Proposed Action on Rules
The Commissioner of Insurance or his designee at a public hearing under
Docket Number 2416 scheduled for September 7, 1999, at 9:00 a.m. in Room 100
of the Texas Department of Insurance Building, 333 Guadalupe Street in Austin
Texas will consider amendments proposed by the staff of the Workers' Compensation
Division to the Texas Basic Manual of Rules, Classifications and Experience
Rating Plan for Workers' Compensation and Employers' Liability Insurance (Manual).
The purposes of these amendments to the Manual are to add, amend and delete
rules as necessary, to eliminate conflicting language within the Manual and
to provide clarification to rules, endorsements and forms by amending existing
language.
The proposed changes by the staff are summarized as follows: 1. Clarify
that the rules contained in the Manual are to be read in harmony with the
standard workers' compensation policy language, adopted endorsements, the
workers' compensation law and the Texas Insurance Code; 2. Amend the classification
used in the example to reflect a classification that includes shop operations;
3. Clarify that a safety award received by an employee as a supplement to
his/her wages, is not considered remuneration for purposes of calculating
workers' compensation premium; 4. Clarify that the formula contained in the
rule is used to determine the basis of premium to calculate workers' compensation
premium if there are no verifiable payroll records for leased or rented vehicles
that operate under Code 7382; 5. Clarify that the expense constant is not
used in determining premium discount, experience rating modification, retrospective
rating or premium incentives for small employers; 6. Clarify that the minimum
premium shall be pro-rated on policies issued for a period less than one year;
7. Delete the entire section on Texas Maintenance Tax Surcharge Recoupment
and other references to the Maintenance Tax Surcharge throughout the Manual;
8. State in the rules that insurance companies are responsible for maintaining
documentation to support schedule ratings; 9. State in the rules that if a
policy is written for a period less than one year or is cancelled prior to
the expiration date, the premium on the policy is projected to a full year
to determine eligibility for the premium incentive for small employers; 10.
Add a new section to the Experience Rating Plan that allows for a preliminary
modifier to be calculated when new experience rating values are not available;
Once new experience rating values have been approved, then it may be necessary
to recalculate the modifier; 11. Clarify that test modifiers for interstate
rated risks cannot be negotiated or used in calculating premium; 12. Delete
the Employers' Liability Coverage Endorsement WC 00 03 03 as it is not applicable.
The rule that allowed an employers' liability only policy to be sold in Texas
was eliminated from the Manual effective 1-1-94; 13. Amend the language in
the Cancellation section of the Texas Amendatory Endorsement to conform to
the language set forth in the Texas Labor Code concerning cancellation of
workers' compensation policies; 14. Add language to Texas Aggregate Deductible
Endorsement and Texas Accident/Aggregate Deductible Endorsement stating that
if the policyholder cancels the policy, the aggregate deductible will not
be reduced to a pro rata amount based on the time the policy was in force.
This change eliminates a conflict that exists between the rule and the endorsement;
15. Add the standard workers' compensation policy as adopted by the Commissioner
to the Forms Section of the Manual. Several clerical errors are being corrected
with the adoption of the policy into the Forms Section of the Manual; 16.
Add the Information Page to the Forms Section of the Manual; and 17. Make
editorial changes throughout the Manual to correct punctuation, typographical
errors, reference to the statutes and reference to rules contained in the
Manual.
The Commissioner has jurisdiction over this matter pursuant to the Insurance
Code, Articles 5.56, 5.57, 5.60 and 5.96.
A copy of the of the full text of the proposed amendments is available
for review in the Office of the Chief Clerk of the Texas Department of Insurance,
333 Guadalupe Street, Austin, Texas 78714-9104. For further information or
to request copies of the amendments, please contact Ms. Angie Arizpe (512)
463-6326, (refer to Ref. Number W-0799-12-I).
The staff and the Commissioner request that written comments to these proposed
amendments be submitted prior to the public hearing on September 7, 1999.
The written comments should be directed to Lynda H. Nesenholtz, General Counsel
and Chief Clerk, Texas Department of Insurance, P. O. Box 149104, MC 113-2A,
Austin, Texas 78714-9104. An additional copy of the comments should be submitted
to Nancy Moore, Deputy Commissioner, Workers' Compensation, Texas Department
of Insurance, P. O. Box 149092, Austin, Texas 78701-9092. Public testimony
at the hearing on September 7, 1999, is also invited and encouraged.
