Proposed Sections
Before an agency may permanently adopt a new or amended section, or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before any action may be taken. The 30-day time period 
gives interested persons an opportunity to review and make oral or written 
comments on the section. Also, in the case of substantive sections, a public 
hearing must be granted if requested by at least 25 persons, a governmental 
subdivision or agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of bold text. [Brackets] indicate deletion of existing 
material within a section.
TITLE 16. ECONOMIC REGULATION
Part I. Railroad Commission of Texas
Chapter 3. Oil and Gas Division
Conservation Rules and Regulations
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Railroad 
Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.)
The Railroad Commission of Texas proposes the repeal of  s3.30 and amendments to 
sec.sec.3.31, 3.34, and 3.49, concerning gas nominations required, gas well 
allowables, gas to be produced and purchased ratably, and gas-oil ratio. These 
proposals eliminate the requirement of filing nominations; establish a procedure 
for determining market demand for each reservoir based on prior production and 
other information; eliminate the "U", "L", and "O*" allowable provisions; change 
the commission's law or policy regarding prorated well allowable limiting 
routines that rely on short-term production history; and establish an allowable 
review procedure for nonprorated and associated wells. The existing language in 
sec.3.30 was adopted by the Railroad Commission on February 9, 1987, and 
published in the February 17, 1987, issue of the Texas Register (12 TexReg 536); 
sec.3.31 was adopted by the Railroad Commission on August 11, 1986, and 
published in the August 19, 1986, issue of the Texas Register (11 TexReg 3680); 
sec.3.34 was adopted by the Railroad Commission on February 1, 1988, and 
published in the February 12, 1988, issue of the Texas Register  (13 TexReg 
838); and sec.3.49 was adopted by the Railroad Commission to be effective on 
January 1, 1976.
Rita E. Percival, systems analyst, oil and gas division, has determined that for 
the first five-year period the repeals are in effect there will be fiscal 
implications as a result of enforcing or administering them. The effect on state 
government for the first five-year period the sections are in effect will be an 
estimated cost of $38,304 for fiscal year 1992 and an estimated savings of $1, 
386 per year fiscal years 1993-1996. There will be no fiscal implications for 
local government.
Peggy S. Gray, hearings examiner, legal division, has determined that for each 
year of the first five years the sections are in effect the public benefit 
anticipated as a result of enforcing the sections will be increased 
understanding of the sections and more accurate determination of reservoir 
market demand and well allowables. There will be no effect on small businesses. 
The economic cost anticipated for those persons who are required to comply with 
the proposal is the value of lost time that will be spent analyzing and 
implementing the proposal. The net effect of the proposal will be a cost savings 
for persons who are currently required to file nominations because the optional 
filing for adjustments will only be necessary when prior production history does 
not completely reflect actual market demand.
Comments on the entire text of the proposals may be submitted to Peggy Gray, 
Hearings Examiners, Oil and Gas Section, Legal Division, Railroad Commission of 
Texas, P.O. Drawer 12967, Austin, Texas 78711-2967. The docket number for the 
proposal is 20-97, 100. All comments must be submitted by 5 p.m. on March 12, 
1992. The Railroad Commission will hold a public hearing on February 26, 1992, 
at 9 a.m. at the William B. Travis State Office Building, 1701 North Congress 
Avenue, Austin, pursuant to the Administrative Procedure and Texas Register Act, 
sec.5(c), Texas Civil Statutes, Article 6252-13a, sec.5(c). For room assignment 
on the date of the hearing please check the bulletin board located in the first 
floor lobby.
278>16 TAC sec.3.30
The repeal is proposed under the Texas Natural Resources Code, sec.sec.81.051, 
81. 052, 85.046, 85.053, 85.055, 85.201-85.203, 86.011, 86.012, 86.041, 86.042, 
86. 081, 86.083-86.090, 86.094, 111.083, 111.090, and 111.133, which provides 
the Railroad Commission of Texas with the authority to adopt rules for the 
following purpose: to govern and regulate persons and their operations under the 
jurisdiction of the Railroad Commission; to prevent waste of oil and gas in 
drilling and producing operations; to distribute, prorate, and apportion 
allowable production to effectuate the provisions and purposes of the Natural 
Resources Code, Chapter 86; to conserve and prevent waste of gas; to prevent 
discrimination in the production and purchasing of gas; to prevent monopolistic 
practices which may be injurious to the general public; and to regulate common 
purchasers of gas to achieve the prior purposes.
sec.3.30. Gas Nominations Required.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201700
Nolan Ward
Secretary
Railroad Commission of Texas
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6941
       
16 TAC sec.sec.3.31, 3.34, 3.49
The amendments are proposed under the Texas Natural Resources Code, sec.sec.81. 
051, 81.052, 85.046, 85.053, 85.055, 85.201-85.203, 86.011, 86.012, 86.041, 86. 
042, 86.081, 86.083-86.090, 86.094, 111.083, 111.090, and 111.133, which 
provides the Railroad Commission of Texas with the authority to adopt rules for 
the following purposes: to govern and regulate persons and their operations 
under the jurisdiction of the Railroad Commission; to prevent waste of oil and 
gas in drilling and producing operations; to distribute, prorate, and apportion 
allowable production; to effectuate the provisions and purposes of the Natural 
Resources Code, Chapter 86; to conserve and prevent waste of gas; to prevent 
discrimination in the production and purchasing of gas; to prevent monopolistic 
practices which may be injurious to the general public; and to regulate common 
purchasers of gas to achieve the prior purposes.
sec.3.31. Gas Well Allowables.
(a)-(b) (No change.)
(c)  Requirements for gas wells in a field for which an allocation formula has 
been adopted.
(1) If acreage is a factor in the allocation formula, a certified plat showing 
the acreage assigned to the well for proration purposes shall be submitted. The 
plat must be accompanied by a statement that all of the acreage claimed can 
reasonably be considered productive of gas and that the distance limitations of 
the field rules have not been exceeded. If all of the acreage claimed is not 
contained in a single lease, a certificate of pooling authority must be 
submitted, on the appropriate commission form. If the distance limitations of 
the field rules are shown to have been exceeded, the plat must show the number 
of acres within and beyond the distance limitations. An operator may request an 
exception to the distance limitations which may be administratively approved by 
the <nl>commission or a commission representative<ol> [director of the Oil and 
Gas Division (director) or the director's delegate] if all the acreage can be 
considered productive. If approval of the request is declined or protest is 
received, the request may be set for hearing. If all of the acreage cannot be 
considered productive, the plat must also show the productive limit of the 
acreage. If a plat shows acreage in the unit in excess of the maximum number of 
acres permitted by the field rules, it will not be accepted.
(2)-(3) (No change.)
(d)  <nl>Determining reservoir allowables and lawful market demand 
<ol>[Ascertaining allowables by adjustment of gas nominations and 
deliverabilities].
<nl>(1) On or before the 20th day of the preceding month, the commission will 
determine the lawful market demand for gas to be produced from each reservoir 
during the upcoming allowable month. The monthly reservoir allowable shall be 
equal to the lawful market demand for that reservoir. The lawful market demand 
is the first prior year's allowable month's production multiplied by the 
calculated decline factor plus inactive well production plus necessary 
adjustments.
<nl>(A) Allowable month-the month during which allowables determined pursuant to 
this section will be effective.
<nl>(B)  First prior year's allowable month's production -the total production 
during the same allowable month in the first prior year from wells that will be 
active in the allowable month and reported production in same allowable month in 
the first prior year. A well is presumed to be active if all commission 
prerequisites for assignment of an allowable have been satisfied.
<nl>(C)  Calculated decline factor-for wells that reported production in the 
same allowable month during both the first and second prior year, the total 
production of such wells in the first prior year's allowable month divided by 
the total production of such wells in the second prior year's allowable month. 
