28 TAC §§7.1801 - 7.1808
The Commissioner of Insurance adopts amendments to §§7.1801-7.1808
concerning withdrawal plan requirements and procedures. Sections 7.1802 and
7.1805 are adopted with changes to the proposed text as published in the October
26, 2001, issue of the
Texas Register
(26
TexReg 8471). Sections 7.1801, 7.1803, 7.1804 and 7.1806-7.1808 are adopted
without changes and will not be republished.
The adopted amendments are necessary to implement H.B. 3020, 76th Legislature,
1999 which amended Insurance Code Article 20A.26 to require health maintenance
organizations (HMOs) to comply with the requirements of Insurance Code Article
21.49-2C which requires authorized insurers to file withdrawal plans with
the Department when an insurer intends to totally withdraw from a line of
insurance or reduce total annual premium volume in a line of insurance by
75 percent. The purpose of Insurance Code Article 21.49-2C is to assist the
Department in monitoring the stability of the market for insurance in Texas.
To accomplish this, Article 21.49-C requires an insurer or an HMO to file
a plan of withdrawal that is constructed to protect the interests of the people
of this state. In addition to the implementation of the amendment to Insurance
Code Article 20A.26, the adopted sections are needed to conform the terminology
of the subchapter to that used in various applicable provisions of the Insurance
Code, including Chapter 26, the Health Insurance Portability and Availability
Act. Finally, the adopted sections are necessary to provide the Department
additional information that will aid the Commissioner in making a determination
that an insurer's or HMO's plan of withdrawal protects the interests of the
people of this state.
The adopted sections will provide orderly and uniform procedures for insurers
and HMOs to file a withdrawal plan with the Department that provides the Commissioner
with the information necessary to determine that the withdrawal plan is constructed
to protect the interests of the people of this state and to monitor the effect
of the withdrawal on the market for health care plans and other insurance
products. Section 7.1801 states the purpose and authority of the subchapter.
Section 7.1802 defines certain terms used in the subchapter. The definition
of "Enrollees of special circumstances" in paragraph (13) is changed to read
"As described in Insurance Code Articles 3.70-3C, §4 and 20A.18A(c)"
to clarify that §7.1805 only requires information about enrollees of
special circumstances and does not require continued coverage of those enrollees.
The definition of "withdrawal" in paragraph (15) is changed in response to
a comment suggesting clarification that withdrawal plans must be filed when
insurers or HMOs begin making plans to reduce their insurance activity in
the state. Adopted §7.1803 defines what constitutes a line of insurance.
Section 7.1804 provides standards to determine when a withdrawal plan must
be filed. Section 7.1805 specifies the minimum information required to be
included in a withdrawal plan. Subsection(a)(8)(B) is changed in response
to a comment to clarify that withdrawal plans must be filed when insurers
begin making plans to reduce their activity. Subsection(b)(8)(B) is changed
to provide consistency with (a)(8)(B) of §7.1805. Section 7.1806 provides
information on submission and approval procedures. Section 7.1807 requires
a withdrawing insurer or HMO to file annual statement data and other required
statistical filings until all policyholder obligations for the withdrawn line
are fulfilled. The requirements for a withdrawing insurer or HMO to resume
writing insurance in this state are specified in §7.1808.
A commenter suggested that the definition of withdrawal in §7.1802
and the language in §7.1805(a)(8)(B) be changed to make it clear that
a withdrawal plan must be filed before an insurer or HMO actually reduces
its presence in the Texas insurance market. The Department agrees with the
comment and has made the clarifying changes.
The Office of Public Insurance Counsel commented in favor of the proposal.
The amendments are adopted under the Insurance Code Articles
3.70-3C, 20A.22, 20A.26, 21.49-2C, and §36.001. Article 3.70-3C addresses
the regulation of preferred provider plans. Article 20A.26 makes any HMO authorized
under Chapter 20A subject to, inter alia, Article 21.49-2C. Article 21.49-2C
requires that insurers file a withdrawal plan if the insurer proposes to withdraw
from writing a line of insurance in this state or proposes to reduce its total
annual premium volume in a line of insurance by 75 percent or more. Article
21.49-2C also authorizes the Commissioner to adopt rules necessary to enforce
the provisions of the article. Article 20A.22 authorizes the Commissioner
to promulgate reasonable rules as necessary and proper to carry out the provisions
of the Texas Health Maintenance Organization Act (Insurance Code Chapter 20A).
