PART 1. TEXAS DEPARTMENT OF INSURANCE
CHAPTER 33. CONTINUING CARE RETIREMENT FACILITIES
The Commissioner of Insurance (Commissioner) adopts amendments to §§33.2, 33.204, 33.403 and 33.404, relating to continuing care retirement facilities generally, application for a certificate of authority, and escrow accounts. The sections are adopted without changes to the proposed text published in the August 22, 2008, issue of the Texas Register (33 TexReg 6722).
REASONED JUSTIFICATION. A continuing care retirement facility, also referred to as a "continuing care retirement center" (CCRC), is an establishment, complex, campus, or group of living units at which a provider engages in the business of providing continuing care. CCRCs are regulated pursuant to the Texas Continuing Care Facility Disclosure and Rehabilitation Act, Health and Safety Code, Chapter 246. A CCRC that is constructed on an as-needed basis and for which a certificate of authority is obtained from the Texas Department of Insurance (Department) prior to facility construction is considered a "phase-in facility." The 80th Texas Legislature, Regular Session, passed House Bill 2392, effective June 15, 2007, adding §246.0735 and §246.0736 to the Health and Safety Code. Section 246.0735 authorizes the Commissioner to create different escrow release requirements for providers that obtain a certificate of authority issued under Chapter 246 prior to facility construction. Section 246.0736 requires the Commissioner to adopt rules to implement the escrow release process.
Traditionally, CCRC operators (the term "operator" and "provider" are used interchangeably in this adoption order) and have first built their facilities, next obtained their certificate of authority from the Department, and then began accepting residents. As a result, the rules regulating CCRC operators prior to this adoption addressed only this kind of business model. However, certain CCRC operators have recently changed their manner of operation by opting to obtain their certificate of authority from the Department prior to facility construction, and subsequently building their facilities in phases on an as-needed basis, depending on demand. This deviation from traditional CCRC operations created a challenge for the Department and the phase-in CCRC provider because the regulations prior to this adoption were not designed to address this phase-in process.
Under the rules prior to this adoption, a continuing care provider operating a phase-in facility had to complete and submit multiple filings with an escrow agent, and subsequently with the Department, each and every time the provider wanted to access funds in an entrance fee escrow account. However, under the adopted amendments, these providers may make an initial filing with the escrow agent, and subsequently with the Department, and then further supplement the filing with quarterly reports to demonstrate the provider's ongoing financial fitness as a whole. This will avoid the submission of multiple reports that fail to provide the pertinent financial information necessary for efficient monitoring by the Department.
The adopted amendments to §§33.2, 33.403, and 33.404 are necessary to implement a process by which continuing care providers who operate facilities that are built on a phase-in basis can access funds from statutorily created entrance fee escrow accounts without creating excessive reporting to the Department, but also while continuing to safeguard the continuing care providers' clients' funds.
The adopted amendment to §33.2 is necessary to revise the definition of "facility" in order to implement newly enacted Health and Safety Code §246.0735. Section 246.0735 authorizes the Commissioner to create different requirements for escrow release for phase-in facilities. Not amending §33.2 would frustrate a phase-in facility's ability to comply with the requirements of Title 33.
The adopted amendment to §33.204, relating to the contents of the application for the certificate of authority, is necessary to specify requirements relating to the number of items that must be provided by an applicant for a certificate of authority to operate as a CCRC. There is no change in the substance of the requirements specified in the rule prior to this adoption. Specifically, applicants are required to provide an original and two copies of all 19 items listed in §33.204, as applicable, instead of only 9 of the items.
The adopted amendments to §33.403, relating to the release of funds from the entrance fee escrow account to the provider, are necessary to implement newly added Health and Safety Code §246.0736. Section 246.0736 provides for the continuing release of escrow if certain conditions are met. These adopted amendments specify the requirements for the release of entrance fee escrow funds for phase-in facilities in order to satisfy the conditions of Health and Safety Code §246.0736. The amendments address phase-in facilities and their method of operations, and provide instructions on how phase-in facility operators achieve release of entrance fee escrow funds.
The adopted amendments to §33.404, relating to loan reserve fund escrow account(s), are necessary to ensure that CCRC operators who lease their facilities maintain one year's worth of anticipated lease payments for the facility in escrow, similar to requirements for CCRC-owned facilities.
HOW THE SECTIONS WILL FUNCTION.