The calculated decline factor cannot be greater than 1.00 or less than 0.90.
<nl>(D) Inactive well production -for new or previously inactive wells that will 
be active in the allowable month and had zero or no production reported in the 
first prior year's allowable month, the deliverability of such wells corrected 
to a monthly production amount. If the well has reported production during any 
of the three most recently reported production months, then the largest monthly 
production during those months will be used instead.
<nl>(E) Necessary adjustments-any further adjustments to the reservoir market 
demand determination that are necessary to more accurately determine the lawful 
market demand for the reservoirs. The amount of the necessary adjustment may be 
based on, but is not limited to, the status of gas production from all 
reservoirs in the state, promotion of conservation of the state's gas resources, 
prevention of waste, prevention of unlawful discrimination, protection of 
correlative rights, and correlative opportunities of each owner of gas in a 
common reservoir to produce and use or sell the gas. For changes in market 
demand, the commission may consider credible information received from all 
sources including, but not limited to, representatives of pipelines, producers, 
and purchasers.
<nl>(2) Any person, other than the commission, requesting a necessary adjustment 
must file such a request no later than the fifth day of the month preceding the 
allowable month. Any appropriate information supporting the request may be 
submitted with the request.
<nl>(A) To be considered, a request for a necessary adjustment must designate 
which of the following reasons support the request:
<nl>(i) <nl> additional demand for the field that was not previously met with 
gas produced from the state:
<nl>(ii)<nl> additional demand for a field that was previously met with 
production from another field in the state: or
<nl>(iii)<nl> abnormal operating conditions that did not permit production from 
the reservoir to satisfy existing market demand during the first prior year's 
allowable month.
<nl>(B) A request for a necessary adjustment pursuant to subparagraph (A) (2)(i) 
or (ii) of this paragraph will be verified by the commission according to all of 
the following:
<nl>(i)<nl> information indicating that the field has produced 85% of the 
assigned allowable during the three most recently reported months:
<nl>(ii)<nl> information indicating that aggregate underproduction for all 
underproduced wells in the field is less than 25% of the estimated market 
demand; and
<nl>(iii)<nl> a verification statement on the request form by a purchaser 
indicating that it reasonably anticipates the need for the additional gas from 
the field.
<nl>(C) A request for a necessary adjustment pursuant to subparagraph 
(A)(2)(iii) of this paragraph must be verified by a statement from a person 
having knowledge of the operating conditions in the field that describes the 
nature of the abnormal operating condition and estimates the amount of 
production restricted by the condition.
<nl>(D) The lawful market demand for each reservoir, which includes the amount 
of any necessary adjustment, shall be determined at the statewide hearing called 
pursuant to the Texas Natural Resources Code,  s86.085.
<nl>(E)  Any person allegedly aggrieved by the commission's determination of the 
necessary adjustment may file a complaint supported by prima facie evidence with 
the commission that alleges good cause to review the determination. After notice 
and opportunity for hearing given to all operators in the field, the commission 
will determine whether corrective action to future allowables should be taken.
<nl>(3) On its own motion or the request of an operator in the field, the 
commission may determine, after notice and opportunity for hearing given to all 
operators in the field, a decline factor determined by generally accepted 
engineering practices that will be used instead of the calculated decline 
factor. The decline factor may be determined administratively by the commission 
or the commission's representative if all operators in the field have been given 
at least 21 days' notice and no protest has been filed.
[(1) The allocation of allowables to all wells in non-associated prorated gas 
fields reservoirs will be determined from the nominations submitted. Prorated 
gas fields are reservoirs or fields in which an allocation formula is in effect. 
In order to ascertain the reasonable reservoir market demand for the gas, 
nominations for gas may be adjusted by comparing the latest reported production 
from the field to the nominations filed for the field for that period.
[(2)  The total nominations for a field for gas from prorated wells for a month 
shall be determined by subtracting the total allowable assigned to nonprorated 
wells for the month from the total nominations for that month for gas from all 
wells in the field.
[(3) Nothing in this subsection shall be interpreted as binding to prevent the 
commission from making other adjustments to nominations when necessary to bring 
allowables for gas to an amount equal to market demand as required by statute.
[(4) No gas well shall be given an allowable in excess of an amount determined 
by the lesser of the well's latest deliverability test on file with the 
commission or the well's highest daily production in any month during the last 
12 months in the production records of the commission at the time the allowable 
is assigned. The daily production is the reported monthly production divided by 
the number of days in the month. If there is a substantial increase in 
production, the commission may determine the highest daily production from 
monthly data submitted by the operator which is more recent than that in the 
production records of the commission.]
<nl>(e) Revision of gas wells' allowables.
<nl>(1) No gas well shall be given an allowable in excess of an amount 
determined by the well's latest deliverability test on file with the commission.
<nl>(2) A nonassociated gas well's allowable may be revised based on prior 
production. However, such a revision must consider at least seven months of 
prior reported production and be established by field rules. Revisions of well 
allowables otherwise specifically provided for in this section or by statute are 
not affected by this paragraph. If any special rules governing any field 
conflict with the provisions of this paragraph then this paragraph shall govern.
<nl>(f)<ol>[(e)] Fields operating under statewide rules.
(1) A statewide prorated field is any [nonassociated] gas field in which no 
special field rules have been adopted and in which at least one well in the 
field has a current reported deliverability of greater than 200 Mcf a day. Daily 
allowable production of gas from individual wells in a statewide prorated field 
shall be determined by allocating the allowable production among the individual 
wells in the proportion that each well's capability to produce (based on the 
latest adjusted deliverability test of record [as determined in subsection 
(d)(4) of this section]) bears to the summation of the most recent reported 
capabilities of all wells producing from the same field.
(2) A statewide exempt field is any [nonassociated] gas field in which no 
special field rules have been adopted and in which no well in the field has a 
current reported deliverability of greater than 200 Mcf a day. Wells in 
statewide exempt fields shall be assigned allowables equal to their capacity to 
produce.
<nl>(g)<ol>[(f)] <nl>Definitions of<ol> [Allowables for] prorated and 
nonprorated wells.
(1) A prorated well is a well for which an allowable is determined by an 
allocation formula.
[(2) 0* allowable wells are prorated wells with an allowable assigned on a 
field-wide basis, excluding special allowable wells, that aids in balancing 
production in that field. Under a O* allowable all production in the month that 
the allowable is assigned is considered overproduction.]
<nl>(2)<ol>[(3)] A nonprorated well is a well for which an allowable is not 
determined by an allocation formula.
<nl>(3)<ol>[(4)] A limited well is a nonprorated well with an allowable set 
below the maximum allowable it would receive under the allocation formula. A 
limited well shall be assigned an allowable at the rate that the well is capable 
of producing <nl>as determined by the most recent deliverability test on file 
with the commission.
<nl>(4)<ol>[(5)] A special allowable well is a nonprorated well granted a fixed 
allowable by the commission after notice and hearing.
<nl>(5)<ol>[(6)] An administrative special allowable well is a nonprorated well 
that has been granted a fixed allowable pursuant to subsection <nl>(k)<ol>[(j)] 
of this section.
<nl>(6)<ol>[(7)] Exempt allowable (X) wells are nonprorated wells in an exempt 
field and are assigned an allowable on a field-wide basis that allows wells to 
produce at capacity.
<nl>(h)<ol>[(g)] Allowable adjustments and balancing provisions for 
<nl>nonprorated<ol> [limited] wells.
(1) A <nl>nonprorated<ol> [limited] well shall not be allowed to accumulate 
underproduction.
(2)  If the most recent production figures reported to the commission show a 
<nl>nonprorated<ol> [limited] well to be overproduced, the allowable will be 
revised to cover overproduction up to the maximum allowable which the well can 
be assigned under an allocation formula. If the indicated capability of a 
<nl>nonprorated <ol> well to produce, plus its latest recorded overproduction, 
is less than its formula allowable, sufficient allowable will be assigned to 
balance the allowable with production.
