Part 1.
TEXAS DEPARTMENT OF INSURANCE
Chapter 7.
CORPORATE AND FINANCIAL REGULATION
Subchapter D. RISK-BASED CAPITAL AND SURPLUS
28 TAC §7.401, §7.410
The Commissioner of Insurance adopts the repeal of §7.401
and §7.410 concerning risk-based capital and surplus. The repeal of these
sections is adopted without changes to the proposal published in the December
24, 2004, issue of the
Texas Register
(29
TexReg 11906).
The repeal of the sections is necessary to adopt a new §7.401 which
appears elsewhere in this issue of the
Texas Register
. The new §7.401 consolidates the rules for risk-based capital
and surplus for all insurers and HMOs in one section.
The purpose of the repeal is to eliminate obsolete sections.
No comments were received on the proposal.
The repeal of the sections is adopted under the Insurance Code §§822.210,
841.205, 884.206, 885.401 and 36.001. Sections 822.210, 841.205, 884.206 and
885.401 provide that the commissioner may adopt rules to require an insurer
to maintain capital and surplus levels in excess of statutory levels to assure
financial solvency of insurers for the protection of policyholders and insurers.
Section 36.001 provides that the commissioner may adopt any rules necessary
and appropriate to implement the powers and duties of the Texas Department
of Insurance under the Insurance Code and other laws of this state.
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 April 5, 2005.
TRD-200501430
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: April 25, 2005
Proposal publication date: December 24, 2004
For further information, please call: (512) 463-6327
28 TAC §7.401
The Commissioner of Insurance adopts new §7.401 concerning
risk-based capital and surplus requirements for insurers and health maintenance
organizations. The new section is adopted with a change to the proposal published
in the December 24, 2004, issue of the
Texas Register
(29 TexReg 11906).
The new section is necessary to adopt the 2003 and 2004 NAIC Life Risk-Based
Capital Report Including Overview and Instructions for Companies, the 2003
and 2004 NAIC Fraternal Risk-Based Capital Report Including Overview and Instructions
for Companies, the 2003 and 2004 NAIC Property and Casualty Risk-Based Capital
Report Including Overview and Instructions for Companies, and the 2003 and
2004 NAIC Health Risk-Based Capital Report including Overview and Instructions
for Companies. The adopted section also provides for specific actions by the
commissioner or the reporting entity when the total adjusted capital of the
reporting entity falls to certain levels specified in the section. Finally,
the adopted section is necessary to effect the consolidation of the existing
risk-based capital rules. A minor change was made in §7.401(g)(2) to
correct a typographical error. Notice of the adopted repeal of §7.401
and §7.410, and amendment of §11.809 appears elsewhere is this issue
of the
Texas Register
.
The risk-based capital requirement is a method of ensuring that an insurer
has an appropriate level of policyholders’ surplus after taking into
account the underwriting, financial, and investment risks of an insurer. The
adopted section will provide the department with a widely used regulatory
tool to identify the minimum amount of capital and surplus appropriate for
an insurance company to support its overall business operations in consideration
of its size and risk exposure and provide for specific actions by the commissioner
or the reporting entity when the total adjusted capital of the reporting entity
falls to certain levels.
No comments were received.
The new section is adopted under the Insurance Code Articles
1.10, 1.32, 21.21, 21.28-A and §§ 822.210, 841.205, 843.404, 885.401,
884.206, and 36.001. Article 1.10, §5 addresses the duties of the department
when an insurer’s solvency is impaired. Article 1.32 authorizes the
commissioner to fix standards for evaluating the financial condition of an
insurer. Article 21.21, §13 authorizes the commissioner to adopt rules
necessary to regulate trade practices in the business of insurance. Article
21.28-A relates to the prevention of insurer delinquencies, supervision and
conservatorship proceedings and authorizes the adoption of rules as necessary.
Sections 822.210, 841.205, 884.206 authorize the commissioner to adopt rules
to require an insurer to maintain capital and surplus levels in excess of
statutory minimum levels to assure financial solvency of insurers for the
protection of policyholders and insurers. Section 843.404 authorizes the commissioner
to adopt rules to require a health maintenance organization to maintain capital
and surplus levels in excess of statutory minimum levels to assure financial
solvency of health maintenance organizations for the protection of enrollees.
Section 885.401 authorizes the commissioner to require fraternal benefit societies
to submit reports the commissioner deems necessary. Section 36.001 authorizes
the commissioner to adopt any rules necessary and appropriate to implement
the powers and duties of the Texas Department of Insurance under the Insurance
Code and other laws of this state.