Section 36.001 authorizes the Commissioner to adopt rules for the conduct
and execution of the powers and duties of the Department only as authorized
by statute.
§7.1802.Definitions.
The following words and terms, when used in this subchapter, shall
have the following meanings, unless the context clearly indicates otherwise.
(1)
Annual Statement--Annual statement most recently filed
by the insurer or HMO with the Texas Department of Insurance.
(2)
Association coverage--Coverage under a health benefit plan
issued to an association or bona fide association as those terms are defined
in §21.2702 of this title (relating to Association Plans).
(3)
Commissioner--Commissioner of Insurance.
(4)
Department--Texas Department of Insurance.
(5)
Individual coverage--Coverage issued by an HMO that provides
an individual health care plan as defined in Insurance Code Article 20A.09(l).
(6)
Large employer coverage--Coverage under a health benefit
plan issued to a large employer as those terms are defined in §26.4 of
this title (relating to Definitions).
(7)
Line of insurance--Each line of business as specified in §7.1803
of this title (relating to What Constitutes a Line of Insurance).
(8)
HMO--A health maintenance organization licensed under Insurance
Code Chapter 20A.
(9)
Medicaid--The Medicaid program under Title XIX of the Social
Security Act of 1965.
(10)
Medicare--Has the same meaning as specified in §3.3303
of this title (relating to Definitions)
(11)
Medicare+Choice plan--Has the same meaning as specified
in §3.3303 of this title.
(12)
Small employer coverage--Coverage under a health benefit
plan issued to a small employer as those terms are defined in §26.4 of
this title.
(13)
Enrollees of special circumstances--As described in Insurance
Code Articles 3.70-3C, §4 and 20A.18A(c).
(14)
CHIP--The Texas Children's Health Insurance Program under
Texas Health and Safety Code Chapter 62.
(15)
Withdrawal--
(A)
Substantial withdrawal occurs when an insurer or HMO on
its own initiative plans to reduce the company's total annual premium volume
for a line of insurance, as defined in §7.1803 of this title, by 75%
or more, except when the insurer or HMO meets any exception specified in §7.1804(b)
of this title (relating to When a Plan Is Required).
(B)
Total withdrawal occurs when an insurer or HMO on its own
initiative plans to no longer engage in the writing of a line of insurance,
as defined in §7.1803 of this title except when the insurer or HMO meets
any exception specified in §7.1804(b) of this title.
§7.1805.Contents of Withdrawal Plan.
(a)
Except for withdrawing HMOs, which are addressed under
subsection (b) of this section, a withdrawing insurer shall file a plan of
orderly withdrawal with the Commissioner that is constructed to protect the
interests of the people of this state. The plan must be signed by at least
one officer of the insurer and, for each line of insurance being withdrawn
or having total annual premium volume reduced by 75% or more, must contain
the following:
(1)
identification, in accordance with the line of insurance
designations in §7.1803 of this title (relating to What Constitutes a
Line of Insurance), of the line or lines of insurance being totally withdrawn
or affected by having total annual premium volume reduced by 75% or more;
(2)
identification of the policy forms by number and type affected
by the withdrawal;
(3)
the dates the insurer intends to begin and complete its
withdrawal;
(4)
an explanation of the reasons for the withdrawal;
(5)
provisions for notifying all of the affected Texas policyholders
and certificateholders of the dates of the beginning and completion of the
total or substantial withdrawal and how the withdrawal will affect them, including,
but not limited to:
(A)
a copy of the notice and an explanation of the manner in
which the notice will be provided to policyholders and certificateholders;
and
(B)
either affirmation that such notice will be provided within
30 days of the approval of the withdrawal plan or a request to provide the
notice at some other specified date or time, and such request must be approved
by the Commissioner;
(C)
identification of any provision of the Insurance Code or
Texas Administrative Code under which notice is mandated.