(3) If a <nl>nonprorated <ol>[limited] well is assigned an allowable that 
results in its removal from the nonprorated classification, the underage status 
of the well shall be reinstated in the amount discontinued at the time the well 
was placed in the nonprorated category. However, credit will not be given for 
underproduction attributable to those months when the well was in a nonprorated 
category, nor will credit be given for underproduction that accumulated prior to 
the immediately preceding balancing period.
<nl>(4) The allowable for a well in a nonprorated field shall be limited to the 
lesser of:
<nl>(A) the maximum allowable the well can receive under applicable rules;
<nl>(B) the well's latest deliverability test on file with the commission; or
<nl>(C) for wells that reported production during any of the three most recently 
reported production months, the largest monthly production during those months 
averaged to a daily amount.
<nl>(i)<ol>[(h)]  Balancing provisions for overproduction and underproduction of 
gas for wells completed in prorated gas fields.
(1) Balancing provisions for prorated fields. Except as provided in subsection 
<nl>(h)<ol>[(g)] of this section or as necessary to prevent waste or protect 
correlative rights, balancing provisions will be applied for wells completed in 
prorated gas fields.
(2)-(3) (No change.)
(4) Underproduction.
(A) (No change.)
(B)  The amount of underproduction to be carried forward into any new balancing 
period as allowed production during such new balancing period shall consist of 
the actual underproduction that accrued in the balancing period immediately 
preceding such new balancing period; and the accumulative well status as to 
underproduction, will be adjusted on each balancing date accordingly. An 
operator may request that underproduction not balanced during a second balancing 
period be carried forward to subsequent balancing periods. The operator's 
request must include evidence of increased market demand that will allow 
underproduction to be produced in the subsequent balancing period. The request 
may be granted administratively by <nl>the commission or a commission 
representative <ol> [director or the director's delegate] if the request was 
filed no later than the first day of the balancing period following the date the 
underproduction is canceled, the operator has given at least 21 days' notice to 
all other operators in the field and the first purchaser of gas from the subject 
well, and no protest to the request has been filed. The request may also be 
approved administratively if the operator provides written waivers of objection 
from all to whom notice should be given as an alternative to notice and absence 
of protest. If the  <nl>commission or a commission representative<ol> [director 
or the director's delegate] declines to grant administratively the request, the 
operator may request a hearing.
(C) If a producing well has been accumulatively underproduced on each of two 
successive balancing dates, the well shall not be assigned a monthly allowable 
greater than the highest monthly production from the well during the immediately 
preceding balancing period; provided, however, the [limited] allowable assigned 
to the well may be adjusted to a value not to exceed the allowable applicable to 
the well under the allocation formula upon certification to the commission from 
the operator that such well is producing gas in excess of the [limited] 
allowable assigned it. <nl>A well assigned an allowable pursuant to this 
subparagraph shall be classified as a nonprorated well.
(5) Overproduction.
(A) (No change.)
(B) A well overproduced as of a balancing date, which was also overproduced on 
the balancing date immediately preceding and remained overproduced for the 
entire period between the two balancing dates, shall be shut-in until the 
overproduction, existent as of the later of such two balancing dates, is made 
up. Upon request by the operator, the commission may grant authority to produce 
such a well at a fractional part of its monthly allowable (reduced rate) until 
its production and allowable are in balance. The <nl>commission or commission 
representative<ol> [director or the director's delegate] may determine the 
permissible rate.
(C) If a protest is received or the commission declines to approve a request to 
produce at a reduced rate, the operator of a well which under the provisions of 
subparagraph (B) of this paragraph is required to be shut-in, may request a 
hearing before the commission to determine whether shutting-in the well would 
damage it. Notice of the hearing will be given to all operators in the field and 
the first purchaser of the subject well. If, after consideration of the evidence 
submitted at the hearing, the commission finds that the well would be damaged if 
shut-in, the commission may allow the overproduction charged against it to be 
made up at a lesser rate than it would be made up if the well were shut-in. The 
<nl>commission or a commission representative<ol> [director or the director's 
delegate] may determine the permissible rate pending the result of the hearing.
(D) (No change.)
<nl>(j)<ol>[(i)] Suspension of allocation formula.
(1) The <nl>commission or a commission representative<ol> [director or the 
director's delegate] may administratively suspend the allocation formula for a 
particular gas field if:
(A)-(C) (No change.)
(2) Suspension of the allocation formula may be initiated by the <nl>commission 
or a commission representative<ol> [director, by the director's delegate], by 
one of the operators in the field, or by one of the first purchasers in the 
field.
(A) The <nl>commission or a commission representative<ol> [director of oil and 
gas or the director's delegate] will determine which fields are appropriate for 
suspension utilizing the criteria of paragraph (1) of this subsection. The 
allocation formula may be suspended administratively by the <nl>commission or a 
commission representative<ol> [director or the director's delegate] if the 
applicant has given at least 21 days' notice of intent to suspend the allocation 
formula for a particular field to each of the operators and first purchasers in 
the field and no protest has been made.
(B) If it is anticipated that suspension of the allocation formula will cause a 
pipeline limitation in a field, first purchasers in the field for which 
suspension of the allocation formula is requested shall notify the 
<nl>commission or a commission representative<ol> [director or the director's 
delegate] within 21 days of the mailing date of the notice of intent to suspend 
the allocation formula.
(C) The allocation formula may also be suspended administratively if the 
applicant provides written waivers of objection from all to whom notice would be 
given. If the <nl>commission or a commission representative <ol> [director or 
the director's delegate] declines to suspend administratively the allocation 
formula, the applicant may request a hearing as provided for in paragraph (4) of 
this subsection.
(3)  Reinstatement of the allocation formula may be initiated by the 
<nl>commission or a commission representative<ol> [director, by the director's 
delegate], by one of the operators in the field, or by one of the first 
purchasers in the field.
(A) If the market demand for gas from a field with suspended allocation drops 
below 100% of deliverability at any time, the operators and/or first purchasers 
for the field shall immediately notify the <nl>commission or a commission 
representative<ol> [director or director's delegate] and give an explanation of 
the reduction in demand. The <nl>commission or a commission representative<ol> 
[director or director's delegate] will then make a determination of whether the 
allocation formula should be reinstated and may immediately reinstate the 
allocation formula.
(B) If a pipeline limitation occurs after suspension of the allocation formula, 
first purchasers in the field shall immediately notify the <nl>commission or a 
commission representative<ol> [director or the director's delegate]. The 
<nl>commission or a commission representative <ol> [director or the director's 
delegate] will then make a determination of whether the allocation formula 
should be reinstated and may immediately reinstate the allocation formula.
(C) An operator or first purchaser may request that the allocation formula for a 
field be reinstated administratively. The request may be approved 
administratively by the <nl>commission or a commission representative <ol> 
[director or the director's delegate] if the applicant provides to the 
commission written waivers of objection from all operators and first purchasers 
for a field. If the applicant fails to secure all necessary waivers or if the  
<nl>commission or a commission representative<ol> [director or the director's 
delegate] declines to approve the request, the operator may request a hearing as 
provided for in paragraph (4) of this subsection. If the matter is set for 
hearing, the allocation formula may be reinstated administratively by the 
<nl>commission or a commission representative <ol> [director or the director's 
delegate] pending the result of the hearing. The notice of request for 
reinstatement shall specify the date on which allocation again becomes 
effective.
(4) If the <nl>commission or a commission representative<ol> [director or the 
director's delegate] denies administratively a request to suspend or reinstate 
allocation formula in a particular field, the applicant may request a hearing. 
In addition to the criteria set forth in paragraph (1) of this subsection, the 
commission will consider whether suspension or reinstatement is necessary to 
prevent waste or protect correlative rights.