§7.401.Risk-Based Capital and Surplus Requirements.
(a)
Purpose. The purpose of implementing a risk-based capital
and surplus provision is to require a minimum level of capital and surplus
to absorb the financial, underwriting, and investment risks assumed by an
insurer or a health maintenance organization.
(b)
Scope.
(1)
Life companies. This section applies to any insurer authorized
to do business in Texas as an insurance company that writes or assumes life
insurance, annuity contracts or liability on, or indemnifies any one person
for, any risk under a health, accident, sickness, or hospitalization policy,
or any combination of those policies, in an amount in excess of $10,000 including:
capital stock companies, mutual life companies, fraternal benefit societies,
and stipulated premium companies doing business in other states. Fraternal
benefit societies are subject to their own separate risk-based capital instructions
as provided in subsection (d)(2) of this section. This section does not apply
to stipulated premium companies only doing business in Texas.
(2)
Property and casualty companies. This section applies to
all domestic, foreign, and alien property and casualty companies subject to
the provisions of the Insurance Code §§822.210 and 982.106, excluding
those insurers that are only authorized to write mortgage guaranty insurance
in all states in which they are licensed and excluding those insurers that
write business only in this state and are not required by law to have capital
stock.
(3)
Health Maintenance Organizations and insurers required
to file the NAIC Health Blank. This section applies to all domestic and foreign
health maintenance organizations subject to the provisions of Insurance Code
Chapter 843 and insurers that file the NAIC Health Blank with the department
under department filing requirements.
(c)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Annual financial statement--The annual statement blank
to be used by insurance companies, as promulgated by the NAIC and as adopted
by the commissioner.
(2)
Authorized control level--The result determined under the
RBC formula in accordance with the RBC instructions.
(3)
NAIC--National Association of Insurance Commissioners.
(4)
RBC formula--NAIC risk-based capital formula.
(5)
RBC instructions--NAIC Risk-Based Capital Report Including
Overview and Instructions for Companies.
(6)
Total adjusted capital--An insurer's adjusted statutory
capital and surplus as determined under the RBC formula in accordance with
the RBC instructions.
(d)
Adoption of RBC formula by reference. The commissioner
adopts by reference the following:
(1)
The 2003 and 2004 NAIC Life Risk-Based Capital Report Including
Overview and Instructions for Companies which includes the RBC formula.
(2)
The 2003 and 2004 NAIC Fraternal Risk-Based Capital Report
Including Overview and Instructions for Companies which includes the RBC formula.
(3)
The 2003 and 2004 NAIC Property and Casualty Risk-Based
Capital Report Including Overview and Instructions for Companies which includes
the RBC formula.
(4)
The 2003 and 2004 NAIC Health Risk-Based Capital Report
Including Overview and Instructions for Companies which includes the RBC formula.
(e)
Filing requirements.
(1)
All companies, except fraternals, subject to this section
are required to file electronically with the NAIC in accordance with and by
the due date specified in the RBC instructions.
(2)
Fraternals shall maintain a paper copy of the report for
review by the department.
(f)
Conflicts. In the event of a conflict between the Insurance
Code, any rule of the department or any specific requirement of this section,
and the RBC formula and/or the RBC instructions, the Insurance Code, rule
or specific requirement of this section shall take precedence and in all respects
control. It is the express intent of this section that the adoption by reference
of the NAIC Risk-Based Capital Reports Including Overview and Instructions
for Companies do not repeal or modify or amend any rule of the department
or any provision of the Insurance Code.
(g)
Actions of commissioner. The level of risk-based capital
is calculated and reported annually. Depending on the results computed by
the risk-based capital formula, the commissioner of insurance may take a number
of remedial actions, as considered necessary. The ratio result of the total
adjusted capital to authorized control level risk-based capital require the
following actions related to an insurer within the specified ranges:
(1)
An insurer reporting total adjusted capital of 150% to
200% of authorized control level risk-based capital institutes a company action
level under which the insurer must prepare a comprehensive financial plan
that identifies the conditions that contribute to the company’s financial
condition. The plan must contain proposals to correct areas of substantial
regulatory concern and projections of the company’s financial condition,
both with and without the proposed corrections. The plan must list the key
assumptions underlying the projections and identify the concerns associated
with the insurer’s business. The RBC plan is to be submitted within
45 days. After review the commissioner will notify the company if the plan
is satisfactory. In the event the commissioner notifies the company that the
plan is not satisfactory, the company shall prepare a revised plan and submit
it to the commissioner. Failure to file this comprehensive financial plan
triggers the next lower action level described in this subsection.