This notification is made pursuant to the Insurance Code, Article 5.96,
which exempts it from the requirements of the Government Code, Chapter 2001
(Administrative Procedure Act).
TRD-9904537
Gene C. Jarmon
Assistant General Counsel
Texas Department of Insurance
Filed: July 28, 1999
The Commissioner of Insurance (Commissioner) will hold a public hearing
under Docket Number 2417 on September 7, 1999, at 9:00 a.m., in Room 100 of
the Texas Department of Insurance Building, 333 Guadalupe Street in Austin,
Texas to consider a petition by the staff of the Texas Department of Insurance
(TDI) proposing the adoption of revised Texas Workers' Compensation Classification
Relativities (classification relativities) to replace those adopted in Commissioner's
Order Number 98-0998 dated August 26, 1998; the adoption of a revised table
to amend the Texas Basic Manual of Rules, Classification, and Experience Rating
Plan for Workers' Compensation and Employers' Liability Insurance (Basic Manual)
concerning the Expected Loss Rates and Discount Ratios used in experience
rating; the adoption of revised tables to amend the Basic Manual concerning
the W and B values and the State Accident Limitations used in the Experience
Rating Formula, the Admiralty/F.E.L.A. Operations Liability Limit Table, the
Offshore Operations Liability Limit Table, and the Tables of Premium Credits
for Promulgated Deductibles; and the adoption of revised tables to amend the
Retrospective Rating Plan Manual for Workers' Compensation and Employers'
Liability Insurance (Retro Manual) concerning the Table of Insurance Charges
- Group Assignments, Table of Classifications by Hazard Group, and Excess
Loss Premium Factors Table.
In its petition, the staff requests consideration of a schedule of the
revised classification relativities and tables amending the Basic Manual and
Retro Manual. The revised classification relativities schedule is proposed
to replace the classification relativities schedule adopted in Commissioner's
Order 98-0998 effective January 1, 1999. The tables amending the Basic Manual
concern the Expected Loss Rates and Discount Ratios, the W and B values and
the State Accident Limitations used in the Experience Rating Formula, the
Admiralty/F.E.L.A. Operations Liability Limit factors, Offshore Operations
Liability Limit factors, and the Premium Credits for Promulgated Deductibles.
The tables amending the Retro Manual concern Insurance Charges - Group Assignments,
Table of Classifications by Hazard Group, and Excess Loss Premium Factors.
The staff requests that the proposed revised classification relativities
be available for adoption by insurers immediately, but that their use be mandatory
for all policies with an effective date on or after January 1, 2000. The staff
further requests that the revised tables amending the Basic Manual and Retro
Manual be made effective for workers' compensation policies with an effective
date on or after January 1, 2000.
The Commissioner has jurisdiction of this matter pursuant to the Texas
Insurance Code, Article 5.60, 5.55C, 5.77, and 5.96. Article 5.60 (a) of the
Texas Insurance Code authorizes the Commissioner to determine hazards by classes
and fix classification relativities applicable to the payroll in each class
for workers' compensation insurance. Article 5.60 (d) provides that the Commissioner
revise the classification system at least once every five years. Article 5.55C
requires TDI to perform an actuarial analysis to determine the amount of rate
reduction applicable to policies utilizing a deductible plan under this article.
It further requires TDI to periodically review the amount of rate reduction.
Article 5.77 authorizes TDI to promulgate premium discount plans, retrospective
rating plans and other systems, plans or formulas if the rates thereby provided
are not excessive, inadequate or unfairly discriminatory. Article 5.96 authorizes
TDI to promulgate, adopt, approve, amend, or repeal standard and uniform rating
manuals, rating plans, classification plans, statistical plans and policy
and endorsement forms for various lines of insurance, including workers' compensation
insurance.