(5) (No change.)
<nl>(k)<ol>[(j)] Administrative special allowable. A well which demonstrates by 
both deliverability test and production data a deliverability of 100 Mcf or less 
is eligible for an administrative special allowable equal to its deliverability.
sec.3.34. Gas to be Produced and Purchased Ratably.
<nl>(a) Definitions. The following words and terms, when used in this section 
and in sec.3.31 of this title (relating to Gas Well Allowables) (Statewide Rule 
31) shall have the following meanings, unless the context clearly indicates 
otherwise.
<nl>(1) Affiliate-A person or entity that owns, is owned by, or is under common 
ownership with another person or entity to the extent of 50% or more or that 
otherwise controls or is controlled by another person or entity. Affiliates of a 
common entity are also affiliates of each other. A person or entity that 
purchases gas solely for purposes other than resale shall not be considered an 
affiliate, and an interstate pipeline, as defined in the Natural Gas Policy Act 
of 1978, sec.2(15) (15 United States Code, sec.3301 et seq), shall not be 
considered an affiliate of an intrastate pipeline.
<nl>(2) Commission representative -A Railroad Commission employee authorized to 
act for the commission. Any authority given to a commission representative is 
also retained by the commission. Any action taken by the commission 
representative is subject to review by the commission.
<nl>(3)  Downstream purchaser -One that purchases natural gas for resale and is 
not a first purchaser.
<nl>(4) First purchaser or initial purchaser-The first purchaser of natural gas 
produced from a well. A first purchaser and any affiliate of the purchaser that 
transports any natural gas it purchases from a well by use of the same pipeline 
system used by the first purchaser of which it is an affiliate shall be treated 
as a single first purchaser for purposes of ratability requirements; provided, 
however, that an affiliate that is purchasing and accepting deliveries pursuant 
to a special marketing program that is in compliance with this section, shall be 
treated as a separate first purchaser; and, provided further that the 
designation of such affiliate as a separate first purchaser is reviewable by the 
commission and may be disallowed upon a showing that the designation was for 
purposes of circumventing this section. Any affiliate may file forms in its own 
name.
<nl>(5) Pipeline system-A network of physically connected pipelines that are 
operated as a single unit under normal conditions.
<nl>(A) A first purchaser's pipeline system is that portion of a physical 
segment of a pipeline that the first purchaser owns.
<nl>(B) If a first purchaser does not own the pipeline it uses to transport its 
gas, the first purchaser's pipeline system shall include all the wells from 
which it purchases that are on the pipeline system of the transport pipeline.
<nl>(C) A first purchaser may not segregate its purchases from any one field 
into two or more pipeline systems by transporting on another pipeline gas that 
it purchases as a first purchaser if the first purchaser is also purchasing as a 
first purchaser from the same field and transporting on a pipeline that it owns.
<nl>(D) A first purchaser may not segregate its purchases from any one field 
into two or more pipeline systems by executing gas exchange agreements.
<nl>(E) Any of a first purchaser's pipeline systems which serve a common 
customer or common customers in a common geographic location shall be operated 
in a manner to avoid unjust or unreasonable discrimination in takes as between 
those systems.
<nl>(F) A first purchaser shall not segregate its physically connected pipelines 
that are capable of being operated as a single unit under normal conditions into 
two or more pipeline systems or designate a gathering system as a separate 
system for purposes of circumventing this section.
<nl>(6)  Prorated gas field-A reservoir or field in which an allocation formula 
is in effect.
<nl>(b)<ol>[(a)] <nl>General provisions.<ol> This section is promulgated to 
promote and maintain ratable production of natural gas and to require production 
in compliance with priority categories established by the commission for the 
purposes of preventing waste, including production in excess of market demand, 
protecting correlative rights, preventing discrimination, and conserving the 
natural resources of this state. An operator shall not produce in excess of its 
ratable share of the market demand as determined by this section and [*] 
sec.3.28 [, 3.30,] and <nl> s<ol>3.31 of this title (relating to Potential and 
Deliverability of Gas Wells to be Ascertained and Reported [; Gas Nominations 
Required;] and Gas Well Allowables) (Statewide Rules 28 [, 30,] and 31). An 
operator shall produce ratably as set out in subsection <nl>(e)<ol>[(b)] of this 
section and shall produce in compliance with subsection <nl>(i)<ol>[(f) ] of 
this section which establishes priority categories of natural gas. Because 
production is dictated by pipeline capacity and market demand, pipelines are an 
integral part of production regulation. The requirements imposed on pipelines by 
this section and [*] sec.3.28 [, 3.30,] and <nl>sec.<ol>3.31 of this title 
(relating to Potential and Deliverability of Gas Wells to be Ascertained and 
Reported [, Gas Nominations Required,] and Gas Well Allowables) (Statewide Rules 
28 [, 30,] and 31) are enforced to assist in the regulation of production and 
provide the only method by which such production regulation can be enforced and 
market demand met as required by statutory law. A first purchaser shall not 
discriminate between different wells from which it purchases in the same field, 
nor shall it discriminate unjustly or unreasonably between separate fields. The 
provisions of this section requiring ratable production and purchasing of gas 
apply to purchase and production from wells from which a first purchaser is 
purchasing on its pipeline system [as defined in sec.3.30(a)(4) of this title 
(relating to Gas Nominations Required) (Statewide Rule 30)].
<nl>(c)  Designation of pipeline system. A first purchaser shall, on or before a 
date designated by the commission or a commission representative, designate its 
pipeline system(s) and shall identify its affiliates that use the same pipeline 
system, including an affiliate operating a special marketing program that is in 
compliance with subsection (k) of this section. A pipeline system designation 
must identify the physical segment of pipeline that constitutes the pipeline 
system and identify by Railroad Commission of Texas lease and/or identification 
number and field the wells on that pipeline system from which the first 
purchaser is purchasing. A change in pipeline system designation is not required 
to add or delete well connections. The designation of a pipeline system cannot 
be changed by a first purchaser without prior approval by the commission or a 
commission representative. Approval of a change in pipeline system designation 
cannot be given without prior notice of the requested designation given by the 
first purchaser to affected operators of wells on the system(s) for which a 
change in designation is sought. A hearing to determine the proper designation 
of a first purchaser's pipeline system may be called by the commission, or may 
be requested by a first purchaser or by an operator filing a complaint. The 
burden of proof in the hearing shall be on the first purchaser.
(d)  Operators who use produced gas. Any person who purchases natural gas at the 
wellhead, at a common point within a field or fields, or at the outlet of a 
processing or treating plant must determine if it is the initial purchaser.
<nl>(e)<ol>[(b)] <nl>Production guidelines.<ol> An operator shall produce 
without discrimination between its wells in the same field on the same first 
purchaser's pipeline system and without unjust or unreasonable discrimination 
between its wells in separate fields on the same first purchaser's pipeline 
system. An operator shall apportion a first purchaser's delivery requests 
ratably to its wells in each field on the same first purchaser's pipeline system 
without discrimination in the same manner as provided in this section and [*] 
sec.3.28 [, 3.30,] and <nl>sec.<ol>3.31 of this title (relating to Potential and 
Deliverability of Gas Wells to be Ascertained and Reported [; Gas Nominations 
Required;] and Gas Well Allowables) (Statewide Rules 28 [, 30,] and 31) and 
shall not produce in excess of its ratable share of the market demand as its 
share is determined by those rules. An operator shall produce in compliance with 
the priority categories of gas production established by the commission in 
subsection <nl>(i)<ol>[(f)] of this section.
<nl>(f) Purchases from different fields.