(2)
An insurer reporting total adjusted capital of 100% to
150% of authorized control level risk-based capital triggers a regulatory
action level initiative. At this action level, an insurance company is also
required to file an RBC plan or revised RBC plan within 45 days, and the commissioner
is required to perform any examinations or analyses to the insurer’s
business and operations that is deemed necessary. The commissioner may issue
orders specifying corrective actions to be taken or may require other appropriate
action.
(3)
An insurer reporting total adjusted capital of 70% to 100%
of authorized control level risk-based capital triggers an authorized control
level. In addition to the remedies available at the higher action levels,
the commissioner may take other action deemed necessary, including initiating
a requlatory intervention to place an insurer under regulatory control.
(4)
An insurer reporting total adjusted capital of less than
70% of authorized control level triggers a mandatory control level which subjects
the insurer to one of the following actions:
(A)
being placed in supervision or conservation;
(B)
being determined to be in hazardous financial condition
as provided by the Insurance Code Article 1.32, and §8.3 of this title
(relating to Hazardous Conditions) regardless of percentage of assets in excess
of liabilities;
(C)
being determined to be impaired as provided by the Insurance
Code Articles 1.10, §5 or 3.60; or
(D)
any other applicable sanctions under the Texas Insurance
Code.
(5)
A life insurer subject to this section is subject to a
trend test if its total adjusted capital to authorized control level risk-based
capital is between 200% and 250%. Any life insurer that trends below 190%
of total adjusted capital to authorized control level risk-based capital would
trigger the company action level.
(h)
Prohibition on announcements. Except as otherwise required
under the provisions of this section, the making, publishing, disseminating,
circulating or placing before the public, or causing, directly or indirectly
to be made, published, disseminated, circulated or placed before the public,
in a newspaper, magazine or other publication, or in the form of a notice,
circular, pamphlet, letter or poster, or over any radio or television station,
or in any other way, an advertisement, announcement or statement containing
an assertion, representation or statement with regard to any component derived
in the calculation, by any insurer, agent, broker or the person engaged in
any manner in the insurance business would be misleading and is, therefore,
prohibited. Any violation of this subsection may be considered a violation
of Insurance Code Article 21.21 §(4)(2).
(i)
Prohibition on use in ratemaking. The RBC instructions
and any related filings are intended solely for use by the commissioner in
monitoring the solvency of insurers subject to this section and in taking
corrective action with respect to insurers and shall not be used by the commissioner
for ratemaking nor considered or introduced as evidence in any rate proceeding
nor used by the commissioner to calculate or derive any elements of an appropriate
premium level or rate of return for any line of insurance which an insurer
or any affiliate is authorized to write.
(j)
Limitations. In no event shall the requirements of this
section reduce the amount of capital and surplus otherwise required by provisions
of the Insurance Code or the Texas Administrative Code, or by authority of
the commissioner 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 April 5, 2005.
TRD-200501431
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: April 25, 2005
Proposal publication date: December 24, 2004
For further information, please call: (512) 463-6327
Subchapter I. FINANCIAL REQUIREMENTS
28 TAC §11.809
The Commissioner of Insurance adopts an amendment to §11.809
concerning financial requirements for health maintenance organizations (HMOs)
and certain insurers. The amendment is adopted without changes to the proposal
published in the December 24, 2004, issue of the
Texas Register
(29 TexReg 11909).
The amendment is necessary to facilitate the adoption of the new §7.401
adopted elsewhere in this issue of the
Texas Register
. The amendment is also necessary to delete the obsolete risk-based
capital requirements in this section.
The adopted section will direct HMOs and insurers which file the NAIC health
blank to the new section which consolidates the risk-based capital rules for
all insurers and HMOs in one section while assuring awareness that the risk-based
capital rules for HMOs and certain other insurers have not be eliminated.
No comments were received on the proposal.
The amendment is adopted under the Insurance Code §§843.404
and 36.001. Section 843.404 authorizes the commissioner to adopt rules to
require a health maintenance organization to maintain capital and surplus
levels in excess of statutory minimum levels to assure financial solvency
of health maintenance organizations for the protection of enrollees. Section
36.001 authorizes the commissioner to adopt any rules necessary and appropriate
to implement the powers and duties of the Texas Department of Insurance under
the Insurance Code and other laws of this state.
