Part I.
Texas Department of Insurance
Chapter 3.
Life, Accident, Health Insurance and Annuities
Subchapter MM. Assessment
28 TAC §3.13001
The Commissioner of Insurance adopts new §3.13001, concerning
definitions, procedures, criteria and forms for the making and collecting
of assessments on insurers that provide health insurance in this state by
the Texas Health Insurance Risk Pool. The section is adopted with changes
to the proposed text as published in the December 19, 1997 issue of the
The new section is required by Insurance Code, Article 3.77, §8 which
directs the commissioner of insurance to adopt rules to provide the procedures,
criteria and forms necessary for the Texas Health Insurance Risk Pool to implement,
collect and deposit assessments made to recoup the Pool's net loss under Insurance
Code, Article 3.77, §13. The section was developed with the assistance
of the Board of Directors of the Texas Health Insurance Risk Pool to assure
that it met the needs of the pool. The board of directors of the pool has
frequently expressed its desire to minimize administrative costs so that the
maximum amount of money collected in premiums and assessments can be used
by the pool to pay claims, therefore the adopted section is intended to meet
the requirement of Insurance Code, Article 3.77, §8, while minimizing
the cost of compliance with the section for the pool. Besides the board's
contribution in the drafting of the section, several changes were made to
the proposed section in response to the board's testimony at the hearing on
the section and written comments submitted by the board. The definition of
"insurer" in §3.13001(a)(2) was changed, a new paragraph in §3.13001(c)(5)
was inserted, §3.13001(c)(3) was changed and §3.13001(e) was changed,
all in response to comments from the pool. In addition to the latitude provided
in the procedures for making assessments and the criteria for those assessments,
the section provides the pool with an outline for the forms to be used in
determining and collecting assessments, instead of adopting a specific form.
The adopted section provides an uncomplicated procedure and clear criteria
for the making of assessments by the board of directors of the pool.
Every insurer that collects health insurance premiums in this state will
be affected by the section. The Texas Health Insurance Risk Pool is authorized
by Insurance Code, Article 3.77, §13, to assess insurers providing health
insurance in this state for operating funds and for any net loss experienced
by the pool in providing insurance to medically uninsurable Texans. The new
section provides definitions, procedures, criteria and forms for the making
and collecting of assessments by the Texas Health Insurance Risk Pool. Section
3.13001(a) contains definitions of the terms used in the section. The definition
of "insurer" was changed in response to a comment to conform it to the definition
of "insurer" in Insurance Code, Article 3.77. Section 3.13001(b) authorizes
the board of directors of the pool to consider and determine the need for,
and the amount of, any regular and interim assessments at any meeting of
the board. Section 3.13001(c)(1)-(3) provides that interim assessments shall
cover estimated cash requirements of the pool and shall be credited against
the regular assessment for the applicable fiscal year. Section 3.13001(c)(4)
directs the board to request insurers to provide the board information on
their health insurance premiums in this state. If an insurer does not provide
the information, the section provides that the board may presume that all
the insurer's health insurance premiums reported to the Texas Department
of Insurance are assessable. A new section 3.13001(c)(5) was inserted in
response to a comment and proposed §3.13001(c)(4) was renumbered as
paragraph (5). Proposed §3.13001(c)(5) was renumbered as paragraph (6).
It provides that the pool may audit the information on health insurance premiums
submitted by insurers. Section 3.13001(c)(6) was renumbered as paragraph
(7). It provides that the board shall determine the date an assessment must
be paid by an insurer and charge interest if an assessment is not paid when
due. Section 3.13001(c)(7) was renumbered as paragraph (8). It provides that
the limitation on assessments of one-half of one percent of an insurers collected
health insurance premiums in this state in Insurance Code, Article 3.77,
§13(e) shall be calculated on the insurer's collected health insurance
premiums for that year. It further provides that the limit shall not apply
after January 1, 2000, which is consistent with the expiration date in the
statute.
Section 3.13001(d) prescribes the information the board will provide an
insurer when an insurer is notified of an assessment. It directs the board
to adopt a form for the gathering information on health insurance premiums
provided for in Section 3.13001(c)(4).
