-TEX-AN 
intercity telecommunications facilities or services until a waiver has been 
issued by the TSD under this rule and the DIR under its applicable rules.
(3) If granted, a waiver will be for a specific period of time and expires on 
the date set by the TSD. A contract for services obtained under waiver may not 
extend beyond the expiration date of the waiver. The TSD and DIR may grant an 
extension of the waiver using the evaluation criteria specified in subsection 
(d) of this section. A request for an extension shall be made at least 90 days 
before the waiver's expiration date.
(c) Requests for waivers. Requests for waivers from the TSD should be submitted 
at least 90 days in advance of the agency's desired date of installation. An 
agency may apprise the TSD of its intent to seek a waiver by providing the TSD 
with its service requirements in writing prior to requesting a waiver. Requests 
for waivers from the TSD must include the following information:
(1) a description of the type of facility or service for which a waiver is being 
requested, including a copy of the specifications if the procurement is to be 
bid competitively;
(2) the reason for requesting a waiver;
(3) a copy of the existing service contract(s) if service is not currently 
provided by a regulated utility;
(4) copies of all billing detail, including call detail, for the most recent 
billing period;
(5) a summary of all other costs for ancillary equipment or services, including 
maintenance services, which the agency pays or will incur through lease, lease-
purchase, or purchase that are directly attributable to providing the service 
requested in the waiver, regardless of the funding sources for paying those 
costs;
(6) a statement as to whether the ancillary equipment or services will be made 
available to the TSD for use in providing TEX-AN service and a detail of any 
costs the agency proposes to bill to the TSD for such use;
(7) specific address(es) and type(s) of equipment at each location to be served; 
and
(8) any other information to demonstrate that the facilities or services are 
cost effective to Texas state government, not a particular facility or location.
(d) Evaluation of waiver requests.
(1) Before granting a waiver, the TSD and the DIR shall separately determine 
that the intercity telecommunications facilities or services requested by an 
agency cannot be provided by the TEX-AN network at a reasonable cost. The 
evaluation of waiver requests will be based on the cost effectiveness to the 
entire State of Texas, not a particular facility or location.
(2) As part of the evaluation of a waiver request, an agency soliciting 
competitive bids for or making a Texas Civil Statutes, Article 601b, sec.3.06 
delegated purchase of non-TEX-AN services or facilities shall provide a copy of 
the lowest and best bid to TSD in order for TSD to determine if the best 
interest of the state will be served by the contract award. If the best interest 
of the state is served by the contract award the TSD shall grant a waiver to the 
requesting agency. A contract may not be awarded by the requesting agency until 
a waiver has been granted by the TSD and DIR. If a waiver is not granted by 
either the TSD or the DIR, no award or purchase of non-TEX-AN services or 
facilities may be made by the requesting agency.
(e) Request for services and facilities, adds, moves, and changes.
(1) Initial requests for services and facilities. All requests for services and 
facilities on the TEX-AN network shall be made in writing to the TSD and will be 
evaluated on a cost effective basis for the customer, the network, and the 
state. The TSD will publish appropriate procedures and guidelines covering 
administrative actions associated with providing services and facilities on TEX-
AN. The TSD may prescribe forms for that purpose and such forms may be 
reproduced locally by state agencies and other governmental bodies.
(2) Adds, moves, and changes. In order to allow for TSD evaluation and 
scheduling of lead time, requests for TEX-AN adds, moves and changes must be 
submitted to the TSD at least 60 days in advance of the date the add, move, or 
change is to become effective. The standard interval for installation of TEX-AN 
line services is 45 days or approximately 6 weeks after the contract provider 
has received an order from the TSD.
(f) Contracts for TEX-AN services.
(1) Political subdivisions. TEX-AN services and facilities provided to political 
subdivisions and other governmental bodies as defined in Texas Civil Statutes, 
Article 601b, sec.10.07, will be covered by contracts between these bodies and 
the TSD.
(2) State agencies. Contracts for TEX-AN services and facilities provided to 
agencies as defined in Texas Civil Statutes, Article 601b, sec.1.02(2) , will 
not be required. However, requests for new services and facilities must be 
forwarded through the appropriate agency channels and then submitted in writing 
to TSD.
(g) Administrative controls. Each state agency and governmental body using TEX-
AN is responsible for assuring that the network is limited to official business 
calls. In addition to establishment of administrative controls, technical 
controls may also be accomplished by limiting access to the network only to 
those individual stations requiring long distance telephone service. Stations 
"blocked" from making outgoing TEX-AN calls may still receive incoming calls.
(h) Delayed or unfilled request.
(1)  Any request by a state agency or other governmental body which cannot be 
provided by the TSD will be returned to the requesting agency with the reasons 
for not providing requested services or facilities set out in writing.
(2)  The TSD will maintain a Voice Requirements Delayed or Unfilled file on 
requested actions. These requests will be implemented in the order received if 
and when the services or facilities become available, at the requesting agency's 
option.
(i) TEX-AN directory. The TSD will publish a TEX-AN directory for the use by the 
TEX-AN customers. The charges for these directories to TEX-AN customers will be 
based on the TSD's cost. Upon request from the TSD, each TEX-AN customer will be 
responsible for providing an up-to-date listing for inclusion in the directory.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on December 30, 1992.
TRD-9201528
Judith M. Porras
General Counsel
General Services Commission
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 463-3446
       
1 TAC sec.121.11
The General Services Commission proposes new sec.121.11, concerning acquisition, 
installation, and maintenance of terminal telephone equipment for the Capitol 
Complex Telephone System (CCTS).
Carl Stringfellow, director for Telecommunications Services Division, has 
determined that for the first five-year period the proposed section is in 
effect, there will be no fiscal implications for state or local government as a 
result of enforcing or administering the section.
Mr. Stringfellow, also has determined that for each year of the first five years 
the proposed section is in effect the public benefit anticipated as a result of 
enforcing the section will be the establishment of orderly procedures by which 
the CCTS user community can obtain and maintain terminal telephone equipment. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposed rule may be submitted to Judith Monaco Porras, General 
Counsel, General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. 
Comments must be received no later than 30 days from the date of publication of 
the proposed rule in the Texas Register.
The new section is proposed under Texas Civil Statutes, Article 601b, sec.10. 
03, which provides the General Services Commission with the authority to 
promulgate guidelines to accomplish the purpose of Article 10, Article 601b.
sec.121.11. Capitol Complex Telephone System (CCTS) Equipment Requisition, 
Payment, Installation And Maintenance.
(a) Definitions.
(1) "New equipment" as used in this section means unused telephone terminal 
equipment purchased by the General Services Commission (GSC) pursuant to 
contract with third party telecommunications vendors of telecommunications 
equipment.
(2) "Refurbished equipment" as used in this section means any used telephone 
terminal equipment originally purchased by the GSC pursuant to a contract with 
third party vendors of telecommunications equipment and which is collected by 
the Telecommunications Services Division (TSD) from CCTS user agencies' inactive 
inventory or disconnects and cleaned, tested, or reconditioned for further use 
by another agency.
(3) "Refurbished equipment cost" in this section means the approximate cost 
incurred by TSD in refurbishing equipment and is subject to change. 
Requisitioning agencies should contact their assigned customer representative 
from TSD for current cost.
(b) Requisition and installation.
(1) Requisition. Using agencies have three options for requesting equipment on a 
work order.
(A)  Refurbished equipment only. Agencies may request "refurbished equipment 
only". TSD will supply refurbished equipment if it is available. If no 
refurbished equipment is available, no equipment will be supplied by TSD and the 
work order will be returned to the requesting agency without action.
(B)  Refurbished equipment, if available. Agencies may request "refurbished 
equipment, if available." TSD will fill these orders with refurbished equipment 
if it is available; if it is not available, TSD will supply new equipment that 
is equivalent to the equipment requested.
(C) New equipment only. Agencies may request that new equipment only be 
installed. TSD will supply only new equipment on these orders.
(2)  Payment.
(A) New equipment. The equipment cost, shipping and handling, labor, and 
material charges are payable in full by the user agency upon installation of the 
equipment by TSD technicians.
(B) Refurbished equipment. The refurbished equipment cost, labor, and material 
charges are payable in full by the user agency upon installation of the 
equipment by TSD technicians.
(3) Prohibition against transfer. No agency other than the original subscriber 
may use the telephone equipment without the prior approval of TSD.
(c) Maintenance, repair, and replacement.
(1) New equipment maintenance and repair.
(A) Ordinary wear and tear. TSD will provide maintenance on all new equipment 
supplied by TSD. New equipment that becomes dysfunctional as a result of a 
product defect or normal wear and tear will be repaired or replaced at TSD's 
option, at no charge to user agencies.
(B) Other damage or loss. New equipment which becomes damaged or broken due to 
misuse or negligence of the user agency will be repaired by TSD, and the user 
agency will be billed for the labor and material charges incurred. Agencies 
shall pay for the replacement costs for all new equipment lost, stolen or 
damaged beyond reasonable repair. TSD will bill the user agency for the 
replacement cost, installation, labor, and materials charges for replacement 
equipment in full in accordance with subsection (b) (3) of this section relating 
to payments.
(2) Refurbished equipment. Once installed by TSD, refurbished equipment may be 
replaced with similar refurbished equipment at the refurbished equipment cost, 
labor, and material charges; or new equipment at the actual equipment cost, 
shipping and handling, labor, and material charges.
(d) Refurbished equipment that is dysfunctional and is not repairable will be 
declared to be surplus equipment by TSD.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201495
Judith M. Porras
General Counsel
General Services Commission
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 463-3446
       
TITLE 7. Banking and Securities
Part VII. State Securities Board
Chapter 117. Administrative Guidelines for Registration of Real Estate Programs
7 TAC sec.sec.117.1, 117.5, and 117.7
The State Securities Board proposes amendments to sec. s117.1, 117.5, and 117. 
7, concerning administrative guidelines for registration of real estate 
programs. The amendments reflect provisions that were included in the most 
recent amendments to the North American Securities Administrators' Association, 
Inc. (NASAA) real estate guidelines.
Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the sections are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Northcutt also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be continued uniformity with other states in applying 
standards for registration of real estate program offerings. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the sections as proposed.
Comments on the proposal may be submitted to Denise Voigt Crawford, State 
Securities Board, P.O. Box 13167, Austin, Texas 78711-3167.
The amendments are proposed under Texas Civil Statutes, Article 581, sec.28-1, 
which provide the board with the authority to adopt rules and regulations 
governing registration statements and applications; classify securities, 
persons, and matters within its jurisdiction; and prescribe different 
requirements for different classes.
sec.117.1. Introduction.
(a) (No change.)
(b)  Definitions. The following words and terms, when used in this chapter, 
shall have the following meanings, unless the context clearly indicates 
otherwise.
(1)-(18) (No change.)
<nl>(19) Independent exert-A person with no material current or prior business 
or personal relationship with the sponsor who is engaged to a substantial extent 
in the business of rendering opinions regarding the value of assets of the type 
held by the program, and who is qualified to perform such work.
<nl>(20)<ol>[(19)] Investment in properties-The amount of capital contributions 
used to make or invest in mortgage loans or the amount actually paid or 
allocated to the purchase, development, construction, or improvement of 
properties acquired by the program, including the purchase of properties, 
working capital reserves allocable thereto (except that working capital reserves 
in excess of 5.0% shall not be included), and other cash payments such as 
interest and taxes but excluding front-end fees.
<nl>(21)<ol>[(20)] Major repairs and rehabilitation-The repair, rehabilitation, 
or reconstruction of a property where the aggregate costs exceed 10% of the fair 
market value of the property at the time of such services.
<nl>(22)<ol>[(21)] Mandatory deferred payments-Payments on account of the 
purchase price of program interests offered in accordance with 17 Code of 
Federal Regulations 240.3a12-9.
<nl>(23)<ol>[(22)] Net worth -The excess of total assets over total liabilities 
as determined by generally accepted accounting principles, except that if any of 
such assets have been depreciated, then the amount of depreciation relative to 
any particular asset may be added to the depreciated cost of such asset to 
compute total assets, provided that the amount of depreciation may be added only 
to the extent that the amount resulting after adding such depreciation does not 
exceed the fair market value of such asset.
<nl>(24)<ol>[(23)] Non-specified property programs-Programs other than specified 
property programs.
<nl>(25)<ol>[(24)] Organization and offering expenses-Those expenses incurred in 
connection with and in preparing a program for registration and subsequently 
offering and distributing it to the public, including sales commissions paid to 
broker-dealers in connection with the distribution of the program and all 
advertising expenses.
<nl>(26)<ol>[(25)] Participant-The holder of a program interest.
<nl>(27)<ol>[(26)] Person-Any natural person, partnership, corporation, 
association, or other legal entity.
<nl>(28)<ol>[(27)] Program-A limited or general partnership, joint venture, 
unincorporated association or similar organization other than a corporation 
formed and operated for the primary purpose of investment in and the operation 
of or gain from an interest in real property, including such entities formed to 
make or invest in mortgage loans.
<nl>(29)<ol>[(28)] Program interest -The limited partnership unit or other 
indicia of ownership in a program.
<nl>(30)<ol>[(29)] Program management fee-A fee paid to the sponsor or other 
persons for management and administration of the program.
<nl>(31)<ol>[(30)] Property management fee-The fee paid for day-to-day 
professional property management services in connection with a program's real 
property projects.
<nl>(32)<ol>[(31)] Prospectus-Shall have the meaning given to that term by the 
Securities Act of 1933, sec.2(10), including a preliminary prospectus, provided, 
however, that such term as used herein shall also include an offering circular 
as described in the Securities Act of 1933, Rule 256, or, in the case of an 
intrastate offering, any document by whatever name known, utilized for the 
purpose of offering and selling securities to the public.
<nl>(33)<ol>[(32)] Purchase price -The price paid upon purchase or sale of a 
particular property, including the amount of acquisition fees and all liens and 
mortgages on the property, but excluding points and prepaid interest.
<nl>(34) Roll-up-A transaction involving the acquisition, merger conversion, or 
consolidation, either directly or indirectly of the program and the issuance of 
securities of a roll-up entity. Such term does not include:
<nl>(A) a transaction involving securities of the program that have been listed 
for at least 12 months on a national securities exchange or traded through the 
National Association of Securities Dealers Automated Quotation National Market 
System; or
<nl>(B) a transaction involving the conversion to corporate, trust or 
association form of only the program if, as a consequence of the transaction, 
there will be no significant adverse change in any of the following:
<nl>(i)<nl> participants' voting rights;
<nl>(ii)<nl> the term of existence of the program;
<nl>(iii) <nl> sponsor compensation; or
<nl>(iv)<nl> the program's investment objectives.
<nl>(35) Roll-up entity-A partnership, real estate investment trust, 
corporation, trust or other entity that would be created or would survive after 
the successful completion of a proposed roll-up transaction.
<nl>(36)<ol>[(33)] Specified property program-A program where, at the time a 
securities registration is ordered effective, more than 75% of the net proceeds 
from the sale of program interests is allocable to the purchase, construction, 
or improvement of specific properties. Reserves shall be included in the non-
specified portion. Net proceeds shall include principal amounts to be received 
on account of mandatory deferred payments.
<nl>(37)<ol>[(34)] Sponsor-Any person directly or indirectly instrumental in 
organizing, wholly or in part, a program or any person who will manage or 
participate in the management of a program, and any affiliate of any such 
person, but does not include a person whose only relation with the program is as 
that of an independent property manager, whose only compensation is as such. 
Sponsor does not include wholly independent third parties such as attorneys, 
accountants, and underwriters whose only compensation is for professional 
services rendered in connection with the offering of syndicate interests. A 
person may also be a sponsor of the program by:
(A)  taking the initiative, directly or indirectly, in founding or organizing 
the business or enterprise of the program, either alone or in conjunction with 
one or more other persons;
(B) receiving a material participation in the program in connection with the 
founding or organizing of the business of the program, in consideration of 
services or property, or both services and property;
(C) having a substantial number of relationships and contacts with the program;
(D) possessing significant rights to control program properties;
(E) receiving fees for providing services to the program which are paid on a 
basis that is not customary in the industry; or
(F)  providing goods or services to the program on a basis which was not 
negotiated at arms-length with the program.
sec.117.5. Conflicts of Interest and Investment Restrictions.
(a) -(n) (No change.)
<nl>(o) Appraisal and compensation.
<nl>(1) In connection with a proposed roll-up, an appraisal of all program 
assets shall be obtained from a competent, independent expert. If the appraisal 
will be included in a prospectus used to offer the securities of a roll-up 
entity, the appraisal shall be filed with the Securities and Exchange Commission 
and the states as an Exhibit to the Registration Statement for the offering. 
Accordingly, an issuer using the appraisal shall be subject to liability for 
violation of the Securities Act of 1933, sec.11, and comparable provisions under 
state laws for any material misrepresentations or material omissions in the 
appraisal. Program assets shall be appraised on a consistent basis. The 
appraisal shall be based on an evaluation of all relevant information, and shall 
indicate the value of the program's assets as of a date immediately prior to the 
announcement of the proposed roll-up. The appraisal shall assume an orderly 
liquidation of the programs assets over a 12 month period. The terms of the 
engagement of the independent expert shall clearly state that the engagement is 
for the benefit of the program and its participants. A summary of the 
independent appraisal, indicating all material assumptions underlying the 
appraisal, shall be included in a report to the participants in connection with 
a proposed roll-up.
<nl>(2) In connection with a proposed roll-up the person sponsoring the roll-up 
shall offer to participants who vote "no" on the proposal the choice of:
<nl>(A) accepting the securities of the roll-up entity offered in the proposed 
roll-up; or
<nl>(B) one of the following:
<nl>(i)<nl> remaining as participants in the program and preserving their 
interests therein on the same terms and conditions as existed previously; or
<nl>(ii)<nl> receiving cash in an amount equal to the participants' pro-rata 
share of the appraised value of the net assets of the program.
<nl>(3) The program shall not participate in any proposed roll-up which would 
result in participants having democracy rights in the roll-up entity which are 
less than those provided for under sec.117.7(a) and (b) of this title (relating 
to Rights and Obligations of Participants). If the roll-up entity is a 
corporation, the voting rights of participants shall correspond to the voting 
rights provided for in these guidelines to the greatest extent possible.
<nl>(4) The program shall not participate in any proposed roll-up which includes 
provisions which would operate to materially impede or frustrate the 
accumulation of shares by any purchaser of the securities of the roll-up entity 
(except to the minimum extent necessary to preserve the tax status of the roll-
up entity). The program shall not participate in any proposed roll-up which 
would limit the ability of a participant to exercise the voting rights of its 
securities of the roll-up entity on the basis of the number of program interests 
held by that participant.
<nl>(5) The program shall not participate in any proposed roll-up in which the 
participants' rights of access to the records of the roll-up entity will be less 
than those provided for under sec.117.7(d) of this title (relating to Rights and 
Obligations of Participants).
<nl>(6) The program shall not participate in any proposed roll-up in which any 
of the costs of the transaction would be borne by the program if the roll-up is 
not approved by the participants.
sec.117.7. Rights and Obligations of Participants.
(a)  Meetings. Meetings of the program may be called by the sponsor or the 
participants holding more than 10% of the then outstanding limited partnership 
interests, for any matters for which the participants may vote as set forth in 
the limited partnership agreement. [A list of the names and addresses of all 
participants shall be maintained as part of the books and records of the limited 
partnership and shall be made available on request to any participant or his 
representative at his cost.] Upon receipt of a written request either in person 
or by certified mail stating the purpose(s) of the meeting, the sponsor shall 
provide all participants, within 10 days after receipt of said request, written 
notice (either in person or by certified mail) of a meeting and the purpose of 
such meeting to be held on a date not less than 15 nor more than 60 days after 
receipt of said request, at a time and place convenient to participants.
(b) Voting rights of limited partners.
(1) (No change.)
(2) Without concurrence of a majority of the outstanding program interests, the 
general partner(s) may not:
(A)-(E) (No change.)
(F) dissolve the program. Notwithstanding subparagraph <nl>(C)<ol>[(B)] of this 
paragraph, an additional general partner may be appointed without obtaining the 
consent of the participants if the addition of such person is necessary to 
preserve the tax status of the program, such person has no authority to manage 
or control the program under the program agreement, there is no change in the 
identity of persons who have authority to manage or control the program, and the 
admission of such person as an additional general partner does not materially 
adversely affect the participants.
(3) Any amendment to the program agreement which modifies the compensation or 
distributions to which a general partner is entitled or which affects the duties 
of a general partner may be conditioned upon the consent of the general partner.  
<nl>With respect to any program interests owned by the sponsor, the sponsor may 
not vote or consent on matters submitted to the participants regarding the 
removal of the sponsor or regarding any transaction between the program and the 
sponsor. In determining the existence of the requisite percentage in interest of 
program interests necessary to approve a matter on which the sponsor may not 
vote or consent, any program interests owned by the sponsor shall not be 
included.
(4)-(5) (No change.)
(c) (No change.)
(d) Access to records. Every <nl>participant <ol> [limited partner] shall at all 
times have access to the records of the <nl>program<ol> [partnership] and may 
inspect and copy any of them. <nl>The limited partnership agreement, by-laws, or 
other program agreement shall include the following provisions regarding access 
to the list of participants:<ol> [A list of the names and address, of all of the 
limited partners shall be maintained as part of the books and records and shall 
be mailed to any limited partner upon request. A reasonable charge for copy work 
may be charged by the program.]
<nl>(1) An alphabetical list of the names, addresses, and business telephone 
numbers of the participants of the program along with the number of program 
interests held by each of them (the participant list) shall be maintained as a 
part of the books and records of the program and shall be available for 
inspection by any participant or its designated agent at the home office of the 
program upon the request of the participant.
<nl>(2) The participant list shall be updated at least quarterly to reflect 
changes in the information contained therein.
<nl>(3) A copy of the participant list shall be mailed to any participant 
requesting the participant list within ten days of the request. The copy of the 
participant list shall be printed in alphabetical order, on white paper, and in 
a readily readable type size (in no event smaller than 10-point type). A 
reasonable charge for copy work may be charged by the program.
<nl>(4) The purposes for which a participant may request a copy of the 
participant list include, without limitation, matters relating to participants' 
voting rights under the program agreement, and the exercise of participants' 
rights under federal proxy laws: and
<nl>(5) If the sponsor of the program neglects or refuses to exhibit, produce, 
or mail a copy of the participant list as requested, the sponsor shall be liable 
to any participant requesting the list for the costs, including attorneys' fees, 
incurred by that participant for compelling the production of the participant 
list, and for actual damages suffered by any participant by reason of such 
refusal or neglect. It shall be a defense that the actual purpose and reason for 
the requests for inspection or for a copy of the participant list is to secure 
such list of participants or other information for the purpose of selling such 
list or copies thereof, or of using the same for a commercial purpose other than 
in the interest of the applicant as a participant relative to the affairs of the 
program. The sponsor may require the participant requesting the participant list 
to represent that the list is not requested for a commercial purpose unrelated 
to the participant's interest in the program. The remedies provided hereunder to 
participants requesting copies of the participant list are in addition to, and 
shall not in any way limit, other remedies available to participants under 
federal law, or the laws of any state.
(e)-(k) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 28, 1992.
TRD-9201391
Richard D. Latham
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 474-2233
       
Chapter 121. Administrative Guidelines for Registration of Oil and Gas Programs
7 TAC sec.sec.121.1, 121.2, 121.8, 121.9
The State Securities Board proposes amendments to sec. s121.1, 121.2, 121.8, and 
121.9 concerning administrative guidelines for registration of oil and gas 
programs. The amendments reflect provisions that were included in the most 
recent admentments to the North American Securities Administrators' Association, 
Inc. (NASAA) oil and gas guidelines.
Michael Northcutt, director, Securities Registration Division has determined 
that for the first five-year period the sections are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Northcutt also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be continued uniformity with other states in applying 
standards for registration of oil and gas programs. There will be no effect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the sections as proposed.
Comments on the proposal may be submitted to Denise Voight Crawford, State 
Securities Board, P.O. Box 13167, Austin, Texas 78711-3167.
The amendments are proposed under Texas Civil Statutes, Article 581, sec.28.1, 
which provides the board with the authority to adopt rules and regulations 
governing registration statements and applications; classify securities, 
persons, and matters within its jurisdiction; and prescribe different 
requirements for difference classes.
sec.121.1. Introduction.
(a) (No change.)
(b) Definitions. The following words and terms, when used in this chapter, shall 
have the following meanings, unless the context clearly indicates otherwise.
(1)-(25) (No change.)
<nl>(26) Roll-up-A transaction involving the acquisition, merger, conversion, or 
consolidation, either directly or indirectly, of the program and the issuance of 
securities of a roll-up entity. Such term does not include:
<nl>(A) a transaction involving securities of the program that have been listed 
for at least 12 months on a national exchange or traded through the National 
Association of Securities Dealers Automated Quotation National Market System; or
<nl>(B) a transaction involving the conversion to corporate, trust or 
association form of only the program if, as a consequence of the transaction. 
there will be no significant adverse change in any of the following:
<nl>(i)<nl> voting rights;
<nl>(ii)<nl> the term of existence of the program;
<nl>(iii)<nl> sponsor compensation; or
<nl>(iv)<nl> the program's investment objectives.
<nl>(27) Roll-up-entity-A partnership trust, corporation or other entity that 
would be created or survive after the successful completion of a proposed roll-
up transaction.
<nl>(28)<ol>[(26)] Sponsor-Any person directly or indirectly instrumental in 
organizing, wholly or in part, a program or any person who will manage or is 
entitled to manage or participate in the management or control of a program. 
"Sponsor" includes the managing and controlling general partner(s) and any other 
person who actually controls or selects the person who controls 25% or more of 
the exploratory, developmental, or producing activities of the program, or any 
segment thereof, even if that person has not entered into a contract at the time 
of formation of the program. "Sponsor" does not include wholly independent third 
parties such as attorneys, accountants, and underwriters whose only compensation 
is for professional services rendered in connection with the offering of units. 
Whenever the context of these guidelines so requires, the term "sponsor" shall 
be deemed to include its affiliates.
<nl>(29)<ol>[(27)] Subordinated interest-An equity interest in a program issued 
to a person, without payment of full consideration, after the attainment of 
certain specified performance by the program.
<nl>(30)<ol>[(28)] Working interest -An interest in an oil and gas leasehold 
which is subject to some portion of the costs of development, operation, or 
maintenance.
sec.121.2. Requirements of Sponsor.
(a)-(e) (No change.)
(f) Investment in program. 
   [(1)] In appropriate cases, in order to create an identity of interest with 
the participants, the Securities Commissioner may require that the sponsor 
purchase for cash up to 5.0% of the program units.
[(2) Any program units acquired by a sponsor prior to the end of the second year 
succeeding the date of formation shall be entitled to the same allocation of 
profit, loss, income, gain and other credit as any other program unit, but any 
such program units shall not be entitled to vote or consent on any matters 
submitted to participants for their consent. In determining the existence of a 
quorum and the requisite percentage in interest of program units necessary to 
approve any program matter, any program units owned by the sponsor shall not be 
included.]
(g)-(j) (No change.)
sec.121.8. Rights and Obligations of Participants.
(a)-(b) (No change.)
(c) Access to program records.
[(1) The general partner shall maintain a list of the names and addresses of all 
participants at the principal office of the partnership. Such list shall be made 
available for the review of any participant or his representative at reasonable 
times, and upon request either in person or by mail the general partner shall 
furnish a copy of such list to any participant or his representative for the 
cost of reproduction and mailing.]
<nl>(1)<ol>[(2)] The participants and/or their accredited representatives shall 
be permitted access to all records of the program, after adequate notice, at any 
reasonable time <nl>and may inspect and copy any of them<ol>. The sponsor shall 
maintain and preserve during the term of the program and for four years 
thereafter all accounts, books, and other relevant program documents. 
Notwithstanding the foregoing, the sponsor may keep logs, well reports, and 
other drilling data confidential for a reasonable period of time.
<nl>(2) The limited partnership agreement, by-laws or other program agreement 
shall include the following provisions regarding access to the list of 
participants.
<nl>(A) An alphabetical list of the names, addresses, and business telephone 
numbers of the participants of the program along with the number of program 
units held by each of them (the participant list) shall be maintained as a part 
of the books and records of the program and shall be available for inspection by 
any participant or its designated agent at the home office of the program upon 
the request of the participant.
<nl>(B) The participant list shall be updated at least quarterly to reflect 
changes in the information contained therein.
<nl>(C) A copy of the participant list shall be mailed to any participant 
requesting the participant list within ten days of the request. The copy of the 
participant list shall be printed in alphabetical order, on white paper, and in 
a readily readable type size (in no event smaller than 10-point type). A 
reasonable charge for copy work may be charged by the program.
<nl>(D) The purposes for which a participant may request a copy of the 
participant list include, without limitation, matters relating to participants' 
voting rights under the program agreement and the exercise of participants' 
rights under federal proxy laws.
<nl>(E) If the sponsor of the program neglects or refuses to exhibit, produce, 
or mail a copy of the participant list as requested, the sponsor shall be liable 
to any participant requesting the list for the costs, including attorneys' fees, 
incurred by that participant for compelling the production of the participant 
list, and for actual damages suffered by any participant by reason of such 
refusal or neglect. It shall be a defense that the actual purpose and reason for 
the request for inspection or for a copy of the participant list is to secure 
the list of participants or other information for the purpose of selling such 
list or information or copies thereof, or of using the same for a commercial 
purpose other than in the interest of the applicant as a participant relative to 
the affairs of the program. The sponsor may require the participant requesting 
the participant list to represent that the list is not requested for a 
commercial purpose unrelated to the participant's interest in the program. The 
remedies provided hereunder to participants requesting copies of the participant 
list are in addition to, and shall not in any way limit, other remedies 
available to participants under federal law, or the laws of any state.
(d) -(e) (No change.)
(f) Voting rights of participants.
(1)  (No change.)
<nl>(2) With respect to any program units owned by the sponsor, the sponsor may 
not vote or consent on matters submitted to the participants regarding the 
removal of the sponsor or regarding any transaction between the program and the 
sponsor. In determining the requisite percentage in interest of program units 
necessary to approve a matter on which the sponsor may not vote or consent, any 
program units owned by the sponsor shall not be included.
(g) (No change.)
sec.121.9. Miscellaneous Provisions.
(a)-(c) (No change.)
<nl>(d) Appraisal and compensation.
<nl>(1) In connection with a proposed roll-up, an appraisal of all program 
assets shall be obtained from a competent, independent expert. If the appraisal 
will be included in a prospectus used to offer the securities of a roll-up 
entity, the appraisal shall be filed with the Securities and Exchange Commission 
and the Securities Commissioner as an Exhibit to the Registration Statement for 
the offering. Accordingly, an issuer using the appraisal shall be subject to 
liability for violation of the Securities Act of 1933, sec.11, and comparable 
provisions under state law for any material misrepresentations or material 
commissions in the appraisal. Program assets shall be appraised on a consistent 
basis. The appraisal shall be based on all relevant information, including 
current reserve estimates prepared by an independent petroleum consultant, and 
shall indicate the value of the program's assets as of a date immediately prior 
to the announcement of the proposed roll-up transaction. The appraisal shall 
assume an orderly liquidation of program assets over a 12 month period. The 
terms of the engagement of the independent expert shall clearly state that the 
engagement is for the benefit of the program and its participants. A summary of 
the independent appraisal, indicating all material assumptions underlying the 
appraisal, shall be included in a report to the participants in connection with 
a proposed roll-up.
<nl>(2) In connection with a proposed roll-up, the person sponsoring the roll-up 
shall offer the participants who vote "no" on the proposal the choice of:
<nl>(A) accepting the securities of the roll-up entity offered in the proposed 
roll-up; or
<nl>(B) one of the following:
<nl>(i)<nl> remaining as participants in the program and preserving their 
interests therein on the same terms and conditions as existed previously; or
<nl>(ii)<nl> receiving cash in an amount equal to the participants' pro-rata 
share of the appraised value of the net assets of the program.
<nl>(3) The program shall not participate in any proposed roll-up which would 
result in the participants having democracy rights in the roll-up entity which 
are less than those provided for under sec.121.8(a) and (f) of this title 
(relating to Rights and Obligations of Participants). If the roll-up entity is a 
corporation, the democracy rights of participants shall correspond to the 
democracy rights provided for in this section to the greatest extent possible.
<nl>(4) The program shall not participate in any proposed roll-up which includes 
provisions which would operate to materially impede or frustrate the 
accumulation of shares by any purchaser of the securities of the roll-up entity 
(except to the minimum extent necessary to preserve the tax status of the roll-
up entity. The program shall not participate in any proposed roll-up which would 
limit the ability of a participant to exercise the voting rights of its 
securities of the roll-up entity on the basis of the number of program units 
held by that participant.
<nl>(5) The program shall not participate in any proposed roll-up in which the 
participants' rights of access to the records of the roll-up entity will be less 
than those provided for under sec.128(c) of this title (relating to Rights and 
Obligations of Participants).
<nl>(6) The program shall not participate in any proposed roll-up in which any 
of the costs of the transaction would be borne by the program if the roll-up is 
not approved by participants.
[(d) Exchange offers.
[(1) The program agreement shall provide that neither the sponsor nor any person 
affiliated with the sponsor (exchange offeror) may make or cause to be made any 
offer to a participant to exchange the participant's units in a program for a 
security unless:
[(A) such offer is made after the expiration of two years after such program 
commenced operations;
[(B) such offer is made to all participants;
[(C)  such offer is on a basis no more advantageous to a sponsor, exchange 
offeror, or underwriter of the offer and their respective affiliates than to 
participants; provided, however, that this subsection shall not prohibit, if 
permitted under applicable state and self-regulatory organization guidelines:
[(i) compensation (including the issuance of securities) to such persons in 
exchange for such persons' other balance sheet assets (non-program interests) 
for inclusion of the sponsor entity in the exchange offer or tender of other 
balance sheet assets of the sponsor, underwriter, or their affiliates, based 
upon exchange valuation principles consistent with these guidelines;
[(ii) compensation to an underwriter for services in connection with the offer; 
provided, however, that no compensation shall be payable to an underwriter for 
the tender of interests by the exchange offeror, its affiliates, or the 
underwriter; and
[(iii) compensation that may be permitted under subparagraph (G) of this 
paragraph;
[(D) payments for services rendered are fully supportable, actual, and 
necessary;
[(E) in computing the exchange ratio, the value of oil and gas reserves and 
other assets must be supported by an appraisal prepared by an independent expert 
which is based upon all pertinent information, including a reserve estimate 
prepared by an independent petroleum consultant, as of the most current feasible 
date, but in no event more than 12 months prior to the effective date of the 
exchange offer;
[(F) the offer is made pursuant to all registration requirements under both 
federal and state laws;
[(G) if the exchange offeror is a corporation, the offer is made in compliance 
with applicable registration requirements for corporate securities and may not 
allow a security with different rights and privileges to be issued to the 
sponsor or affiliates unless there is justification therefor;
[(H) the offer does not allow for an accelerated subordinated interest to the 
partnership sponsors without regard to the existing payout provision;
[(I) additional shares to be issued pursuant to future reevaluation of 
properties include reevaluation of similar properties held by participants;
[(J) there will be no overrides newly established to the sponsor, exchange 
offeror, or affiliates on of the exchange and any overrides to be established to 
nonaffiliates on such leases and the basis therefor are disclosed in detail;
[(K) all properties to be exchanged are to be evaluated on the same basis or 
standard of evaluation; and
[(L) material properties of the sponsor or affiliates to be exchanged have 
complete cost disclosure. Recent acquisitions of the sponsors or affiliates will 
be reviewed to determine if any claimed value increase is justified.
[(2) For the purposes of paragraph (1) of this subsection, an "offer of 
exchange" includes any security ("unit") of a program which is convertible into 
a security issued by the sponsor or another issuer. Departures from the 
guidelines in this subsection may be considered where good cause and proper 
justification are shown.]
(e)-(g) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 28, 1992.
TRD-9201390
Richard D. Latham
Securities Commissioner
Stat Securities Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 474-2233
       