(6)
provisions for meeting all of the insurer's contractual
obligations, including, but not limited to:
(A)
notification of all affected agents of the insurer of the
date the insurer intends to begin and complete the withdrawal;
(B)
for fire and casualty insurers, a statement affirming the
insurer's compliance with the provisions of the Insurance Code, Article 21.11-1,
relating to cancellation of agency contracts;
(C)
for insurers writing liability coverage as specified in
the Insurance Code, Article 21.49-2A, a statement affirming the insurer's
compliance with the provisions of Article 21.49-2A, relating to cancellation
and nonrenewal of certain liability insurance coverage; and
(D)
for insurers writing property and casualty coverage as
specified in the Insurance Code, Article 21.49-2B, a statement affirming the
insurer's compliance with the provisions of Article 21.49-2B, relating to
cancellation and nonrenewal of certain property and casualty policies;
(7)
provisions for providing service to the insurer's Texas
policyholders and claimants;
(8)
information on Texas business, including:
(A)
for insurers filing total withdrawal plans, the total annual
premium volume and the number of policies and certificates and covered persons
in Texas for each line to be withdrawn;
(B)
for insurers filing substantial withdrawal plans, the total
annual premium volume and number of policies and certificates and covered
persons in Texas before substantial withdrawal is effected and the estimated
total annual premium volume and number of policies and certificates and covered
persons in Texas after substantial withdrawal is effected for each line to
be substantially withdrawn;
(C)
estimate of what percentage of the Texas market the withdrawal
constitutes;
(D)
any information necessary to assist the Commissioner in
determining whether a market availability problem is created by the total
or substantial withdrawal, the extent of the problem, and what market assistance
may be needed to alleviate the problem, including, but not limited to, the
following:
(i)
type of location and geographic area subject to the withdrawal
if not statewide (identify type of area such as suburban, urban, rural, or
list specific rating territories) and zip codes if entire state not included
in withdrawal; and
(ii)
if applicable, types of risks no longer being covered
(for example, if no longer writing private passenger auto insurance coverage
for single-car families or for persons without supporting business; or if
no longer providing homeowner's insurance coverage for low-value homes, or
in areas with high loss-ratios, or in areas with historically high exposure
to natural disasters). The information listed in this clause is provided for
purposes of example only and is not intended to be a comprehensive or exhaustive
list.
(E)
if an insurer is unable to provide the exact number of
policies and certificates and covered persons, the insurer shall provide estimates
and explain how the estimates were determined;
(9)
provisions for identifying policyholders or certificateholders
of special circumstances;
(10)
identification of any third party contracts which may
provide for the continuity of care to enrollees of special circumstances;
(11)
number of and estimated amount of all losses outstanding
in Texas, including claims incurred but not reported;
(12)
a plan to handle the losses specified in paragraph (11)
of this subsection, including, but not limited to:
(A)
identification of what assets will be available for paying
outstanding incurred but not reported claims, claims in the course of settlement,
and associated loss adjustment expenses;
(B)
identification of who specifically will administer the
run-off of the business; and
(C)
an actuarial opinion certifying that adequate reserves
are available to pay outstanding claims.
(13)
if Texas policyholders or certificateholders are to be
reinsured, the filing of a reinsurance agreement pursuant to all statutory
and regulatory requirements and, when applicable, the filing of an assumption
certificate;
(14)
provisions for meeting any applicable statutory obligations,
including, but not limited to:
(A)
payment of any guaranty fund assessments;
(B)
participation in any assigned risk plan, pool, fund, facility,
or joint underwriting arrangement; and
(C)
payment of any taxes.
(15)
a list of any other products the insurer will continue
to offer in Texas; and
(16)
for insurers filing total withdrawal plans, affirmation
that no new business will be solicited by the insurer in this state during
or following the withdrawal period unless the insurer first complies with §7.1808
of this title (relating to Requirements To Resume Writing Insurance).