Section 3.13001(e) was changed in response to a comment by changing the
title of the subsection changed to "Unpaid Assessments or Abatements." Also
in response to a comment, a sentence was added at the end of the subsection
providing that an insurer receiving an abatement or deferment shall remain
liable to the pool for the deficiency. Since the sentence is identical to
the language in Insurance Code, Article 3.77, §13(e), there is no substantive
change caused by the addition of this sentence.
Five commenters suggested that the definition of "health insurance premium"
in §3.13001(a)(1) be changed by adding Medicare supplement premiums
subject to Insurance Code, Article 3.74 and small group health insurance
premiums subject to Insurance Code, Articles 26.01 through 26.76 to the coverages
that are excluded from the definition of the term under §3.13001(a)(1)(B).
RESPONSE: Staff disagrees with the comments, but has inserted a new paragraph
(5) in §3.13001(c) and renumbered the subsequent paragraphs. The definition
of "health insurance premiums" in the section is patterned after the definition
of "health insurance" in Insurance Code, Article 3.77, §2. Medicare
supplement premiums and small group health insurance premiums are clearly
health insurance coverages, however Insurance Code, Article 3.77 §13(d)
specifically provides that the premium for these coverages is excluded in
the calculation of the amount of an assessment on an insurer. Since the calculation
of an assessment is expressly described in Article 3.77, §13(d), the
department did not repeat it in the regulation. To address the concerns expressed
by the commenters, the department has inserted a new paragraph (5) in §3.13001(c)
and renumbered paragraphs (5) through (7). The new §3.13001(c)(5) paraphrases
Article 3.77, §13(d), therefore the new paragraph has no substantive
effect.
Two commenters suggested that long term care insurance be excluded from
the definition of health insurance premium.
RESPONSE: The definition of "health insurance premiums" is patterned after
the definition of "health insurance" in Article 3.77, §2. The statutory
definition does not mention long term care, and is not susceptible to an
interpretation that would allow excluded coverages to be expanded by a regulation
of the department. For example, in the Health Insurance Portability and Availability
Act (Insurance Code, Article 26.035), the Legislature excluded long term
care coverage from the definition of "creditable coverage", therefore, the
department believes the Legislature could have used similar language in Article
3.77 if it intended to exclude long term care premiums.
Another commenter noted that the definition of "insurer" in §3.13001(a)(2)
did not include the language in Insurance Code, Article 3.77 that provides
"and any other entity providing a plan of health insurance or health benefits
subject to state insurance regulation."
RESPONSE: The department has added the language to the definition of "insurer"
in the section.
One commenter said there was inconsistency in terms between §3.13001(c)(3)
and §3.13001(c)(2) and suggested that "incurred claims" in paragraph
(3) be changed to "incurred losses for the current calendar year."
RESPONSE: The department agrees with the comment and changed §3.13001(c)(3)
in accordance with the comment.
One commenter stated that "each insurer" be deleted from §3.13001(c)(4)
because it was redundant.
RESPONSE: The intent of §3.13001(c)(4) is to direct the board of directors
of the pool to determine the total amount of health insurance premiums collected
in this state by all insurers and the total amount of health insurance premiums
collected in this state by each insurer. These two numbers will be used as
the denominator and the numerator, respectively, in the calculation of an
insurer's assessment.
One commenter stated that the title of §3.13001(e) should be changed
since the subsection did not address enforcement of the section. The commenter
suggested the subsection be titled "Unpaid Assessments or Abatements."
RESPONSE: The department agrees with the comment and changed §3.13001(e)
in accordance with the comment.
One commenter recommended that §3.13001(e)(2) be changed by adding
a sentence at the end of the paragraph so it would conform with Insurance
Code, Article 3.77, §13(c).
RESPONSE: The sentence, "The insurer receiving such abatement or deferment
shall remain liable to the pool for the deficiency," was added to paragraph(2).
Comments on the provisions of the section were received from Texas Health
Insurance Risk Pool, American Council of Life Insurance, Texas Association
of Life and Health Insurers and Health Insurance Association of America.
The Texas Health Insurance Risk Pool and the Texas Association of Life and
Health Insurers also testified at the hearing. No comments for or against
the section were received.
The new section is adopted under the Insurance Code, Articles
3.77 and 1.03A. Article 3.77, §8 provides authorization for the Commissioner
of Insurance to adopt rules to provide the procedures, criteria and forms
necessary to implement, collect, and deposit assessments made and collected
under the Insurance Code, Article 3.77, §13. Article 1.03A provides
that the commissioner of insurance may adopt rules and regulations for the
conduct and execution of the duties and functions of the Texas Department
of Insurance only as authorized by a statute.