<nl>(1) <ol>[(c)] In making purchases and accepting deliveries between fields, a 
first purchaser of natural gas that purchases and accepts delivery of gas from 
more than one field on its same pipeline system must accept from each field a 
consistent percentage of the portion of the aggregate deliverability and total 
gas limits that it is entitled to purchase from all wells from which it 
purchases on its pipeline system, unless the purchaser can demonstrate a just 
and reasonable basis for discriminating between fields.
<nl>(2)  Natural gas purchase's from a well by a first purchaser that uses 
another first purchaser's pipeline system to transport its gas and sells the gas 
purchased on that pipeline system solely to the first purchaser that owns the 
transport pipeline must be treated as first purchases of gas by the first 
purchaser that owns the transport pipeline.
<nl>(g) Purchases within a field.
<nl>(1)<ol>[(d)] In making purchases and accepting deliveries within fields, a 
first purchaser of natural gas that purchases and accepts delivery of gas from 
different gas wells in the same priority category (see subsection <nl>(i) 
<ol>[(f)] of this section) in the same field on its same pipeline system shall 
purchase and accept from the wells from which it purchases in the field a 
consistent percentage of the portion that it is entitled to purchase of the 
maximum allowable that a well is entitled to under the field's allocation 
formula. If purchases and deliveries from different wells in the same field 
become nonratable, the first purchaser shall consider commission-assigned 
underproduction and overproduction to establish an appropriate pattern of 
purchases or acceptance of deliveries to restore ratability.
<nl>(2) Natural gas purchases from a well by a first purchaser that uses another 
first purchaser's pipeline system to transport its gas and sells the gas 
purchased on that pipeline system solely to the first purchaser that owns the 
transport pipeline must be treated as first purchases of gas by the first 
purchaser that owns the transport pipeline.
<nl>(3)  Purchases and deliveries of casinghead gas shall be based on the well's 
gas limit (see sec.3.49 of this title (relating to Gas-Oil Ratio)) (Statewide 
Rule 49) as provided in subsection <nl>(h)<ol> [(e)] of this section. 
Overproduction and underproduction of gas is administered by the provisions of 
sec.3.31 of this title (relating to Gas Well Allowables) (Statewide Rule 31). A 
first purchaser shall not reduce purchases from a limited well (see sec.3. 
31<nl>(g)(3)<ol>[(f)(4)] of this title (relating to Gas Well Allowables)) until 
all prorated gas wells from which it purchases in the field connected to its 
same pipeline system are ratably reduced to the assigned allowable of the 
limited well. Below that point, purchases from all prorated wells and limited 
wells should be reduced ratably by purchasing and accepting delivery of the same 
percentage of the portion that it is entitled to purchase of the maximum 
allowable established for the well by the fields allocation formula. If 
purchases and deliveries from different wells in the same field become 
nonratable, the first purchaser shall consider commission-assigned 
underproduction and overproduction in establishing an appropriate pattern of 
purchases or acceptances of deliveries to restore ratability. When purchases of 
gas described in subsection <nl>(i)<ol>[(f)] (2) or (5) of this section are to 
be reduced, they shall be reduced ratably within each priority category.
<nl>(h)<ol>[(e)] <nl>Casinghead gas reductions.<ol> When purchases and 
deliveries of casinghead gas described in subsection <nl>(i)(1)[(f)(1)] or (3) 
of this section are to be reduced, each well's share of the reduction shall be 
calculated by multiplying the total reduction by the fractional share that each 
well's gas limit bears to the arithmetic sum of the aggregate gas limits of all 
wells in the field from which the first purchaser has been purchasing on its 
same pipeline system. In calculating its reduction of a well, a first purchaser 
shall use that portion of the gas limits that it is entitled to purchase. A well 
operating under net gas/oil ratio authority shall produce no more gas than its 
gas limit as it would be reduced by the previously mentioned procedure absent 
the net gas/oil ratio authority.
<nl>(i)<ol>[(f)] Priority categories. First purchasers of gas shall satisfy 
their pipeline system demand for gas by purchasing and accepting delivery of gas 
from the following priority categories in ascending numerical order. Lower 
priority category gas is gas from a higher numerical category. A first purchaser 
shall not within its pipeline system curtail gas from a priority category if the 
purchaser is purchasing and accepting delivery of lower priority category gas as 
a first purchaser on its same pipeline system. A first purchaser's purchases and 
acceptance of delivery of first, second, or third priority category gas under an 
obligation to purchase and accept delivery from the tailgate of a plant 
processing gas to extract liquids, or from a gathering system that purchases 
from wells and is required by contract or by its physical connections to sell 
its gas entirely to the purchaser, whether or not these purchases are made as a 
first purchaser, shall not be curtailed if the first purchaser is purchasing and 
accepting delivery of lower priority category gas purchaser on its same pipeline 
system. If curtailed, the curtailment must be ratable with like priority 
category gas which the first purchaser is purchasing and accepting delivery of 
from wells on its same pipeline system.
(1) (No change.)
(2) Second priority shall be given to gas from special allowable wells as 
defined in sec.3.31<nl>(q)(4) <ol>[(f)(5)] of this title (relating to Gas Well 
Allowables) (Statewide Rule 31) granted special allowable status after the 
effective date of this section to prevent physical waste. Wells classified as 
special allowable wells pursuant to notice and hearing prior to the effective 
date of this section shall be given second priority unless a new determination 
is made that the special allowable status is not necessary to prevent physical 
waste.
(3) (No change.)
(4) Fourth priority shall be given to gas from wells classified under 
sec.3.49(b) of this title (relating to Gas-Oil Ratio) (statewide Rule 49(b)), 
but only to the extent of one full allowable for multiple 49(b) wells.
(5)  Fifth priority shall be given to gas from administrative special allowable 
wells as defined in sec.3.31<nl>(g)(5) <ol>[(f)(6)] of this title (relating to 
Gas Well Allowables) (Statewide Rule 31), to gas from special allowable wells 
(see sec.3.31<nl>(g)(4) <ol>[(f)(5)] of this title (relating to Gas Well 
Allowables)) granted that status prior to the effective date of this section 
(see paragraph (2) of this subsection) without notice and hearing, and to gas 
from special allowable wells granted that status by the commission subsequent to 
the effective date of this section after notice and hearing for other reasons 
than to prevent physical waste.
(6) Sixth priority shall be given to the remainder of gas well gas, including 
limited wells (see subsection <nl>(g) <ol> [(d)] of this section).
<nl>(j)<ol>[(g)] <nl>Prohibition against discriminating in favor of purchaser's 
own production. <ol> A first purchaser of natural gas may not discriminate 
between or against natural gas of a similar kind or quality in favor of its own 
production or production in which it may be directly or indirectly interested in 
whole or in part.
<nl>(k)<ol>[(h)] <nl>Special marketing programs.<ol> If a first purchaser elects 
to qualify an affiliate as a separate first purchaser [in sec.3. 30(a)(1) of 
this title (relating to Gas Nominations Required) (Statewide Rule 30) ], the 
first purchaser may designate the affiliate as a special marketing program. The 
special marketing program must comply with the following with respect to the 
[nomination,] purchase [,] and acceptance of delivery of natural gas. (1)-(4)(No 
change.)
(5) The affiliated first purchaser must continue in compliance with this section 
[and sec.3.30 of this title (relating to Gas Nominations Required) (Statewide 
Rule 30)] to [nominate,] purchase [,] and accept delivery from the wells for 
which the offer was made and not accepted.
(6) With respect to the [nomination and] purchase of gas from those that accept 
an offer made pursuant to this subsection, the special marketing program 
purchaser must comply with this section and [*] sec.3.28 [, 3.30,] and <nl>sec. 
<ol> 3.31 of this title (relating to Potential and Deliverability of Gas Wells 
To Be Ascertained and Reported [; Gas Nominations Required;] and Gas Well 
Allowables) (Statewide Rules 28 [, 30,] <nl>and<ol> 31) as a separate first 
purchaser.
(7) (No change.)