The classification relativities currently in effect were based on experience
data reflecting workers' compensation experience from policies with effective
dates in 1991 through 1995. The proposed classification relativities are based
on the analysis of experience data from policies with effective dates in 1992
through 1996. The staff's proposed classification relativities reflect changes
in experience that occur over time, due to such things as technological advances
and improvements in safety programs. The indicated resulting relativities
were balanced to the level of the current relativities through the application
of off-balance factors. This provides for a revenue neutral set of relativities
in relation to the current relativities. The staff proposes to limit changes
in the classification relativities to +25% and -25%. These limited relativities
have been balanced overall to the level of the current relativities. This
would help to minimize possible rate shock due to large indicated changes
in the relativities.
Modifications to the classification relativities require concurrent changes
in the Table II of the Basic Manual concerning the Expected Loss Rates and
Discount Ratios. The current Table II, which became effective on January 1,
1999, contains expected loss rates that were based on the level of losses
used to experience rate a policy effective on July 1, 1999 and reflect the
current classification relativities. Staff proposes an adjustment to make
the expected loss rates more reflective of the level of losses that would
be used to experience rate policies that would be effective in 2000, and reflect
the proposed classification relativities. Staff also proposes to cap changes
in the expected loss rates to +25% and -25%.
The W and B values are used to assign credibility to an insured's actual
experience in the experience rating formula. The staff proposes to adjust
the W and B values to reflect changes in payrolls and cost in more recent
years. The State Accident Limitations are used to limit the losses that enter
into the experience rating formula. The staff proposes to adjust these limits
to reflect the current level of claims costs. Staff proposes $107,000 as the
Texas Per Claim Accident Limitation and $214,000 as the Texas Multiple Claim
Accident Limitation.
The Admiralty/F.E.L.A. Operations Liability Limit Table is used to determine
the additional premium to be charged an employer that chooses higher limits
of employers' liability coverage under Admiralty law or F.E.L.A. The staff
proposes an increase based on available experience.
The Offshore Operation Liability Limits Table is used to determine the
additional premium to be charged if an employer chooses higher limits of liability
coverage for oil, gas, or other mineral operations on or over water. The staff
proposes to adjust the table similarly to the adjustments in the Admiralty/F.E.L.A.
Operations Liability Limit Table.
TDI is required to periodically review the amount of the premium credits
in the Table of Premium Credits for Promulgated Deductibles. The staff proposes
to adjust the credits in the Table of Premium Credits for Promulgated Deductibles
to reflect the most recently available loss distributions of individual claims
and aggregate loss distributions by insured.
The Table of Insurance Charges - Group Assignments is used to identify
the columns of the Retro Manual's Table M that an insurer is to use to determine
the insurance charge element of an insured's retrospective premium. The staff
proposes to update the table based in part on the table currently being used
in other jurisdictions.
The Table of Classifications by Hazard Group is used in determining the
cost of a limitation applied to individual claims entering the retrospective
rating formula. The staff proposes to update the Table of Classifications
by Hazard Group assignments based on the most recent countrywide classification
experience adjusted to reflect the Texas classification system.
The Excess Loss Premium Factors are used to determine the cost of limiting
the amount of individual losses that enter into the retrospective premium
formula. The staff proposes to adjust this table to reflect the most recently
available loss distributions by injury type.
Copies of the full text of the staff petition and the proposed revised
schedule and table are available for review in the Office of the Chief Clerk
of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas,
78714-9104. For further information or to request copies of the petition and
proposed revised schedule and table, please contact Angie Arizpe at (512)
463-6326 (refer to Ref. Number W-0799-13-I).
Comments on the proposed changes must be submitted in writing within 30
days after publication of the proposal in the Texas Register to Lynda Nesenholtz,
the Office of Chief Clerk, P. O. Box 149104, MC 113-2A, Austin, Texas, 78714-9104.
An additional copy of the comment should be submitted to Philip Presley, Chief
Property and Casualty Actuary, P. O. Box 149104, MC 105-5F, Austin, Texas,
78714-9104.
This notification is made pursuant to the Texas Insurance Code, Article
5.96, which exempts action taken under this article from the requirements
of the Administrative Procedure Act (Government Code, Title 10, Chapter 2001).
TRD-9904538
Gene C. Jarmon
Assistant General Counsel
Texas Department of Insurance
Filed: July 28, 1999