Chapter 139. Exemptions by Rule or Order
7 TAC sec.139.6
The State Securities Board proposes an amendment to sec.139.6, concerning 
distributions by liquidating trustees in order to expand the circumstances under 
which the exemption will be available.
Richard D. Latham, securities commissioner, has determined that for the first 
five-year period the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Mr. Latham also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be that the exemption will be broad enough to cover situations in 
which the articles of dissolution are filed either before or after a 
distribution. This section is promulgated under the authority of the Texas Tax 
Code, Title 2; therefore no analysis of the effect on small businesses is 
required. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Denise Voight Crawford, State 
Securities Board, P.O. Box 13167, Austin, Texas 78711-3167.
The amendment is proposed under Texas Civil Statutes, Article 581, sec.28.1, 
which provides the board with the authority to adopt rules and regulations 
governing registration statements and applications; classify securities, 
persons, and matters within its jurisdiction; and prescribe different 
requirements for difference classes.
sec.139.6. Distributions by Liquidating Trustees. The distribution to security 
holders of record at the time of <nl>the corporation's <ol> dissolution <nl>or 
liquidation<ol> of [any] securities held by the liquidating trustee [of a 
corporation which has filed articles of dissolution pursuant to a plan of 
complete liquidation and dissolution approved by the shareholders] shall be 
exempt from the securities <nl>registration<ol> and dealer registration 
requirements of the Act<nl>. The distribution of such securities, as part of 
their pro rata share of assets, to the security holders of records shall be 
exempt <ol>, provided <nl>that either articles of dissolution of the dissolving 
corporation have been or will be filed pursuant to a plan of complete 
liquidation or dissolution approved by the shareholders or a court of competent 
jurisdiction orders the dissolution and<ol> no security holder is obligated to 
pay or give any consideration other than the surrender of his shares of the 
dissolved corporation.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 28, 1992.
TRD-9201388
Richard D. Latham
State Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 474-2233
       
Chapter 141. Administrative Guidelines for Registration of Equipment Programs.
7 TAC sec.sec.141.1, 141.5, 141.6
The State Securities Board proposes amendments to sec. s141.1, 141.5, and 141. 6 
concerning administrative guidelines for registration of equipment programs. The 
amendments reflect provisions that were included in the most recent amendments 
to the North American Securities Administrator's Associations, Inc. (NASAA) 
equipment program guidelines.
Michael Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the sections are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Northcutt also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be continued uniformity with other states in applying 
standards for registration of equipment program offerings.
This section is promulgated under the authority of the Texas Tax Code, Title 2; 
therefore no analysis of the effect on small businesses is required. There is no 
anticipated economic cost to persons who are required to comply with the 
sections as proposed.
Comments on the proposal may be submitted to Denise Voight Crawford, State 
Securities Board, P.O. Box 13167, Austin, Texas 78711-3167.
The amendments are proposed under Texas Civil Statutes, Article 581, sec.28.1, 
which provides the board with the authority to adopt rules and regulations 
governing registration statements and applications; classify securities, 
persons, and matters within its jurisdiction; and prescribe different 
requirements for different classes.
sec.141.1. Introduction.
(a) (No change.)
(b) Definitions. Where terms used in the prospectus are subject to more than one 
interpretation and such terms are material to program provisions, the prospectus 
shall contain a glossary of such terms. Any discrepancies between the 
definitions set forth in these guidelines and the definitions set forth in the 
glossary shall be indicated in the application filed with the Securities 
Commissioner.
(1) Acquisition expenses-Expenses including, but not limited to[,] legal fees 
and expenses, travel and communication expenses, costs of appraisals, accounting 
fees and expenses, and miscellaneous expenses relating to selection and 
acquisition of equipment, whether or not <nl>acquired<ol> [required].
(2) (No change.)
<nl>(3) Administrator-Referred to as Securities Commissioner throughout these 
guidelines.
<nl>(4)<ol>[(3)] Affiliate-
(A)  any person directly or indirectly controlling, controlled by[,] or under 
common control with another person;
(B)-(C) (No change.)
(D) if such other person is an officer, director[,] or partner, any company for 
which such person acts in such capacity.
<nl>(5)<ol>[(4)]<nl>  Assessments-Additional amounts of capital which may be 
mandatorily required of or paid at the option of a participant beyond his 
subscription commitment.
<nl>(6)<ol>[(5)] Capital contribution -The gross amount of investment in a 
program by a participant, or all participants, as the case may be.
<nl>(7)<ol>[(6)] Carried interest -An interest taken in a program by a person, 
other than the promotional interest provided for in sec.141. 4(c)(3) and (d) of 
this title (relating to Compensation and Expenses), for which full consideration 
has neither been paid nor is to be paid.
<nl>(8) <ol>[(7)] Cash available for distribution-Cash flow plus cash funds 
available for distribution from program reserves less amounts set aside for 
restoration or creation of reserves.
<nl>(9)<ol>[(8)] Cash flow -Program cash funds provided from operations, without 
deduction for depreciation, but after deducting cash funds used to pay all other 
expenses, debt payments, capital improvements, and replacements (other than cash 
funds withdrawn from reserves).
<nl>(10)<ol>[(9)] Competitive equipment sale commission-That brokerage fee paid 
for services rendered in connection with the purchase or sale of equipment which 
is reasonable, customary, and competitive in light of the size, type, and 
location of the equipment.
<nl>(11)<ol>[(10)]  Cross-reference sheet-A compilation of the guideline 
sections, referenced to the page of the prospectus, program agreement, or other 
exhibits, and justification of any deviation from the guidelines.
<nl>(12)<ol>[(11)]  Equipment management-Personnel and services necessary to the 
leasing activities of the program, including, but not limited to, leasing and 
re-leasing of program equipment, arranging for necessary maintenance and repair 
of the equipment, collecting revenues, paying operating expenses, determining 
that the equipment is used in accordance with all operative contractual 
arrangements and providing clerical and bookkeeping services necessary to the 
operation of program equipment.
<nl>(13)<ol>[(12)] Front-end fees -Fees and expenses paid by any party for any 
services rendered during the program's organizational or acquisition phase 
including organization and offering expenses, leasing fees, acquisition fees, 
acquisition expenses, and any other similar fees, however designated by the 
sponsor. Front-end fees shall not include any acquisition fees or acquisition 
expenses paid by a manufacturer of equipment to any of its employees unless such 
persons are affiliates of the sponsor.
<nl>(14)<ol>[(13)] Full payout leases-Leases under which the non-cancellable 
rental payments due during the initial term of the lease are sufficient to 
recover the purchase price of equipment.
<nl>(15)  Independent exert -A person with no material current or prior business 
or personal relationship with the sponsor who is engaged to a substantial extent 
in the business of rendering opinions regarding the value of assets of the type 
held by the program, and who is qualified to perform such work.
<nl>(16) <ol>[(14)] Investment in equipment-The amount of capital contributions 
actually paid or allocated to the purchase, manufacture, or renovation of 
equipment acquired by the program, including the purchase of equipment, working 
capital reserves allocable thereto (except that working capital reserves in 
excess of 3.0% shall not be included), and other cash payments such as interest 
and taxes[,] but excluding front-end fees.
<nl>(17)<ol>[(15)] Leasing fee -The total of all fees and commissions paid by 
any party in connection with the initial lease of equipment acquired by a 
program.
<nl>(18)<ol>[(16)] Net disposition proceeds-The proceeds realized by the program 
from sale, refinancing[,] or other disposition of program equipment, including 
insurance proceeds or leasee indemnity payments arising from the loss or 
destruction of the equipment, less all program liabilities.
<nl>(19)<ol>[(17)] Net lease provisions-Contractual arrangements under which the 
lessee assumes responsibility for, and bears the cost of, insurance, taxes, 
maintenance, repair, and operation of the leased asset and where the non-
cancellable rental payments under the lease are absolutely net to the lessor.
<nl>(20)<ol>[(18)] Net worth -The excess of total assets over total liabilities 
as determined by generally accepted accounting principles, except that if any of 
such assets have been depreciated, then the amount of depreciation relative to 
any particular asset may be added to the depreciated cost of such asset to 
compute total assets. The amount of depreciation may be added only to the extent 
that the amount resulting after adding such depreciation does not exceed the 
fair market value of such asset.
<nl>(21)<ol>[(19)] Operating leases -Leases which will return to the lessor less 
than the purchase price of equipment from rentals payable during the initial 
term of the lease.
<nl>(22)<ol>[(20)] Organizational and offering expenses-Expenses incurred in 
connection with preparing a program for registration and subsequently offering 
and distributing it to the public, including sales commissions paid to broker-
dealers in connection with the distribution of program interests and all 
advertising expenses except advertising expenses related to the leasing of the 
program's equipment.
<nl>(23)<ol>[(21)] Participant-The holder of a program interest.
<nl>(24)<ol>[(23)] Person-Any natural person, partnership, corporation, 
association, or other legal entity.
<nl>(25)<ol>[(23)] Program-A limited or general partnership, joint venture, 
unincorporated association[,] or similar organization other than a corporation 
formed and operated for the primary purpose of investment in and the operation 
of or gain from an interest in equipment.
<nl>(26)<ol>[(24)] Program interest -The limited partnership unit or other 
indicia of ownership in a program.
<nl>(27)<ol>[(25)] Prospectus-The meaning given to that term by the Securities 
Act of 1933, sec.2(10), including a preliminary prospectus; provided, however, 
that such term as used herein shall also include an offering circular as 
described in the Securities Act of 1933, Rule 256, General Rules and 
Regulations, or, in the case of an intrastate offering, any document by whatever 
name known, utilized for the purpose of offering and selling securities to the 
public.
<nl>(28)<ol>[(26)] Purchase price of equipment-The price paid upon the purchase 
or sale of a particular item of equipment, including the amount of acquisition 
fees and all liens and mortgages on the equipment, but excluding points and 
prepaid interest.
<nl>(29) Roll up-A transaction involving the acquisition, merger, conversion, or 
consolidation either directly or indirectly of the program and the issuance of 
securities of a roll-up entity. Such term does not include:
<nl>(A) a transaction involving securities of a program that have been for at 
least 12 months listed on a national securities exchange or traded through the 
National Association of Securities Dealers Automated Quotation National Market 
System; or
<nl>(B) a transaction involving the conversion to corporate trust or association 
form of only the program if, as a consequence of the transaction, there will be 
no significant adverse change in any of the following:
<nl>(i)<nl> participant's voting rights:
<nl>(ii)<nl> the term of existence of the program;
<nl>(iii)<nl> sponsor compensation; or
<nl>(iv)<nl> the program's investment objectives.
<nl>(30) Roll-up entity-The partnership, corporation, trust or other entity that 
would be created or would survive after the successful completion of a proposed 
roll-up transaction.
<nl>(31)<ol>[(27)] Specified equipment program-A program where, at the time a 
securities registration is ordered effective, at least 75% of the net proceeds 
from the sale of program interests are allocable to the purchase or renovation 
of identified equipment or one specified type of identified equipment. Reserves 
shall not be included in the 75%.
<nl>(32)<ol>[(28)] Sponsor-Any person directly or indirectly instrumental in 
organizing, wholly or in part, a program or any person who will manage or 
participate in the management of a program <nl>,<ol> and any affiliate of any 
such person. Sponsor does not include a person whose only relation with the 
program is that of an independent equipment manager and whose only compensation 
is as such. Sponsor does not include wholly independent third parties such as 
attorneys, accountants, and underwriters whose only compensation is for 
professional services rendered in connection with the offering of program 
interests.
sec.141.5. Conflicts of Interest and Investment Restrictions.
(a) -(q) (No change.)
<nl>(r) Appraisal and compensation.
<nl>(1)  In connection with a proposed rollup, an appraisal of all program 
assets shall be obtained from a competent, independent expert. If the appraisal 
will be included in a prospectus used to offer the securities of a roll-up 
entity, the appraisal shall be filed with the Securities and Exchange Commission 
and the states as an Exhibit to the Registration Statement for the offering. 
Accordingly, an issuer using the appraisal shall be subject to liability for 
violation of the Securities Act of 1933, sec.11, and comparable provisions under 
state laws for any material misrepresentations or material omissions in the 
appraisal. Program assets shall be appraised on a consistent basis. The 
appraisal shall be based on an evaluation of all relevant information, and shall 
indicate the value of the program's assets as of a date immediately prior to the 
announcement of the proposed roll-up transaction. The appraisal shall assume an 
orderly liquidation of program assets over a 12 month period. The terms of the 
engagement of the independent expert shall clearly state that the engagement is 
for the benefit of the program and its participants. A summary of the 
independent appraisal, indicating all material assumptions underlying the 
appraisal, shall be included in a report to the participants in connection with 
a proposed roll-up.
<nl>(2) In connection with a proposed roll-up, the person sponsoring the roll-up 
shall offer to participants who vote "no" on the proposal the choice of:
<nl>(A) accepting the securities of the roll-up entity offered in the proposed 
roll-up; or
<nl>(B) one of the following:
<nl>(i)<nl> remaining as participants in the program, and preserving their 
interests therein on the same terms and conditions as existed previously; or
<nl>(ii)<nl> receiving cash in an amount equal to the participants' pro-rata 
share of the appraised value of the net assets of the program.
<nl>(3) The program shall not participate in any proposed roll-up which would 
result in participants having democracy rights in the roll-up entity which are 
less than those provided for under sec.141.6(a) and (b) of this title (relating 
to Rights and Obligations of Participants). If the roll-up entity is a 
corporation, the voting rights of participants shall correspond to the voting 
rights provided for in these guidelines to the greatest extent possible.
<nl>(4) The program shall not participate in any proposed roll-up which includes 
provisions which would operate to materially impede or frustrate the 
accumulation of shares by any purchaser of the securities of the roll-up entity 
(except to the minimum extent necessary to preserve the tax status of the roll-
up entity). The program shall not participate in any proposed roll-up which 
would limit the ability of a participant to exercise the voting rights of its 
securities of the roll-up entity on the basis of the number of program interests 
held by that participant.
<nl>(5) The program shall not participate in any proposed roll-up in which 
participants' rights of access to the records of the roll-up entity will be less 
than those provided for under sec.141.6(d) of this title (relating to Rights and 
Obligations of Participants ) .
<nl>(6) The program shall not participate in any proposed roll-up in which any 
of the costs of the transaction would be borne by the program if the roll-up is 
not approved by participants.
sec.141.6. Rights and Obligations of Participants.
(a) Meetings. Meetings of the program may be called by the sponsor or the 
participants holding more than 10% of the then outstanding program interests, 
for any matters for which the participants may vote as set forth in the program 
agreement. [A list of the names and addresses of all participants shall be 
maintained as part of the books and records of the program, and shall be made 
available by mail on request to any participant or a designated representative 
thereof at their cost.] Upon receipt of a written request, either in person or 
by registered mail, stating the purpose(s) of the meeting, the sponsor shall 
provide all participants within 10 days after receipt of said request, written 
notice (either in person or by certified mail) of a meeting and the purpose of 
such meeting to be held on a date not less than 15 nor more than 60 days after 
distribution of such notice, at the time and place specified in the request, or 
if none, at a time and place convenient to participants.
(b) Voting rights of participants. The limited partnership agreement must 
provide that a majority of the then outstanding program interests may, without 
the necessity for concurrence by the sponsor, vote to:
(1) amend the limited partnership agreement;
(2) dissolve the program;
(3) remove the sponsor and elect a new sponsor; and
(4) approve or disapprove the sale of all or substantially all of the assets of 
the program <nl>except pursuant to a plan disclosed in the final prospectus<ol>. 
The agreement should provide for a successor sponsor where the only sponsor of 
the program is an individual;
<nl>(5) with respect to any program interests owned by the sponsor. the sponsor 
may not vote or consent on matters submitted to the participants regarding the 
removal of the sponsor or regarding any transaction between the program and the 
sponsor. In determining the requisite percentage in interest of program 
interests necessary to approve a matter on which the sponsor may not vote or 
consent, any program interests owned by the sponsor shall not be included.
(c) (No change.)
(d) Access to records. Any participant and designated representative thereof 
shall be permitted access to all records of the program at all reasonable 
times<nl>,<ol>[.] <nl>and may inspect and coy any of them. The limited 
partnership agreement, by-laws, or other program agreement shall include the 
following provisions regarding access to the list of participants:
<nl>(1) An alphabetical list of the names, addresses, and business telephone 
numbers of the participants of the program along with the number of program 
interests held by each of them (the "participant list") shall be maintained as a 
part of the books and records of the program and shall be available for 
inspection by any participant or its designated agent at the home office of the 
program upon the request of the participant.
<nl>(2) The participant list shall be updated at least quarterly to reflect 
changes in the information contained therein.
<nl>(3)  A copy of the participant list shall be mailed to any participant 
requesting the participant list within 10 days of the request. The copy of the 
participant list shall be printed in alphabetical order, on white paper, and in 
a readily readable type size (in no event smaller than 10-point type). A 
reasonable charge for copy work may be charged by the program.
<nl>(4) The purposes for which a participant may request a copy of the 
participant list include, without limitation, matters relating to participants' 
voting rights under the program agreement, and the exercise of participants' 
rights under federal proxy laws.
<nl>(5) If the sponsor of the program neglects or refuses to exhibit, produce, 
or mail a copy of the participant list as requested, the sponsor shall be liable 
to any participant requesting the list for the costs, including attorneys' fees, 
incurred by that participant for compelling the production of the participant 
list, and for actual damages suffered by any participant by reason of such 
refusal or neglect. It shall be a defense that the actual purpose and reason for 
the requests for inspection or for a copy of the participant list is to secure 
such list of participants or other information for the purpose of selling such 
list or copies thereof, or of using the same for a commercial purpose other than 
in the interest of the applicant as a participant relative to the affairs of the 
program. The sponsor may require the participant requesting the participant list 
to represent that the list is not requested for a commercial purpose unrelated 
to the participant's interest in the program. The remedies provided hereunder to 
participants requesting copies of the participant list are in addition to, and 
shall not in any way limit, other remedies available to participants under 
federal law, or the laws of any state.
(e) -(h) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 28, 1992.
TRD-9201389
Richard D. Latham
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 474-2233
       