<nl>(1)<ol>[(i)] <nl>Sellers' complaint procedure.<ol> Any operator or 
nonoperator that is denied by the first purchaser in violation of this section 
or [*]  s3.28 [, 3.30,] or  <nl>sec.<ol>3.31 of this title (relating to 
Potential and Deliverability of Gas Wells to be Ascertained and Reported [; Gas 
Nominations Required;] and Gas Well Allowables) (Statewide Rules 28 [, 30,] and 
31) the opportunity to produce a well's ratable share of gas or opportunity for 
a well to participate in a special marketing program may file a complaint with 
the commission and request the commission to direct the first purchaser to end 
the discriminatory practices. A complainant may request a hearing regarding 
alleged discriminatory practices or to determine whether a first purchaser is or 
has, through gas exchange agreements or through actions of its affiliate(s), 
denied an operator a reasonable opportunity to market its gas.
<nl>(m) <ol>[(j)] <nl>Purchasers' complaint procedure.<ol> If after reasonable 
notice by the purchaser, an operator fails to comply with a first purchaser's 
request to reduce production ratably in compliance with this section and [*] 
sec.3.28 [, 3.30,] and <nl> s<ol>3.31 of this title (relating to Potential and 
Deliverability of Gas Wells to be Ascertained and Reported [; Gas Nominations 
Required;] and Gas Well Allowables) (Statewide Rules 28 [, 30,] and 31) the 
purchaser may file a complaint with the commission and request the commission to 
direct the operator to comply with the purchaser's requests to reduce production 
ratably. The complainant or the operator may request the commission to take 
further action, including setting the issue for hearing.
<nl>(n)<ol>[(k)]  <nl>Hardship exceptions.<ol> If the operation of this section 
or [*] sec.3. 28 [, 3.30,] or <nl>sec.<ol>3.31 of this title (relating to 
Potential and Deliverability of Gas Wells to be Ascertained and Reported [, Gas 
Nominations,] and Gas Well Allowables) (Statewide Rules 28 [, 30,] and 31) 
causes undue hardship, the commission may, after proper notice and hearing, 
grant an exception or take appropriate action, including action to prevent waste 
or protect correlative rights.
<nl>(o)<ol>[(l)] <nl>Severability provisions.<ol> If any provision of this 
section or its application to any person or circumstance is held invalid, the 
invalidity shall not affect other provisions or applications of the section 
which can be given effect without the invalid provisions or appreciation, and 
the provisions of the section are declared to be severable.
sec.3.49. Gas-Oil Ratio.
(a) (No change.)
(b) Any gas well producing from the same reservoir in which oil wells are 
completed and producing shall be allowed to produce daily only that amount of 
gas which is the volumetric equivalent in reservoir displacement of the gas and 
oil produced from the oil well in the reservoir that withdraws the maximum 
amount of gas in the production of its daily oil allowable.
(1)-(2) (No change.)
<nl>(3) The allowable for an associated gas well as determined by this 
subsection shall be limited to the lesser of:
<nl>(A) the gas well allowable as calculated by paragraph (1) or (2) of this 
subsection;
<nl>(B) the well's latest deliverability test on file with the commission; or
<nl>(C) for wells that reported production during any of the three most recently 
reported production months, the largest monthly production during those months 
averaged to a daily amount.
(c)-(i) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201700
Kim Williamson
Secretary
Railroad Commission of Texas
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6941
       
TITLE 22. EXAMINING BOARDS
Part III. Texas Board of Chiropractic Examiners
Chapter 73. Licenses and Renewals
22 TAC sec.73.3
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Board of 
Chiropractic Examiners or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The Texas Board of Chiropractic Examiners proposes the repeal of 22 TAC 
sec.73.3, concerning refresher courses and the requirements for continuing 
education.
Jennie Smetana, executive director, has determined that for the first five-year 
period the repeal is in effect there will be no fiscal implications for state or 
local government as a result of enforcing or administering the repeal.
Ms. Smetana, also has determined that for each year of the first five years the 
repeal is in effect the public benefit anticipated as a result of enforcing the 
repeal will be the current rule is being repealed in order to propose a new rule 
which will require an increased number of hours for continuing education for the 
doctors each year. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the repeal 
as proposed.
Comments on the proposal may be submitted to Jennie Smetana, Executive Director, 
Texas Board of Chiropractic Examiners, 8716 MoPac Expressway North, Suite 301, 
Austin, Texas 78759.
The repeal is proposed under Texas Civil Statutes, Article 4512b, which provide 
the Texas Board of Chiropractic Examiners with the authority to promulgate 
procedural rules and regulations as deemed necessary.
sec.73.3. Refresher Courses.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201597
Jennie Smetana
Executive Director
Texas Board of Chiropractic Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 343-1895
       
The Texas Board of Chiropractic Examiners proposes new  s73.3 concerning 
refresher courses and the requirements for continuing education.
Jennie Smetana, executive director, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Mr. Smetana, also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be that the doctors will be required to attend and complete 
additional continuing education. This will help ensure that the doctors will 
stay up to date on the latest treatments and procedures which will benefit each 
and every patient. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the section 
as proposed.
Comments on the proposal may be submitted to Jennie Smetana, Executive Director, 
Texas Board of Chiropractic Examiners, 8716 Mopac Expressway North, Suite 301, 
Austin, Texas 78759.
The new section is proposed under Texas Civil Statutes, Article 4512b, which 
provide the Texas Board of Chiropractic Examiners with the authority to 
promulgate procedures rules and regulations as deemed necessary.
sec.73.3. Refresher Courses. <ol> The following information is regarding 
continuing education courses for license renewal.
(1) Requirements.
(A) All licensees will annually attend and complete 16 hours of continuing 
education.
(B) Fourteen hours of the continuing education may be completed at any course or 
seminar elected by the licensee, as long as it is sponsored by a state or 
national association or a chiropractic college which is accredited by the 
Council on Chiropractic Education and approved by the board.
(C) Only those topics listed as authorized procedures in sec.75.7(a) and (b) of 
this title (relating to Authorized Practices, Techniques, and Procedures) shall 
be acceptable in these courses or seminars.
(D) Two hours of the continuing education must be presented by the board and 
will be given at the following seminars:
(i) Texas Chiropractic Association-Lubbock;
(ii) Texas Chiropractic Association Convention;
(iii) Chiropractic Society of Texas Annual Convention;
(iv) Parker College of Chiropractic Homecoming;
(v) Texas Chiropractic College Homecoming.
(2) Verification.
(A) Verification of the two hour board presentation will be provided to the 
board office annually. The sponsoring organization will submit an alphabetical 
list showing the name of the attending doctor, license number, and number of 
hours completed.
(B) Each doctor will be responsible for documenting verification of the 
additional 14 hours of continuing education.
(C) Upon request by the board, the licensee will be responsible for providing 
verification of his continuing education for the five year period preceding the 
date of request made by the board.
(D) Should the licensee fail to submit verification upon request by the board, 
it will be considered a violation of Texas Civil Statutes, Article 4512b, 
sec.8b(a).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201596
Jennie Smetana
Executive Director
Texas Board of Chiropractic Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 343-1895
       
Chapter 81. Chiropractic Facilities
22 TAC sec.81.1
The Texas Board of Chiropractic Examiners proposes new  s81.1, concerning 
chiropractic facilities and the registration of all facilities providing 
chiropractic care.
Jennie Smetana, Executive Director, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Ms. Smetana, also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be that the rule will provide the board with the information 
essential for regulating the practice of chiropractic. Registration of 
chiropractic facilities allows the board to identify all facilities where 
chiropractic services are being provided, not just licensed doctors. There will 
be no effect on small businesses. There is no anticipated economic cost to 
person who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Jennie Smetana, Executive Director, 
Texas Board of Chiropractic Examiners, 8716 MoPac Expressway North, Suite 301, 
Austin, Texas 78759.