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 April 5, 2005.
TRD-200501432
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: April 25, 2005
Proposal publication date: December 24, 2004
For further information, please call: (512) 463-6327
Chapter 102.
PRACTICES AND PROCEDURES--GENERAL PROVISIONS
28 TAC §§102.3 - 102.5
The Texas Workers' Compensation Commission (the commission)
adopts amendments to §§102.3 - 102.5, without changes to the proposed
text published in the February 4, 2005, issue of the
Texas Register
(30 TexReg 462).
As required by the Government Code §2001.033, the commission's reasoned
justification for these rules is set out in this order, which includes the
preamble, which in turn includes the rules. This preamble contains a summary
of the factual basis of the rules, a summary of comments received from interested
parties, names of those groups and associations who commented and whether
they were for or against adoption of the rules, and the reasons why the commission
disagrees with some of the comments and proposals.
No changes were made to the proposed rules in response to public comment
received in writing, which are described in the summary of comments and responses
section of this preamble. No public comment was received at a public hearing
held on February 17, 2005.
The adopted amendments establish a primary framework for the commission's
transition to an electronic billing system. Currently, the majority of medical
bills in the Texas workers' compensation system are submitted on paper forms
to insurance carriers, third party administrators, or to medical bill review
vendors. Minimal electronic billing occurs in the system.
House Bill 2511 (HB 2511), passed in 1999 by the 76th Texas Legislature,
added Texas Labor Code §401.024 which allows the commission to adopt
rules to permit or require electronic transmission in place of established
forms, manners, or procedures that require paper processing. The adopted amendments
are part of the commission's Electronic Billing and Reimbursement (eBill)
project initiated to identify and implement an electronic billing solution
for the Texas workers' compensation system. The eBill project is a component
of the commission's Business Process Improvement (BPI) initiative; a coordinated
set of projects that use technology to streamline agency processes to meet
the goals set out in HB 2511.
Adopted amendments to Chapter 102, concerning Practices and Procedures
- General Provisions, apply the provisions of that chapter to medical benefits;
modify language to define electronic communication and electronic transmission;
and include Claim and Medical Electronic Data Interchange (EDI) and electronic
billing and reimbursement as electronic transmissions. The amended rules will
allow greater flexibility for system participants to exchange medical billing,
reimbursement, and documentation data electronically.
Adopted amendments to §102.3(f) remove the reference to specific rules
so that if there is a conflict between this rule and provisions of another
rule applicable to a specific type of benefit, the other rule prevails.
No changes were made to the amendments as proposed to §102.4, concerning
General Rules for Non-Commission Communications. The adopted amendment to
subsection (h) clarifies that the provisions of subsection (h)(2) refer to
mail sent via the United States Postal Service regular mail. The adopted amendment
to subsection (k) expands the definition of written communication by including
"submissions." The adopted amendment to subsection (m) defines electronic
communications and electronic transmissions consistent with §401.024(a)
of the Texas Labor Code. This adopted amendment is consistent with §401.024(a)
of the Texas Workers' Compensation Act. Adopted new subsection (p) establishes
the date of receipt for non-commission communications. Received date is important
in medical bill submission and processing and by defining the received date
the commission is able to more effectively enforce these rules.
The adopted amendments to subsection (d) of §102.5, concerning General
Rules for Written Communications to and from the Commission, adds the term
"the earliest of" to clarify which receipt date will be used when more than
one method can be applied to the facts and clarify that the term "mail" applies
to United States Postal Service regular mail.
These adopted amendments also allow the commission to implement use of
an electronic mail box in place of the physical mail box currently used by
insurance carrier Austin representatives to support the transition to electronic
mail communication under the BPI initiative. The adopted amendments to subsections
(e) and (f) are consistent with language in §102.4(m) and Texas Labor
Code §401.024(a), which define electronic communication and electronic
transmission. Adopted amendments to subsections (e) and (f) also include Claim
and Medical Electronic Data Interchange (EDI) and electronic billing and reimbursement
as electronic transmissions. The adopted amendment to subsection (g) expands
the definition of written communication by including "submissions." The adopted
amendment to subsection (h) defines the meaning of electronic transmissions
and is consistent with §401.024(a) of the Texas Workers' Compensation
Act.
A comment supporting the proposed amendments to §§102.3 - 102.5
was received from the Insurance Council of Texas.
Comments opposing the proposed amendment to §§102.3 - 102.5 were
received from the following groups: Rogers, Booker, and Trevino, P.C. and
Absolue Dance Studio.