TITLE 16. ECONOMIC REGULATION
Part II. Public Utility Commission of Texas
Chapter 23. Substantive Rules
Certification
16 TAC sec.23.31
The Public Utility Commission of Texas proposes an amendment to sec.23.31 and 
sec.23.66, concerning substantive rules. The amendment to sec.23.31 concerns 
notices of intent for the construction of electric generating units and 
certificates of convenience and necessity for such units. The amendment to  s23. 
66 relates to arrangements between qualifying facilities and electric utilities. 
The proposed rules, if adopted, will require utilities that are planning to 
acquire additional generating capacity to conduct formal solicitations to seek 
alternative suppliers to provide the additional capacity. In addition, the rules 
will require utilities to wheel power between non-utility suppliers and 
consumers of the power, in certain circumstances.
Jess Totten, assistant general counsel, has concluded that it is not possible to 
determine, on the basis of the information that is available now, the fiscal 
implications for state or local government for the first five-year period that 
the sections are in effect. The solicitation requirement is likely to reduce 
utilities' cost of providing service, resulting in lower electric rates for 
state and local government, but the proposed rules concerning the wheeling of 
power may increase electric rates for state and local government.
The revenues of many municipalities include franchise fees that are paid by 
utilities that provide service within the municipality. Typically the franchise 
fee is calculated as a percentage of the utility revenues in the city. If 
utility revenues to customers within the limits of a city increase or decrease, 
as a result of this rule, the city's revenues from any franchise fees will also 
increase or decrease. Beyond the impact on franchise fees, it does not appear 
that enforcing or administering these sections will have any effect on the 
revenues of state or local government.
Mr. Totten has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be that utilities that are considering adding to their 
generating capability will be required to consider a broader set of alternatives 
and the process by which the commission considers utilities' applications to 
build new plants will be more orderly. These factors should permit utilities to 
select lower cost alternatives than would be available in the absence of these 
amendments, ultimately resulting in lower cost electric service for utility 
customers in Texas. In addition, the rules will facilitate the provision of 
lower cost electricity to industrial customers, through the wheeling rules that 
are proposed.
Just as for state and local government, it is impossible to determine whether 
this rule will increase costs for small businesses; the solicitation rules 
should result in reduced electric rates, but the wheeling rules may result in 
increased electric rates for small businesses. There is no anticipated economic 
cost to persons who are required to comply with the sections as proposed.
Mr. Totten also has determined that for each of the first five years the 
sections are in effect, there will be no impact on employment in the 
geographical areas affected by implementing the requirements of the sections.
In connection with these proposed rules, the commission is also asking a series 
of questions related to integrated resource planning, purchased power, demand-
side management, environmental externalities, and alternative dispute 
resolution. The commission is interested in having the comments of all 
interested parties on the proposed rule and their responses to the questions. 
Interested parties are asked to notify the commission, in advance of filing 
comments on the proposed rules or responses to the questions, that they intend 
to file comments. The commission will use these filings to prepare an official 
service list for this rulemaking proceeding. Parties that file comments should 
serve a copy of their comments on the other parties on this service list.
The commission has also decided to hold a public workshop after all of the 
comments are filed. The commission has not yet decided the exact format or date 
for such a workshop, but it is the commission's intention to permit oral 
comments by the different groups that are interested in the issues raised by the 
proposed rules and the questions, and to permit the commission to ask questions 
of the parties that appear to give comments. In a subsequent notice, the 
commission will provide more details concerning the public workshop.
The first set of questions pertains to demand-side management.
Should the scope of demand-side management include changes in rate design, 
"valley filling" and "strategic load growth," or low-efficiency equipment?
Regulatory Barrier to Demand-Side Management: What should the commission do to 
eliminate barriers and the perceived risk associated with the acquisition of 
demand-side resources by electric utilities? Please describe the regulatory 
barriers to end-use energy efficiency, conservation, and demand-side management 
and the methods the commission could use to eliminate those barriers. What 
methods should the commission use to insure the full and timely recovery of 
reasonable expenditures for demand-side management? Should the commission 
expense or capitalize these expenditures? Should the commission set up a 
mechanism to insure the recovery of "lost revenues" due to the implementation of 
demand-side management programs.
Regulatory Incentives for Demand-Side Management:<ol>  Should the commission 
provide electric utilities an incentive for acquiring low-cost demand-side 
resources? If so, how? Please consider the adjustment to the rate of return 
allowed by sec.23.21(c)(1)(B) in making your comments. Should the commission 
reward utilities for achieving reductions in peak demand as well as the 
conservation of electrical energy?
Regulatory Authority and Practice: Does the commission have sufficient authority 
for the regulation of electric utility activities in end-use energy efficiency, 
conservation, and demand-side management? Should the commission get more 
involved in the details of demand-side programs than it has in the past? Should 
the commission require certain demand-side management programs or a particular 
level of expenditures? Should the commission establish energy efficiency goals 
for Texas and require electric utilities to adopt and meet those goals? Please 
evaluate the following: the commission's regulatory authority to establish 
goals, the process by which the commission would review or set goals, the 
specific goal of system load factor improvement, fuel-switching goals (to 
electricity), and the promotion of electricity use. What types of costs and 
benefits are associated with maintaining the following goals: reducing 
electricity consumption during times of excess capacity, reducing electricity 
consumption during off-peak periods, achieving savings now which would otherwise 
be lost ("lost opportunities")? Should the commission adopt minimum energy 
efficiency standards for conservation demand-side management programs? What role 
should the commission take in the regulation of electric utility end-use 
competition with natural-gas utilities? What should the commission do to promote 
competition in end-use efficiency activities? Should retail wheeling be 
considered as a type of DSM?
Technical and Economic Potential:<ol> Should utilities be required to forecast 
the technical and economic potential for demand-side management in their service 
areas? What methods should the commission use to determine the technical and 
economic potential for demand-side management?
Program Selection and Evaluation:<ol> What methods and criteria should the 
commission adopt to insure program implementation, monitoring, and comprehensive 
performance evaluation of demand-side management programs? Please discuss the 
strengths and weaknesses of the "California standard practice" for the 
cost/benefit analysis of demand-side management programs. What perspective(s) is 
(are) most important? Why? What should be the role of quantified environmental 
externalities in the calculation of the total resource cost test? What 
importance should the commission assign to the rate impact of various demand-
side management programs. Should the commission focus on each program or 
consider the collective rate impact of all demand-side management programs?
Energy Efficiency, Productivity, and Economic Development:<ol> Should the 
commission encourage demand-side management activities which enhance economic 
development? Should the commission require that the promoted technologies are 
innovative and/or energy efficient?
Pricing and Rate Design: <ol> Should the commission insure that the structure 
(rate design) of retail and wholesale tariffs encourages end-use energy 
efficiency? If so, how?
The second set of questions pertains to purchased power.
Major Issues:<ol>  What are the risks of purchased power and how should the 
risks be evaluated? Should the commission require potential nonutility 
generators (NUGs) to file particular information? If so, what? Should all NUG 
offers be reported to the commission? What criteria should the commission use to 
evaluate the reliability and economics of NUGs. What are the major technical, 
legal and regulatory impediments to the optimal use of purchased power? Should 
incentives be used as a means to encourage utilities to aggressively pursue the 
purchased power option? If so, how? Should the commission clarify the use of the 
Public Utility Regulatory Act (PURA), sec.39(b) for adjustments to the rate of 
return to encourage use of purchased power? If so, how? Should the commission 
consider the technical efficiency of cogenerated power to determine a bonus for 
the efficiency of operations of the electric utility? If so, how? Should the 
commission make adjustments to the PCRF (or other factor) to provide utilities 
with an incentive to acquire purchased power? If so, what adjustments? What is 
an equitable way to distribute the costs and benefits of purchased power among 
shareholders and ratepayers? Should the commission encourage joint ventures 
between electric utilities in the construction of power plants. Should 
independent power projects be allowed in Texas? If so, how should the PURA be 
modified?
Transmission Access and Retail Sales:<ol> Who should be allowed to have access 
to a utility's transmission system? Should retail sales by a NUG be allowed as 
an option to satisfy a need for capacity? If so, should there be any limits to 
whom a NUG can sell? If so, should sales be limited to the time when the utility 
has a need for additional capacity? If so, should the wheeling rules be changed 
to encourage a NUG's sale of power?
Bidding:<ol> Please comment on the current system of "competitive negotiations" 
between the utilities and potential suppliers. What improvements can be made in 
the process for a utility securing a contract with a NUG? What criteria should 
the commission use to determine whether the utility has adequately negotiated 
before making a final decision to accept or reject the offer from a potential 
supplier? Should proposals from utilities be treated differently than proposals 
from a NUG? Should the commission explicitly require that utilities that project 
a need for generating capacity conduct a solicitation of prospective suppliers? 
How should such a solicitation relate to the existing avoided cost, NOI, and CCN 
proceedings? What should the commission's role be in such a solicitation? Should 
the commission determine the need for capacity, establish guidelines for the 
solicitation process, or certify the result of the solicitation process? How 
should the commission deal with utility construction costs that differ from what 
was estimated in the CCN? Should an upper limit be placed on the costs allowed 
in rate base? Should the utility be rewarded if the final costs are below the 
original estimate? If so, how?
Avoided Cost:<ol>  Please comment on the current avoided cost methodology. 
Should a different methodology which concentrates on the overall costs/benefits 
to the system be used in place of the committed unit basis (CUB)? Should avoided 
cost be based on long-run marginal costs for the system instead of the 
incremental need for additional capacity? Should the commission revise the 
avoided cost rules to encourage utilities to include cost- adjustment clauses in 
their contracts with qualifying facilities, to encourage cost adjustments 
related to changes in the utilities' cost of capital and other factors that 
affect the utilities' avoided cost? Should the commission consider all future 
generating units as avoidable units and set avoided costs for each unit? The 
third set of questions pertains to environmental externalities.
Definition:<ol> How should this commission define "environmental externalities?" 
How are externalities distinct from internalized costs? That is, what are and 
what are not externalities?
Evaluation:<ol> Please provide a comprehensive list of the categories of 
environmental and other externalities which the commission should consider. How 
should the commission weigh and consider the environmental externalities 
presented in regulatory proceedings (e.g., costs vs. benefits and qualitative 
vs. quantitative measures)? What methods should the commission use to 
quantitatively and qualitatively consider the environmental externalities 
associated with alternative resources? Should the commission establish standard 
values for environmental externalities as a starting point for the inclusion of 
these effects in the resource planning process? What should the commission do to 
insure that the dollar values used to quantify environmental externalities are 
appropriate and are improved over time? How can the uncertainty associated with 
current estimates be reflected in the use of these values?
Regulatory Treatment:<ol> What are the likely impacts of the consideration of 
environmental externalities on various resource alternatives? How will such 
consideration affect the evaluation of demand-side management programs and 
purchased power options? Are there aspects of environmental externalities which 
should be considered only by agencies other than the commission? What are the 
regulatory and economic barriers to the full consideration of environmental 
externalities in the resource planning process? Is there a better way to 
consider externalities other than in an NOI proceeding?
Public Input:<ol>  How should the commission provide the public with an 
opportunity for formal input regarding the consideration of environmental 
externalities in the resource planning process? The fourth set of questions 
pertains to integrated resource planning.
Definition and Scope: <ol> Please define "integrated resource planning" and 
distinguish it, if necessary, from the current practice in Texas and from the 
term "integrated least-cost utility planning." What are the most significant 
activities which the commission should undertake to insure that all resource 
alternatives are appropriately weighed in the resource planning process? Should 
the avoided cost process, NOI processs, CCN process, and load forecast report be 
modified to make each perform its function better? If so, how? Should the 
integrated resource plan be approved on a periodic basis? If so, how often? 
Should the avoided cost process be streamlined such that the determination of 
the avoidable units and avoided costs can be determined in conjunction with the 
load forecast filing, NOI application, or CCN application? How should the 
commission monitor a utility's implementation of its approved integrated 
resource plan? Should the scope of the current rules be expanded, so that the 
commission reviews utilities' programs for refurbishment and improvement of 
efficiency of generating and transmission facilities to a greater extent than it 
does now? What scope and methods should the commission consider in NOI and CCN 
proceedings during its review of alternative resources with respect to the 
availability, risks, reliability, and financing requirements? Should the NOI 
process be considered more of an informal initial step in the planning process? 
If so, what, if any, changes would be required to the PURA or commission rules? 
What was the Legislature's intent in adopting PURA, sec.54(d)?
Regulatory Authority for Resource Planning:<ol>  Does the commission have 
sufficient authority for the regulation of electric utility load forecasting, 
integrated resource planning, and resource plan implementation? Is a 
comprehensive integrated resource planning rule necessary to insure proper 
planning and plan implementation? What existing rules should be changed to 
improve integrated resource planning in Texas? Please describe the scope and 
frequency of data filing requirements necessary for the integrated resource 
planning process.
Public Hearings:<ol> How should the commission provide the public with an 
opportunity for formal input into the integrated resource planning process?
Resource Mix:<ol>  In the selection of electrical generating resources, should 
the commission give preference to Texas fuels and technologies (e.g., natural 
gas) or renewable resources? Please provide a definition of "resource mix" which 
includes various fuels, generation technologies, ownership states, supply and 
demand resources, etc. What criteria and methods should the commission use to 
define an appropriate resource mix?
Analysis of Resource Alternatives:<ol> What level of specificity should the 
commission require regarding the methods and models used by utilities to analyze 
resource alternatives? Should the commission dictate which methods and models 
are employed? Should interested parties attempt to reach agreement regarding the 
methods and models employed? Would you recommend a different list of alternative 
resources than those stated in sec.23.21(h)? If so, please provide a list. The 
fifth set of questions pertains to alternative dispute resolution. What role 
should alternative dispute resolution (ADR) methods have in the resource 
planning process? What role should a facilitator play in the ADR process? What 
role should "policy dialogue" play in the ADR process? What role should 
mediation play in the ADR process? What role should "information sharing" play 
in the ADR process? What role should "consensus building" play in the ADR 
process? Should the commission adopt a procedure similar to the FERC's notice of 
inquiry procedure? Parties should file thirteen copies of their comments on the 
proposed rule and responses to the questions with the commission's secretary, 
Mary Ross McDonald, 7800 Shoal Creek Boulevard, Austin, Texas 78757, within 45 
days after publication. Reply comments should be filed within 65 days after 
publication. All parties that intend to file comments or responses should file a 
notice to that effect with Ms. McDonald within 20 days after publication. When 
filing comments and responses, parties should serve the other parties on the 
official service list, which will be compiled by the commission and provided to 
all parties that indicate that they intend to file comments or responses. 
Comments should refer to Project Number 10780. The commission considered the 
questions in connection with Project Number 10842, but the questions are being 
issued with the proposed rules in Project Number 10780. Accordingly, commission 
intends to close out Project Number 10842. The commission has directed that a 
staff member be appointed to facilitate the reconciliation of the disparate 
views that are anticipated in connection with this rule. A process of informal 
dispute resolution will begin with a meeting that will be held 20 days after 
publication of this proposed rule at the commission's offices at the address 
referred to previously. Interested parties should plan to attend this meeting. 
The key dates for this proposed rule and request for comments are as follows: 20 
days after publication -parties notify commission of intention to file comments; 
20 days after publication -informal dispute resolution meeting with facilitator; 
45 days after publication-filing date for comments on proposed rule and 
questions; 65 days after publication-filing date for reply comments.
The amendment is proposed under Texas Civil Statutes, Article 1446c, sec.16, 
which provide the Public Utility Commission of Texas with the authority to make 
and enforce rules reasonably required in the exercise of its powers and 
jurisdiction.
sec.23.31. Certification Criteria.
(a) Definitions. The following words and terms, when used in this section, shall 
have the following meanings, unless the context clearly indicates otherwise.
(1)-(4) (No change.)
<nl>(5) Feasible-(with respect to a designated plant, alternative, or demand-
side management ("DSM") activities) Reasonably likely to work or be useful in 
attaining the end desired.
<nl>(6) Proposed plant-One or more generating units located at a single plant 
site, including an additional generating unit at an existing generating plant 
site or a significant modification or addition to an existing generating unit 
which changes the operating characteristics of the unit.
<nl>(7) Integrated resource plan -A combination of resources including both 
supply and demand-side alternatives which the utility selects to meet its 
expected load over a ten year planning horizon.
<nl>(8) Designated plant-A proposed plant included in a utilitys integrated 
resource plan for which the utility is seeking approval.
(b) (No change.)
(c) Certificates for new service areas and facilities. Except for certificates 
granted under subsection (b) of this section, the commission may grant 
applications and issue certificates only after finding that the certificate is 
necessary for the service, accommodation, convenience, or safety of the public. 
[For an electric utility generating unit, the commission may grant an 
application only when it finds that purchased power, conservation, and 
alternative capacity and associated energy sources available at a lower or equal 
cost to the ratepayers, together with capacity from qualifying facilities with 
which contracts have been executed, cannot be reasonably expected to be 
available in sufficient quantity and for sufficient duration to allow the 
utility to modify its capacity expansion plan so as to provide for deferral or 
cancellation of the generating unit for which certification is requested.] The 
commission may issue the certificate as applied for, or refuse to issue it, or 
issue it for the construction of a portion[,] only of the contemplated system or 
facility or extension thereof, or for the partial exercise only of the right or 
privilege. The commission may amend or revoke any certificate issued under this 
section upon a finding of fact that the public convenience and necessity 
requires such amendment or revocation. [The cost of construction of a new 
electric generating unit found reasonable in granting a certificate may be taken 
into consideration in determining the amount of construction work in progress 
and the plant in service associated with that unit to be included in the rate 
base of the utility. In addition, the projected design electrical rating, 
capacity factor, and heat rate associated with the unit shall be taken into 
consideration in determining recoverable fuel expenses associated with the 
operation of the unit.]
(1)-(4) (No change.)
<nl>(5) An electric utility applying for a certificate for a designated plant 
must first file a notice of intent (NOI) to file an application for 
certification. A utility should file an NOI application upon deciding that it 
should construct the designated plant and before it commits or expends 
substantial resources on the proposed plant. In no event shall a utility file an 
NOI application for a designated unit at the time that the utility has pending 
before the commission a prior application for NOI approval of another designated 
plant. The application shall include the utility's integrated resource plan. The 
utility shall specify in its application which plant(s) contained within the 
integrated resource plan is (are) designated plant(s) and which plant(s) are 
avoidable generating unit(s). The avoidable generating unit(s) may be identical 
to the designated plant(s). The application shall also include the utility's 
standard avoided cost calculations for the avoidable unit(s) and terms and 
conditions for purchase required by sec.23.66(h)(4) of this title (relating to 
Arrangements between Qualifying Facilities and Electric Utilities).
<nl>(A) Purpose of proceeding. The purpose of an NOI proceeding is to:
<nl>(i)<nl> decide the appropriateness, in light of the alternatives, of the 
utility's designated plant;
<nl>(ii)<nl> establish the utility's avoidable generating unit(s);
<nl>(iii)<nl> approve the standard avoided cost calculations for the avoidable 
generating unit(s) and approve the terms and conditions for the purchase of firm 
energy and capacity, that may be applicable to contracts for purchased power; 
and
<nl>(iv) <nl> decide the feasibility of DSM activities incorporated in the 
utility's integrated resource plan.
<nl>(B) Matters reserved for certification proceeding. It is not the purpose of 
an NOI proceeding to decide the specific site or site facilities, whether 
conservation, and alternative energy sources cannot meet the need, or whether 
the designated plant is the best and most economical choice of technology 
available because those issues will be decided in the subsequent certification 
proceeding in the event that the NOI is approved.
<nl>(C) Commission review. The commission will approve an NOI for each 
designated plant if it concludes that the designated plant is feasible, is 
compatible with the commission's most recent long-term forecast, and should be 
given further consideration in light of alternatives. Approval of the NOI thus 
allows the utility to apply for certification of the designated plant, but does 
not imply that the plant is the best alternative available to the utility. The 
commission will also approve, for each avoidable generating unit, the standard 
avoided cost calculation for that unit and the terms and conditions for the 
purchase of firm capacity and energy. Approval of the NOI thus establishes the 
prices, terms, and conditions that are a reasonable starting point for a 
utility's negotiations of power purchase arrangements.
<nl>(D)  Standards. The commission will apply the standards in this paragraph in 
reviewing a utility's NOI filing, which must include the information required in 
the commission's application to enable the commission to decide the 
appropriateness of the designated plant, determine the standard avoided cost 
calculation(s) for the avoidable unit(s) and the terms and conditions for 
purchase of firm capacity and energy, and determine the feasibility of DSM 
activities.
<nl>(i)<nl> Specificity of plans. The utility's plans and cost estimates must be 
specific enough for the designated plant to be compared with alternatives, but 
the plans should not be final. In particular, the utility need not propose a 
specific site for the designated plant.
<nl>(ii)<nl> Need. The utility must demonstrate that the designated plant is 
compatible with the commission's most recent long-term forecast. Such 
compatibility may be demonstrated by showing that there is a reasonable 
likelihood that the designated plant will be needed when scheduled to be in 
service. The demonstration of compatibility includes consideration of any data 
that materially affect the commission's most recent long-term forecast.
<nl>(iii)<nl> Standard avoided cost. The utility must demonstrate that the 
calculation of its avoided cost has been performed in accordance with sec.23.66 
of this title.
<nl>(iv)<nl> DSM activities. The utility must demonstrate that it has complied 
with subparagraph (F) of this paragraph.
<nl>(E) Analysis of alternatives. The utility must show that it used a 
reasonable method to evaluate the advantages and disadvantages of the designated 
plant and a broad range of alternatives to it.
<nl>(i)<nl> Scope. At a minimum, the following alternatives must be considered:
<nl>(I)  increasing the capacity or efficiency of existing generation, 
transmission, and distribution facilities;
<nl>(II) extending the life of existing generating capacity;
<nl>(III) participation in a jointly owned plant;
<nl>(IV) constructing a generating plant employing technologies or fuels 
different from those of the designated plant;
<nl>(V) demand side management, including conservation and load management.
<nl>(ii) <nl> Method. The utility must show that it used a reasonable method of 
narrowing the range of alternatives and that it adequately considered the 
remaining alternatives to the designated plant. At a minimum, adequate 
consideration includes an assessment of the following factors for the designated 
plant and each feasible alternative:
<nl>(I) availability;
<nl>(II) cost and benefits -operating and capital costs, cost of related 
facilities, and environmental statutory compliance costs and benefits;
<nl>(III) reliability;
<nl>(IV) risks; and
<nl>(V)  financing requirements -whether the utility can finance the designated 
plant or alternative without unduly impairing its financial condition.
<nl>(F) DSM activities. For those DSM activities contained in a utility's 
integrated resource plan, the utility must furnish the following:
<nl>(i)<nl> description of the program;
<nl>(ii) <nl> projected peak demand reduction (in kilowatts) and energy savings 
(in kilowatt-hours) per participating customer;
<nl>(iii)<nl> projected total participating customers per year and cumulative 
for the forecast period;
<nl>(iv)<nl> projected program nonrecurring costs (e.g., customer rebates) per 
customer and assumed escalation rates;
<nl>(v) <nl> projected program recurring costs per customer per year and assumed 
escalation rates; and
<nl>(vi)<nl> detailed documentation of all assumptions employed in the 
calculation of information required by this paragraph.
<nl>(G) Hearing on NOI application. The commission shall conduct a hearing on 
the NOI application and shall issue a report on its findings pertaining to the 
appropriateness of the designated plant, the establishment of the avoidable 
units, the establishment of the standard avoided cost calculation and the terms 
and conditions for the purchase of firm capacity and energy, and the feasibility 
of DSM activities. In conjunction with the issuance of the report, the 
commission shall render a decision approving or disapproving the NOI within 180 
days from the date of filing the NOI.
<nl>(6) An electric utility may not apply for certification of a generating 
plant until it has conducted a solicitation for offers to supply capacity that 
would allow it to defer or displace such plant. The deadline for responses to 
such solicitation shall occur after commission approval of a utility's NOI for 
the proposed generating plant. If, by the time the utility files a CCN for a 
unit, the costs detailed in the application for the certificate are 5.0% or more 
greater than those determined as the utility's avoided costs in the NOI 
proceeding for the same unit, the utility shall be required to re-solicit 
capacity offers, with the new costs becoming the utility's avoided cost. Offers 
made in response to the solicitation or re-solicitation shall be reviewed in 
accordance with this paragraph before the utility may apply for certification.
<nl>(A) A utility conducting a solicitation shall do all of the following:
<nl>(i)<nl> issue the solicitation in a manner reasonably designed to ensure 
that those interested in responding are notified, including, but not limited to, 
publication in newspapers of general circulation and the Wall Street Journal. 
The notice shall identify the date 90 days from issuance of the solicitation by 
which all final responses to the request shall be received by the utility;
<nl>(ii) <nl> disclose in the solicitation the projected need for additional 
capacity and include a copy of the utility's annual filing made in accordance 
with sec.23.66(c) of this title;
<nl>(iii)<nl> provide in the solicitation all information necessary for 
potential respondents to develop in a timely manner proposals to meet the 
capacity needs identified in clause (ii) of this subparagraph, including a 
method by which potential respondents may obtain clarifying and procedural 
information;
<nl>(iv)<nl> review the proposals from respondents and to the extent the 
capacity sought is not met by customer requests pursuant to subparagraph (B) of 
this paragraph, the utility shall enter, within 90 days of the solicitation 
deadline, binding contracts with respondents whose proposals provide the most 
appropriate capacity resources necessary to meet the utility's capacity needs, 
as determined by the utility's NOI; and
<nl>(v)<nl> maintain for five years following the solicitation copies of all 
documents relating to the capacity solicitation. A copy of each contract entered 
into pursuant to clause (iv) of this subparagraph and subparagraph (B) of this 
paragraph shall be filed with the commission and made available for review or 
copying by any person so requesting.
<nl>(B)  Upon the request of a customer of the utility, in the form of a 
proposal responding to a capacity solicitation issued pursuant to paragraph (5) 
of this subsection, the utility shall purchase electric capacity, energy, or 
standby power at terms agreed to by the customer from a nonutility generator 
(including qualifying facilities), and the utility shall resell the capacity, 
energy, or standby power to the customer at no increase in price. All of the 
following apply.
<nl>(i)<nl> The total electric capacity of the requests granted shall not exceed 
the total amount of capacity sought in the solicitation.
<nl>(ii)<nl> The amount of capacity purchased and resold to one customer shall 
not be less than 10 megawatts of demand and the contract term shall be a minimum 
of three years;
<nl>(iii)<nl> Every utility whose transmission facilities are impacted by the 
customer's purchase from a nonutility generator shall charge the customer a fee 
for purchasing and reselling electric, capacity, energy, or standby power at a 
rate equal to the respective utility's charges for transmission wheeling 
services, pursuant to sec.23.66(d)(4) and (5) of this title.
<nl>(iv)<nl> The utility shall make available standby service at rates approved 
by the commission to customers requesting to purchase capacity and energy 
pursuant to this subparagraph.
<nl>(v)<nl> If the total amount of the requests pursuant to this subparagraph 
exceeds the total amount of capacity sought in the solicitation, the capacity 
represented by each of the requests shall be reduced equally until the 
solicitation level is reached.
<nl>(vi)<nl> If the total amount of the requests pursuant to this subparagraph 
is less than the total amount of capacity sought in the solicitation, the 
utility shall contract with other respondents as set forth in subparagraph (A) 
of this paragraph.
<nl>(7)  An electric utility may file for a certificate for a new generating 
unit no earlier than 90 days from the approval of the NOI.
<nl>(A) For an electric utility generating unit, the commission may grant an 
application only when it finds that purchased power, conservation load 
reductions resulting from certificates granted pursuant to paragraph (1)(F) of 
this subsection, and alternative capacity and associated energy sources offered 
at a lower or equal cost to the ratepayers, together with capacity from 
qualifying facilities with which contracts have been executed, cannot be 
reasonably expected to be available in sufficient quantity and for sufficient 
duration to allow the utility to modify its capacity expansion plan so as to 
provide for deferral or cancellation of the generating unit for which 
certification is requested. The cost of construction of a new electric 
generating unit found reasonable in granting a certificate will be presumed to 
be the maximum amount allowable for construction work in progress or plant in 
service associated with that unit to be included in the rate base of the 
utility. In addition the projected design electrical rating, capacity factor, 
and heat rate associated with the unit shall be taken into consideration in 
determining recoverable fuel expenses associated with the operation of the unit.
<nl>(B) The commission will determine the appropriateness of the DSM programs 
contained in the utility's filing and determine that the associated costs are 
reasonable expenses of the utility to be afforded treatment in accordance with 
sec.23.22(d) of this title (relating to Energy Efficiency Plan).
<nl>(8) If the utility does not foresee a need for a new generating unit but 
does anticipate DSM activities to fulfill an estimated capacity requirement, 
then the utility may file information in accordance with subparagraph (c)(5)(F) 
of this section for its DSM activities incorporated in its integrated resource 
plan, for commission review. The commission shall determine within 90 days after 
filing, the feasibility of the DSM activities. Upon the commission's 
determination that the DSM activities are feasible, then the commission shall 
determine that the associated costs are reasonable expenses of the utility to be 
afforded treatment in accordance with sec.23.22(d) of this title (relating to 
the rate treatment of conservation programs).
(d)-(g) (No change.)
[(h) Notice of intent applications for generating plants. A utility should file 
a notice of intent (NOI) application upon deciding that it should construct a 
new generating plant.
[(1) Purpose of proceeding. The purpose of an NOI proceeding is to decide the 
appropriateness of a proposed plant, in light of the alternatives, before a 
utility commits or expends substantial resources on the proposed plant. It is 
not the purpose of an NOI proceeding to decide the specific site or site 
facilities, whether conservation and alternative energy sources cannot meet the 
need, or whether the proposed plant is the best and most economical choice of 
technology available, because those issues will be decided in the subsequent 
certification proceeding in the event that the NOI is approved.
[(2)  commission review. The commission will approve the NOI if it concludes 
that the proposed plant is feasible and reasonable, is compatible with the 
commission's most recent long-term forecast, and should be given further 
consideration in light of the alternatives. Approval of the NOI thus allows the 
utility to supply for certification of the proposed plant, but does not imply 
that the plant is the best alternative available to the utility.
[(3)  Standards. The commission will apply the standards in this paragraph in 
reviewing a utility's NOI filing, which must include the information required in 
the commission's application to enable the commission to decide the 
appropriateness of the proposed plant.
[(A) Specificity of plans. The utility's plans and cost estimates must be 
specific enough for the proposed plant to be compared with alternatives, but the 
plans should not be final. In particular, the utility need not propose a 
specific site for a generating plant.
[(B) Need. The utility must demonstrate that the proposed plant is compatible 
with the commission's most recent long-term forecast. Such compatibility may be 
demonstrated by showing that there is a reasonable likelihood that the proposed 
plant will be needed when scheduled to be in service. The demonstration of 
compatibility includes consideration of any data that materially affect the 
commission's most recent long-term forecast.
[(4)  Analysis of alternatives. The utility must show that it used a reasonable 
method to evaluate the advantages and disadvantages of the proposed plant and a 
broad range of alternatives to it.
[(A) Scope. At a minimum, the following alternatives must be considered:
[(i) increasing the capacity or efficiency of existing generation, transmission, 
and distribution facilities;
[(ii) extending the life of existing generating capacity;
[(iii) purchasing all or a portion of an existing or planned generating plant;
[(iv) constructing a generating plant employing technologies or fuels different 
from those of the proposed plant;
[(v)  purchasing power from other utilities in the same reliability council;
[(vi) purchasing power from qualifying facilities as defined in sec.23.66(a) of 
this title (relating to Arrangements between Qualifying Facilities and Electric 
Utilities); and
[(vii) demand-side management, including conservation and renewable resources.
[(B) Method. The utility must show that it used a reasonable method of narrowing 
the range of alternatives and that it adequately considered the remaining 
alternatives to the proposed plant. At a minimum, adequate consideration 
includes an assessment of the following factors for the proposed plant and each 
feasible alternative:
[(i) availability;
[(ii) cost and benefits -operating and capital costs, cost of related 
facilities, environmental costs and benefits, and any cost and benefits accruing 
to persons other than the utility and its ratepayers (for example, 
environmental, social and health);
[(iii)  reliability;
[(iv) risks; and
[(v) financing requirements whether the utility can finance the proposed plant 
or an alternatives without unduly impairing its financial condition.
[(5)  Definitions. The following words and terms, when used in this subsection, 
shall have the following meanings unless the context clearly indicates 
otherwise.
[(A) Feasible-(With respect to a proposed plant or alternative) reasonably 
likely to work or be useful in attaining the end desired.
[(B)  Proposed plant-One or more generating units, including an additional 
generating plant site.]
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 29, 1992.
TRD-9201451
Mary Ross McDonald
Secretary of the Commission
Public Utility Commission of Texas
Earliest possible date of adoption: March 23, 1992
For further information, please call: (512) 458-0100
       