The new section is proposed under Texas Civil Statutes, Article 4512b, which 
provide the Texas Board of Chiropractic Examiners with the authority to 
promulgate procedural rules and regulations as deemed necessary.
sec.81.1. Chiropractic Facilities.
(a) Any facility providing chiropractic care must be registered with the Texas 
Board of Chiropractic Examiners and this registration must be renewed annually.
(b) Requirements for obtaining a Certificate of Registry include the following:
(1) application shall be made on a form prescribed by the board;
(2) provisions acceptable to the board shall be made to assure that all 
chiropractic services are provided by or under the direction or a doctor of 
chiropractic who holds a currently valid license to practice chiropractic in 
Texas;
(3) names and addresses of all parties with an ownership interest in an office 
or place of business providing chiropractic services shall be registered with 
the board including all general and limited partners and all shareholders of 
corporations;
(4) names and addresses of each doctor licensed by the board who is employed, 
contracted, or otherwise engaged to provide or direct the provision of 
chiropractic services shall be registered with the board; and
(5) no licensee, owner, partner, or shareholder shall be less than 21 years of 
age. This board may deny a certificate if the applicant has been convicted for 
any offense which, under the laws of Texas is a felony or is an offense 
involving moral turpitude.
(c) It shall be a violation of this section:
(1) to operate an office or place of business offering chiropractic services 
without obtaining a Certificate of Registration as provided herein;
(2) to fail to comply with the requirements of subsections (a) and (b) of this 
section;
(3) to operate an office or place of business providing chiropractic services 
without complying with all provisions of this Act and with the rules of the 
board; or
(4) for an individual, other than the primary treating doctor of chiropractic, 
to control or attempt to control, in any way whatsoever, the professional 
judgment of such treating doctor or his/her office staff with respect to patient 
care.
(d) A violation of this section constitutes the unauthorized practice of 
chiropractic and the Texas Board of Chiropractic Examiners may revoke or suspend 
a Certificate of Registration, or probate a registration suspension for any 
violation of the Act or rules of the board.
(e) This registration does not apply to Hospitals or Public Health Clinics 
registered with the Texas Department of Health or other state agencies or a 
student enrolled in a college of chiropractic in this state engaged in 
internship under the control of a chiropractic college in this state.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201598
Jennie Smetana
Executive Director
Texas Board of Chiropractic Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 343-1895
       
Part IX. Texas State Board of Medical Examiners
Chapter 177. Certification of Nonprofit Health Corporations
22 TAC sec.177.1-177.2
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas State 
Board of Medical Examiners or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The Texas State Board of Medical Examiners proposes the repeal of sec.177.1 and 
sec.177.2, concerning the certification of nonprofit health corporations. 
Extensive rewrite of the sections are felt necessary; therefore, repeal of the 
sections with simultaneous proposed new chapter wording is submitted. This is to 
comply with House Bill 2478, enacted by the 72nd Legislature.
Pat Wood, secretary to the executive director, has determined that for the first 
five-year period the repeals are in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
repeals.
Ms. Wood also has determined that for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals will be clarification of the rules by omission. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the repeal as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 149134, Austin, 
Texas 78714-9134. A public hearing will be held at a later date.
The repeals are proposed under Texas Civil Statutes, Article 4495b, which 
provide the Texas State Board of Medical Examiners with the authority to make 
rules, regulations, and bylaws not inconsistent with this Act as may be 
necessary for the governing of its own proceedings, the performance of its 
duties, the regulation of the practice of medicine in this state, and the 
enforcement of this Act.
sec.177.1. Purpose.
sec.177.2. Procedure.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201787
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 834-4502
       
22 TAC sec.177.1
The Texas State Board of Medical Examiners proposes new  s177.1, concerning the 
certification of nonprofit health corporations. This new section will comply 
with the mandate of House Bill 2478, enacted by the 72nd Legislature.
Pat Wood, secretary to the executive director, has determined that for the first 
five-year period the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
There will be no local employment impact.
Ms. Wood also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be to allow the employment of physicians in organizations operated 
as a migrant, community, or homeless health center. There will be no effect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted to Pat Wood, P.O. Box 149134, Austin, 
Texas 78714-9134. A public hearing will be held at a later date.
The new section is proposed under Texas Civil Statutes, Article 4495b, which 
provide the Texas State Board of Medical Examiners with the authority to make 
rules, regulations, and bylaws not inconsistent with this Act as may be 
necessary for the governing of its own proceedings, the performance of its 
duties, the regulation of the practice of medicine in this state, and the 
enforcement of this Act.
sec.177.1. Certification of Nonprofit Health Corporations.
(a) Any health organization formed solely by persons licensed by the board shall 
make application and present the documentation following to the executive 
director of the Texas State Board of Medical Examiners for certification.
(1) A written request to the board by each health organization's chief executive 
officer will suffice as the application.
(2) The following documentation shall be submitted:
(A) a copy of the certificate of incorporation under the Texas Non-Profit 
Corporation Act;
(B) proof that the entity is organized for any or all of the following purposes:
(i) the carrying out of scientific research and research projects in the public 
interest in the fields of medical sciences, medical economics, public health, 
sociology, and related areas;
(ii) the supporting of medical education in medical schools through grants and 
scholarships;
(iii) the improving and developing of the capabilities of individuals and 
institutions studying, teaching, and practicing medicine;
(iv) the delivery of health care to the public;
(v) the engaging in the instruction of the general public in the area of medical 
science, public health, and hygiene and related instruction useful to the 
individual and beneficial to the community; and
(C) proof that the entity is organized and incorporated by persons licensed by 
the board and that the directors and trustees of the organization and their 
successors in office shall be persons licensed by the board and actively engaged 
in the practice of medicine. The term "actively engaged in the practice of 
medicine" shall mean that the physician is engaged in full-time service of 
diagnosing or treating mental or physical ailments of human beings at least 40 
hours per week.
(b) Migrant, community, or homeless health centers who wish to employ physicians 
shall make application and present the required proof to the executive director 
of the Texas State Board of Medical Examiners for approval.
(1) A written request to the board by each health center's chief executive 
officer will suffice as the application.
(2) The following documentation shall be submitted:
(A) a copy of the certificate of incorporation under the Texas Non-Profit 
Corporation Act;
(B) written proof of compliance with the Internal Revenue Code, sec.501(c) (3).
(C) written proof of compliance with 42 United States Code, sec.254(b) or (c), 
or sec.256.
(c) The board may, at its discretion, refuse to approve and certify any such 
health organization making application to the board if in the board's 
determination the applying nonprofit corporation is established or organized or 
operated in contravention to or with the intent to circumvent any of the 
provisions of the Medical Practice Act.
(d) The board shall revoke an approval or certification if in the board's 
determination the nonprofit corporation is established, organized, or operated 
in contravention of or with the intent to circumvent any of the provisions of 
the Medical Practice Act.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201786
Homer R. Goehrs, M.D.
Executive Director
Texas State Board of Medical Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 834-4502
       
Part XII. Board of Vocational Nurse Examiners
Chapter 233. Education
Operation of a Vocational Nursing Program
22 TAC sec.233.25
The Board of Vocational Nurse Examiners proposes an amendment to sec.233.25, 
concerning workshops for faculty of vocational nursing programs.
Marjorie A. Bronk, executive director, has determined that for the first five-
year period the section is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the section.
Mrs. Bronk also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section may be public benefit in enhancing current knowledge. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the section as proposed.
Comments on the proposal may be submitted to Marjorie A. Bronk, Executive 
Director, Board of Vocational Nurse Examiners, 9101 Burnet Road, Suite 105, 
Austin, Texas 78758, (512) 835-2071.