§3.13001.Assessments.
(a)
Definitions. Words and terms used in this section that
are defined in Insurance Code, Article 3.77, have the same meanings as defined
therein. The following words and terms, when used in this section, shall
have the following meanings unless the context clearly indicates otherwise.
(1)
Health insurance premiums - any consideration collected
by an insurer for individual or group medical or health care services for
residents of the State of Texas whether by insurance or otherwise, or received
by a health care plan or arrangement that pays for or furnishes medical or
health care services whether by insurance or otherwise.
(A)
The term includes, but is not limited to the coverages
described in clauses (i) - (iv) of this paragraph:
(i)
individual or group medical or health care services;
(ii)
Stop-loss or excess loss insurance for physicians, health
care providers, hospitals, or for any benefit arrangements to the extent
permitted by Section 3, Employee Retirement Income Security Act of 1974 (29
U.S.C. Section 1002);
(iii)
Hospital, medical or surgical expense incurred coverages
or any combination of coverages; or
(iv)
Health coverage provided through a multiple employer
welfare arrangement, except for any amount for stop loss or excess loss insurance.
(B)
The term does not include the coverages described in (i)
- (x) of this paragraph:
(i)
short term limited duration coverage;
(ii)
coverage only for accident (including accidental death
and dismemberment;
(iii)
disability income insurance;
(iv)
dental only or vision only benefits that are limited
in scope to a narrow range or type of benefits and that are generally excluded
from policies that combine hospital medical or surgical benefits;
(v)
credit insurance;
(vi)
coverage only for a specified disease or illness (for
example, cancer policies), or hospital indemnity or other fixed indemnity
insurance (for example "Hospital Confinement Indemnity Coverage" as defined
in §3.3073 of this title (relating to Minimum Standards for Hospital
Confinement Indemnity Coverage) provided that:
(I)
there is no coordination between the provision of benefits
and benefits provided under any other policy; and
(II)
benefits are paid with respect to a covered event regardless
of whether benefits are provided with respect to the same event under any
policy.
(vii)
coverage issued as a supplement to liability insurance;
(viii)
insurance arising out of workers' compensation or similar
law;
(ix)
automobile medical-payment insurance and personal injury
protection; or
(x)
insurance under which benefits are payable with or without
regard to fault and which is statutorily required to be contained in any
liability insurance policy or equivalent self insurance.
(2)
Insurer - any entity that provides health
insurance in this state, including stop-loss or excess loss insurance. The
term includes, but is not limited to, an insurance company; a health maintenance
organization operating under the Texas Health Maintenance Organization Act
(Chapter 20A, Insurance Code); an approved nonprofit health corporation;
a fraternal benefit society; a stipulated premium insurance company; a group
hospital service corporation subject to Chapter 20, Insurance Code; a multiple
employer welfare arrangement subject to Insurance Code, Article 3.95-1 et
seq., a surplus lines carrier; an insurer providing stop-loss or excess loss
insurance to physicians, health care providers, hospitals, or to any benefit
arrangements to the extent permitted by Section 3, Employee Retirement Income
Security Act of 1974 (29 U.S.C. Section 1002); and any other entity providing
a plan of health insurance or health benefits subject to state insurance
regulation.
(3)
Interim assessment - an assessment made for the purpose
of funding anticipated shortfall of revenues to cover organizational and
interim operating expenses, including claims, of the pool.
(4)
Regular assessment - an assessment made for the purpose
of recouping any net losses of the pool during the previous calendar year.
(b)
Procedures.
(1)
For the purpose of providing the funds necessary to carry
out the powers and duties of the pool, the board shall determine interim
and regular assessments, at such times and for such amounts as the board
finds necessary.
(2)
Interim and regular assessments may be considered
at any meeting of the board and must be approved by the board in accordance
with the plan of operation.
(c)
Criteria.
(1)
Computation of the funds necessary to carry out the powers
and duties of the pool shall be made with a reasonable degree of accuracy,
recognizing that exact determinations may not always be possible.
