TITLE exempt-filings

Texas Department of Insurance

Proposed Action on Rules

The Commissioner of Insurance (Commissioner) will hold a public hearing under Docket No. 2495 on September 18, 2001, at 9:30, in Room 100 of the William P. Hobby 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 No. B-0058-00 dated October 23, 2000; and 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. Staff's petition (Ref. No. W-0801-11-I), was filed on August 8, 2001.

In its petition, the staff requests consideration of a schedule of revised classification relativities and tables amending the Basic Manual. The revised classification relativities schedule is proposed to replace the classification relativities schedule adopted in Commissioner's Order B-0058-00 effective January 1, 2001. The tables amending the Basic Manual concern the Expected Loss Rates and Discount Ratios.

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, 2002. The staff further requests that the revised tables amending the Basic Manual be made effective for workers' compensation experience modifiers with an effective date on or after January 1, 2002.

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.

The classification relativities currently in effect were based on experience data reflecting workers' compensation experience from policies with effective dates in 1993 through 1997. The proposed classification relativities are based on the analysis of experience data from policies with effective dates in 1994 through 1998. 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, 2001, contains expected loss rates that were based on the level of losses used to experience rate the average policy that would be subject to the new expected loss rates. Such a policy would be effective on July 1, 2001 and would 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 2002, and reflect the proposed classification relativities. Staff also proposes to cap changes in the expected loss rates to +25% and -25%.

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 Sylvia Gutierrez at (512) 463-6327 (refer to Ref. No. W-0801-11-I).

Comments on the proposed changes may be submitted in writing within 30 days after publication of the proposal in the Texas Register to 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. Public testimony at the hearing on September 18, 2001, is also invited and encouraged.

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, Ch. 2001).

This agency hereby certifies that the proposed rules have been reviewed by legal counsel and found to be within the agency's authority to adopt.

TRD-200104538

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Filed: August 8, 2001


Proposed Action on Rules

The Commissioner of Insurance at a public hearing under Docket No. 2494 scheduled for September 18, 2001 at 9:30 a.m. in Room 100 of the William P. Hobby 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 (the Manual). The purposes of these amendments to the Manual are to modify rules as necessary, to eliminate conflicting language within the Manual and to provide clarification to rules, endorsements and forms. Staff's petition (Ref. No. W-0801-10-I), was filed on August 8, 2001.

The staff proposes amendments to the Manual as follows:

1. Amend Rule IX E. - Employee Leasing Arrangements to add the term professional employers organization services to the definition of employee provider firm. This change is recommended pursuant to Section 91.001 (14), Labor Code.

2. Amend Rule IX E. - Employee Leasing Arrangements to delete the reference to the Texas Workers' Compensation Insurance Fund (Fund) throughout that rule. This change is recommended pursuant to Act of June 15, 2001, H.B.3458, 77th Leg., R.S. (to be codified at TEX. Ins. Code Ann. art. 5.76-3) which changes the name of the Fund to the Texas Mutual Insurance Company. Staff recommends that rather than amending the references from the Fund to the Texas Mutual Insurance Company (Texas Mutual) in this rule, it is not necessary to specifically mention the Fund since it is an insurance company licensed to write workers' compensation insurance.

3. Amend Employee Provider Form EP-1 to change reference from the Fund to the "insurer of last resort" in number 8 and make editorial changes of adding the word "its" and amending the date in the notary part to show "20__" in lieu of "199_."

4. Amend Employee Provider Form EA-1A to change the reference from the Fund to the "insurer of last resort" in number 9 and make editorial changes of adding the word "its" and amending the date in the notary part to show "20__" in lieu of "199_."

5. Amend Employee Provider/Client Company Endorsement WC 42 04 06 B to change the reference from the Fund to the "insurer of last resort" in number 10 to change the reference from the Fund to the "insurer of last resort" and make editorial changes of substituting the word "its" for "and each," making the words officer, director and affiliate plural, and amending the date in the notary part to show "20__" in lieu of "199_."

6. Amend Accidents Involving Two or More Persons form ERM 4.1 to delete the references to a specific maximum amount in two places on the form and change the wording to read "the accident limitation shown in Table III of the Experience Rating Plan." By making this change, the form will not need to be amended each time the accident limitation is changed in Table III of the Experience Rating Plan.

7. Amend Report of Experience for Self Insurers Forms ERM-6A, ERM-6B and ERM-6C to amend the date in the notary section to show "20__" in lieu of "199_."

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 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. Sylvia Gutierrez (512) 463-6327 (refer to Ref. No.W-0810-10-I).

The staff and the Commissioner request that written comments to these proposed amendments be submitted prior to the public hearing on September 18, 2001. 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 149104, MC 105-2A, Austin, Texas 78714-9104. Public testimony at the hearing on September 18, 2001, is also invited and encouraged.

This notification is made pursuant to the Insurance Code, Article 5.96, which exempts if from the requirements of the Government code, Chapter 2001 (Administrative Procedure Act).

The agency hereby certifies that the proposal has been reviewed by the legal counsel and found to be within the agency's authority to adopt.

TRD-200104539

Lynda Nesenholtz

General Counsel and Chief Clerk

Texas Department of Insurance

Filed: August 8, 2001