Quality of Service
16 TAC sec.23.66
The amendment is proposed under Texas Civil Statutes, Article 1446c, sec.16, 
which provide the Public Utility Commission of Texas with the authority to make 
and enforce rules reasonably required in the exercise of its powers and 
jurisdiction.
sec.23.66. Arrangements between Qualifying Facilities and Electric Utilities.
(a) Definition. The following words and terms, when used in this section, shall 
have the following meanings, unless the context clearly indicates otherwise.
(1) Avoidable generating unit-A [power] <nl>generating <ol> plant or [set of 
power] plants [in a utility's commission approved generation expansion plan] 
<nl>approved by the commission pursuant to sec.23.31(c)(5) of this title 
(relating to Notice of Intent Proceedings) or included in a utility's integrated 
resource plan<ol> that may be displaced or deferred due to firm capacity 
provided to the utility by qualifying facilities. <nl>In addition, an avoidable 
generating unit must be reasonably representative of the type of plant a utility 
would construct to meet new load or replace existing generation resources.
(2)-(21) (No change.)
(b)-(c)  (No change.)
(d) Electric utility obligations.
(1)  Obligation to purchase from qualifying facilities.
(A)-(F) (No change.)
(G) In order to provide for an orderly consideration of the potential for 
purchased power from qualifying facilities to displace or defer a planned 
generation addition and/or provide for the orderly consideration of multiple and 
competing offers to supply future capacity, a utility [is allowed to set up]  
<nl>shall establish<ol> timely and reasonable time periods, or "windows," for 
the solicitation and evaluation of capacity offers. <nl>Such windows may be 
opened at any time at the discretion of the utility. but shall be required 
within a reasonable time following the determination by the commission in an NOI 
proceeding that a utility has a need for additional generating capacity. 
Solicitations made pursuant to this provision shall be governed by the 
requirements of sec.23.31(c)(6) of title (relating to Certification Criteria) 
<ol> [Each utility shall maintain records of all offers received from qualifying 
facilities for a period of five years from receipt thereof].
(2)-(3)  (No change.)
(4) Transmission to other electric utilities. If a qualifying facility with a 
rated capacity greater than one megawatt interconnected with the host utility at 
a voltage greater than 60,000 volts measured phase to phase requests, an 
electric utility shall transmit energy and/or capacity from the qualifying 
facility to any [other electric utility] <nl>location<ol> designated by the 
qualifying facility, <nl>including to any other electric utility<ol>, provided 
that such transmittal is not in violation of federal law or other jurisdictional 
authority <nl>and provided that a certificate for the sale of energy and/or 
capacity has been obtained if necessary.<ol> No electric utility is required to 
enter into any transmission arrangement if, solely by reason of such 
transmission arrangement, the electric utility would become subject to 
regulation as a public utility under the Federal Power Act, Part II. Any 
electric utility to which such energy and/or capacity is transmitted shall 
purchase such energy and/or capacity as if the qualifying facility were 
supplying energy and/or capacity directly to such electric utility. Transmission 
[to other electric utilities] shall be governed by the following:
(A)-(F) (No change.)
(5) Charges for transmission wheeling service. Transmission wheeling service 
shall be offered on a planned capacity or on an as available capacity basis at 
the option of the qualifying facility. However, for any single transaction, 
wheeling contracts with impacted utilities must all be of the same type (i.e., 
planned capacity or as available capacity). Planned capacity transmission 
wheeling service shall be provided with the same level of resource commitment, 
the same priorities, similar contractual conditions in accordance with this rule 
and other treatment similar to that provided to other customers of the utility 
who use firm services provided by the utility. Planned capacity transmission 
wheeling service can only be denied if an impacted utility successfully 
petitions the commission and shows that the cost and/or scheduling of needed 
system improvements are such that there would be a significant detrimental 
effect on their other customers or that such service is prohibited by actions of 
any governmental agency or regulatory authority having jurisdiction. As 
available capacity transmission wheeling service may be denied under the same 
circumstances or if there is insufficient capacity available on the transmission 
system of the impacted utility or if the transaction will create an undue 
interference on the utility's obligation to serve its existing firm customers. 
Charges for transmission wheeling service shall be determined as follows.
(A)-(F) (No change.)
(G) Term of transmission wheeling contracts. For planned capacity transmission 
wheeling contracts impacted, utilities shall offer a term at least as long as 
the term of the qualifying facility's purchase power contract with the 
purchasing utility. For as available transmission wheeling contracts, the 
impacted utility shall [not be required to] offer [a term] <nl>terms <ol> 
[longer than] <nl>ranging between one hour and<ol> one year.
(6) (No change.)
(e)-(g) (No change. )
(h) Rates for purchases of firm power from a qualifying facility.
(1)-(2) (No change.)
(3) <nl>Prior to the establishment of any window for the solicitation of offers 
to supply capacity and as a requirement in any Notice of Intent filing,<ol> [By 
December 30, 1984, and by December 30, 1987, and every two years thereafter] 
each electric utility shall file with the commission a standard avoided cost 
calculation and terms and conditions for the purchase of firm energy and 
capacity [from qualifying facilities], the terms of which are subject to 
commission review and approval after notice and opportunity for hearing. [For 
good cause, a utility may revise its avoided cost calculation and terms and 
conditions and file them with the commission at any time before its next 
required filing otherwise is due. If the utility elects to file an interim 
standard avoided cost calculation, then on the date that the standard avoided 
cost calculation would otherwise be due, the utility must file a new standard 
avoided cost calculation or indicate that the interim remains valid.] <nl>For 
non-NOI-related standard avoided cost filings for which a hearing has been 
requested, the following procedure shall be required. <ol> Prior to a hearing, 
the presiding examiner shall discuss settlement of all issues in dispute. The 
parties shall be required to present to the presiding examiner a list of all 
issues which have been settled and a list of all issues which remain in dispute. 
<nl>The presiding examiner shall set a schedule for discovery and the filing of 
testimony on the issues that remain in dispute, and<ol> [The] <nl>the<ol> 
hearing on the merits shall be limited to those issues which remain in dispute. 
Failure to participate in the settlement conference by any party shall be 
grounds for dismissal as a party to the proceedings. The purpose of the standard 
avoided cost calculation and terms and conditions for the purchase is to provide 
prices, terms, and conditions that may be applicable to <nl>power<ol> purchase 
arrangements [between] <nl>by <ol> a utility [and a qualifying facility]. The 
standard avoided cost calculation shall be stated in terms of dollars-per-
kilowatt (or per KVA) per year (or per month) and cents per kilowatt-hour. Along 
with these calculations, each utility shall file with the commission the program 
logic (except to commercial programs subject to copyright protection) and 
associated data used to derive these calculations, along with any narrative 
instruction necessary to understand the calculations. <nl>The utility shall also 
file its proposed standard terms and conditions. <ol> The actual computer 
programs, or reasonable substitute, and data shall be made available by the 
utility on the appropriate computer media at not more than the actual 
reproduction cost.
<nl>(4) [At least one] <nl>The<ol> standard avoided cost calculation and terms 
and conditions for purchase <nl>filed as part of the NOI filing shall be based 
on the expected costs of the avoidable generating plant designated in the NOI 
filing and <ol> shall contain the following:
(A) the net present value of the avoided capacity costs of the utility 
calculated according to the committed unit basis methodology. The committed unit 
basis methodology develops avoided capacity costs based on the estimated cost of 
a specific, avoidable generating unit or group of avoidable generating units in 
the utility's expansion plan. The following criteria shall be used in the 
calculation of avoided costs:
(i)-(vii) (No change.)
(viii) property taxes and insurance costs-<nl>these costs <ol> [those cases] 
calculated at ratios allowed in the utility's most recent Texas rate [case] 
<nl>cases <ol>;
(ix)-(xiii) (No change.)
(B) the expected net present value of the energy costs associated with the type 
of fuel to be used in the unit, or units, specified in [(h)(3)(A)] subparagraph 
(A) of this paragraph;
(C) (No change.)
[(D) the amount of capacity, in excess of its own installed generation or 
purchased according to a legally enforceable obligation, that the utility will 
require by year for the next 10 years and the percentage of that capacity to be 
provided by qualifying facilities;
[(E) a reasonable estimate of the cost of cancellation or deferral of the 
avoidable unit and the basis for such estimate.]
<nl>(5) A utility may also file, or the commission may require, an avoided cost 
calculation based on the difference between the cost of the total capacity and 
energy furnished by the qualifying facility and the utility. computed as though 
the capacity and energy furnished by the qualifying facility had been furnished 
by the utility. Such a filing shall contain the following:
<nl>(A) the amount of capacity that the utility will require by year for the 
next 10 years and the types of generating plants expected to provide that 
capacity;
<nl>(B) the capacity payments resulting from the differential revenue 
requirements analysis; and
<nl>(C) the energy payments resulting from the differential revenue requirements 
analysis.
<nl>(6)<ol>[(4)] If a utility does not generate electric power [or have any 
avoidable units in its generation expansion plan,] <nl>or does not plan to 
generate electric power <ol>, then that utility is exempted from the 
requirements of paragraph [(3)] <nl>(4)<ol>(A) and (B) of this subsection. 
[Instead of the filing dates provided in the first sentence of paragraph (3) of 
this subsection,] <nl>Such<ol> a utility shall file by January 31 [, 1985, and 
by January 31, 1988, and every two years thereafter,] <nl>of every even-numbered 
year<ol>, information based on one of <nl>the following<ol> two options; 
(provided, however, that it may revise its filing at any time before the next 
filing date is due and shall revise its filing in the event its construction 
plans call for a generating plant):
(A) a standard avoided cost calculation and proposal for purchase of firm 
capacity and energy based upon the capacity and energy components of its 
avoidable firm power purchases; or
(B) the name and address of the utility which supplies power to the 
nongenerating utility.
<nl>(7)<ol>[(5)] [Instead of the dates provided in the first sentence of 
paragraph (3) of this subsection, a] <nl>A<ol> cooperative-owned generation and 
transmission utility or a river authority is allowed to file [, by January 31, 
1985, and by January 31, 1988, and every to years thereafter,] an avoided cost 
calculation and terms and conditions for purchase from qualifying facilities 
that determines avoided capacity costs according to the [committed unit basis] 
methodologies  <nl>described in paragraph (4) or (5) of this subsection <ol>, 
but which employ criteria which differ from these listed in paragraph 
<nl>(4)<ol> [(3)](A)(i)-(xiii) of this subsection, as long as the criteria 
chosen replicate assumptions applicable to their financial structures. A 
cooperative-owned generation and transmission utility or a river authority 
remains subject to all the other requirements of paragraph (3) of this 
subsection.
(i)-(m) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 29, 1992.
TRD-9201457
Mary Ross McDonald
Secretary of the Commission
Public Utility Commission of Texas
Proposed date of adoption: March 23, 1992
For further information, please call: (512) 458-0100
       
Part IV. Texas Department of Licensing and Regulation
Chapter 75. Air Conditioning and Refrigeration Contractor License Law
16 TAC sec.75.20, sec.75.70
The Texas Department of Licensing and Regulation proposes amendments to 
sec.75.20 and sec.75.70 concerning licensing requirements and responsibilities 
of the licensee. The change in sec.75.20 and deletion of sec.75.70(h) makes the 
rule governing reissuance of expired licenses more consistent with the 
requirement in the Act that an applicant have at least three years experience 
with the tools of the trade within the last five years. The addition in 
sec.75.70(e) reinstates the provision that a license holder is responsible for 
all work done under his license, which was inadvertently omitted in a prior rule 
change.
Meryl Vaughan, administrative assistant, Boiler Section, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Vaughan also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be consumer protection will be enhanced by the change in 
sec.75.20 and the deletion of sec.75.70(h) by ensuring that contractors 
returning to HVAC work are still knowledgeable in industry technology, and by 
the addition in sec.75.70(e) by making it easier to assign responsibility for 
accidents and poor work. There will be no effect on small businesses. The 
anticipated economic cost to persons who are required to comply with the section 
as proposed will be reexamination and associated expenses for a small percent of 
applicants in the amount of $175 in 1992-1996.
Comments on the proposal may be submitted to Elvis Schulze, General Counsel, 
Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 
78711.
The amendments are proposed under Texas Civil Statutes, Article 8861, which 
provide the Texas Department of Licensing and Regulation with the authority to 
promulgate and enforce a code of rules and take all action necessary to assure 
compliance with the intent and purpose of the Act.
sec.75.20. Licensing Requirements.
(a)-(d) (No change.)
(e) Renewals.
(1)-(2) (No change.)
[(3) A license that has expired for a period of two years or less may be renewed 
by submitting the renewal application, payment of the renewal fee, evidence of 
the insurance requirement as provided in sec.75.40 of this title (relating to 
Insurance Requirement) and an additional $50 late renewal penalty fee. If a 
license has expired for a period of more than two years, that license may not be 
renewed. The former license holder may obtain a new license in the same manner 
as a new applicant, including taking the applicable exam and payment of all 
required fees. ]
<nl>(3)<ol>[(4)] Contractors renewing their licenses must sign the renewal 
notice which will be sent to them.
<nl>(f) Reissuance.
<nl>(1) A license that has expired for a period of less than two years may be 
reissued upon submission of:
<nl>(A) the renewal application;
<nl>(B) payment of the renewal fee and late renewal fee as provided in sec.75.80 
of this title (relating to Fees);
<nl>(C) evidence of the insurance required as provided in sec.75.40 of this 
title (relating to Insurance Requirement); and
<nl>(D) evidence of experience with the tools of the trade as provided in the 
Act, sec.4(e) and subsection (a)(2) of this section, using the date of the 
application for renewal as the date for determining compliance with the Act, 
sec.4(3) and subsection (a)(2) of this section.
<nl>(2) If an applicant has violated the Act or rules, the department may deny 
the reissuance of the license in accordance with the Act, sec.5.
<nl>(3) A license that has expired for a period of more than two years may not 
be renewed. The former license holder may obtain a new license in the same 
manner as a new applicant, including taking the applicable exam and payment of 
all required fees.
sec.75.70. Responsibilities of the Licensee.
(a)-(d) (No change. )
(e) Each license shall be used only by the business listed as the business 
affiliation on the license. If a licensed contractor works as a subcontractor 
for another business, he may not do so under his license. He must work under the 
license of the business to which he has contracted, and he may not bill or 
receive payment for such subcontracting from any other source. <nl>The licensed 
contractor is responsible for work done under his license.
(f)-(g) (No change.)
[(h) A contractor who is not contracting with the public may request inactive 
status for a period not to exceed 24 consecutive months. Insurance is not 
required on an inactive license. The original license and wallet card must be 
returned to the department during the inactive period. In order to return to 
active status, a request in writing and proof of insurance must be submitted to 
the department. Licenses expiring during inactive status must be renewed by 
payment of the renewal fee.]
<nl>(h) <ol>[(i)] Each person licensed under the Act shall notify, within 10 
days, the municipal authority who has control of the enforcement of regulations 
relative to air conditioning and refrigeration contracting in the municipality 
in which the person is engaged in air conditioning and refrigeration hat the 
person has obtained a state license. The notification must be in the form 
required by the municipality. A listing of all municipalities in which a 
licensee has registered shall be submitted to the department. The department 
notified within 10 days of any change.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 31, 1992.
TRD-9201556
Larry E. Kosta
Executive Director
Texas Department of Licensing and Regulation
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 463-3127
       
TITLE 22. EXAMINING BOARDS
Part VI. Texas State Board of Registration of Professional Engineers
Chapter 131. Practice and Procedure
Application for Registration
22 TAC sec.131.55
The Texas State Board of Registration for Professional Engineers proposes an 
amendment to sec.131.55, concerning application for registration. The section as 
amended provides clarification that an application for registration is not 
considered initiated until the application has been accepted in the board 
office.
Charles E. Nemir, P.E., executive director, has determined that for the first 
five-year period the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Mr. Nemir also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be clarification of the application for registration requirements. 
There will be no effect on small businesses as a result of enforcing the 
section. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Charles E. Nemir, P.E., Executive 
Director, Texas State Board of Registration for Professional Engineers, P.O. 
Drawer 18329, Austin, Texas 78760.
The amendment is proposed under Texas Civil Statutes, Article 3271a, sec.8(a), 
which provide the board with the authority to make and enforce all rules and 
regulations necessary for the performance of its duties.
sec.131.55. Application for Registration from Nonresidents.  In general, 
applicants not residents of Texas must apply under the provisions of the Texas 
Engineering Practice Act (the Act), sec.21. To be eligible under sec.21, the 
applicant must be registered and in good standing in the state in which he is 
practicing or formerly practiced, and the applicant must have met the 
requirements for registration under the Act, sec.12(a) or (b), at the time he 
was granted an original registration. In addition, the application shall include 
all documentation as described in sec.131.54 of this title (relating to General 
Application Information) to be considered complete. If the applicant is 
currently registered in the state of his residence or practice but registration 
was granted under requirements less than those specified in the Act, sec.12(a) 
or (b), he may apply under  s12(a) or (b), whichever is appropriate, if he has 
acquired the minimum requirements subsequent to his original registration.
(1) Non-Texas residents who have accredited engineering degrees from Texas 
colleges or universities, or are employees of a company whose primary 
administrative office (not regional, division, or other subdivision offices) is 
located in Texas, or move from Texas after [initiating] an application for 
registration <nl>has been accepted by the board<ol> may apply for an original 
registration in this state.
(2)-(3) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 29, 1992.
TRD-9201392
Charles E. Nemir, P.E.
Executive Director
Texas State Board of Registration for Professional Engineers
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 440-7723
       
Part XIII. Texas Board of Licensure for Nursing Home Administrators
Chapter 241. Administrative Authority
22 TAC sec.241.3
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Board of 
Licensure for Nursing Home Administrators or in the Texas Register office, Room 
245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Board of Licensure for Nursing Home Administrators proposes the repeal 
of 22 TAC sec.241.3, concerning officers and duties of the board. Current rules 
do not adequately describe the functions of the board and the executive 
director, specifically in the areas of disciplinary action and general reporting 
requirements.
Robert Conkright, executive director, has determined that for the first five-
year period the repeal is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the repeal.
Mr. Conkright, also has determined that for each year of the first five years 
the repeal is in effect the public benefit anticipated as a result of enforcing 
the repeal will be the deletion of rules which do not adequately describe the 
functions of the board and executive director. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the repeal as proposed.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, Texas Board of Licensure for Nursing Home Administrators, 4800 North 
Lamar Boulevard, Suite 310, Austin, Texas 78756.
The repeal is proposed under Texas Civil Statutes, Article 442d, sec.8, which 
provide the Texas Board of Licensure for Nursing Home Administrators with the 
authority to make rules and regulations not inconsistent with law as may be 
necessary or proper for the performance of its duties, and to take such other 
actions as may be necessary to enable the state to meet the requirements set 
forth in the Social Security Act, sec.1908 (42 United States Code, sec.1396g), 
the Federal rules and regulations promulgated thereunder, and other pertinent 
Federal authority; provided, however, that no rule shall be promulgated, 
altered, or abolished without the approval of a two thirds majority of the 
board.
sec.241.3. Officers and Duties of the Board.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201583
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 458-1955
       
The Texas Board of Licensure for Nursing Home Administrators proposes new 22 TAC 
sec.241.3, concerning officers and duties of the board. The new rule allows the 
board to increase its involvement in disciplinary actions and general reporting 
requirements. The rule develops a clear definition of the officers and positions 
of the board.
Robert Conkright, executive director, has determined that for the first five-
year period the section is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the section.
Mr. Conkright also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the rules provide a clearer definition of the duties of the 
executive director and the board. The new rules will also require board 
involvement in all disciplinary actions. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, Texas Board of Licensure for Nursing Home Administrators, 4800 North 
Lamar Boulevard, Suite 310, Austin, Texas 78756.
The new section is proposed under Texas Civil Statutes, Article 442d, sec.8, 
which provide the Texas Board of Licensure for Nursing Home Administrators with 
the authority to make rules and regulations not inconsistent with law as may be 
necessary or proper for the performance of its duties, and to take such other 
actions as may be necessary to enable the state to meet the requirements set 
forth in the Social Security Act, sec.1908 (42 United States Code, sec.1396g), 
the Federal rules and regulations promulgated thereunder, and other pertinent 
Federal authority; provided, however, that no rule shall be promulgated, 
altered, or abolished without the approval of a two thirds majority of the 
board.
sec.241.3. Officers and Duties of the Board.
(a) At the first regular meeting after January 1 of each year, the board will 
elect from its appointed members a chair, vice-chair, and secretary/treasurer to 
serve a term to coincide with calendar years.
(1) The chair will preside at all meetings of the board, appoint all members of 
committees of the board, and serve as ex-officio member to all committees.
(2) The vice-chair shall serve as chair in the absence of the chair, and perform 
all duties assigned by the chair.
(3) The secretary/treasurer shall cause the minutes of each board meeting to be 
accurately transcribed and sent to each member of the board, make a monthly 
report to the board on expenditures and budget, and present all fiscal matters 
to the board. The secretary/treasurer shall serve as chair in the absence of the 
chair and vice-chair.
(4) The chair, vice-chair, and secretary/treasurer will compose the executive 
committee. The executive committee shall appoint a licensed administrator to the 
Disciplinary Review Panel and shall also appoint a person to serve as chair of 
the Disciplinary Review Panel for each complaint investigation. The members of 
executive committee, individually and/or collectively, shall be the official 
spokesperson(s) for the agency in all matters before the legislature.
(b)  The executive director is responsible for implementing the agency's 
strategic plan, insuring that all policies and procedures are consistent with 
the mission statement and goals of the agency, and is responsible for the daily 
operations of the agency. The executive director is the custodian of all 
official agency records and is a member of the Disciplinary Review Panel.
(c) All meetings of the board will be conducted in accordance with Robert's 
Rules of Order Newly Revised<ol> unless the board, by rule, adopts a different 
procedure.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201582
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 458-1955
       
Chapter 243. Application
22 TAC sec.sec.243.1-243.3
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas Board of 
Licensure for Nursing Home Administrators or in the Texas Register office, Room 
245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Board of Licensure for Nursing Home Administrators (TBLNHA) proposes 
the repeal of 22 TAC sec.sec.243.1-243.3 concerning application procedures for 
prospective nursing home administrators. This chapter does not adequately 
describe the internal practices, procedures, and requirements used by TBLNHA 
staff to process applications.
Robert Conkright, executive director, has determined that for the first five-
year period the repeals are in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the repeals.
Mr. Conkright also has determined that for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals will be current rules do not insure fair and uniform processing of 
all applications. There will be no effect on small businesses. The possible 
economic cost to persons who are required to comply with the rule as proposed 
will be an estimated reduction in cost of $35 in 1992-1996.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, Texas Board of Licensure for Nursing Home Administrators, 4800 North 
Lamar Boulevard, Suite 310, Austin, Texas 78756.
The repeals are proposed under Texas Civil Statutes, Article 442d, sec.8, which 
provide the Texas Board of Licensure for Nursing Home Administrators with the 
authority to make rules and regulations not inconsistent with law as may be 
necessary or proper for the performance of its duties, and to take such other 
actions as may be necessary to enable the state to meet the requirements set 
forth in the Social Security Act, sec.1908 (42 United States Code, sec.1396g), 
the Federal rules and regulations promulgated thereunder, and other pertinent 
Federal Authority; provided, however, that no rule shall be promulgated, 
altered, or abolished without the approval of a two-thirds majority of the 
board.
sec.243.1. Application Procedures.
sec.243.2. Administrators-in-Training.
sec.243.3. Preceptorial Qualifications and Control.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201588
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 458-1955
       
22 TAC sec.sec.243.1-243.5
The Texas Board of Licensure for Nursing Home Administrators proposes new 22 TAC 
sec.sec.243.1-243.5 concerning application procedures for nursing home 
administrators. The new chapter describes the internal practices, procedures, 
and requirements used by TBLNHA staff to process applications. These rules 
clarify these procedures, allow for criminal background checks of applicants, 
allow for no waiver of internship hours, clarify requirements of AIT 
(administrator in training) training, and clarify requirements for preceptors.
Robert Conkright, executive director, has determined that for the first five-
year period the sections are in effect there will be fiscal implications as a 
result of enforcing or administering the sections. The effect on state 
government for the first five-year period the section will be in effect will be 
an estimated additional cost of $1,200 in 1992-1996; and an estimated increase 
in revenue of $6,000 in 1992-1996. There will be no effect on local government 
for the first five-year period the sections are in effect.
Mr. Conkright also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be that it ensures fair and uniform processing of all 
applications. The new rules clearly specify requirements for licensure. There 
will be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the sections as proposed.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, Texas Board of Licensure for Nursing Home Administrators, 4800 North 
Lamar Boulevard, Suite 310, Austin, Texas 78756.
The new sections are proposed under Texas Civil Statutes, Article 442d, sec.8, 
which provide the Texas Board of Licensure for Nursing Home Administrators with 
the authority to make rules and regulations not inconsistent with law as may be 
necessary or proper for the performance of its duties, and to take such other 
actions as may be necessary to enable the state to meet the requirements set 
forth in the Social Security Act, sec.1908 (42 United States Code, sec.1396g), 
the Federal rules and regulations promulgated thereunder, and other pertinent 
Federal Authority; provided, however, that no rule shall be promulgated, 
altered, or abolished without the approval of a two thirds majority of the 
board.
sec.243.1. Application Procedures. <ol> Application for licensure may be 
obtained at the offices of Texas Board of Licensure for Nursing Home 
Administrators (TBLNHA), 4800 North Lamar Boulevard, Suite 310, Austin, Texas 
78756.
(1) On forms provided by the agency, an applicant for examination and 
qualification for a nursing home administrator's license will complete and 
submit the following information:
(A) an application for nursing home administrator's license;
(B) an application for examination;
(C) personal data information;
(D) a non-refundable application/testing fee as set by the legislature payable 
by certified funds only (cashier's check or money order);
(E) a college transcript sent directly from the applicant's college to the 
agency;
(F)  internship plan and calendars (if serving internship through the board); 
and
(G) an applicant who has completed college level course work outside of the 
United States is responsible for having the foreign transcript evaluated and 
converted to semester or quarter hours recognized by United States colleges.
(2) Each applicant must answer all questions fully and precisely. Insufficient 
answers may be grounds for denial of application (see sec.243.2 of this title 
(relating to Denial of Application). All answers must be typed or printed in 
indelible ink, and notarized where indicated. Any misrepresentation, deceit, or 
material misstatements of fact in this application may cause revocation, 
suspension, or disqualification of this application for licensure as a nursing 
home administrator.
(3) Upon TBLNHA's receipt of an application, applicant becomes subject to a 
criminal background investigation. Failure to acknowledge prior convictions for 
other than minor traffic violations, will result in denial of application.
(4) A complete application must be on file prior to taking the State and 
Comprehensive examinations. Complete applications must be received by TBLNHA 
seven days prior to the examination date. No exceptions will be made.
(5) Applicants who are currently licensed in another state and are requesting 
partial endorsement:
(A) must comply with education requirements as listed in sec.247.2 of this title 
(relating to Minimum Requirements). Without a bachelor's degree, there must be 
no lapse in licensure;
(B) must be licensed and in good standing for one year or more as a nursing home 
administrator and must be the administrator of record for at least one year; 
these requirements may be served in conjunction with one another; or if 
applicant has not been licensed for a minimum of one year, applicant must 
provide evidence of an approved six month or 520 hour internship served in 
another state;
(C) must have all states in which a license was previously held submit a 
certification of tenure, test results, education, disciplinary history, and 
current status even if the license is inactive or expired;
(D) must make application on forms provided by the agency as referenced in 
subsection (a) of this section;
(E) must have passing NAB or PES test scores verified by the state(s) for which 
applicant has been previously licensed which may be accepted in lieu of the 
comprehensive examination as certified by the state that administered the test. 
All applicants must take the State Standards examination.
(F) A temporary license may be issued upon receipt and approval of a complete 
application and will be in effect for two weeks beyond the next scheduled 
examination. If a passing score is not achieved, the temporary license expires. 
If applicant is unable to be present for the exam, the temporary license may be 
extended upon suitable documentation of the following: death in immediate 
family, natural disaster, or medical emergency. Otherwise temporary license will 
expire. There will be no exceptions.
(6) Upon TBLNHA's receipt of a complete application, the application remains 
valid for one year. If the applicant allows his or her file to remain inactive 
for one year or more, the application becomes null and void and the applicant 
will be required to register as a new applicant and meet the application 
requirements that exist at such time. A written request for extension will renew 
the application for one year from the date of receipt.
sec.243.2. Denial of Application.
(a) Upon receipt of an application, Texas Board of Licensure for Nursing Home 
Administrators (TBLNHA) staff will review and evaluate documents submitted for 
eligibility for licensure. If an application is deemed unacceptable, applicant 
will receive written notification of deficiencies and will be given the 
opportunity to correct deficiencies by working with TBLNHA staff.
(b) If the application remains unsatisfactory, applicant may exercise his/her 
right to petition the decision according to the procedures outlined in Chapter 
251, concerning disciplinary process.
sec.243.3. Waivers.
(a) Upon review of an applicant's official college transcripts, Texas Board of 
Licensure for Nursing Home Administrators (TBLNHA) staff will evaluate and 
determine additional education needed and applicant will be informed in writing.
(b) There will be no waiver of internship hours.
sec.243.4. Administrators-in-Training.
(a) An individual under the auspices of an approved college is bound by college 
rules. Individuals who are receiving their internship training through a college 
shall indicate the college of enrollment and anticipated completion date on the 
internship plan form.
(b) An administrator in training (AIT) will follow the application procedures 
outlined in sec.243.1(a) of this title (relating to Application Procedures). The 
AIT must submit the internship plan form and calendars provided by the agency. 
Calendars must specify hours under direct supervision of the preceptor; daily 
topics covered; and number of hours served per day.
(c) AIT training may begin upon receipt of a letter of notice by the agency that 
a complete application along with a complete internship plan is on file. See 
243.2 of this title (relating to Denial of Application).
(d)  Each administrator-in-training will receive supervision from a preceptor 
approved by the board.
(e) Training requirements and procedures.
(1) Administrators-in-Training will serve an internship for a minimum period of 
520 hours in a nursing home licensed by the Texas Department of Health for 60 
beds or more and participating in Medicaid programs as a nursing facility.
(2) Eighty percent of training must be conducted between the hours of 6 a.m. and 
9 p.m., Monday-Sunday. AITs may not train for less than two or more than six 
hours per training day, no more than 20 hours per week.
(3)  The preceptor will provide direct supervision a minimum of four planned 
hours per every 20 hours of training conducted at the facility where the AIT(s) 
is training.
(4) Any absence of an AIT shall be made up at the end of the internship.
(f) Preceptors will forward attendance calendars to the agency at the conclusion 
of each month of training if 20 hours or more of training have been completed. 
When less than 20 hours of training is conducted during the month, attendance 
calendars will be submitted when the 20 hour training threshold is reached.
(g) The board must be notified by the preceptor in writing within 10 working 
days from the date of the change if the AIT leaves the program, there is a 
change of preceptor, a change in the training plan, or any change in the amount 
or kind of training provided.
(h) If the internship training program is interrupted for any reason, the AIT 
will have a period of one year from the date of filing the last performance 
evaluation report to resume training, otherwise the application becomes null and 
void and the AIT will be required to register as a new applicant and meet the 
application requirements that exist at such time. A written request for 
extension will renew the application for one year from the date of receipt.
(i) AITs may not serve their training in a facility which is currently 
decertified for medicaid participation. Upon decertification, AIT training must 
be suspended and reinitiated in a certified facility. Appropriate TBLNHA forms 
must be submitted before reinitiating the internship.
sec.243.5. Preceptorial Qualifications and Procedures.
(a) All persons desiring to serve as preceptors must:
(1) have an active license;
(2) attend a preceptor seminar conducted by Texas Board of Licensure for Nursing 
Home Administrators (TBLNHA).
(b) Eligibility requirements.
(1) An administrator with less than a bachelor's degree desiring to become a 
preceptor must have at least three years' experience as a licensed nursing home 
administrator in the State of Texas.
(2) An administrator with a bachelor's degree or higher educational achievement 
desiring to become a preceptor must have at least two years' experience as a 
licensed nursing home administrator in the State of Texas.
(3) If such administrator has obtained a license in Texas through partial 
endorsement, that administrator must have three years' experience as a licensed 
nursing home administrator with the most recent year in this state.
(c) Preceptor denial.
(1) The board may refuse to approve preceptors for training AITs if there is 
good cause to believe that the preceptor has failed to provide proper training 
for AITs previously assigned to him or her.
(2) Repeated allegations lodged with this board against a nursing home 
administrator, including decertification for medicaid participation, may be 
grounds for refusal to grant approval to be a preceptor, or approve AITs serving 
under that preceptor unless such allegations have been resolved to the 
satisfaction of the board.
(d) AIT training must be conducted in one facility by one preceptor at a time. 
No person may serve as a preceptor for more than one AIT at any given time.
(e) No person shall be precepted/trained by any relative who is related within 
the second degree by affinity or within the third degree by consanguinity.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201589
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 458-1955
       
Part XIV. Texas Optometry Board
Chapter 275. Continuing Education
22 TAC sec.275.2
The Texas Optometry Board proposes an amendment to sec.275.2, concerning 
continuing education. This rules requires that all licensed optometrists obtain 
a minimum of six hours of continuing education in diagnostic or therapeutic 
education per calendar year, which is one-half of the mandatory 12-hour 
requirement. Because of new legislation which allows all optometrists to use 
diagnostic pharmaceutical agents and therapeutically certified optometrists to 
use both diagnostic as well as therapeutic pharmaceutical agents, this rule will 
assure the public that the optometrists are remaining proficient in that area of 
practice.
Lois Ewald, executive director, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Ms. Ewald also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the assurance that qualified optometrists are conducting their 
practices in a competent manner by virtue of receiving current education 
regarding the use of pharmaceutical agents. There will be no effect on small 
businesses. The anticipated economic cost to persons who are required to comply 
with the section as proposed will be none, as they are currently required to 
obtain 12 hours per calendar year.
Comments on the proposal may be submitted to Lois Ewald, Executive Director, 
Texas Optometry Board, 9101 Burnet Road, Suite 214, Austin, Texas 78758.
The amendment is proposed under Texas Civil Statutes, Article 4552, sec.2.14, 
which provide the Texas Optometry Board with the authority to promulgate 
substantial and procedural rules.
sec.275.2. Required Education.
(a)-(f) (No change.)
<nl>(g) Diagnostic or therapeutic education courses. Beginning January 1, 1993, 
a minimum of six hours of the mandatory 12 credit hours will be required per 
calendar year in diagnostic or therapeutic continuing education.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201532
Lois Ewald
Executive Director
Texas Optometry Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 835-1938
       
Part XIX. Polygraph Examiners Board
Chapter 395. Code of Operating Procedure of Polygraph Examiners
22 TAC sec.395.17
The Polygraph Examiners Board proposes new sec.395.17, concerning written 
authorization to inspect polygraph records for the ultimate benefit of the 
public.
Bryan M. Perot, executive officer, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Mr. Perot also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the polygraph industry will be more closely regulated in areas 
that the board determines to be critical. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Bryan M. Perot, Polygraph Examiners 
Board, P.O. Box 4087, Austin, Texas 78773.
The new section is proposed under Texas Civil Statutes, Article 4413(29cc), 
which provide the Polygraph Examiners Board with the authority to regulate 
persons who purport to be able to detect deception or to verify truth of 
statements through the use of instrumentation.
sec.395.17. Written Authorization To Inspect Polygraph Records. <ol> In addition 
to the name, mailing address, and telephone number of the board, each waiver of 
liability that is signed by the subject of a polygraph examination shall contain 
a statement requesting the subject to give written authorization for the 
polygraph examiner to release all information obtaining during the polygraph to 
the Polygraph Examiners Board to enable the board to verify that the polygraph 
examination was administered in accordance with the Polygraph Examiners Act and 
the board's rules and regulations. The information obtained during the polygraph 
examination shall contain, but not be limited to: polygraph charts, question 
sheets, written reports, data sheets, films, audio and video tapes, opinions of 
the examiner from chart analysis, and other pertinent papers.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 29, 1992.
TRD-9201518
Bryan M. Perot
Executive Officer
Polygraph Examiners Board
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 465-2058
       