Section 33.2, Definitions. The adopted amendment to §33.2(13) revises the definition of "facility" in order to accommodate newly enacted Health and Safety Code §246.0735. Under §246.0735, the Commissioner is authorized to create different requirements for escrow release for phase-in facilities. Under the amended definition of "facility," the other requirements of Title 33 will apply to phase-in facilities built on an as-needed basis.
Section 33.204, Contents of Application for Certificate of Authority. Under the adopted amendment to §33.204, an applicant for a certificate of authority to operate as a CCRC is required to provide an original and two copies of all 19 items listed in §33.204, as applicable.
Section 33.403, Release of Funds from the Entrance Fee Escrow Account to Provider. Under the adopted amendments to §33.403, phase-in CCRC operators must provide evidence of occupancy and 10 percent of the entrance fees for a phase-in facility instead of evidence that a facility is at least 50 percent reserved for CCRC residents and 10 percent of the entrance fees as a condition to be met before entrance fee escrow funds can be released. Other adopted amendments to §33.403 incorporate "leasing" or "lease payments" into the conditions to be met before entrance fee escrow release for phase-in CCRC operators. The inclusion of these terms results in the application of the conditions in §33.403 to CCRC operators who lease their facilities.
Section 33.404, Loan Reserve Fund Escrow Account. Under the adopted amendments to §33.404, CCRC operators who lease their facilities must maintain a loan reserve fund escrow account equal to 12 months of lease payments for the facilities.
SUMMARY OF COMMENTS. The Department did not receive any comments on the published proposal.
SUBCHAPTER A. GENERAL PROVISIONS
STATUTORY AUTHORITY. The amendments are adopted pursuant to the Health and Safety Code §§246.003, 246.022, 246.0735, and 246.0736 and Insurance Code §36.001. The Health and Safety Code §246.003 authorizes the Commissioner to adopt rules to administer and enforce Chapter 246 of the Health and Safety Code. The Health and Safety Code §246.022 requires the Commissioner to adopt rules stating the information an applicant for a certificate of authority to operate a CCRC must submit. The Health and Safety Code §246.0735 authorizes the Commissioner to create different escrow release requirements for providers that obtain a certificate of authority issued under Chapter 246 prior to facility construction. The Health and Safety Code §246.0736 requires the Commissioner to adopt rules to implement the escrow release process. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance and other laws of the 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 February 17, 2009.
TRD-200900662
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: March 9, 2009
Proposal publication date: August 22, 2008
For further information, please call: (512) 463-6327
STATUTORY AUTHORITY. The amendments are adopted pursuant to the Health and Safety Code §§246.003, 246.022, 246.0735, and 246.0736 and Insurance Code §36.001. The Health and Safety Code §246.003 authorizes the Commissioner to adopt rules to administer and enforce Chapter 246 of the Health and Safety Code. The Health and Safety Code §246.022 requires the Commissioner to adopt rules stating the information an applicant for a certificate of authority to operate a CCRC must submit. The Health and Safety Code §246.0735 authorizes the Commissioner to create different escrow release requirements for providers that obtain a certificate of authority issued under Chapter 246 prior to facility construction. The Health and Safety Code §246.0736 requires the Commissioner to adopt rules to implement the escrow release process. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance and other laws of the 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 February 17, 2009.
TRD-200900664
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: March 9, 2009
Proposal publication date: August 22, 2008
For further information, please call: (512) 463-6327
STATUTORY AUTHORITY. The amendments are adopted pursuant to the Health and Safety Code §§246.003, 246.022, 246.0735, and 246.0736 and Insurance Code §36.001. The Health and Safety Code §246.003 authorizes the Commissioner to adopt rules to administer and enforce Chapter 246 of the Health and Safety Code. The Health and Safety Code §246.022 requires the Commissioner to adopt rules stating the information an applicant for a certificate of authority to operate a CCRC must submit. The Health and Safety Code §246.0735 authorizes the Commissioner to create different escrow release requirements for providers that obtain a certificate of authority issued under Chapter 246 prior to facility construction. The Health and Safety Code §246.0736 requires the Commissioner to adopt rules to implement the escrow release process. The Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance and other laws of the 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 February 17, 2009.
TRD-200900663
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: March 9, 2009
Proposal publication date: August 22, 2008
For further information, please call: (512) 463-6327