(2)
Regular assessments shall cover the net losses of
the pool, including administrative expenses and incurred losses, for the
preceding calendar year as determined by the board and reported in the annual
statement of the pool filed with the commissioner. Any interim assessments
made in a fiscal year shall be credited as offsets against the regular assessment
for that fiscal year.
(3)
Interim assessments shall cover projected cash requirements
of the pool, as determined by the board, after taking into account operating
and investment activity and expected and incurred losses for the current
calendar year which may exceed collected premiums.
(4)
The board shall determine the health insurance premiums
of all insurers and each insurer in the state from information provided by
the insurers, subject to verification as provided in paragraph (6) of this
subsection. If an insurer fails to timely respond to a request for information,
the board shall presume that the unresponsive insurer has no health insurance
premiums exempt from assessment and the amount reflected in the Schedule
T of the annual statement for the preceding year for accident, health insurance
premium including policy, membership and other fees shall be used in determining
its assessment. In the event the entity does not file on schedule T, or does
not file schedule T for all affected premiums, the board shall use the most
comparable available information.
(5)
The assessment imposed against each insurer shall
be in an amount that is equal to the ratio of the health insurance premiums
collected by the insurer in this state during the preceding calendar year,
except for Medicare supplement premiums subject to Insurance Code, Article
3.74 and small group health insurance premiums subject to Insurance Code,
Articles 26.01 through 26.76, to the health insurance premiums collected
by all insurers in this state during the preceding calendar year, except
for Medicare supplement premiums subject to Insurance Code, Article 3.74
and small group health insurance premiums subject to Insurance Code, Articles
26.01 through 26.76.
(6)
The board may audit from time to time the information
provided by insurers under paragraph (4) of this subsection.
(7)
The board shall determine the due date for payment
of the assessment, which shall not be less than the 30th day after the date
on which the notice of the assessment is mailed to the insurers. Interest
shall accrue on any unpaid amount at a rate determined by the board, beginning
on the due date.
(8)
The total amount of all assessments on an insurer
in a calendar year shall not exceed one-half of one percent of the insurer's
health insurance premiums for that year. The limitation in this paragraph
does not apply on or after January 1, 2000.
(d)
Forms.
(1)
The board shall adopt a form for the invoicing of each
insurer's portion of any assessment. The form shall include:
(A)
The health insurance premiums for all insurers for the
preceding calendar year except for Medicare supplement premiums subject to
Article 3.74 and small group health insurance premiums subject to Articles
26.01 through 26.76;
(B)
The health insurance premiums for the individual insurer
for the preceding calendar year except for Medicare supplement premiums subject
to Article 3.74 and small group health insurance premiums subject to Articles
26.01 through 26.76;
(C)
The amount of total assessment and whether the assessment
is a regular assessment or interim assessment;
(D)
If a regular assessment, the amount of any interim assessment
credited toward that regular assessment;
(E)
The amount of the assessment for the insurer; and
(F)
The payment due date for the assessment and the interest
rate which will apply to any delinquent payment.
(2)
The board shall adopt a form for requesting
the data necessary to determine the amount of assessments.
(e)
Unpaid Assessments or Abatements.
(1)
Any insurer whose certificate of authority to do business
in this state is canceled or surrendered shall be liable for any unpaid assessments
that relate to health insurance premiums written prior to the date of such
cancellation or surrender.
(2)
An insurer may petition the commissioner for an abatement
or deferment of all or part of an assessment imposed by the board. The commissioner
may abate or defer, in whole or in part, such assessment if the commissioner
determines that the payment of the assessment would endanger the ability
of the participating insurer to fulfill its contractual obligations. If an
assessment against an insurer is abated or deferred in whole or in part,
the amount of such assessment abated or deferred shall be assessed against
the other insurers in a manner consistent with the basis for assessments
set forth in Insurance Code, Article 3.77, §13(e). The insurer receiving
such abatement or deferment shall remain liable to the pool for the deficiency.
This agency hereby certifies that the adoption has been
reviewed by legal counsel and found to be a valid exercise of the agency's
legal authority.
Filed with the Office of the Secretary of State on January
27, 1998.
TRD-9801200
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: February 16, 1998
Proposal publication date: December 19, 1997
For further information, please call: (512) 463-6327
Subchapter C. General Standards of Independent Review
Chapter 12.
Independent Review Organizations