(b)
A withdrawing HMO shall file a plan of orderly withdrawal
with the Commissioner that is constructed to protect the interests of the
people of this state. The plan must be signed by at least one officer of the
HMO and, for each line of insurance being withdrawn or having total annual
premium reduced by 75% or more, must contain the following:
(1)
identification, in accordance with the line of insurance
designations in §7.1803 of this title, of the line or lines of insurance
being totally withdrawn or affected by having total annual premium volume
reduced by 75% or more;
(2)
identification by form number of the evidences of coverage
affected by withdrawal;
(3)
the dates the HMO intends to begin and complete its withdrawal;
(4)
an explanation of the reasons for the withdrawal;
(5)
provisions for notifying all of the affected Texas enrollees
and contractholders of the dates of the beginning and completion of the total
or substantial withdrawal and how the withdrawal will affect them, including,
but not limited to:
(A)
a copy of the notice and an explanation of the manner in
which the notice will be provided to enrollees or contractholders;
(B)
either an affirmation that such notice will be provided
within 30 days of the approval of the withdrawal plan or a request to provide
the notice at some other specified date or time, and such request must be
approved by the Commissioner; and
(C)
identification of any provisions of the Insurance Code
or the Texas Administrative Code under which notice is mandated;
(6)
provisions for meeting all of the HMO's contractual obligations,
including, but not limited to, notification to all affected agents of the
HMO of the dates the HMO intends to begin and complete the withdrawal;
(7)
provisions for providing service to the HMO's Texas enrollees
and providers;
(8)
information on Texas business, including:
(A)
for HMOs filing total withdrawal plans, the total annual
premium volume and the number of affected contractholders and enrollees in
Texas for each line to be withdrawn;
(B)
for HMOs filing substantial withdrawal plans, the total
annual premium volume and the number of affected enrollees and contractholders
in Texas before substantial withdrawal is effected and the estimated total
annual premium volume and number of enrollees and contractholders in Texas
after substantial withdrawal is effected for each line to be substantially
withdrawn;
(C)
an estimate of what percentage of the Texas HMO market
the withdrawal constitutes, as measured by enrollee;
(D)
an estimate of what percentage of the HMO's service area
or service areas the withdrawal constitutes and the counties affected by the
withdrawal; and
(E)
any information necessary to assist the Commissioner in
determining whether a market availability problem is created by the total
or substantial withdrawal, the extent of the problem, and what market assistance
may be needed to alleviate the problem;
(9)
provisions for identifying enrollees of special circumstance;
(10)
identification of any third party contracts which may
provide for the continuity of care to enrollees of special circumstance;
(11)
number of and estimated amount of all losses outstanding
in Texas, including claims incurred but not reported;
(12)
a plan to handle the losses specified in paragraph (11)
of this subsection, including, but not limited to:
(A)
identification of what assets will be available for paying
outstanding incurred but not reported claims, claims in the course of settlement,
and associated loss adjustment expenses;
(B)
identification of who specifically will administer the
run-off of the business, if any; and
(C)
an actuarial opinion certifying that adequate reserves
are available to pay outstanding claims;
(13)
provisions for meeting any applicable statutory obligations;
(14)
for HMOs filing total withdrawal plans, an affirmation
that no new business will be solicited by the HMO in this state during or
following the withdrawal period unless the HMO first complies with §7.1808
of this title;
(15)
a list of any other products the HMO will continue to
sell in Texas in each service area; and
(16)
for HMOs filing total withdrawal plans, quarterly financial
projections from the beginning of the withdrawal to the completion of the
withdrawal. The quarterly financial projections shall include:
(A)
a balance sheet;
(B)
an income statement;
(C)
a statement of cash flows; and
(D)
members.
(c)
The filing of a single consolidated withdrawal plan for
all withdrawing insurance companies or HMOs in the same holding company system,
as defined in the Insurance Holding Company System Regulatory Act, the Texas
Insurance Code Article 21.49-1, §2, does not meet the requirements of
this subchapter. A separate withdrawal plan must be filed for each insurance
company or HMO intending to totally or substantially withdraw from a line
or lines of insurance.
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 10, 2002.
TRD-200200124
Lynda Nesenholtz
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: January 30, 2002
Proposal publication date: October 26, 2001
For further information, please call: (512) 463-6327