Part XXIV. Board of Veterinary Medical Examiners
Chapter 575. Practice and Procedure
22 TAC sec.575.22
The Texas Board of Veterinary Medical Examiners proposes new sec.575.22, 
concerning reinstatement of veterinary licenses, which would prohibit persons 
whose veterinary license has been revoked or cancelled through disciplinary 
action by the Board, from petitioning the Board for reinstatement for five 
years, unless another time period is provided for in the Board Order. This rule 
does not apply to licensees who have had their license cancelled for non-payment 
of renewal fees.
Mr. Buddy Matthijetz, executive director, has determined that for the first 
five-year period the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Mr. Matthijetz, also has determined that for each year of the first five years 
the section is in effect the public benefit anticipated as a result of enforcing 
the section will be to ensure that practitioners have adequate time for 
rehabilitation prior to petitioning the board for reinstatement, in order that 
the public might be protected from unethical/unlawful practitioners. There will 
be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Buddy Matthijetz, Texas Board of 
Veterinary Medical Examiners, 1946 South IH-35, Suite #306, Austin, Texas 78704.
The new section is proposed under Texas Civil Statutes, Article 8890, sec.7(a), 
which provide the Texas Board of Veterinary Medical Examiners with the authority 
to make, alter, or amend such rules and regulations as may be necessary or 
desirable to carry into effect the provisions of this Act.
sec.575.22. Reinstatement of Veterinary Licenses.
(a) A person whose license to practice veterinary medicine has been cancelled or 
revoked, whether voluntary or by action of the board, may after five years from 
the effective date of such cancellation or revocation, petition the board for 
reinstatement of the license, unless another time is provided in the order, or 
unless no allowances were made for reinstatement. This rule does not apply to 
licensees that let their license lapse for non-payment of renewal fees and where 
a cancellation or revocation proceeding is not pending.
(b) The petition shall be in writing and in the form prescribed by the board.
(c)  On investigation and hearing, the board may, at its discretion, grant or 
deny the petition. If such petition is denied by the Board, a subsequent 
petition may not be considered by the board until 12 months from the date of 
denial of the previous petition.
(d) The applicant or his legal representative must appear before the Board to 
state the request for reinstatement of license.
(e) At the reinstatement hearing, the applicant shall have the burden of proving 
why the applicant's license should be reinstated.
(f) The applicant, by submitting a petition for reinstatement, requests and 
consents to the board's exercise of jurisdiction over the petition.
(g) In considering a petition for reinstatement, the board may consider the 
following:
(1) moral character;
(2)  employment history;
(3) financial support to his/her family;
(4) participation in continuing education programs or other methods of 
maintaining currency with the practice of veterinary medicine;
(5)  criminal history record, including arrests, indictments and convictions 
relating to felonies or misdemeanors involving moral turpitude;
(6)  offers of employment as a veterinarian;
(7) involvement in public service activities in the community;
(8) failure to comply with the provisions of the Board Order revoking or 
cancelling the applicant's license;
(9) failure to comply with provisions of the Veterinary Licensing Act regarding 
unauthorized practice;
(10) action by other state and federal regulatory agencies;
(11) any physical, chemical, emotional or mental impairment;
(12) the gravity of the offense for which the applicant's license was cancelled, 
revoked or restricted and the impact the offense had upon the public health, 
safety and welfare;
(13) the length of time since the applicant's license was cancelled, revoked, or 
restricted, as a factor in determining whether the time period has been 
sufficient for the applicant to have rehabilitated himself/herself to be able to 
practice veterinary medicine in a manner consistent with the public health, 
safety and welfare;
(14)  whether the license was submitted voluntarily for cancellation at the 
request of the licensee; and
(15) other rehabilitative actions taken by the applicant.
(h) If the board grants the petition for reinstatement, the applicant must 
successfully complete the State Board Examination during the regularly scheduled 
examination administration times.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 27, 1992.
TRD-9201360
Buddy Matthijetz
Executive Director
Texas Board of Veterinary Medical Examiners
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 447-1183
       