Summaries of the comments and commission responses are as follows:
COMMENT: Commenter stated support of the adopted amendments. Commenter
stated the move to electronic bill submissions and reimbursement data will
result in significant improvements in the timely billing and payment of medical
bills for treatment provided to injured employees and will also result in
significant cost savings to the workers' compensation system by reducing the
amount of paper that flows to and from the various system participants.
RESPONSE: The commission agrees.
COMMENT: Commenter stated that proposed §102.4(p) is contrary to current §130.12(b)
and that the rule should specify that other rules requiring delivery through
verifiable means would not be trumped by §102.4(p).
RESPONSE: The commission disagrees that subsection (p) of §102.4,
relating to General Rules for Non-Commission Communication, conflicts with
subsection (b) of §130.12, relating to the Finality of the First Certification
of Maximum Medical Improvement and/or First Assignment of Impairment Rating
since these two rules regulate different types of communication. Section 102.4(p)
relates to communication between parties that do not involve the commission.
Section 130.12(b) relates to the timeframes to appeal decisions of maximum
medical improvement and/or first assignment of impairment rating to the commission.
COMMENT: Commenter stated that §102.5(d) does not address issues raised
by the appeals panel and court decisions regarding actual receipt date. Commenter
suggested use of the language, "unless the recipient acknowledges receipt
at an earlier date." Commenter further recommended that the receipt date in §102.5(d)
be the first working day five days after the date mailed via United States
Postal Service and the deemed receipt date should only be on a working day
because holidays affect the receipt date for insurance carriers and injured
workers on holidays. The commenter further stated that it does not seem reasonable
to apply the working day provision only to communication placed in the insurance
carrier's Austin representative box. Finally, the commenter states that such
a provision gives the impression of being consistent with §102.2(a)(3).
RESPONSE: The commission understands the commenter's points regarding the
actual receipt date. No change to the proposed amendments to subsection (d)
of §102.5 will be made at this time. Additional language to address commenter's
concerns will likely be proposed in the future as the commission's transition
to an electronic billing system progresses beyond the foundational level and
further amendments are appropriate. The commission disagrees that the working
day provision needs to be added to this rule as subsection (d) of §102.3,
relating to Computation of Time, already addresses the commenter's concerns.
The computation of time relating to receipt of correspondence on a non-working
day is addressed in subsection (d) of §102.3 which indicates that "any
written or telephonic communication received other than during normal business
hours on working days are considered received at the beginning of normal business
hours on the next working day." The commission disagrees with the reference
to §102.2(a)(3) relating to Gifts, Grants, and Donations, as the two
rules are unrelated.
COMMENT: Commenter states that the commission does not have the power to
change §410.202(a), statutory "received" requirement to a "deemed received"
requirement.
RESPONSE: The commission disagrees. The adopted amendments do not conflict
with the statutory requirements of receipt dates. Section 410.202(a) relates
to the timeframe for responding to correspondence. Adopted §102.5(d)
defines the receipt dates of written communication to and from the commission
and not the timeframe to respond to such correspondence.
The amended rules are adopted pursuant to the Texas Labor Code §402.061,
which requires the commission to adopt rules necessary for the implementation
and enforcement of the Texas Workers Compensation Act; Texas Labor Code §401.024,
which provides the commission the authority to require use of facsimile or
other electronic means to transmit information in the system; Texas Labor
Code §402.042 which authorizes the Executive Director to enter orders
as authorized by the statute as well as to prescribe the form, manner, and
procedure for transmission of information to the commission; Texas Labor Code §402.061,
which authorizes the commission to adopt rules necessary for the implementation
and enforcement of the Texas Workers' Compensation Act; Texas Labor Code §413.008
which authorizes the commission to collect certain medical bill and payment
information from the insurance carrier; and HB 2511, 76th Texas Legislature
which sets goals for the reduction of paper communication requirements.
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 April 8, 2005.
TRD-200501471
Susan Cory
General Counsel
Texas Workers' Compensation Commission
Effective date: April 28, 2005
Proposal publication date: February 4, 2005
For further information, please call: (512) 804-4288
Subchapter I. PROVIDER BILLING PROCEDURES
Chapter 11.
HEALTH MAINTENANCE ORGANIZATIONS
Part 2.
TEXAS WORKERS' COMPENSATION COMMISSION
Chapter 134.
BENEFITS--GUIDELINES FOR MEDICAL SERVICES, CHARGES, AND PAYMENTS