 
TITLE 28. INSURANCE
Part I. Texas Department of Insurance
Chapter 3. Life, Accident, and Health Insurance and Annuities
Subchapter T. Minimum Standards for Medicare Supplement Policies
28 TAC sec.sec.3.3301, 3.3303-3.3309, 3.3313, 3.3315, 3.3317-3. 3325
State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.3.3301, 3.3303-3.3309, 3.3313, 3.3315, and 3.3317-3.3321, 
and new sec.sec.3.3322-3.3325, concerning minimum standards for Medicare 
supplement policies following passage of the Omnibus Budget Reconciliation Act 
of 1990, Public Law 101-508. The amendments will assure orderly implementation, 
conversion, and effective disclosure of Medicare supplement insurance benefits 
and premiums by licensed insurers, companies subject to the Insurance Code, 
Chapter 20, and by health maintenance organizations. The amendment to sec.3.3301 
deletes the reference to age and makes full disclosure a requirement for all 
sales of Medicare supplement policies. The amendment to sec.3.3303 adds 
definitions for the terms "applicant," "certificate," "issuer", and "Medicare," 
and clarifies that individual or group evidences of coverage issued under the 
Federal Social Security Act, sec.1876 or sec.1833, are not Medicare supplement 
policies. The amendment to sec.3.3304 adds a definition for "Medicare approved 
amounts," and states restrictions on the definitions of "convalescent nursing 
home," "extended care facility," and "skilled nursing facility." The amendment 
to sec.3.3305 restates the prohibition against limitations or exclusions on 
coverage that are more restrictive than those of Medicare in instances where 
policies or certificates are advertised, solicited, or issued as Medicare 
supplement policies. The amendment to sec.3.3306 revises the benefit conversion 
requirements and the prohibition against preexisting conditions waiting periods, 
elimination periods, and probationary periods in replacement policies or 
certificates. It also provides for the suspension of benefits and premiums upon 
the request of the policyholder for any period not to exceed 24 months for which 
the policyholder is eligible for Medicaid benefits, as well as providing for 
reinstitution of such benefits. The amendment to sec.3.3306 provides for uniform 
structure, language, designation, and format for Medicare supplement benefit 
plans and outlines of coverage. The amendment to sec.3.3307 changes the minimum 
loss ratio for individual policies to 65% of earned premiums, amends the 
requirements for the filing of rates and rating schedules, provides for 
collection and filing of data for refunds, and sets out requirements for refunds 
or credits. In sec.3.3307, the board proposes to adopt by reference a form for 
use in complying with the section. The Board has filed with the Office of the 
Secretary of State, Texas Register Section, copies of the form proposed for 
adoption by reference. This form, entitled "Medicare Supplement Refund 
Calculation Form," is published by the Texas Department of Insurance and is 
available from the Publication Division, Mail Code 108-5A, Texas Department of 
Insurance, P.O. Box 149104, Austin, Texas 78714-9104. The amendment to  s3.3308 
brings the section into compliance with federal requirements for uniform 
disclosures in the outline of coverage for Medicare supplement policies. The 
amendment provides for a required notice to be provided to policyholders 
regarding changes to Medicare supplement coverage. In sec.3.3308, the board 
proposes to adopt by reference a form for use in complying with the section. The 
board has filed with the Office of the Secretary of State, Texas Register 
Section, copies of the form entitled "Notice on Changes in Medicare and Your 
Medicare Supplement Insurance-19__." This form is published by the Texas 
Department of Insurance and persons desiring copies of the form may obtain 
copies from the Publications Division, Mail Code 108-5A of the Texas Department 
of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. The amendment to sec.3. 
3309 changes the requirements for replacement of Medicare supplement policies 
and includes statements and questions to be included upon the taking of an 
application for Medicare supplement coverage. The amendment to sec.3.3313 
removes a transitional requirement for a time period which already has elapsed. 
The amendment to sec.3.3315 sets out in detail the specific standards for claims 
payment as provided in the Omnibus Budget Reconciliation Act of 1987, Public Law 
100-203. The amendment to sec.3.3317 removes the provision that compensation 
upon replacement of a Medicare supplement policy may ever be permitted to exceed 
renewal compensation. The amendment to sec.3.3318 sets out the effective date 
for this subchapter, as amended. The amendment to sec.3.3319 replaces existing 
paragraph (3) with a provision designed to assure that prospective insureds are 
aware of the existence and availability of the basic "core" benefit package, and 
to assure the fair and accurate comparison of policies. The amendment to sec.3. 
3320 strengthens the requirement that an agent recommending the purchase or 
replacement of a Medicare supplement policy determine the appropriateness of the 
purchase or replacement. The amendment to sec.3.3321 provides updated 
information about the division from which reporting forms are available. New 
sec.3.3322 provides for the filing and approval of Medicare supplement forms and 
sets out the requirements for discontinuance of particular policy or certificate 
forms. New sec.3.3323 sets out the process for filing and review of proposed 
premium rate increases with respect to Medicare supplement coverages. New 
sec.3.3324 sets out the requirements for availability and effectiveness of 
Medicare supplement coverage for all newly eligible beneficiaries under the 
Medicare program. New sec.3.3325 sets out essential provisions permitting 
issuers to provide Medicare supplement coverages through preferred provider, 
managed care arrangements.
Myron, deputy insurance commissioner, life group, has determined that for the 
first five-year period tthe sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on local employment or 
local economy.
Myron also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be more effective regulation of Medicare supplement insurance 
products and benefits in Texas by implementing federal standards for consumer 
protection that have developed from the Omnibus Budget Reconciliation Act of 
1990. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the proposed sections 
other than costs already necessitated by state and federal legislation.
on the proposal may be submitted to Rhonda Myron, Deputy Insurance Commissioner 
for the Life Group, Mail Code 106-1A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
amendments and new sections are proposed under the Insurance Code, Article 3.74, 
sec.sec.2(b), 2(c), 2(f), 4(d), 4(f), 5(b), 5(f), 9B, and 10, and Texas Civil 
Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, Article 3.74, 
sec.2(b), provides that the board shall adopt a basic policy form providing only 
those benefits common to all Medicare supplement policies, and that it may also 
adopt additional policies whose combination of benefits conforms to one of the 
benefit packages authorized by 42 United States Code, sec.1395ss. Article 3.74, 
sec.2(c), provides that the board shall issue such reasonable rules to establish 
specific standards for provisions of Medicare supplement policies, including 
requirements that are at least equal to those required by federal law. Article 
3.74, sec.2(f), further provides that rules that are adopted by the board must 
include requirements that are at least equal to those required by federal law. 
Article 3.74. sec.4(d), provides that the board shall issue reasonable rules 
providing loss ratio standards applicable to rates charged for Medicare 
supplement policies to the extent necessary for the state to obtain or retain 
certification as a state with an approved regulatory program under 42 United 
States Code, sec.1395ss. Article 3.74, sec.4(f), provides that the board, by 
rule, shall provide a process for review and approval of proposed premium 
increases with respect to Medicare supplement policies or benefits, consistent 
with 42 United States Code, sec.1395ss. Article 3.74, sec.5(b), provides that 
the board, by rule, shall prescribe the format and content of the outline of 
coverage required by the statute, including provisions at least equal to those 
required by applicable federal law. Article 3.74, sec.5(f), further provides 
that any rules adopted by the board under Article 3.74, sec.5 must include 
requirements at least equal to those required by all applicable federal law. 
Article 3.74, sec.9B, provides that the board shall adopt rules limiting the 
commission or other compensation to be paid to an agent for the sale of Medicare 
supplement coverage, including replacement coverage, and that such rules must 
conform to, but be no more restrictive than, requirements of federal law which 
must be met in order for the state to obtain or retain certification as a state 
with an approved regulatory program under 42 United States Code, sec.1395ss. 
Article 3.74, sec.10, provides that the board shall adopt any rules applicable 
to regulation of Medicare supplement coverage which are necessary for the state 
to obtain or retain certification as a state with an approved regulatory program 
under 42 United States Code, sec.1395ss. Texas Civil Statutes, Article 6252-13a, 
sec.4, authorize and require each state agency to adopt rules of practice 
setting forth the nature and requirement of available procedures; sec.5 
prescribe the procedures for adoption of rules by a state administrative agency.
sec.3.3301. Purpose.  The purpose of these sections is to provide for the 
reasonable standardization of coverage and simplification of terms and benefits 
of Medicare supplement policies; to facilitate public understanding and 
comparison of such policies; to eliminate provisions contained in such policies 
which may be misleading or confusing in connection with the purchase of such 
policies or with the settlement of claims; and to provide for full disclosures 
in the sale of accident and sickness insurance coverages to persons eligible for 
Medicare [by reason of age].
sec.3.3303. Definitions.  The following words and terms, when used in this 
subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise.
(1) [the terms "applicant," "certificate," and "Medicare" have the same meaning 
as found in the Insurance Code, Article 3.74, sec.1.]
   <nl>Applicant-
<nl>(A) In the case of an individual Medicare supplement policy, the person who 
seeks to contract for insurance or other health benefits.
<nl>(B) In the case of a group Medicare supplement policy, the proposed 
certificate holder.
   <nl>Certificate-Any certificate issued under a group Medicare supplement 
policy, which certificate has been delivered or issued for delivery in this 
state regardless of the place where the policy was delivered or issued for 
delivery.
   <nl>Issuer-An insurance company, fraternal benefit society, health care 
service plan, health maintenance organization, or any other entity delivering or 
issuing for delivery in this state Medicare supplement policies or certificates.
   <nl>Medicare-The Health Insurance for the Aged Act, Part 1 of Title I of the 
Social Security Amendments of 1965, as amended (Public Law 89-97).
 Medicare supplement policy-A group or individual policy of accident and 
sickness insurance or a subscriber contract of a hospital service corporation 
subject to the Insurance Code, Chapter 20, or<nl>, to the extent required by 
federal law, an<ol> evidence of coverage issued by a health maintenance 
organization subject to the Texas Health Maintenance Organization Act, which 
policy, subscriber contract, or <nl>such<ol> evidence of coverage is advertised, 
marketed, or designed primarily as a supplement to reimbursements under Medicare 
for the hospital, medical, or surgical expenses of persons eligible for Medicare 
[by reason of age]. Such term does not include:
(A) a policy, contract, subscriber contract, or evidence of coverage of one or 
more employers or labor organizations, or of the trustees of a fund established 
by one or more employers or labor organizations, or combination thereof, for 
employees or former employees, or combination thereof, or for members or former 
members, or combination thereof, of the labor organizations; [or]
(B) a policy or health care benefit plan including a policy or contract of group 
insurance or group contract of a hospital service corporation subject to the 
Insurance Code, Chapter 20, or group evidence of coverage issued by a health 
maintenance organization subject to the Texas Health Maintenance Organization 
Act, when such policy or plan is not marketed or held to be a Medicare 
supplement policy or benefit plan; or
<nl>(C) an individual or group evidence of coverage issued pursuant to a 
contract under the Federal Social Security Act, sec.1876 or sec.1833 (42 United 
States Code, sec.sec.1395, et seq) by a health maintenance organization subject 
to the Texas Health Maintenance Organization Act (Texas Insurance Code, Chapter 
20A) .
 Qualified actuary -An actuary who is a member of either the Society of 
Actuaries or the American Academy of Actuaries.
sec.3.3304. Policy Definitions and Terms. No insurance policy, subscriber 
contract,  <nl>certificate,<ol> or evidence of coverage may be advertised, 
solicited, or issued for delivery in this state as a Medicare supplement policy 
<nl>unless<ol> [if] such policy, subscriber contract, <nl>certificate,<ol> or 
evidence of coverage contains definitions or terms which [do not] conform to the 
requirements of this section.
(1) "Accident," "Accidental Injury," or "Accidental Means" shall be defined to 
employ "result" language and shall not include words which establish an 
accidental means test or use words such as "external, violent, visible wounds, " 
or similar words of description or characterization.
(A) The definition shall not be more restrictive than the following: "Injury or 
injuries for which benefits are provided means accidental bodily injury 
sustained by the insured person which is the direct result of an accident, 
independent of disease or bodily infirmity or any other cause, and occurs while 
insurance <nl>or health<ol> coverage is in force."
(B) (No change.)
(2) (No change.)
(3) "Convalescent Nursing Home," "Extended Care Facility," or "Skilled Nursing 
Facility" shall be defined in relation to its status, facilities, and available 
services. <nl>In no event shall such terms be defined more restrictively than as 
defined in the Medicare program.
(A)-(B) (No change.)
(4) (No change.)
(5) "Medicare" shall be defined in the policy<nl>, certificate, or evidence of 
coverage<ol>. Medicare may be substantially defined as "The Health Insurance for 
the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then 
Constituted or Later Amended" or "Title I, Part I of Public Law 89-97, as 
Enacted by the 89th Congress of the United States of America and popularly known 
as the Health Insurance for the Aged Act, as then constituted and any later 
amendments or substitutes thereof," or words of similar import.
<nl>(6) "Medicare Approved Amounts" refer to the level of service or amount of 
health care reimbursement recognized and approved for a particular medical or 
health care service or procedure by Medicare.
<nl>(7)<ol>[(6)] "Medicare Eligible Expenses" are health care expenses of the 
kinds covered by Medicare, to the extent recognized as reasonable <nl>and 
medically necessary<ol> by Medicare. [Payment of benefits by insurers for 
Medicare eligible expenses may be conditioned upon the same or less restrictive 
payment conditions, including determinations of medical necessity as are 
applicable to Medicare claims.]
<nl>(8)<ol>[(7)] "Mental or Nervous Disorders" shall not be defined more 
restrictively than a definition including neurosis, psychoneurosis, psychopathy, 
psychosis, or mental or emotional disease or disorder of any kind.
<nl>(9)<ol>[(8)] "Nurses" may be defined so that the description of nurse is 
restricted to a type of nurse, such as registered graduate professional nurse 
(RN), a licensed practical nurse (LPN), or a licensed vocational nurse (LVN). If 
the words "nurse," "trained nurse," or "registered nurse" are used without 
specific instruction, then the use of such terms requires the <nl>issuer 
<ol>[insurer] to recognize the services of any individual who qualifies under 
such terminology in accordance with the applicable statutes or administrative 
rules of the licensing or registry board of Texas.
<nl>(10)<ol>[(9)] "Physician" may be defined by including words such as "duly 
qualified physician" or "duly licensed physician," <nl>but shall not be defined 
more restrictively than as defined in the Medicare program.<ol> The use of such 
terms requires an <nl>issuer<ol> [insurer] to recognize and to accept, to the 
extent of its obligation under the contract, all providers of medical care and 
treatment when such services are within the scope of the provider's licensed 
authority and are provided pursuant to applicable laws.
<nl>(11)<ol>[(10)] "Sickness" shall not be defined to be more restrictive than 
the following: "Sickness means illness or disease of <nl>a covered<ol> [an 
insured] person which first manifests itself after the effective date of 
insurance <nl>or health coverage<ol> and while the insurance <nl>or health 
coverage<ol> is in force." The definition shall not be construed to limit 
sec.3.3306(1) of this title (relating to Minimum Benefit Standards). The 
definition may be further modified to exclude sicknesses or diseases for which 
benefits are provided under any workers' compensation, occupational disease, 
employer's liability, or similar law.
sec.3.3305. Prohibited Policy Provisions.
(a) <nl>Except for permitted preexisting condition clauses described 
sec.3.3306(1)(A) of this title (relating to Minimum Benefit Standards), no 
policy or certificate may be advertised, solicited, or issued for delivery in 
this state as a Medicare supplement policy if such policy or certificate 
contains limitations or exclusions on coverage that are more restrictive than 
those of Medicare. <ol> [No insurance policy, subscriber contract, or evidence 
of coverage may be advertised, solicited, or issued for delivery in this state 
as a Medicare supplement policy if such policy, subscriber contract, or evidence 
of coverage limits or excludes coverage by type of illness, accident, treatment, 
or medical condition, except as follows:]
[(1) foot care in connection with corns, calluses, flat feet, fallen arches, 
weak feet, chronic foot strain, or symptomatic complaints of the feet, but only 
to the extent limited or excluded by Medicare;
[(2) mental or emotional disorders, alcoholism and drug addiction;
[(3) illness, treatment, or medical condition arising out of:
[(A) war or act of war (whether declared or undeclared), participation in a 
felony, riot or insurrections, service in the armed forces or units auxiliary 
thereto;
[(B) suicide (sane or insane), attempted suicide, or intentionally self-
inflicted injury;
[(C) aviation, except as a fare-paying passenger on a scheduled airline;
[(4) cosmetic surgery, except that "cosmetic surgery" may not include 
reconstructive surgery when such service is incidental to or follows surgery 
resulting from trauma, infection, or other diseases of the involved part;
[(5) care in connection with the detection and correction by manual or 
mechanical means of structural imbalance, distortion, or subluxation in the 
human body for purposes of removing nerve interference and the effects thereof, 
where such interference is the result of or related to distortion, misalignment, 
or of, or in the vertebral column, but only to the extent limited or excluded by 
Medicare;
[(6) treatment provided in a governmental hospital; benefits provided under 
Medicare or other governmental program (except Medicaid), any state or federal 
workers' compensation, employer's liability or occupational disease law, or any 
motor vehicle no-fault law; services rendered by employees of hospitals, 
laboratories, or other institutions; services performed by a member of the 
covered person's immediate family and services for which no charge is normally 
made in the absence of insurance;
[(7) dental care or treatment;
[(8) eye glasses, hearing aids, and examination for the prescription or fitting 
thereof;
[(9) rest cures, custodial care, transportation, and routine physical 
examinations, but only to the extent limited or excluded by Medicare;
[(10) territorial limitations, but only to the extent limited or excluded by 
Medicare.]
(b) [Medicare supplement policies may exclude coverage for any expense to the 
extent of any benefit available to the insured under Medicare.]
[(c) ]No Medicare supplement policy <nl>or certificate<ol> may use waivers to 
exclude, limit, or reduce coverage or benefits for specifically named or 
described preexisting diseases or physical conditions.
[(d) The terms "Medicare supplement," "Medigap," and words of similar import 
shall not be used unless the policy is issued in compliance with provisions of 
this subchapter.]
<nl>(c)<ol>[(e)] No Medicare supplement [insurance] policy, contract, or 
certificate in force in this state shall contain benefits which duplicate 
benefits provided by Medicare.
sec.3.3306. Minimum Benefit Standards. No insurance policy, subscriber contract,  
<nl>certificate,<ol> or evidence of coverage may be advertised, solicited, or 
issued for delivery in this state as a Medicare supplement policy unless the 
policy, contract,<nl> certificate,<ol> or evidence of coverage meets the 
<nl>applicable <ol> standards in paragraphs (1)-(3) of this section. These are 
minimum standards and do not preclude the inclusion of other provisions or 
benefits which are not inconsistent with these standards.
(1) General standards. The following standards apply to Medicare supplement 
policies and are in addition to all other requirements of this subchapter, the 
Insurance Code, Article 3.74, and any other applicable law.
(A) A Medicare supplement policy may not deny a claim for losses incurred more 
than six months from the effective date of coverage for a preexisting condition. 
The policy may not define a preexisting condition more restrictively than a 
condition for which medical advice was given or treatment was recommended by or 
received from a physician within six months before the effective date of 
coverage. If a Medicare supplement policy replaces another Medicare supplement 
policy, the replacing <nl>issuer <ol> [insurer] shall waive any time periods 
applicable to preexisting condition waiting periods, elimination periods, and 
probationary periods in the new Medicare supplement policy [for similar 
benefits] to the extent such time was spent under the original policy.
(B)-(C) (No change.)
(D) <nl>No<ol> [a "noncancellable," "guaranteed renewable," or "noncancellable 
and guaranteed renewable"] Medicare supplement policy shall [not: ]
[(i) ]provide for termination of coverage of a spouse solely because of the 
occurrence of an event specified for termination of coverage of the insured, 
other than the nonpayment of premium; or
[(ii) ]be cancelled or nonrenewed by the <nl>issuer <ol> [insurer] solely on the 
grounds of deterioration of health.
<nl>(E) Each Medicare supplement policy shall be guaranteed renewable and shall 
comply with the provisions of clauses (i)-(iv) of this subparagraph.
<nl>(i)<nl> The issuer shall not cancel or nonrenew the policy for any reason 
other than nonpayment of premium or material misrepresentation.
<nl>(ii)<nl> If the Medicare supplement policy is terminated by the group 
policyholder and is not replaced as provided in clause (iv) of this 
subparagraph, the issuer shall offer certificate holders an individual Medicare 
supplement policy which (at the option of the certificate holder):
<nl>(I) provides for continuation of the benefits contained in the group policy; 
or
<nl>(II) provides for such benefits as otherwise meets the requirement of this 
subsection.
<nl>(iii)<nl> If an individual is a certificate holder in a group Medicare 
supplement policy and the individual terminates membership in the group, the 
issuer shall:
<nl>(I) offer the certificate holder conversion opportunity described in clause 
(ii) of this subparagraph; or
<nl>(II) at the option of the group policyholder, offer the certificate holder 
continuation of coverage under the group policy.
<nl>(iv)<nl> If a group Medicare supplement policy is replaced by another group 
Medicare supplement policy purchased by the same policyholder, the succeeding 
issuer shall offer coverage to all persons covered under the old group policy on 
its date of termination. Coverage under the new policy shall not result in any 
exclusion for preexisting conditions that would have been covered under the 
group policy being replaced.
<nl>(F)<ol>[(E)] Termination of a Medicare supplement policy shall be without 
prejudice to any continuous loss which commenced while the policy was in force, 
but the extension of benefits beyond the period during which the policy was in 
force may be predicated upon the continuous total disability of the insured, 
limited to the duration of the policy benefit period, if any, or payment of the 
maximum benefits.
(G) <nl>A Medicare supplement policy or certificate shall provide that benefits 
and premiums under the policy or certificate shall be suspended at the request 
of the policyholder or certificate holder for the period (not to exceed 24 
months) in which the policyholder or certificate holder has applied for and is 
determined to be entitled to medical assistance under Title XIX of the Social 
Security Act, but only if the policyholder or certificate holder notifies the 
issuer of such policy or certificate within 90 days after the date the 
individual becomes entitled to such assistance. Upon receipt of timely notice, 
the issuer shall return to the policyholder or certificate holder that portion 
of the premium attributable to the period of Medicaid eligibility, subject to 
adjustment for paid claims.
<nl>(i)<nl> If such suspension occurs and if the policyholder or certificate 
holder loses entitlement to such medical assistance, such policy or certificate 
shall be automatically reinstituted (effective as of the date of termination of 
such entitlement) as of the termination of such entitlement if the policyholder 
or certificate holder provides notice of loss of such entitlement within 90 days 
after the date of such loss and pays the premium attributable to the period, 
effective as of the date of termination of such entitlement.
<nl>(ii)<nl> Reinstitution of such coverages shall provide for the following:
<nl>(I) waiver of any waiting period with respect to treatment of pre-existing 
conditions;
<nl>(II) coverage which is equivalent to coverage in effect before the date of 
such suspension; and
<nl>(III) classification of premiums on terms at least as favorable to the 
policyholder or certificate holder as the premium classification terms that 
would have applied to the policyholder or certificate holder had the coverage 
not been suspended.
(2) <nl>Standards for the basic "core" benefits common to all benefit plans. 
Every issuer shall make available a policy or certificate including only the 
basic "core" package of benefits described in subparagraphs (A)-(E) of this 
paragraph to each prospective insured. An issuer may make available to 
prospective insureds any of the other Medicare supplement insurance benefit 
plans in addition to the basic "core" package, but not in lieu of that package. 
The basic "core" benefits shall consist of the following<ol> [Minimum benefit 
standards. A maximum of three separate Medicare supplement policies may be 
offered by any insurer or other entity designated in the Insurance Code, Article 
3.74, sec.1(a), which offers Medicare supplement insurance or benefits for sale 
in this state, one of which must be a basic Medicare supplement policy that 
meets the minimum standards of Medicare supplement insurance policies adopted by 
the board. For a group master policy issued in connection with any certificates 
providing group Medicare supplement insurance benefits to a resident of this 
state, a maximum of three alternative sets of benefits may be provided in 
connection with such policy. Every insurance policy advertised, solicited, or 
issued for delivery as a Medicare supplement policy, however, must meet all the 
following minimum standards of coverage in subparagraphs (A)-(G) of this 
paragraph]:
(A) [coverage for either all or none of the Medicare Part A inpatient hospital 
deductible amount;]
[(B) ]coverage for Part A Medicare eligible expenses for hospitalization to the 
extent not covered by Medicare from the 61st day through the 90th day in any 
Medicare benefit period;
<nl>(B) coverage for Part A Medicare eligible expenses, to the extent not 
covered by Medicare, incurred as daily hospital charges during use of Medicare 
lifetime hospital inpatient reserve days;
(C) [coverage for the reasonable cost of the first three pints of blood (or 
equivalent quantities of packed red blood cells, as defined under federal 
regulations) under Medicare Part A unless replaced in accordance with federal 
regulations;]
[(D) coverage for Part A Medicare eligible expenses incurred as daily hospital 
charges during use of Medicare's lifetime hospital inpatient reserve days;]
[(E)] upon exhaustion of all Medicare hospital inpatient coverage including the 
lifetime reserve days, coverage of  <nl>the<ol> [90% of all] Medicare Part A 
eligible expenses for hospitalization  <nl>paid at the diagnostic related group 
(DRG) day outlier per diem or other appropriate standard of payment, <ol> [not 
covered by Medicare] subject to a lifetime maximum benefit of an additional 365 
days;
<nl>(D) coverage under Medicare Parts A and B for the reasonable cost of the 
first three pints of blood (or equivalent quantities of packed red blood cells, 
as defined under federal regulation) unless replaced in accordance with federal 
regulation;
<nl>(E)<ol>[(F)] coverage for the coinsurance amount of Medicare eligible 
expenses under Part B regardless of hospital confinement, subject to [a maximum 
calendar year out-of-pocket amount equal to] the Medicare Part B deductible 
[($75); and]. [effective January 1, 1990, coverage under Medicare Part B for the 
reasonable cost of the first three pints of blood (or equivalent quantities of 
packed red blood cells, as defined under federal regulations), unless replaced 
in accordance with federal regulations or already paid for under Part A, subject 
to the Medicare Part B deductible amount.]
(3) <nl>Standards for Additional Benefits. The additional benefits as uniformly 
defined in subparagraphs (A)-(K) of this paragraph shall be included in Medicare 
Supplement Benefit Plans B-J only as provided in paragraphs (5)-(12) of this 
section.
<nl>(A) Medicare Part A Deductible-Coverage for all of the Medicare Part A 
inpatient hospital deductible amount per benefit period.
<nl>(B) Skilled Nursing Facility Care-Coverage for the actual billed charges up 
to the coinsurance amount from the 21st day through the 100th day in a Medicare 
benefit period for post-hospital skilled nursing facility care eligible under 
Medicare Part A.
<nl>(C) Medicare Part B Deductible-Coverage for all of the Medicare Part B 
deductible amount per calendar year regardless of hospital confinement.
<nl>(D) Eighty Percent of the Medicare Part B Excess Charges-Coverage for 80% of 
the difference between the actual Medicare Part B charge as billed and the 
Medicare-approved Part B charge, not to exceed any charge limitation established 
by the Medicare program or state law.
<nl>(E) One Hundred Percent of the Medicare Part B Excess Charges-Coverage for 
all of the difference between the actual Medicare Part B charge as billed and 
the Medicare-approved Part B charge, not to exceed any charge limitation 
established by the Medicare program or state law.
<nl>(F) Basic Outpatient Prescription Drug Benefit-Coverage for 50% of 
outpatient prescription drug charges, after a $250 calendar year deductible, to 
a maximum of $1,250 in benefits or services received by the insured per calendar 
year, to the extent not covered by Medicare.
<nl>(G) Extended Outpatient Prescription Drug Benefit-Coverage for 50% of 
outpatient prescription drug charges, after a $250 calendar year deductible to a 
maximum of $3,000 in benefits or services received by the insured per calendar 
year, to the extent not covered by Medicare.
<nl>(H) Medically Necessary Emergency Care in a Foreign Country -Coverage to the 
extent not covered by Medicare for 80% of the billed charges for Medicare-
eligible expenses for medically necessary emergency hospital, physician, and 
medical care received in a foreign country, which care would have been covered 
by Medicare if provided in the United States and which care began during the 
first 60 consecutive days of each trip outside the United States, subject to a 
calendar year deductible of $250, and a lifetime maximum benefit of $50,000. For 
purposes of this benefit, "emergency care" shall mean care needed immediately 
because of an injury or an illness of sudden and unexpected onset.
<nl>(I) Preventive Medical Care Benefit or Services-Coverage for the preventive 
health services described in clauses (i)-(iv) of this subparagraph. Coverage for 
preventive medical care benefits or services shall be for the actual charges up 
to 100% of the Medicare-approved amount for each service, as if Medicare were to 
cover the service as identified in American Medical Association Current 
Procedural Terminology (AMA CPT) codes, to a maximum of $120 annually under this 
benefit. This benefit shall not include payment for any procedure covered by 
Medicare:
<nl>(i)<nl> an annual clinical preventive medical history and physical 
examination that may include tests and services from clause (ii) of this 
subparagraph and patient education to address preventive health care measures;
<nl>(ii)<nl> any one or a combination of the following preventive screening 
tests or preventive services, the frequency of which is considered medically 
appropriate:
<nl>(I) fecal occult blood test and/or digital rectal examination;
<nl>(II) mammogram;
<nl>(III) dipstick urinalysis for hematuria, bacteriuria, and proteinauria;
<nl>(IV) pure tone (air only) hearing screening test, administered or ordered by 
a physician;
<nl>(V) serum cholesterol screening (every five years);
<nl>(VI) thyroid function test; or
<nl>(VII) diabetes screening;
<nl>(iii)<nl> influenza vaccine administered at any appropriate time during the 
year and Tetanus and Diphtheria booster (every 10 years);
<nl>(iv)<nl> any other tests or preventive measures determined appropriate by 
the attending physician.
<nl>(J) At-Home Recovery Benefit -Coverage for services to provide short term, 
at-home assistance with activities of daily living for those recovering from an 
illness, injury, or surgery.
<nl>(i)<nl> For purposes of this benefit, the following definitions in 
subclauses (I)-(IV) of this clause shall apply.
<nl>(I) Activities of daily living include, but are not limited to, bathing, 
dressing, personal hygiene, transferring, eating, ambulating, assistance with 
drugs that are normally self-administered, and changing bandages or other 
dressings.
<nl>(II) Care provider means a duly qualified or licensed home health 
aide/homemaker, personal care aide, or nurse provided through a licensed home 
health care agency or referred by a licensed referral agency or licensed nurses 
registry.
<nl>(III) Home shall mean any place used by the insured as a place of residence, 
provided that such place would qualify as a residence for home health care 
services covered by Medicare. A hospital or skilled nursing facility shall not 
be considered the insured's place of residence.
<nl>(IV) At-home recovery visit means the period of a visit required to provide 
at-home recovery care, without limit on the duration of the visit, except each 
consecutive four hours in a 24-hour period of services provided by a care 
provider is one visit.
<nl>(ii)<nl> Coverage requirements and limitations.
<nl>(I) At-home recovery services provided must be primarily services which 
assist in activities of daily living.
<nl>(II) The insured's attending physician must certify that the specific type 
and frequency of at-home recovery services are necessary because of a condition 
for which a home care plan of treatment was approved by Medicare.
<nl>(III) Coverage is limited to:
<nl>(-a-) no more than the number and type of at-home recovery visits certified 
as necessary by the insured's attending physician. The total number of at-home 
recovery visits shall not exceed the number of Medicare approved home health 
care visits under a Medicare approved home care plan of treatment;
<nl>(-b-) the actual charges for each visit up to maximum coverage of $40 per 
visit;
<nl>(-c-) $1,600 per calendar year;
<nl>(-d-) seven visits in any one week;
<nl>(-e-) care furnished on a visiting basis in the insured's home;
<nl>(-f-) services provided by a care provider as defined in this section;
<nl>(-g-) at-home recovery visits while the insured is covered under the policy 
or certificate and not otherwise excluded;
<nl>(-h-) at-home recovery visits received during the period the insured is 
receiving Medicare approved home care services or no more than eight weeks after 
the service date of the last Medicare approved home health care visit.
<nl>(iii)<nl> Coverage is excluded for the following:
<nl>(I) home care visits paid for by Medicare or other government programs; and
<nl>(II) care provided by family members, unpaid volunteers, or providers who 
are not care providers.
<nl>(K) New or Innovative Benefits-Any benefit which an issuer may, with the 
prior approval of the commissioner, offer in addition to the benefits provided 
in a policy or certificate that otherwise complies with the applicable 
standards. Such new or innovative benefits may include benefits that are 
appropriate to Medicare supplement insurance, new or innovative, not otherwise 
available, cost-effective, and offered in a manner which is consistent with the 
goal of simplification of Medicare supplement policies. <ol> [Explanation of 
percentages in parentheses in paragraph (2) of this section. The percentages 
within parentheses in paragraph (2)(A)-(G) of this section are intended to mean 
the copayment amounts, whatever those amounts are.]
(4) <nl>Requirement of uniformity for all Medicare supplement benefit plans. An 
issuer shall make available only those groups, packages, or combinations of 
Medicare supplement benefits as described in this section, unless otherwise 
permitted by provisions of paragraph (3)(K) of this section and in sec.3.3324 of 
this title (relating to Medicare Select policies). Benefit plans shall be 
uniform in structure, language, designation, and format to the standard Benefit 
Plan A, defined as the basic "core" plan of benefits in paragraph (2) of this 
section and described in paragraph (5) of this section, and Benefit Plans B-J, 
described in paragraphs (6)-(14) of this section. All benefit plans shall 
conform to the definitions set out in sec.3.3303 of this title (relating to 
Definitions) and sec.3.3304 of this title (relating to Policy Definitions and 
Terms). Each benefit shall be structured in accordance with the format provided 
in paragraphs (2) and (3) of this section. Each benefit plan shall list the 
benefits in the order shown in paragraphs (5)-(14) of this section. For purposes 
of this paragraph, "structure, language, and format" means style, arrangement, 
and overall content of a benefit. In addition to the benefit plan designations 
required in this paragraph, an issuer may use other designations to the extent 
permitted by law.<ol> [Medicare eligible expenses. Medicare eligible expenses 
shall mean health care expenses of the kinds covered by Medicare, to the extent 
recognized as reasonable by Medicare. Payment of benefits by insurers for 
Medicare eligible expenses may be conditioned upon the same or less restrictive 
payment conditions, including determinations of medical necessity, as are 
applicable to Medicare claims.]
(5) <nl>Standardized Medicare Supplement Benefit Plan A. Medicare supplement 
Benefit Plan A shall include only the Core Benefits common to All Benefit Plans, 
as defined in paragraph (2) of this section.<ol> [Cancellation and nonrenewal.]
[(A) Except as authorized by the State Board of Insurance, an insurer shall 
neither cancel nor fail to renew a Medicare supplement policy or certificate for 
any reason other than nonpayment of premium or material misrepresentation.
[(B) If a group Medicare supplement insurance policy is terminated by the group 
policyholder and not replaced as provided in subparagraph (D) of this paragraph, 
the insurer shall offer certificate holders an individual Medicare supplement 
policy. The insurer shall offer the certificate holder at least the following 
choices:
[(i) an individual Medicare supplement policy which provides for continuation of 
the benefits contained in the group policy, subject to any provision where the 
group policy contains incentives of providing greater levels of benefits when 
certain providers and/or facilities are utilized, in which case the continuation 
of benefits must be at least equivalent to the lower level of benefits provided 
for utilization of nonpreferred providers in the group policy being terminated; 
and
[(ii) an individual Medicare supplement policy which provides only such benefits 
as are required to meet the minimum standards.
[(C) If membership in a group is terminated, the insurer shall:
[(i) offer the certificate holder such conversion opportunities as are described 
in subparagraph (B) of this paragraph; or
[(ii) at the option of the group policyholder, offer the certificate holder 
continuation of coverage under the group policy.
[(D) If a group Medicare supplement policy is replaced by another group Medicare 
supplement policy purchased by the same policyholder, the succeeding insurer 
shall offer coverage to all persons covered under the old group policy on it 
date of termination. Coverage under the new group policy shall not result in any 
exclusion for preexisting conditions that would have been covered under the 
group policy being replaced.]
<nl>(6) Standardized Medicare Supplement Benefit Plan B. Medicare supplement 
Benefit Plan B shall include only the Core Benefits as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible as defined in paragraph (3) 
of this section.
<nl>(7) Standardized Medicare Supplement Benefit Plan C. Medicare supplement 
Benefit Plan C shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Medicare Part B Deductible and Medically Necessary Emergency Care in a 
Foreign Country as defined in paragraph (3) of this section.
<nl>(8) Standardized Medicare Supplement Benefit Plan D. Medicare supplement 
Benefit Plan D shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Medically Necessary Emergency Care in a Foreign Country and the At-Home 
Recovery Benefit as defined in paragraph (3) of this section.
<nl>(9) Standardized Medicare Supplement Benefit Plan E. Medicare supplement 
Benefit Plan E shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Medically Necessary Emergency Care in a Foreign Country, and Preventive 
Medical Care as defined in paragraph (3) of this section.
<nl>(10) Standardized Medicare Supplement Benefit Plan F. Medicare supplement 
Benefit Plan "F" shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, the Skilled Nursing 
Facility Care, the Part B Deductible, One Hundred Percent of the Medicare Part B 
Excess Charges, and Medically Necessary Emergency Care in a Foreign Country as 
defined in paragraph (3) of this section.
<nl>(11) Standardized Medicare Supplement Benefit Plan G. Medicare supplement 
Benefit Plan "G" shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Eighty Percent of the Medicare Part B Excess Charges, Medically Necessary 
Emergency Care in a Foreign Country, and the At-Home Recovery Benefit as defined 
in paragraph (3) of this section.
<nl>(12) Standardized Medicare Supplement Benefit Plan H. Medicare supplement 
Benefit Plan "H" shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Basic Prescription Drug Benefit, and Medically Necessary Emergency Care in 
a Foreign Country as defined in paragraph (3) of this section.
<nl>(13) Standardized Medicare Supplement Benefit Plan I. Medicare supplement 
Benefit Plan "I" shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, One Hundred Percent of the Medicare Part B Excess Charges, Basic 
Prescription Drug Benefit, Medically Necessary Emergency Care in a Foreign 
Country, and At-Home Recovery Benefit as defined in paragraph (3) of this 
section.
<nl>(14) Standardized Medicare Supplement Benefit Plan J. Medicare supplement 
Benefit Plan "J" shall include only the Core Benefit as defined in paragraph (2) 
of this section, plus the Medicare Part A Deductible, Skilled Nursing Facility 
Care, Medicare Part B Deductible, One Hundred Percent of the Medicare Part B 
Excess Charges, Extended Prescription Drug Benefit, Medically Necessary 
Emergency Care in a Foreign Country, Preventive Medical Care, and At-Home 
Recovery Benefit as defined in paragraph (3) of this section.
sec.3.3307. Loss Ratio Standards.
(a) Minimum aggregate loss ratio standard. <nl>A <ol> Medicare supplement  
<nl>individual or group policy form shall not be delivered or issued for 
delivery unless the individual or group policy form can be expected, as 
estimated <ol> [policies delivered or issued for delivery in this state shall 
return to policyholders or certificate holders in the form of aggregate benefits 
under the policy,] for the entire period for which rates are computed to provide 
coverage, <nl>to return to policyholders and certificate holders in the form of 
aggregate benefits (not including anticipated refunds or credits) provided under 
the individual policy form or group policy form,<ol> on the basis of incurred 
claims experience or incurred health care expenses where coverage is provided by 
a health maintenance organization on a service, rather than reimbursement, and 
earned premiums for such period, not including any changes in additional 
reserves, and in accordance with generally accepted actuarial principles and 
practices:
(1) at least 75% of the aggregate amount of premiums earned in the case of group 
policies; <nl>or<ol> [and]
(2) At least <nl>65%<ol> [60%] of the aggregate amount of premiums earned in the 
case of individual policies.
(b) Calendar year experience loss ratio standard. For the most recent calendar 
year, the ratio of incurred losses to earned premiums for all policies or 
certificates which have been in force for three years or more, as of December 
31st of the most recent year, shall be equal to or greater than:
(1) (No change.)
(2) at least <nl>65<ol> [60]% of the amount of premiums earned in the case of 
individual policies.
(c) Filing of rates and rating schedules. All filings of rates and rating 
schedules shall demonstrate that [actual and] expected <nl>claims<ol> [losses] 
in relation to premiums comply with the requirements of this section <nl>when 
combined with actual experience to date. Filings of rate revisions shall also 
demonstrate that the anticipated loss ratio over the entire future period for 
which the revised rates are computed to provide coverage can be expected to meet 
the appropriate loss ratio standards<ol>.
(1) Each Medicare supplement policy or certificate form shall be accompanied, 
upon submission for approval, by an actuarial memorandum. Such memorandum shall 
be prepared and signed by a qualified actuary in accordance with generally 
accepted actuarial principles and practices, and shall contain the information 
listed in the following subparagraphs:
(A)-(E) (No change.)
(F) a certification that the anticipated aggregate loss ratio is at least 
<nl>65<ol> [60]% (for individual coverage) or at least 75% (for group coverage), 
which certification should include a statement of the period over which the 
aggregate loss ratio is expected to be realized;
(G)-(H)  (No change.)
(2) Subsequent rate adjustment filings, except for those rates filed solely due 
to a change in the Part A calendar year deductible, shall also provide an 
actuarial memorandum, prepared by a qualified actuary, in accordance with 
generally accepted actuarial principles and practices, which memorandum shall 
contain the information in the following subparagraphs.
(A)-(D) (No change.)
(E) A demonstration and certification by the qualified actuary shall be included 
to show that the past plus future expected experience after the rate change will 
result in an aggregate loss ratio equal to, or greater than, the required 
minimum aggregate loss ratio.
(i)-(ii) (No change.)
[(iii) The rate change and demonstration shall be based on experience of forms 
used in Texas, which are similar to the named form if the experience in clause 
(i) or (ii) of this subparagraph is not credible, but the experience for all 
similar Texas forms is credible.
[(iv) The rate change and demonstration shall be based on any other reasonable 
experience which is credible for purposes of this rate filing, if the experience 
in clauses (i), (ii), or (iii) of this subparagraph is not credible. For the 
purposes of this section, the definition of a credible basis shall be in 
accordance with generally accepted actuarial principles and practices. The 
assumptions used in this demonstration shall be reasonable and stated in the 
memorandum.]
(F)-(G) (No change.)
(d) Annual filing <nl>of premium rates<ol> required. Every <nl>issuer of<ol> 
[insurance entity providing] Medicare supplement policies or benefits in this 
state shall file annually its rates, rating schedule, and supporting 
documentation, including ratios of incurred losses to earned premiums for the 
most recent calendar year broken down by calendar year of issue, for purposes of 
demonstrating that the issuer [insurance entity] is in compliance with the loss 
ratio standards.  <nl>The supporting documentation shall also demonstrate in 
accordance with actuarial standards of practice using reasonable assumptions 
that the appropriate loss ratio standards can be expected to be met over the 
entire period for which rates are computed. Such demonstration shall exclude 
active life reserves. An expected third-year loss ratio which is greater than or 
equal to the applicable percentage shall be demonstrated for policies or 
certificates in force less than three years.<ol> The annual filing requirements 
in this subsection shall be as follows:
(1)-(5) (No change.)
(e) Refund <nl>or<ol> [and] <nl> credit<ol> [credits] <nl>calculation.<ol> 
<nl>An issuer shall collect and file with the commissioner by May 31 of each 
year the data contained in the reporting form contained in the "Medicare 
Supplement Refund Calculation Form," incorporated herein by reference for each 
type in a standard Medicare supplement benefit plan. This form is published by 
the Texas Department of Insurance and copies of this form are available from the 
Publication Division, Mail Code 108-5A of the Texas Department of Insurance, 
P.O. Box 149104, Austin, Texas 78714-9104.<ol> [If the loss ratio for the most 
recent calendar year for all Texas Medicare supplement policies or certificates 
which have been in force for three years or more as of December 31st of the most 
recent year is less than the percentage under the calendar year loss ratio 
standard, and such Texas experience is credible, then a premium refund or credit 
shall be made on an equitable basis to those policyholders or certificate 
holders with coverage in force as of December 31st. Any insurance entity making 
a refund or credit pursuant to this subsection shall file documentation which 
supports that the refund or credit is reasonable and equitable. For future 
demonstration of compliance with loss ratio standards, such refunds or credits 
may be treated as incurred claims.]
<nl>(1) If on the basis of the experience as reported the benchmark ratio since 
inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 
3), then a refund or credit calculation is required. The refund calculation 
shall be done on a statewide basis for each type in a standard Medicare 
supplement benefit plan. For purposes of the refund or credit calculation, 
experience on policies issued within the reporting year shall be excluded.
<nl>(2) A refund or credit shall be made only when the benchmark loss ratio 
exceeds the adjusted experience loss ratio and the amount to be refunded or 
credited exceeds a de minimis level. Such refund shall include interest from the 
end of the calendar year to the date of the refund or credit at a rate specified 
by the secretary of health and human services, but in no event shall it be less 
than the average rate of interest for 13-week Treasury notes. A refund or credit 
against premiums due shall be made by September 30 following the experience year 
upon which the refund or credit is based.
(f) Premium adjustments to conform with minimum standards for loss ratios. As 
soon as practicable, but prior to the effective date of <nl>enhancements to<ol> 
Medicare benefits [changes], every <nl>issuer of<ol> [insurer, health care 
service plan, or other entity providing] Medicare supplement insurance  
<nl>policies,<ol> [or] contracts <nl>, or coverage<ol> in this state shall file 
with the board, in accordance with the applicable filing procedures of this 
state, the items required in paragraphs (1) and (2) of this subsection.
(1) Appropriate premium adjustments necessary to produce loss ratios [at least 
as great] as [originally] anticipated  <nl>for the current premium <ol> for the 
applicable policies or contracts shall be filed. Such supporting documents as 
necessary to justify the adjustment shall accompany the filing.
(A) Every <nl>issuer of<ol> [insurer, health care service plan, or other entity 
providing] Medicare supplement insurance or benefits to a resident of this state 
pursuant to the Insurance Code, Article 3.74, shall make such premium 
adjustments as are:
(i) (No change.)
(ii) expected to result in a loss ratio at least as great as that originally 
anticipated in the rates used to produce current premium by the <nl>issuer<ol> 
[insurer, health care service plan, or other entity] for such Medicare 
supplement insurance policies or contracts.
(B) (No change.)
<nl>(C) If an issuer fails to make premium adjustments acceptable to the 
commissioner, the commissioner may order premium adjustments, refunds, or 
premium credits deemed necessary to achieve the loss ratio required by this 
section.
(2) (No change.)
(g) Maintenance of data. Incurred claims and earned premium experience shall be 
maintained for each policy form with [credible] business in force in Texas, by 
calendar year of issue, and shall be made available to the <nl>Texas Department 
<ol> [State Board] of Insurance. [Experience data for policy forms with 
noncredible business of force in Texas may be combined and maintained with other 
forms.]
sec.3.3308. Required Disclosure Provisions.
(a) General rules.
(1) Medicare supplement policies <nl>and certificates<ol> shall include a 
renewal[,] or continuation[, or nonrenewal] provision. The language or 
specifications of such provision must be consistent with the type of contract 
issued. Such provisions shall be appropriately captioned, and shall appear on 
the first page of the policy<nl>, and shall include any reservation by the 
issuer of the right to change premiums and any automatic renewal premium 
increases based on the age of the policyholder.
(2) Except for riders or endorsements by which the  <nl>issuer<ol> [insurer] 
effectuates a request made in writing by the <nl>policyholder <ol> [insured], or 
by which the <nl>issuer<ol> [insurer] exercises a specifically reserved right 
under a Medicare supplement policy, or by which the <nl>issuer <ol> [insurer] is 
required to reduce or eliminate benefits to avoid duplication of Medicare 
benefits, all riders or endorsements added to a Medicare supplement policy after 
date of issue or at reinstatement or renewal which reduce or eliminate benefits 
or coverage in the policy shall require signed acceptance by the 
<nl>policyholder <ol> [insured]. After the date of [policy] issue <nl>of the 
policy or certificate,<ol> any rider or endorsement which increases benefits or 
coverage with a concomitant increase in premium during the policy term 
<nl>shall<ol> [must] be agreed to in writing signed by the <nl>policyholder <ol> 
[insured], unless the benefits are required by the minimum standards for 
Medicare supplement insurance policies, or unless the increased benefits or 
coverage is required by law. Where a separate additional premium is charged for 
benefits provided in connection with riders or endorsements, such premium charge 
shall be set forth in the policy.
(3) [A] Medicare supplement <nl>policies <ol> [policy which] <nl>shall not 
provide<ol> [provides] for the payment of benefits based on standards described 
as "usual and customary," "reasonable and customary," or words of similar 
import[, shall include a definition of such terms and an explanation of such 
terms in its accompanying outline of coverage].
(4) If a Medicare supplement policy <nl>or certificate<ol> contains any 
limitations with respect to preexisting conditions, such limitations 
<nl>shall<ol> [must] appear as a separate paragraph of the policy and be labeled 
as "Preexisting Condition Limitations." The term "preexisting condition" shall 
be defined when used in a Medicare supplement policy or certificate and an 
explanation of such term shall appear in its accompanying outline of coverage.
(5) Medicare supplement policies <nl>and <ol> [or] certificates issued to 
persons eligible for Medicare [by reason of age] shall have a notice prominently 
printed on the first page or attached thereto stating in substance that the 
policyholder or certificate holder shall have the right to return the policy or 
certificate within 30 days of its delivery and to have the premium refunded if 
after examination the insured person is not satisfied for any reason.
(6) <nl>Issuers of<ol> [HMOs issuing evidences of coverage and insurers issuing] 
accident and sickness policies, certificates, or subscriber contracts which 
provide hospital or medical expense coverage on an expense incurred or indemnity 
basis, except accident only policies, to a person(s) eligible for Medicare [by 
reason of age] shall provide to all applicants a Medicare supplement "buyer's 
guide" in the form developed jointly by the National Association of Insurance 
Commissioners and the Health Care Financing Administration of the United States 
Department of Health <nl>and Human Services <ol>[, Education, and Welfare] 
<nl>in no smaller than 12-point type.<ol> If a buyer's guide incorporating the 
latest statutory changes is not available from a government agency, companies 
may comply with this provision by modifying the latest available guide to the 
extent required by applicable law. Except as provided in this section, delivery 
of the buyer's guide shall be made whether or not such policies, certificates, 
subscriber contracts, or evidences of coverage are advertised, solicited, or 
issued as Medicare supplement policies <nl>or certificates <ol> as defined in 
this regulation. Except in the case of direct response <nl>issuers<ol> 
[insurers], delivery of the buyer's guide shall be made to the applicant at the 
time of application, and acknowledgment of receipt of the buyer's guide shall be 
obtained by the  <nl>issuer<ol> [insurer]. Provided, however, <nl>issuers<ol> 
[insurers] shall deliver the buyer's guide to the applicant for a direct 
response Medicare supplement policy upon request, but not later than at the time 
the policy is delivered.
(7) (No change.)
(b) Outline of coverage requirements for Medicare supplement policies.
(1) <nl>Issuers of<ol> [Insurers issuing] Medicare supplement <nl>coverage<ol> 
[policy for delivery] in this state shall provide an outline of coverage to all 
applicants, including certificate holders under group policies, at the time 
application is <nl>presented to the prospective applicant<ol> [made], and, 
except for direct response policies, shall obtain an acknowledgment of receipt 
of such outline from the applicant.
(2) If a Medicare supplement policy or certificate is issued on a basis which 
would require revision of the outline of coverage delivered at the time of 
application, a substitute outline of coverage properly describing the policy or 
certificate actually issued <nl>shall<ol> [must] accompany such policy or 
certificate when it is delivered and contain the following statement in no less 
than 12-point type, immediately above the company name: "Notice: Read this 
outline of coverage carefully. It is not identical to the outline of coverage 
provided upon application and the coverage originally applied for has not been 
issued."
(c) Form for outline of coverage. In providing outlines of coverage to 
applicants pursuant to the requirements of subsection (b)(1) of this section, 
insurers shall use a form which complies with the requirements of this 
subsection. The outline of coverage must contain each of the following <nl>four 
parts in the following order: a cover page, premium information, disclosure 
pages, and charts displaying the features of each benefit plan offered by the 
issuer <ol> [paragraphs (1)-(10) of this subsection, in the order and form set 
out in this subsection]. The outline of coverage <nl>shall be in the language 
and format prescribed in paragraphs (1) and (2) of this subsection in no less 
than 12-point type.<ol> [must begin with the heading which follows this 
sentence. ]
[(Company Name)]
[(Outline of Medicare)]
[(Supplement Coverage)]
(1) <nl>All plans A-J shall be shown on the cover page, and the plan(s) that are 
offered by the issuer shall be prominently identified. Premium information for 
plans that are offered shall be shown on the cover page or immediately following 
the cover page and shall be prominently displayed. The premium and mode shall be 
stated for all plans that are offered to the prospective applicant. All possible 
premiums for the prospective applicant shall be illustrated.<ol> [Read Your 
policy Carefully-This outline of coverage provides a very brief description of 
the important features of your policy. This is not the insurance contract and 
only the actual policy provisions will control. The policy itself sets forth in 
detail the rights and obligations of both you and your insurance company. It is, 
therefore, important that you READ YOUR POLICY CAREFULLY!]
(2) <nl>The following items shall be included in the outline of coverage. 
(Dollar amounts which are shown in parentheses for each of the plan-specific 
charts on the following pages are for calendar year 1992. Issuers shall, for 
each plan offered, appropriately complete outline-of-coverage-chart statements 
about amounts to be paid by Medicare, the plan, and the covered person by 
replacing the amount in parentheses with the dollar amount corresponding to each 
covered service for the applicable calendar year benefit period.)
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<nl>PREMIUM INFORMATION (Boldface Type)
<nl>We (insert issuer's name) can only raise your premium if we raise the 
premium for all policies like yours in this state. (If the premium is based on 
the increasing age of the covered person for individual contracts or class of 
persons covered under group contracts, include information specifying when 
premiums will change.)
<nl>DISCLOSURES (Bold Type)
<nl>Use this outline to compare benefits and premiums among policies.
<nl>READ YOUR POLICY VERY CAREFULLY (Boldface Type)
<nl>This is only an outline describing your policy's most important features. 
The policy is your (insurance contract) (contract for coverage). You must read 
the policy itself to understand all of the rights and duties of both you and 
(name of issuer).
<nl>RIGHT TO RETURN POLICY (Boldface Type)
<nl>If you find that you are not satisfied with your policy, you may return it 
to (insert issuer's address). If you send the policy back to us within 30 days 
after you receive it, we will treat the policy as if it had never been issued 
and return all of your payments.
<nl>POLICY REPLACEMENT (Boldface Type)
<nl>If you are replacing another health insurance policy or other health 
coverage, do NOT cancel it until you have actually received your new policy and 
are sure you want to keep it.
<nl>NOTICE (Boldface Type)
<nl>This policy may not fully cover all of your medical cost. Neither (insert 
company's name) nor its agents are connected with Medicare. (For agents) (Insert 
company's name) is not connected with Medicare. (For direct response business) 
This outline of coverage does not give all the details of Medicare coverage. 
Contact your local Social Security Office or consult "The Medicare Handbook" for 
more details.
<nl>COMPLETE ANSWERS ARE VERY IMPORTANT (Boldface Type)
<nl>When you fill out the application for the new policy, be sure to answer 
truthfully and completely all questions about your medical and health history. 
The company may cancel your policy and refuse to pay any claims if you leave out 
or falsify important medical information. (If the policy or certificate is 
guaranteed issue, this paragraph need not appear.)
<nl>Review the application carefully before you sign it. Be certain that all 
information has been properly recorded.
<nl>(Include for each plan prominently identified in the cover page, a chart 
showing the services, Medicare payments, plan payments and insured payments for 
each plan, using the same language, in the same order, using uniform layout and 
format as shown in the charts in subsection (c)(2) of this section. No more than 
four plans may be shown on one chart. For purposes of illustration, charts for 
each plan are included in this regulation. An issuer may use additional benefit 
plan designations on these charts pursuant to sec.3. 3306 of this title 
(relating to Minimum Benefit Standards.)
<nl>(Include an explanation of any innovative benefits on the cover page and in 
the chart, in a manner approved by the commissioner.)<ol> [Medicare Supplement 
Coverage-Policies of this category are designed to supplement Medicare by 
covering some hospital, medical, and surgical services which are partially 
covered by Medicare. Coverage is provided for hospital inpatient charges and 
some physician charges, subject to any deductibles and copayment provisions 
which may be in addition to those provided by Medicare, and subject to other 
limitations which may be set forth in the policy. The policy does not provide 
benefits for custodial care such as help in walking, getting in and out of bed, 
eating, dressing, bathing, and taking medicine (delete of such coverage is 
provided).]
[(3)(a)(for agents:) Neither (insert company's name) nor its agents are 
connected with Medicare.]
[(b) (for direct responses:) [(insert company's name) is not connected with 
Medicare.
[(4) A brief summary of the major benefit gaps in Medicare Parts A and B with a 
parallel description of supplemental benefits, including dollar amounts (and 
indexed coinsurance or deductibles, as appropriate), provided by the Medicare 
supplement coverage in the following order:
 [(5) (Statement that the policy does or does not cover the following:)
[(A) private duty nursing;
[(B) skilled nursing home care costs (beyond what is covered by Medicare);
[(C) custodial nursing home care costs;
[(D) intermediate nursing home care costs;
[(E) home health care, above number of visits covered by Medicare;
[(F) physician charges (above Medicare's reasonable charge);
[(G) drugs (other than prescription drugs furnished during a hospital or skilled 
nursing facility stay);
[(H) care received outside USA;
[(I) dental care or dentures, checkups, routine immunizations, cosmetic surgery, 
routine foot care, examinations for the cost of eyeglasses or hearing aids.
[(6) (A description of any policy provisions which exclude, eliminate, resist, 
reduce, limit, delay, or in any other manner operate to qualify payments of the 
benefits described in paragraph (4) of this subsection, including conspicuous 
statements:)
[(A) (that the chart summarizing Medicare benefits only briefly describes such 
benefits.)
[(B) (that the Health Care Financing Administration or its Medicare publications 
should be consulted for further details and limitations.)
[(7) (A description of policy provisions respecting renewability or continuation 
of coverage, including any reservation of rights to change premium.)
[(8) (The total premium payable shall be stated. In the event the mode stated is 
not an exact multiple of the annual premium, then the annual premium shall also 
be stated. Initial policy fees shall be stated separately. If premiums are 
"step-rated," they shall either be disclosed for each step or the initial 
premium may be disclosed accompanied by a statement as follows: "Renewal 
premiums for this policy will increase periodically depending upon (your age) 
(the policy year)." Unless a policy is issued with guaranteed premium rates, 
this paragraph must contain the statement "premiums are subject to change." This 
paragraph shall also include a statement of the policy grace period.)
[(9) (A statement that the person to whom the policy is issued is permitted to 
return the policy within 30 days (or more as stated in the policy) of its 
delivery to that person and to have the premium paid refunded.)
[(10) DUPLICATE MEDICARE SUPPLEMENT COVERAGE IS COSTLY AND UNNECESSARY. A SINGLE 
MEDICARE SUPPLEMENT POLICY IS USUALLY BETTER THAN SEVERAL MEDICARE SUPPLEMENT 
POLICIES WITH OVERLAPPING OR DUPLICATE COVERAGE. (Drafting note: The term 
"certificate" should be substituted for the work "policy" throughout the outline 
of coverage where appropriate.)]
(d) Notice regarding policies or <nl>certificates <ol> [subscriber contracts] 
which are not Medicare supplement policies. Any accident and sickness insurance 
policy, subscriber contract, or evidence of coverage other than a Medicare 
supplement policy, disability income policy, basic, catastrophic, or major 
medical expense policy, or single premium nonrenewable policy, issued for 
delivery in this state to persons eligible for Medicare [by reason of age] shall 
be accompanied by a notice to the insureds under the policy, subscriber 
contract, or evidence of coverage that the policy, subscriber contract, or 
evidence of coverage is not a Medicare supplement policy. Such notice shall 
either be printed on or attached to the first page of the outline of coverage 
delivered to insureds under the policy or subscriber contract, or if no outline 
of coverage is delivered, to the first page of the policy, certificate, 
subscriber contract, or evidence of coverage delivered to insureds. Such notice 
shall be in no less than 12-point type and shall contain the following language: 
"THIS (POLICY, CERTIFICATE, SUBSCRIBER CONTRACT, OR EVIDENCE OF COVERAGE) IS NOT 
A MEDICARE SUPPLEMENT (POLICY OR CERTIFICATE). If you are eligible for Medicare, 
review the Medicare Supplement Buyers Guide available from the company.
(e) <nl>Notice requirements.
<nl>(1) As soon as practicable, but no later than 30 days prior to the annual 
effective date of any Medicare benefit changes, every issuer providing Medicare 
supplement coverage to a resident of this state shall notify its policyholders, 
contract holders, and certificate holders of modifications it has made to 
Medicare supplement insurance policies, contracts or certificates. Such made to 
Medicare supplement insurance policies, contracts, or certificates. Such notice 
shall be in a format prescribed by the Texas Department of Insurance. 
Accordingly, the board adopts and incorporates herein by reference the following 
form: "Notice on Changes in Medicare and Your Medicare Supplement Insurance-19 . 
This form is published by the Texas Department of Insurance and copies of this 
form may be obtained from the Publications Division, Mail Code 108-5A of the 
Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Such 
notice shall:
<nl>(A) include a description of revisions to the Medicare program and a 
description of each modification made to the coverage provided under the 
Medicare supplement insurance policy, contract or certificate; and
<nl>(B) inform each covered person as to when any premium adjustment is to be 
made due to changes in Medicare.
<nl>(2) The notice of benefit modifications and any premium adjustments shall be 
in outline form and in clear and simple terms so as to facilitate comprehension.
<nl>(3) Such notice shall not contain or be accompanied by any solicitation.<ol> 
[Conspicuous reminder concerning duplicate coverage. The language provided in 
subsection (c)(10) of this section must be included in the outline of coverage 
in a conspicuous manner in at least 10-point type in all capital letters.]
sec.3.3309. Requirements for Application Forms and Replacement Coverage.
(a) Application forms shall include the following  <nl>information, statements 
and<ol> questions designed to elicit information as to whether, as of the date 
of the application, the applicant has another Medicare supplement <nl>or other 
health<ol> insurance policy or certificate in force or whether a Medicare 
supplement policy or certificate is intended to replace any other accident and 
sickness policy or certificate presently in force. A supplementary application 
or other form to be signed by the applicant and agent, except where the coverage 
is sold without an agent, containing such questions may be used.
<nl>(1) The Information shall be provided to prospective covered persons in 
statement form conforming to subparagraphs (A)-(D) of this paragraph.
<nl>(A) You do not need more than one Medicare supplement policy.
<nl>(B) If you are 65 or older, you may be eligible for benefits under Medicaid 
and may not need a Medicare supplement policy.
<nl>(C) The benefits and premiums under your Medicare supplement policy will be 
suspended during your entitlement to benefits under Medicaid for 24 months. You 
must request this suspension within 90 days of becoming eligible for Medicaid. 
If you are no longer entitled to Medicaid, your policy will be reinstituted if 
requested within 90 days of losing Medicaid eligibility.
<nl>(D) Counseling services may be available in your state to provide advice 
concerning your purchase of Medicare supplement insurance and concerning 
Medicaid.
<nl>(2) Information shall be elicited from prospective covered persons by asking 
the questions as provided in subparagraphs (A)-(D) of this paragraph.
<nl>(A)<ol>[(1)] To the best of your knowledge,
<nl>(B)<ol>[(1)] Do you have another Medicare supplement insurance policy, [or] 
certificate <nl>or coverage<ol> in force (including health care service contract 
or health maintenance organization contract)? If so, with which company?
<nl>(B)<ol>[(2)] <nl>Do <ol> [Did] you have  <nl>any other health insurance 
policies or coverages that provide benefits which this Medicare supplement 
policy would duplicate<ol> [another Medicare supplement policy or certificate in 
force during the last 12 months]?
<nl>(i)<ol>[(A)] If so, with which company?
<nl>(ii)<ol>[(B)] <nl>What kind of<ol> [If that] policy [lapsed, when did it 
lapse]?
<nl>(C)<ol>[(3)] Are you covered by Medicaid?
<nl>(D)<ol>[(4)] <nl>If your answer to question 1 or 2 is "yes, do<ol> [Do] you 
intend to replace [any of your] <nl>these<ol> medical or health insurance 
policies or coverages with this policy (certificate)?
(b) Agents shall list the following:
(1) <nl>any other health insurance<ol> policies<nl>or coverages<ol> sold to the 
applicant which are still in force; and
(2) <nl>any other health insurance<ol> policies  <nl>or coverages<ol> sold to 
the applicant in the past five years which are no longer in force.
<nl>(c) In the case of a direct response issuer, a copy of the application or 
supplemental form, signed by the applicant, and acknowledged by the issuer, 
shall be returned to the applicant by the issuer upon delivery of the policy.
<nl>(d)<ol>[(c)] Upon determining that a sale will involve replacement[,] <nl>of 
Medicare supplement coverage, any issuer <ol> [an insurer], other than a direct 
response <nl>issuer<ol> [insurer], or its agent, shall furnish the applicant, 
prior to issuance or delivery of the Medicare supplement policy or certificate, 
a notice regarding replacement of  <nl>Medicare supplement<ol> [accident and 
sickness] coverage. One copy of such notice signed by the applicant and the 
agent, except where the coverage is sold without an agent, shall be provided to 
the applicant and an additional signed copy shall be retained by the 
<nl>issuer<ol> [insurer]. A direct response <nl>issuer<ol> [insurer] shall 
deliver to the applicant at the time of the issuance of the policy the notice 
regarding replacement of <nl>Medicare supplement<ol> [accident and sickness] 
coverage.
<nl>(e)<ol>[(d)] The notice required by subsection (c) of this section for an 
<nl>issuer<ol> [insurer, other than a direct response insurer,] shall be 
provided[,] in substantially the following form.
NOTICE TO APPLICANT REGARDING
REPLACEMENT OF MEDICARE
SUPPLEMENT INSURANCE
<nl>(Issuer's<ol> [Insurance company's] name and address <nl>)
SAVE THIS NOTICE! IT MAY BE IMPORTANT
TO YOU IN THE FUTURE
According to (your application) (information you have furnished), you intend to 
[lapse or otherwise] terminate existing Medicare supplement <nl>coverage<ol> 
[insurance] and replace it with a policy to be issued by (<nl>Issuer's<ol> 
[Company's] Name) [Insurance Company]. Your new policy <nl>will<ol> 
<nl>provide<ol> [provides] 30 days within which you may decide without cost 
whether you desire to keep the policy. For your own information and protection, 
you should be aware of and seriously consider certain factors which may affect 
the insurance protection available to you under the new policy.
You should review this new coverage carefully<nl>. <ol>[,] <nl>Compare<ol> 
[comparing] it with all accident and sickness coverage you now have<nl>.<ol>[,] 
[and] <nl>Terminate<ol> [terminate] your present policy only if, after due 
consideration and acceptance by the replacing <nl>issuer<ol> [insurer], you find 
that purchase of this Medicare supplement coverage is a wise decision.
STATEMENT TO APPLICANT BY <nl>ISSUER,<ol> (OR OTHER REPRESENTATIVE: [(Use 
additional sheets, as necessary.)]
I have reviewed your current medical or health [insurance] coverage. <nl>The<ol> 
[I believe the] replacement of <nl>coverage resulting from<ol> [insurance 
involved in] this transaction <nl>does not duplicate coverage, to the best of my 
knowledge. The replacement policy is being purchased for the following reasons:
<nl>Additional benefits,
<nl>Same benefits but lower premiums,
<nl>Fewer benefits and lower premiums
<nl>Other (specify)_________________________________ 
____________________________________________________________ 
______________________________________________________________ <ol> [materially 
improves your position. My conclusion has taken into account the following 
considerations, which I call to your attention:] <nl>I call to your attention 
the following items for your consideration.
(1) Health conditions which you may presently have (preexisting conditions) may 
not be immediately or fully covered under the new policy. This could result in 
denial or delay of a claim for benefits under the new policy, whereas a similar 
claim might have been payable under your present policy. [Drafting Note: This 
subsection may be modified if pre-existing conditions are covered under the new 
policy.]
(2) (No change.)
(3) [If you are replacing existing Medicare supplement insurance coverage, you 
may wish to secure the advise of your present insurer or its agent regarding the 
proposed replacement of your present policy. This is not only your right, but it 
is also in your best interest to make sure you understand all the relevant 
factors involved in replacing your present coverage.]
[(4) ]If[, after due consideration,] you still wish to terminate your present 
policy and replace it with new coverage, be certain to truthfully and completely 
answer all questions on the application concerning your medical <nl>and <ol>[/] 
health history. Failure to include all material medical information on an 
application may provide a basis for the <nl>issuer <ol> [company] to deny any 
future claims and to refund your premium as though the policy had never been in 
force. After the application has been completed and before you sign it, read  
<nl>and review<ol> it carefully to be certain that all information has been 
properly recorded.
<nl>(4) Do not cancel your present policy until you have received your new 
policy and are sure that you want to keep it.
______________________________
Signature of Agent or other Representative
______________________________
Typed Name and Address of <nl>Issuer or <ol> Agent
[The above "Notice to Applicant" was delivered to me on:]
______________________________
(Applicant's Signature)[(Date)]
______________________________
(Date) [(Applicant's Signature)]
<nl>(f) Subsection (e) (1) and (2) of this section (applicable to preexisting 
conditions) may be deleted by an issuer if the replacement does not involve 
application of a new pre-existing condition limitation.
[(e) The notice required by subsection (c) of this section for a direct response 
insurer shall be provided in substantially the following form.]
[NOTICE TO APPLICANT REGARDING
REPLACEMENT OF MEDICARE
SUPPLEMENT INSURANCE]
[(Insurance company's name and address)]
[SAVE THIS NOTICE! IT MAY BE IMPORTANT
TO YOU IN THE FUTURE.]
[According to (your application) (information you have furnished), you intend to 
lapse or otherwise terminate existing Medicare supplement insurance and replace 
it with the policy delivered herewith issued by (Company Name) Insurance 
Company. Your new policy provides 30 days within which you may decide without 
cost whether you desire to keep the policy. For your own information and 
protection, you should be aware of and seriously consider certain factors which 
may affect the insurance protection available to you under the new policy.]
[You should review this new coverage carefully, comparing it with all accident 
and sickness coverage you now have, and terminate your present policy only if, 
after due consideration, you find that purchase of this Medicare supplement 
coverage is a wise decision.]
[(1) Health conditions which you may presently have (preexisting conditions) may 
not be immediately or fully covered under the new policy. This could result in 
denial or delay of a claim for benefits under the new policy, whereas a similar 
claim might have been payable under your present policy.
[(2) State law provides that your replacement policy or certificate may not 
contain new preexisting conditions waiting periods, elimination periods, or 
probationary periods. Your insurer will waive any time periods applicable to 
preexisting conditions waiting periods, elimination periods, or probationary 
periods in the new policy (or coverage) for similar benefits to the extent such 
time was spent (depleted) under the original policy.
[(3) If you are replacing existing Medicare supplement insurance coverage, you 
may wish to secure the advise of your present insurer or its agent regarding the 
proposed replacement of your present policy. This is not only your right, but it 
is also in your best interest to make sure you understand all the relevant 
factors involved in replacing your present coverage.
[(4) (To be included only if the application is attached to the policy.) If, 
after due consideration, you still wish to terminate your present policy and 
replace it with new coverage, read the copy of the application attached to your 
new policy and be sure that all questions are answered fully and correctly. 
Omissions or misstatements in the application could cause an otherwise valid 
claim to be denied. Carefully check the application and write to (Company Name 
and Address) within 30 days if any information is not correct and complete, or 
if any past medical history has been left out of the application.]
[__________________________]
[(Company Name)]
sec.3.3313. Filing Requirements for Advertising. A Medicare supplement policy 
shall not be deemed to meet the standards and requirements set forth in this 
subchapter unless the filing company has complied with the requirements of the 
following paragraphs.
(1) <nl>Every issuer<ol> [Until September 20, 1989, every insurer, nonprofit 
hospital service corporation, health maintenance organization (including agents 
for these entities)] providing Medicare supplement insurance or benefits in this 
state shall provide to the <nl>department<ol> [board] for review a copy of any 
advertisement, as defined in sec.21.102 of this title (relating to Scope), used 
to promote a policy which is approved under the provisions of this subchapter. 
The copy of the advertisement [must be provided to the board no later than 15 
days after its first used in this state.]
[(2) After September 20, 1989, any advertisement as referenced in paragraph (1) 
of this section] shall be submitted to the  <nl>department<ol> [board] no later 
than 60 days prior to its first use. At the expiration of the 60-day period 
provided by this paragraph, any advertisement filed with the <nl>department <ol> 
[board] shall be deemed acceptable, unless before the end of that 60-day period 
the <nl>department <ol> [board] has notified the entity of its nonacceptance.
<nl>(2)<ol>[(3)] All advertisements shall comply with all applicable federal and 
state laws and shall be submitted in accordance with sec.21.120 of this title 
(relating to Filing for Review). This section does not require prior 
<nl>departmental <ol> [board] approval of the advertisement. Nothing in this 
section relieves any person from otherwise complying with all applicable laws or 
from any sanction imposed by law.
sec.3.3315. Standards for Claims Payment.
(a) Every <nl>issuer of<ol> [insurance entity providing] Medicare supplement 
policies, contracts, [or] certificates <nl>or coverage<ol> for delivery in this 
state shall comply with <nl>the Social Security Act, sec.1882(c) (3) (as enacted 
by sec.4081(b)(2)(C)<ol> [all provisions] of the Omnibus Budget Reconciliation 
Act of 1987 (OBRA) 1987, (Public Law Number 100-203), [sec.4081, and with all 
requirements set forth in Public Law 96-265, 42 United States Code, sec.1395ss.] 
<nl>by<ol>:
<nl>(1) accepting a notice from a Medicare carrier on duly assigned claims 
submitted by participating physicians and suppliers as a claim for benefits in 
place of any other claim form otherwise required and making a payment 
determination on the basis of the information contained in that notice;
<nl>(2) notifying the participating physician or supplier and the beneficiary of 
the payment determination;
<nl>(3) paying the participating physician or supplier directly;
<nl>(4) furnishing, at the time of enrollment, each enrollee with a card listing 
the policy name, number, and a central mailing address to which notices from a 
Medicare carrier may be sent;
<nl>(5) paying user fees for claim notices that are transmitted electronically 
or otherwise; and
<nl>(6) providing to the secretary of health and human services, at least 
annually, a central mailing address to which all claims may be sent by Medicare 
carriers.
(b) Compliance with the requirements set forth in subsection (a) of this section 
<nl>shall<ol> [must] be certified on the Medicare supplement insurance 
experience reporting form.
sec.3.3317. Permitted Compensation Arrangements.
(a) An <nl>issuer<ol> [insurer] or other entity designated in the Insurance 
Code, Article 3.74, sec.1(a), may provide commission or other compensation to an 
agent for the sale of a Medicare supplement policy or certificate only if the 
first-year commission or other first-year compensation is no more than 200% of 
the commission or other compensation paid for selling or servicing the policy or 
certificate in the first renewal year, or the first 12-month service period 
immediately following the initial 12-month service period of the policy in 
instances where premium payments is other than on an annual basis.
(b) (No change.)
(c) No <nl>issuer<ol> [entity] shall provide compensation to its agents and no 
agent shall receive compensation greater than the renewal compensation payable 
by the replacing <nl>issuer<ol> [insurer] on renewal policies or certificates if 
an existing policy or certificate is replaced [unless benefits of the new policy 
or certificate are clearly and substantially greater than the benefits under the 
replaced policy].
(d) (No change.)
sec.3.3318. Effective Date of Amendments; Impact on Existing Policies.  Adoption 
of new sections and amendments to existing sections of this subchapter is 
necessary to facilitate implementation of amendments to the Insurance Code, 
Article 3.74, pursuant to Acts of the  <nl>72nd<ol> [71st] Legislature, 
<nl>1991<ol> [1989]. New sections and amendments [effective September 20, 1989,] 
to this subchapter apply only to Medicare supplement policies and certificates 
delivered[,] or issued for delivery[, or renewed] on or after<nl> March 1, 
1992<ol> [September 20, 1989]. Policies and certificates delivered, issued for 
delivery, or renewed before <nl>March 1, 1992 <ol> [September 20, 1989], are 
subject to the rules as they existed at the time the policy was delivered, 
issued for delivery, or renewed, respectively, and those sections or portions of 
sections are continued in effect for that purpose.
sec.3.3319. Standards for Marketing.
(a) Every <nl>issuer<ol> [insurer, health care service plan, or other entity] 
marketing Medicare supplement [insurance] coverage in this state, directly or 
through its agents, shall establish marketing procedures to ensure that:
(1)-(2)  (No change.)
(3) <nl>all prospective policyholders are advised prior to the time an 
application is taken, that the basic "core" benefit package is available, 
including the contents of such basic "core" benefit package<ol> [a mechanism or 
formula exists and is being used to determine whether a replacement policy or 
certificate contains benefits clearly and substantially greater than the 
benefits under the replaced policy for purposes of triggering first-year 
commissions as authorized in sec.3.3317 of this title (relating to Permitted 
Compensation Arrangements)];
(4) (No change.)
(5) auditable procedures for verifying compliance with sec.3.3314 of this title 
(relating to Standards for Facilitating Comparison among Policies) <nl>and with 
provisions of this section are in place and utilized <ol> [are established].
(b) Every <nl>issuer<ol> [insurer, health care service plan, or other entity] 
marketing Medicare supplement [insurance] coverage in this state, directly or 
through its agents, shall ensure that the following notice is prominently 
displayed by type, stamp, or other appropriate means on the first page of [both] 
the policy [and the outline of coverage]: "Notice to buyer: This policy may not 
cover all of <nl>your medical expenses<ol> [the costs associated with medical 
care incurred by the buyer during the period of coverage. The buyer is advised 
to review carefully all policy limitations]."
(c) (No change.)
sec.3.3320. Appropriateness of Recommended Purchase and Excessive Insurance.
(a) (No change.)
(b) Any sale of Medicare supplement coverage which will provide an individual 
more than one Medicare supplement policy or certificate is prohibited[; 
provided, however, that additional Medicare supplement coverage may be sold if, 
when combined with that individual's health coverage already in force, it would 
insure no more than 100% of the individual's actual medical expenses covered 
under the combined policies].
sec.3.3321. Reporting of Multiple Policies.
(a) [Every insurer or other entity providing Medicare supplement insurance 
coverage in this state shall report annually, on] <nl>On<ol> or before March 
1[,] <nl>of every year, every issuer of Medicare supplement coverage in this 
state shall report <ol> the following information to the <nl>Texas Department 
<ol> [State Board] of Insurance for every individual resident of this state for 
whom the insurer or entity has more than one Medicare supplement [insurance] 
policy or certificate in force:
(1)-(2) (No change.)
(b) The items set forth in subsection (a) of this section shall be grouped by 
individual policyholder and reported on a form substantially similar in layout, 
design, and wording to the form entitled Form for Reporting Multiple Medicare 
Supplement Insurance Policies, which the State Board of Insurance adopts and 
incorporates herein by reference. Copies of this form are available from and on 
file at the office of the <nl>Consumer Services<ol> [Market Conduct] Division, 
Mail Code <nl>111-1A <ol> [016-4], of the  <nl>Texas Department<ol> [State 
Board] of Insurance, P.O. Box 149091, Austin, Texas 78701-9091.
sec.3.3322. Filing and Approval of Policies and Certificates; Discontinuance of 
Forms.
(a) An issuer shall not deliver or issue for delivery a policy or certificate to 
a resident of this state unless the policy form or certificate form has been 
filed with and approved by the commissioner in accordance with filing 
requirements and procedures prescribed by the Insurance Code and applicable 
regulations.
(b) An issuer shall not use or change premium rates for a Medicare supplement 
policy or certificate unless the rates, rating schedule, and supporting 
documentation have been filed with the department in accordance with the filing 
requirements and procedures prescribed by the Insurance Code and this 
subchapter.
(c) Except as provided in paragraphs (1) and (2) of this subsection, an issuer 
shall not file for approval more than one form of a policy or certificate of 
each type for each standard Medicare supplement benefit plan. An issuer may 
offer, with the approval of the commissioner, one additional policy form or 
certificate form of the same type for the same standard Medicare supplement 
benefit plan, one for each of the following cases:
(1) the inclusion of new or innovative benefits; and
(2) the offering of coverage to individuals eligible for Medicare by reason of 
disability.
(d) For the purposes of this section, a "type" means an individual policy, a 
group policy, an individual Medicare Select policy, or a group Medicare Select 
policy.
(e) Except as provided in paragraph (1) of this subsection, an issuer shall 
continue to make available for purchase any policy form or certificate form 
issued after the effective date of this regulation that has been approved by the 
commissioner. A policy form or certificate form shall not be considered to be 
available for purchase unless the issuer has actively offered it for sale in the 
previous 12 months.
(1) An issuer may discontinue the availability of a policy form or certificate 
form if the issuer provides to the commissioner in writing its decision at least 
30 days prior to discontinuing the availability of the form of the policy or 
certificate. After receipt of the notice by the commissioner, the issuer shall 
no longer offer for sale the policy form or certificate form in this state.
(2) An issuer that discontinues the availability of a policy form or certificate 
form pursuant to paragraph (1) of this section shall not file for approval a new 
policy form or certificate form of the same type for the same standard Medicare 
supplement benefit plan as the discontinued form for a period of five years 
after the issuer provides notice to the commissioner of the discontinuance. The 
period of discontinuance may be reduced if the commissioner determines that a 
shorter period is appropriate.
(f) The sale or other transfer of Medicare supplement business to another issuer 
shall be considered a discontinuance for the purposes of this subsection.
(g) A change in the rating structure or methodology shall be considered a 
discontinuance under subsection (e)(1) of this section, unless the issuer 
complies with the following requirements:
(1) the issuer provides an actuarial memorandum, in a form and manner prescribed 
by the commissioner, describing the manner in which the revised rating 
methodology and resultant rates differ from the existing rating methodology and 
resultant rates;
(2) the issuer does not subsequently put into effect a change of rates or rating 
factors that would cause the percentage differential between the discontinued 
and subsequent rates as described in the actuarial memorandum to change. The 
commissioner may approve a change to the differential which is in the public 
interest.
(h) The experience of all policy forms or certificate forms of the same type in 
a standard Medicare supplement benefit plan shall be combined for purposes of 
the refund or credit calculation prescribed in sec.3.3307 of this title 
(relating to Loss Ratio Standards), except that forms assumed under an 
assumption reinsurance agreement shall not be combined with the experience of 
other forms for purposes of the refund or credit calculation.
sec.3.3323. Increases To Premium Rates. Premium rates, rating schedules, and 
supporting documentation for a Medicare supplement policy or certificate to be 
used in this state shall be filed with the Texas Department of Insurance. Any 
request for an increase to rates for such policies or certificates is subject to 
review by and hearing before the board if one or more of the following 
conditions, as determined by an actuary for the department, is present.
(1) The increase, exclusive of any increase occasioned by changes in the laws 
regulating Medicare supplement coverages, is not necessary to maintain an 
anticipated lifetime loss ratio at least equal to the minimum that is required 
by statute and set out in sec.3.3307 of this title (relating to Loss Ratio 
Standards).
(2) An increase to premium has been effected on the same block or blocks of 
business within the preceding 12 months.
(3) An increase to premium would result in unfair discrimination, as provided in 
the Insurance Code, Article 21.21, sec.4 (7)(b), between individuals of the same 
class and of essentially the same hazard in the amount of premium, policy fees, 
or rates charged for a policy or contract.
(4) An increase to premium would result in the benefits offered under the policy 
form to be unreasonable in relation to the premiums charged.
(5) An increase to premium would have the practical effect of altering the 
rating structure of the policy form to which it is applied, or would create a 
new set of rating criteria under such policy form.
(6) A contemplated increase to premium has the practical effect of resulting in 
a series of planned future increases to premium rather than a one-time increase.
sec.3.3324. Open Enrollment.
(a) No issuer shall deny or condition the issuance or effectiveness of any 
Medicare supplement policy or certificate available for sale in this state, nor 
discriminate in the pricing of such a policy or certificate because of the 
health status, claims experience, receipt of health care, or medical condition 
of an applicant where an application for such policy or certificate is submitted 
during the six month period beginning with the first month in which an 
individual (who is 65 years of age or older) first enrolled for benefits under 
Medicare Part B. No issuer shall engage in a premium rating practice which 
results in higher premiums for any policy solely because such policy is issued 
pursuant to the provisions of this section. Each Medicare supplement policy and 
certificate currently available from an issuer shall be made available to all 
applicants who qualify under this subsection without regard to age.
(b) Subsection (a) of this section shall not be construed as preventing the 
exclusion of benefits under a policy, during the first six months, based on a 
preexisting condition for which the policyholder or certificate holder received 
treatment or was otherwise diagnosed during the six months before it became 
effective.
sec.3.3325. Medicare Select Policies and Certificates.
(a) This section shall apply to Medicare Select policies and certificates, as 
defined in this section.
(b) No policy or certificate may be advertised as a Medicare Select policy or 
certificate unmless it meets the requirements of this section.
(c) The following words and terms, when used in this section, shall have the 
following meanings, unless the context clearly indicates otherwise.
(1) Complaint-Any dissatisfaction expressed by an individual concerning a 
Medicare Select issuer or its network providers.
(2) Grievance-Dissatisfaction expressed in writing by an individual insured 
under a Medicare Select policy or certificate with the administration, claims 
practices, or provision of services concerning a Medicare Select issuer or its 
network providers.
(3) Medicare Select Issuer-An issuer offering, or seeking to offer, a Medicare 
Select policy or certificate.
(4) Medicare Select Policy or Medicare select certificate -A Medicare supplement 
policy or certificate, respectively, that contains restricted network 
provisions.
(5) Network provider-A provider of health care, or a group of providers of 
health care, which has entered into a written agreement with the issuer to 
provide benefits covered under a Medicare Select policy.
(6) Restricted network provisions-Any provision which conditions the payment of 
benefits, in whole or in part, on the use of network providers.
(7) Service area-The geographic area approved by the commissioner within which 
an issuer is authorized to offer a Medicare Select policy.
(d) The commissioner may authorize an issuer to offer a Medicare Select policy 
or certificate, pursuant to this section and the Omnibus Budget Reconciliation 
Act (OBRA) of 1990,  s4358 if the commissioner finds that the issuer has 
satisfied all of the requirements of this subchapter.
(e) A Medicare Select issuer shall not issue a Medicare Select policy or 
certificate in this State until its plan of operation has been approved by the 
commissioner.
(f) A Medicare Select issuer shall file a proposed plan of operation with the 
department, the form and content of which shall be subject to approval by the 
commissioner. The plan of operation shall contain, at a minimum, the information 
in paragraphs (1)-(7) of this subsection.
(1) The plan must contain evidence that all covered services that are subject to 
restricted network provisions are available and accessible through network 
providers, including a demonstration of each of the items referenced in 
subparagraphs (A)-(E) of this paragraph.
(A) Covered services can be provided by network providers with reasonable 
promptness with respect to geographic location, hours of operation and after-
hour care. The hours of operation and availability of after-hour care shall 
reflect usual practice in the local area. Geographic availability shall reflect 
the usual travel times within the community.
(B) The number of network providers in the service area must be shown to be 
sufficient, with respect to current and expected policyholders, either:
(i) to deliver adequately all services that are subject to a restricted network 
provision; or
(ii) to make appropriate referrals.
(C) Written agreements with network providers describing specific 
responsibilities must be included.
(D) Emergency care availability 24 hours per day and seven days per week must 
demonstrated.
(E) In the case of covered services that are subject to a restricted network 
provision and are provided on a prepaid basis, there are written agreements with 
network providers prohibiting such providers from billing or otherwise seeking 
reimbursement from or recourse against any individual covered under a Medicare 
Select policy or certificate. This paragraph shall not apply to supplemental 
charges or coinsurance amounts as stated in the Medicare Select policy or 
certificate.
(2) A clear description of the service area must be provided by narrative 
statement and/or a map.
(3) The grievance procedure to be utilized must be described.
(4) The quality assurance program must be described, including:
(A) the formal organizational structure;
(B) the written criteria for selection, retention, and removal of network 
providers; and
(C) the procedures for evaluating quality of care provided by network providers, 
and the process to initiate corrective action when warranted.
(5) Network providers must be listed and described, by specialty.
(6) Copies of the written information proposed to be used by the issuer to 
comply with subsection (k) of this section must be provided.
(7) Any other information requested by the commissioner must be provided.
(g) A Medicare Select issuer shall file any proposed changes to the plan of 
operation, except for changes to the list of network providers, with the 
commissioner prior to implementing such changes. Such changes shall be 
considered approved by the commissioner after 30 days unless specifically 
disapproved.
(h) An updated list of network providers shall be filed with the commissioner at 
least quarterly.
(i) A Medicare Select policy or certificate shall not restrict payment for 
covered services provided by non-network providers if:
(1) the services are for symptoms requiring emergency care or are immediately 
required for an unforeseen illness, injury, or a condition; and
(2) it is not reasonable to obtain such services through a network provider.
(j) A Medicare Select policy or certificate shall provide payment for full 
coverage under the policy for covered services that are not available through 
network providers.
(k) A Medicare Select issuer shall make full and fair disclosure in writing of 
the provisions, restrictions, and limitations of the Medicare Select policy or 
certificate to each applicant. This disclosure shall include at least the 
following:
(1) an outline of coverage sufficient to permit the applicant to compare the 
coverage and premiums of the Medicare Select policy or certificate with other 
Medicare supplement policies or certificates offered by the issuer and with 
other Medicare Select policies or certificates;
(2) a description (including address, phone number, and hours of operation) of 
the network providers, including primary care physicians, specialty physicians, 
hospitals, and other providers;
(3) a description of the restricted network provisions, including payments for 
coinsurance and deductibles when providers other than network providers are 
utilized;
(4) a description of coverage for emergency and urgently needed care and other 
out-of-service area coverage;
(5) a description of limitations on referrals to restricted network providers 
and to other providers;
(6) a description of the policyholder's rights to purchase any other Medicare 
supplement policy or certificate otherwise offered by the issuer; and
(7) a description of the Medicare Select issuer's quality assurance program and 
grievance procedure.
(l) Prior to the sale of a Medicare Select policy or certificate, a Medicare 
Select issuer shall obtain from the applicant a signed and dated form stating 
that the applicant has received the information provided pursuant to subsection 
(k) of this section and that the applicant understands the restrictions of the 
Medicare Select policy or certificate.
(m) A Medicare Select issuer shall have and use procedures for hearing 
complaints and resolving written grievances from the subscribers. Such 
procedures shall be aimed at mutual agreement for settlement and may include 
arbitration procedures.
(1) The grievance procedure shall be described in the policy and certificates 
and in the outline of coverage.
(2) At the time the policy or certificate is issued, the issuer shall provide 
detailed information to the policyholder describing how a grievance may be 
registered with the issuer.
(3) Grievances shall be considered in a timely manner and shall be transmitted 
to appropriate decision-makers who have authority to fully investigate the issue 
and take corrective action.
(4) If a grievance is found to be valid, corrective action shall be taken 
promptly.
(5) All concerned parties shall be notified about the results of a grievance.
(6) The issuer shall report no later than each March 31st to the commissioner 
regarding its grievance procedure. The report shall be in a format prescribed by 
the commissioner and shall contain the number of grievances filed in the past 
year and a summary of the subject, nature, and resolution of such grievances.
(n) At the time of initial purchase, a Medicare Select issuer shall make 
available to each applicant for a Medicare Select policy or certificate the 
opportunity to purchase any Medicare supplement policy or certificate otherwise 
offered by the issuer.
(o) At the request of an individual covered under a Medicare Select policy or 
certificate, a Medicare Select issuer shall make available to the individual 
covered the opportunity to purchase any Medicare supplement policy or 
certificate offered by the issuer which has comparable or lesser benefits and 
which does not contain a restricted network provision. The issuer shall make 
such policies or certificates available without requiring evidence of 
insurability after the Medicare Select policy or certificate has been in force 
for six months.
(p) For the purposes of this subsection, a Medicare supplement policy or 
certificate will be considered to have comparable or lesser benefits unless it 
contains one or more significant benefits not included in the Medicare Select 
policy or certificate being replaced. For the purposes of this paragraph, a 
significant benefit means coverage for the Medicare Part A deductible, coverage 
for prescription drugs, coverage for at-home recovery services, or coverage for 
Part B excess charges.
(q) Medicare Select policies and certificates shall provide for continuation of 
coverage in the event the secretary of health and human services determines that 
Medicare Select policies and certificates issued pursuant to this section should 
be discontinued due to either the failure of the Medicare Select Program to be 
reauthorized under law or it substantial amendment.
(1) Each Medicare Select issuer shall make available to each individual covered 
under a Medicare Select policy or certificate the opportunity to purchase any 
Medicare supplement policy or certificate offered by the issuer which has 
comparable or lesser benefits and which does not contain a restricted network 
provision. The issuer shall make such policies and certificates available 
without requiring evidence of insurability.
(2) For the purposes of this subsection, a Medicare supplement policy or 
certificate will be considered to have comparable or lesser benefits unless it 
contains one or more significant benefits not included in the Medicare Select 
policy or certificate being replaced. For the purposes of this paragraph, a 
significant benefit means coverage for the Medicare Part A deductible, coverage 
for prescription drugs, coverage for at-home recovery services, or coverage for 
Part B excess charges.
(r) A Medicare Select issuer shall comply with reasonable requests for data made 
by state or federal agencies, including the United States Department of Health 
and Human Services, for the purpose of evaluating the Medicare Select Program.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201439
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 463-6327
       
TITLE 40. SOCIAL SERVICES AND ASSISTANCE
Part III. Texas Commission on Alcohol and Drug Abuse
Chapter 152. Approved Alcohol Awareness Programs
General Provisions
40 TAC sec.sec.152.1-152.7
The Texas Commission on Alcohol and Drug Abuse proposes new sec.sec.152.1-152.7, 
concerning alcohol awareness programs. The new section defines terms commonly 
used and establishes minimum standards and criteria for the operation of 
approved alcohol awareness programs for minors who are convicted of the offense 
of purchase, consumption or possession of an alcoholic beverage. The section is 
proposed to define what programs must do to become an alcohol awareness program 
approved by the Texas Commission on Alcohol and Drug Abuse.
John Hopkins, director, Fiscal and Support Services has determined that for the 
first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Hopkins, also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be the establishment of quality programming in alcohol 
awareness programs approved by the commission, as well as establishing 
guidelines for curriculum content. There will be no effect on small businesses. 
The possible economic cost to persons who are required to comply with the rule 
as proposed will vary, depending on the fees each program chooses to assess each 
Alcohol Awareness Program participant. Approximate cost to individuals will be 
$35 to $40 for fiscal years 1992-1996.
Comments on the proposal may be submitted to Denise F. Mosel, Division 
Assistant, Texas Commission on Alcohol and Drug Abuse, 720 Brazos, Suite 403, 
Austin, Texas 78701-2506.
The new section is proposed under Acts 1991, 72nd Legislature, Regular Session, 
Chapter 163, effective September 1, 1991, which provides the Texas Commission on 
Alcohol and Drug Abuse with the authority to promulgate written rules and 
regulations setting forth minimum standards for the operation of approved 
Alcohol Awareness Programs for minors who are convicted of the offense of 
purchase, consumption or possession of an alcoholic beverage.
sec.152.1. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
 Approved program -A program approved by the Texas Commission on Alcohol and 
Drug Abuse as set forth under this chapter.
 Class roster-A list of class participants for each course. Class rosters shall 
contain the following information for each participant: individual pre-course 
and post-course test scores; class averages of pre-course and post-course test 
scores; screening instrument scores; attendance records; and referral 
recommendations.
 Commission-The Texas Commission on Alcohol and Drug Abuse.
 Minor-A person under the age of 21 years.
 Reporting period -That period of time beginning with the date the approval of 
the program was granted by the commission and ending August 31 of each year.
 Screening instrument -A written device administered to each approved program 
participant for the purpose of:
(A) identification of the existence of any significant substance abuse problem;
(B) making recommendations for further evaluation, counseling or treatment where 
indicated.
sec.152.2. Objective.  Pursuant to the legislative directive in Acts 1991, 72nd 
Legislature, Regular Session, Chapter 163, effective September 1, 1991, amending 
the Alcoholic Beverage Code, Chapter 106, by the adoption of this chapter it is 
the intent of the commission to promulgate written rules and regulations setting 
forth minimum standards for the operation of approved alcohol awareness programs 
for minors who are convicted of the offense of purchase, consumption, or 
possession of an alcoholic beverage, or others who are required or ordered by 
the court to attend such approved programs. These rules establish the minimum 
acceptable level of quality and educational content for commission approved 
alcohol awareness programs in Texas.
sec.152.3. Scope of Rules, Regulations, and Standards. <ol> Any entity or 
individual seeking to operate an approved program shall be required to obtain 
written approval by the commission pursuant to this chapter. In addition, any 
individual or entity operating an approved program, employed by an approved 
program, or providing instruction in the curriculum of an approved program shall 
be required to comply with this chapter.
sec.152.4. Program Approval.
(a) A program seeking approval by the commission shall be required to:
(1) make application to the commission on a prescribed application form;
(2) provide a detailed description of the educational curriculum, including, 
without limitation, the instructional manual and lists of: written material, 
films, videos and any other instructional materials utilized in the program;
(3) provide a copy of the screening instrument to be utilized by the program.
(b) Upon approval of the program, a notification of approval will be issued to 
the program by the commission.
(c) Approval shall become effective on the first day of the month following 
notification of approval, and shall expire on the 31st day of August of the 
first odd numbered year thereafter.
sec.152.5. Approved Program Renewal.
(a) Within 30 days prior to the expiration of approval, a program seeking 
renewal of approval by the commission shall be required to:
(1) make application to the commission for renewal on a prescribed application 
form;
(2) provide a detailed description of the current educational curriculum, 
including, without limitation, the instructional manual and lists of: written 
material, films, videos and any other instructional materials utilized in the 
program;
(3) provide a copy of the screening instrument to be utilized by the program.
(b) Upon the renewal of approval of the program, a notification of renewal of 
approval will be issued to the program by the commission.
(c) Approval shall become effective on September 1st of the year of renewal, and 
shall expire on the 31st day of August of the first odd numbered year 
thereafter.
(d) Approved programs which fail to obtain renewal of approval prior to 
September 1st on the year of expiration of approval, shall be required to make 
application to the commission pursuant to sec.152.4 of this chapter (relating to 
Program Approval).
sec.152.6. Denial, Revocation or Non-Renewal of Approval.
(a)  Grounds. The commission may deny, revoke, or refuse to issue or renew a 
program's approval if the program or any person connected with the program fails 
to comply with the rules, regulations, and standards of the commission as set 
forth in this chapter, or with any other requirement of law.
(b) Notice of intent to deny, revoke, or refuse to renew program approval. 
Whenever the commission proposes to deny, revoke or refuse to renew program 
approval, the program shall be given written notification by the issuance of a 
notice of intent to deny, revoke, or refuse to renew program approval which 
shall be mailed to the program by registered or certified mail at the address on 
file with the commission.
(c) Show cause hearing before the executive director. Any program which has been 
issued a notice of intent to deny, revoke or refuse to renew program approval 
shall be entitled to submit within 30 days of mailing of such notice, a request 
for hearing before the executive director and shall be given the opportunity to 
show cause why such action should not be taken by the commission. At the show 
cause hearing the program shall have the right to introduce evidence, to call 
witnesses, and to cross-examine witnesses who testify in support of the 
commission's proposed action. The commission shall be entitled to submit 
evidence through affidavits and documentation, or through the testimony of 
witnesses. The rules of evidence shall not apply. The executive director shall 
decide whether or not the show cause hearing shall be recorded.
(d) Notice of denial, revocation, or refusal to renew program approval. After a 
show cause hearing under subsection (c) of this section, or after 30 days from 
the mailing of the notice of intent to deny, revoke or refuse to renew program 
approval if a show cause hearing was not requested, the program shall be given 
written notification of the decision of the commission. If the commission 
decides to deny, revoke, or refuse to renew program approval, a notice of 
denial, revocation or refusal to renew program approval shall be issued to the 
program, which shall include written notification of the grounds upon which such 
action was taken, and the procedure for seeking an appeal.
(e) Contested cases; administrative review. A program which has been issued a 
notice of denial, revocation or refusal to renew program approval shall have the 
right to contest such action by the commission pursuant to the procedures set 
forth for administrative review of contested cases in the Administrative 
Procedure and Texas Register Act (Texas Civil Statutes, Article 6252-13a), 
provided however, within 30 days from the registered or certified mailing of the 
notice of denial, revocation or refusal to renew program approval, the program 
shall be required to give notice to the commission of the program's intent to 
contest the commission's action.
(f) Final action. Unless contested pursuant to the procedures set forth in 
subsection (e) of this section or as otherwise required by law, the commission's 
action shall become final 30 days after the registered or certified mailing of 
the notice of denial, revocation or refusal to renew program approval and shall 
not thereafter be subject to appeal or review.
sec.152.7. Invalidity of Provisions. If any part of this chapter is found to be 
invalid by a court of competent jurisdiction, this shall not affect any other 
part of this chapter which is not dependent upon the invalid part. For this 
purpose, all parts of this chapter are declared to be severable.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201563
Bob Dickson
Executive Director
Texas Commission on Alcohol and Drug Abuse
Proposed date of adoption: April 1, 1992
For further information, please call: (512) 867-8720
       
Alcohol Awareness Program Standards
40 TAC sec.sec.152.20-152.33
The Texas Commission on Alcohol and Drug Abuse, proposes new sec.sec.152.20-152. 
33, concerning alcohol awareness programs. The new sections establish minimum 
standards and criteria for the operation of approved alcohol awareness programs 
for minors who are convicted of the offense of purchase, consumption, or 
possession of an alcoholic beverage. The new sections are proposed to define 
what programs must do to become an alcohol awareness program approved by the 
Texas Commission on Alcohol and Drug Abuse.
John Hopkins, director, Fiscal and Support Services, has determined that for the 
first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections.
Mr. Hopkins also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be the establishment of quality programming in alcohol 
awareness programs approved by the commission, as well as establishing 
guidelines for curriculum content. There will be no effect on small businesses. 
The possible economic cost to persons who are required to comply with the rule 
as proposed will vary, depending on the fees each program chooses to assess each 
Alcohol Awareness Program participant. Approximate cost to individuals will be 
$35 to $40 for fiscal years 1992-1996.
Comments on the proposal may be submitted to Denise F. Mosel, Division 
Assistant, Texas Commission on Alcohol and Drug Abuse, 720 Brazos, Suite 403, 
Austin, Texas 78701-2506.
The new sections are proposed under Acts 1991, 72 Legislature, Regular Session, 
Chapter 163, effective September 1, 1991 which provide Texas Commission on 
Alcohol and Drug Abuse with the authority to promulgate written rules and 
regulations setting forth minimum standards for the operation of approved 
Alcohol Awareness Programs for minors who are convicted of the offense of 
purchase, consumption or possession of an alcoholic beverage.
sec.152.20. Purpose of Approved Program. The purpose of an Alcohol Awareness 
Program approved by the commission shall be to present information to 
participants on the effects of alcohol upon behavior and upon the lives of 
persons who use alcohol; to help participants identify their own drinking 
patterns or problems; to educate participants about the laws relating to 
possession, consumption and purchase of alcoholic beverages; and, to assist 
participants in developing a plan to reduce the probability of involvement in 
future alcohol-related illegal behavior or detrimental activity.
sec.152.21. Program Content.
(a) The curriculum of an approved program shall include, at minimum, education 
and instruction in the following areas:
(1) societal values related to alcohol consumption by minors;
(2) the influence of alcohol advertising on young people;
(3)  the physical, social, and psychological effects of alcohol upon young 
people;
(4) the relationship between motor vehicle and other accidents and alcohol use;
(5) relevant laws relating to purchase, possession or consumption of alcoholic 
beverages by minors;
(6) drinking patterns and problems of young people, including alcohol abuse and 
addiction;
(7)  decision making skills.
(b) Course content of an approved program shall be made age-appropriate for 
class participants.
(c) An age-appropriate pre- and post-knowledge test shall be required.
sec.152.22. Curriculum Format. <ol> The curriculum of an approved program shall 
be set forth in writing utilizing a format which identifies the sequence of 
presentation, and describes specific objectives, academic content, learning 
activities, audio-visual materials, and evaluation measures.
sec.152.23. Program Admission. <ol> Persons shall be eligible for admission to 
an approved program as follows:
(1) all persons ordered by a court to attend an alcohol awareness course 
pursuant to the Texas Alcoholic Beverage Code, sec.106.115(a) or (b);
(2) parents or guardians of persons younger than 18 years of age who are 
eligible pursuant to subsection (a) of this section;
(3) any other person deemed eligible by the program administrator of an approved 
program.
sec.152.24. Confidentiality. <ol> Approved programs shall be subject to and 
abide by all federal and state laws relating to confidentiality of 
patient/client records including, without limitation, 42 United States Code, 
sec.290dd-3, and sec.290ee-3; and Texas Civil Statues, Article 5561h.
sec.152.25. Program Operation Requirements. All approved programs shall be 
required to:
(1) utilize in the course instruction, the curriculum presented to commission 
under sec.152.4 or sec.152.5 of this chapter (relating to Program Approval and 
Approved Program Renewal);
(2)  present the curriculum in the manner and sequence in which it was submitted 
to the commission;
(3) conduct the course a minimum of one time during each reporting period;
(4) develop and utilize a form to collect the following data from each 
participant:
(A) name;
(B) street address;
(C) city/zip code;
(D) date of birth;
(E)  social security number (if any);
(F) driver's license number (if any);
(G) grade in school or educational level;
(5) complete all registration, data collection, pre-course testing, and 
screening procedures prior to the first class. Testing and screening shall be 
performed by program personnel including program administrators and instructors, 
or if performed by support staff, under the direct supervision of program 
personnel;
(6) display transparencies, slides, films, and videos in a manner which:
(A) produces a clear image when projected on a surface;
(B) utilizes television monitors which are at least 25 inches in diameter and 
high quality videotapes;
(C) allows all participants to have an unobstructed view;
(7) utilize appropriate classroom facilities for instruction;
(8) administer a screening instrument to each participant which has been 
approved by the commission;
(9) administer and evaluate pre-course and post-course tests in a manner which 
is consistent with the learning objectives of the curriculum;
(10) conduct an exit interview with each participant to discuss the 
participant's progress in the course, and the results obtained from the 
screening instrument;
(11) make available a listing or roster of available chemical dependency 
counseling and treatment resources in the area to each participant whose 
screening instrument results identify the existence of a significant substance 
abuse problem indicating need for further evaluation or treatment;
(12) administer, at the end of each course, a student course evaluation;
(13) set specific course fees which shall be reasonable, and posted in full view 
in each classroom facility, and which should be used to maintain and enhance the 
program's operations;
(14) have resources which are sufficient to carry out the program to completion;
(15)  deliver curriculum instruction in language and terminology which is 
understandable and age-appropriate for class participants;
(16) when possible, provide classes for persons 18 years of age and over which 
are separate from classes for participants who are under the age of 18 years;
(17) maintain attendance records and class rosters which shall contain the 
following information for each participant: individual pre-course and post-
course test scores; class averages of pre-course and post-course test scores; 
screening instrument scores; attendance records; and referral recommendations;
(18) conduct classes no larger than 25 participants; parents or guardians 
excluded.
sec.152.26. Discrimination Prohibited. <ol> Any action taken, or function 
performed by an approved program pursuant to this chapter or otherwise shall be 
done without regard to the sex, race, religion, age, national origin, or 
handicap of the person affected.
sec.152.27 Participant Complaints. <ol> Programs shall prominently display at 
each site where coursework is conducted a sign containing the name, mailing 
address, and telephone number of the commission and a statement notifying all 
persons that any complaints against the program may be directed to the 
commission. Upon verbal or written request, programs and any person associated 
therewith, including, without limitation, staff, volunteers, administrators, 
officers and directors, shall also be required to expeditiously provide complete 
and concise information about complaint procedures, including procedures for 
complaining directly to the commission.
sec.152.28. Program Administrators.
(a) Each approved program shall designate a program administrator who shall be 
responsible for and insure the proper operation of the program and compliance 
with this chapter.
(b)  The program administrator shall be required to provide the court system and 
the commission with written class schedules for distribution to potential 
participants. The class schedule shall include the dates, times, and locations 
where classes will be held, and the fees charged by the program for course 
attendance.
(c) Program administrators shall develop a written job description setting forth 
the duties, responsibilities, and performance requirements of program 
instructors.
(d) Program administrators shall be knowledgeable about Alcohol Awareness 
Program operation, course scheduling, court referrals, and court operations.
(f) Program administrators shall be knowledgeable about the curriculum to be 
utilized in the approved program, and shall meet all of the requirements for 
program instructors, including the ability to teach the course.
sec.152.29. Program Instructors. <ol> Program instructors shall be selected 
using the following criteria:
(1) instructors should have professional experience and training in education, 
juvenile justice, criminal justice, counseling, social work, psychology, or 
other behavioral sciences;
(2) instructors should be knowledgeable about the law as it applies to persons 
under the age of 21 and the purchase, possession or consumption of alcoholic 
beverages; the juvenile justice system; alcohol abuse and addiction; child and 
adolescent development; and referral resources for alcohol-related problems 
which affect youth and families;
(3) for each course the instructor will be conducting, instructors shall be 
required to have completed a training program in the curriculum which will be 
utilized in that course. The instructor shall also be required to have completed 
training in the administration of the screening instrument utilized by the 
approved program;
(4) instructors shall possess good communication skills including a command of 
the language in which the course is taught, and an ability to utilize vocabulary 
understandable to all class participants;
(5) each approved program shall develop a written job description which 
specifically outlines the qualifications, duties, and responsibilities of the 
course instructor(s).
sec.152.30. Classroom Facilities.
(a) Classroom facilities shall be conducive to study and shall encourage good 
educational practices, and shall provide:
(1) a sufficient number of tables or desks;
(2)  adequate seating;
(3) sufficient lighting;
(4) appropriate acoustics and climate control.
(b) Classroom facilities shall be easily accessible to all class participants.
(c) Equipment shall be maintained in working order and in good condition for use 
in class instruction.
sec.152.31. Record Keeping and Reporting.
(a) Data collection.
(1) The program administrator shall be responsible for collecting and 
maintaining data on each class participant as required in sec.152.25 of this 
chapter (relating to Program Operation Requirements).
(2) Class rosters shall be retained by the program administrator for at least 
three years from the date of course completion. All other records shall be 
retained for a period of one year from the date of course completion.
(b) The program administrator shall submit the following information to the 
commission no later than September 15 of each year:
(1) total number of participants entering each course;
(2) total number of participants successfully completing each course;
(3) total number of courses held annually;
(4) driver's license numbers of all participants, or, in the absence of a 
driver's license number, the social security number and birth date of each 
participant;
(5) total number of participants having a significant substance abuse problem as 
indicated by the approved screening instrument.
(c) The program administrator shall notify the commission within 30 days of any 
change of address, telephone number, or change of program administrator.
sec.152.32. Program Listing. <ol> A list of approved programs shall be 
maintained by the commission.
sec.152.33. Program Monitoring. <ol> Approved programs may be monitored by the 
commission for compliance with this chapter.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201564
Bob Dickson
Executive Director
Texas Commission on Alcohol and Drug Abuse
Earliest possible date of adoption: April 1, 1992
For further information, please call: (512) 867-8720
       
Part IX. Texas Department on Aging
Chapter 251. Memorandum of Understanding between TDoA, TDHS, TDH, and TXMH/MR
Policies and Procedures
40 TAC sec.251.13
The Texas Department on Aging proposes new sec.251.13, concerning memorandum of 
understanding regarding the Texas Department in Aging's function of long-term 
care coordination for the elderly in its memorandum with the Texas Department of 
Human Services, Texas Department of Health and Texas Department of Mental 
Health/Mental Retardation. The purpose of the new section is to clearly define 
the responsibilities of each agency biennially, revising and updating the Texas 
Long-Term Care State Plan for the elderly.
Charles Hubbard, director of Finance and Administration, has determined that for 
the first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section.
Mr. Hubbard also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be clarification of the responsibilities of each agency in 
executing the memorandum of understanding. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the section as proposed.
Comments on the proposal may be submitted to Peggy Seely, Community Based Care 
Specialist, P.O. Box 12786, Austin, Texas 78711.
The new section is proposed under the Human Resources Code, Chapter 101, which 
provides the Texas Department on Aging with the authority to promulgate rules 
governing the operation of the department.
sec.251.13. Memorandum of Understanding between Texas Department on Aging, Texas 
Department of Human Services, Texas Department of Health and Texas Mental Health 
and Mental Retardation.
(a) Introduction and purpose. The 72nd Texas Legislature, upon the 
recommendation of the Sunset Advisory Commission, enacted legislation which 
abolished the Long-Term Care Coordinating Council for the Elderly, and 
transferred its functions to the Texas Department on Aging (TDoA). Under the 
terms of this legislation, TDoA shall:
(1) revise, update, and review the implementation of the Texas Long-Term Care 
State Plan and submit biennial reports to the governor and the legislature;
(2) review issues concerning long-term care for the elderly and develop 
appropriate policy recommendations for the state; and
(3) encourage cooperative, comprehensive, and complementary planning among the 
public, private, and volunteer sectors for the provision of long-term care 
services.
(b)  Required memorandums. The legislation further states that TDoA, the Texas 
Department of Human Services (TDHS), the Texas Department of Health (TDH), and 
Texas Mental Health and Mental Retardation (TXMHMR), shall adopt a memorandum of 
understanding clearly defining the responsibilities of each agency in biennially 
revising and updating the Texas Long-Term Care State Plan for the Elderly. In 
accordance with the requirements of Senate Bill 377, enacted by the 72nd 
Legislature, TDoA, TDHS, TDH, and TXMHMR hereby enter into this Memorandum of 
Understanding.
(c) Background-Texas Long-Term Care State Plan for the Elderly and Health and 
Human Services Strategic Plans. The Long-Term Care Coordinating Council for the 
Elderly completed the last published Long-Term Care State Plan for the Elderly 
for the period 1984-1986, and subsequently published a Revision and Status 
Report<ol> in October 1986. The departments of Human Services, Health, Mental 
Health and Mental Retardation, and Aging were each represented on the Long-Term 
Care Coordinating Council for the Elderly.
(1)  The components of the plan included:
(A) mission statement;
(B) definition of long-term care;
(C) Description of long-term care services;
(D) goals and objectives.
(2) The 72nd Legislature enacted 1 House Bill 7 mandating the development of a 
coordinated, six-year strategic plan for health and human services. An 
interagency work group was convened in FY 1991 in response to 1 House Bill 7 to 
identify goals and strategies for health and human services. The work group 
identified the following strategy for long-term care: "Increase the availability 
and diversity of long-term care. Long term care is provided to support people 
with chronic conditions in settings ranging from their own homes to total-care 
facilities." Additionally, the work group specified a number of tactics to carry 
out the strategy.
(d) Agency responsibilities in reviewing and revising the long-term care plan 
for the elderly (LTC Plan). TDoA, TDHS, TDH, and TXMHMR each agree to the 
following responsibilities for the biennial review and update of the LTC Plan:
(1) Each agency will appoint a staff representative to serve on a Long-Term Care 
Interagency Planning Committee (LTCIPC) to:
(A)  review the LTC Plan;
(B) review and analyze the results of each agency's independent review of long-
term care service needs which have been conducted as a result of each agency's 
strategic planning process;
(C) review the general progress of the state in meeting the long-term care needs 
of elderly Texans;
(D) propose priorities for long-term care services based upon the coordinated 
six-year strategic planning process;
(E) revise and update the LTC Plan, in a format to be determined by the LTCIPC, 
on the basis of the progress review and the analysis of needs, no later than 
August 31 of each even-numbered year.
(2) TDoA will submit the biennial LTC Plan revisions to the governor and the 
legislature no later than October 31 of each even-numbered year.
(3) TDoA will convene meetings of the LTCIPC on an annual basis, and more often 
as needed.
(4) Each agency will provide additional staff support that may be required for 
the LTCIPC to accomplish its work.
(e) Effective date and duration of the memorandum of understanding.
(1) The chief executive officers of each of the agencies have reviewed and 
agreed to the stipulations of this memorandum, with the understanding that it 
shall be effective in Fiscal Year 1992 upon approval by the Texas Board on 
Aging, the Texas Board of Human Services, the Texas Board of Health, and the 
Texas Board of Mental Health and Mental Retardation.
(2) In accordance with the Human Resources Code, Subchapter B, Chapter 101, 
sec.101.031, not later than the last month of each state fiscal year, each of 
the agencies listed above shall review and update this memorandum.
(3) A complete copy of the Memorandum of Understanding between the Texas 
Department on Aging, Texas Department of Human Services, Texas Department of 
Health and the Texas Mental Health and Mental Retardation is on file at the 
Texas Department on Aging, Post Office Box 12786, Austin, Texas 78711.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 28, 1992.
TRD-9201373
Mary Sapp
Executive Director
Texas Department on Aging
Earliest possible date of adoption: March 9, 1992
For further information, please call: (512) 444-2727