The amendment is proposed under Texas Civil Statutes, Article 4528c, sec.5(g), 
which provide the Board of Vocational Nurse Examiners with the authority to make 
such rules and regulations as may be necessary to govern its procedures and to 
carry in effect the purposes of the law.
sec.233.25. <nl>Faculty Continuing Education Requirements  [Workshops]. 
[Budgeting shall include monies for director and instructors to attend available 
workshops to improve teaching skills and knowledge.] <nl>To enhance teaching 
skills and knowledge, program director and nursing faculty<ol> [Faculty members] 
shall attend [workshops and/or] continuing education programs<nl>/activities 
<ol> of not less than <nl>15<ol> [40] hours annually. Foci shall include 
<nl>topics in<ol> one or more of the following <nl>areas<ol>: nursing, health 
<nl>care<ol> [services], and education. <nl>Budgeting shall include monies for 
program director and nursing faculty to attend continuing education 
programs/activities.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201695
Marjorie A. Bronk, R.N., M.S.H.P.
Executive Director
Board of Vocational Nurse Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 835-2071
       
Chapter 239. Contested Case Procedure
Enforcement
22 TAC sec.239.11, sec.239.16
The Board of Vocational Nurse Examiners proposes an amendment to sec.239.11 and 
new sec.239.16, concerning enforcement. Rule 239.11 is being amended to include 
referring of individuals for treatment/rehabilitation with the intent of 
receiving remuneration (as directed by the Senate Interim Committee on Health 
and Human Services), to add that failure to repay a guaranteed student loan is 
considered unprofessional conduct, and to add other violations that may be 
considered unprofessional conduct. Rule 239.16 is proposed in order to allow for 
consistency in rules in adopting a rule relative to defaulted student loans.
Marjorie A. Bronk, executive director, has determined that for the first five-
year period the sections are in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the 
sections.
Mrs. Bronk also has determined that for each year of the first five years the 
sections are in effect there will be the following public benefits: 
sec.239.11(16) -this amendment will improve the system of accessing health 
services to the citizens of Texas by not limiting their choice of institutions; 
and sec.239.11(18) -this amendment will enhance government funds by causing 
individuals to repay monies owed to the state on student loans. Other amendments 
more clearly outline reasons the public may file a complaint against an 
individual's license for disciplinary action. There will be no effect on small 
businesses.
The anticipated economic cost to persons who are required to comply with the 
sections as proposed would be the impact of loss of earning power if licensure 
is withheld or disciplinary action is taken against the license of the 
individual for noncompliance of the rules.
Comments on the proposal may be submitted to Marjorie A. Bronk, Executive 
Director, Board of Vocational Nurse Examiners, 9101 Burnet Road, Suite 105, 
Austin, Texas 78758, (512) 835-2071.
The amendment and new section are proposed under Texas Civil Statutes, Article 
4528c, sec.5(g), which provide the Board of Vocational Nurse Examiners with the 
authority to govern its procedures and to carry in effect the purposes of the 
law.
sec.239.11. Unprofessional Conduct. <ol> Unprofessional or dishonorable conduct, 
likely to deceive, defraud, or injure the public may include the following 
described acts or omissions:
(1)-(15) (No change.)
<nl>(16) knowingly and willfully referring any individual for 
treatment/rehabilitation with the express intent of receiving remuneration, 
either directly or indirectly;
<nl>(17) knowingly falsifying and/or forging a physician's order/prescription;
<nl>(18) failing to repay a guaranteed student loan, as provided in the Texas 
Education Code;
<nl>(19)<ol>[(16)] failing to conform to the minimal standards of acceptable 
prevailing practice, regardless of whether or not actual injury to any person 
was sustained, including, but not limited to:
(A) failing to assess and evaluate a patient's/client's status or failing to 
institute nursing intervention which might be required to stabilize a 
patient's/client's condition or prevent complications;
(B) performing or attempting to perform nursing techniques or procedures or both 
in which the nurse is untrained by education or experience;
(C) delegating nursing care functions or responsibilities to an individual 
lacking the ability or knowledge to perform the function or responsibility in 
question;
(D) causing suffering, permitting or allowing physical or emotional injury or 
impairment of dignity or safety to the patient/client, or failing to report same 
in accordance with the incident reporting procedure where the vocational nursing 
is employed or working;
(E) knowingly or consistently failing to follow the policy and procedure for the 
wastage of medication(s) in effect at the facility at which the nurse is 
employed or working;
(F) leaving a nursing assignment without notifying appropriate personnel;
(G) engaging in unnecessary violence towards any person in connection with the 
practice of vocational nursing;
<nl>(H)  failing to comply with a supervisor's valid directives;
<nl>(I)  negligently or intentionally violating a physician's order addressing 
patient care;
<nl>(20)<ol>[(17)] being convicted of a crime which relates to the practice of 
vocational nursing. Those crimes which the board considers to be directly 
related to the duties and responsibilities of a licensed vocational nurse shall 
include, but are not limited to:
(A) any felony or misdemeanor which involves an act of fraud, dishonesty, or 
deceit;
(B)  any criminal violation of the Vocational Nurse Act or other statutes 
regulating or pertaining to nursing or the medical profession;
(C) any crime involving moral turpitude;
(D) murder;
(E) assault;
(F) burglary;
(G) robbery;
(H) theft;
(I)  rape or sexual abuse;
(J) patient/client abuse;
(K) injury to an elderly person;
(L) child molestation, abuse, endangerment, or neglect;
(M)  felony conviction for driving while intoxicated, driving under the 
influence of alcohol or drugs, or driving while ability is impaired;
(N) sale, distribution, or illegal possession of narcotics, controlled 
substances or dangerous drugs;
(O) tampering with a governmental record;
(P)  offenses which include attempting or conspiring to commit any of the 
offenses in this subsection;
<nl>(21)<ol>[(18)] violating state or federal laws relative to drugs, including 
controlled substances and dangerous drugs;
<nl>(22)<ol>[(19)] in determining whether a crime not listed previously relates 
to vocational nursing, consideration by the board of:
(A) the nature and seriousness of the crime;
(B) the relationship of the crime to the purposes for requiring a license to 
practice vocational nursing;
(C) the extent to which a license might offer opportunities to engage in further 
criminal activity of the same type as that in which the person was previously 
engaged; and
(D) the relationship of the crime to the ability, capacity, or fitness required 
to perform the duties and to discharge the responsibilities of a vocational 
nurse.
sec.239.16. Peer Assistance Programs.
(a) A peer assistance program for licensed vocational nurses will identify, 
assist, and monitor colleagues with job impairing alcohol or drug problems, 
and/or mental health impairment.
(1) The program will provide statewide peer advocacy services available to all 
licensed vocational nurses impaired by alcohol or drug abuse and/or mental 
illness.
(2) The program shall have a statewide monitoring system that will be able to 
track the nurse while preserving anonymity.
(3) The program shall provide a network of trained peer interveners located 
throughout the state.
(4) The program shall have a written plan for the education and training or 
interveners and other program personnel.
(5) The program shall have a written plan for the education of licensed 
vocational nurses, other practitioners, and employers.
(6) The program shall have a mechanism for documenting program compliance, and 
any noncompliance may be reported to the board within 10 working days.
(7) The program shall demonstrate financial stability and funding sufficient to 
operate the program.
(8) The program shall collect and make available to the board and/or other 
appropriate persons data relating to impaired licensed vocational nurses and the 
success/failure of peer assistance.
(9) The program shall have a written plan for a systematic total program 
evaluation and shall be subject to evaluation by the board.
(10) The program shall comply with all minimum criteria established by the Texas 
Commission on Alcohol and Drug Abuse, and if the board determines that the 
program no longer complies with the established criteria, the program shall have 
30 days to attain compliance or the board may revoke its approval of the 
program.
(11) The program shall establish a plan to verify previous disciplinary action 
prior to admitting a nurse to the peer assistance program and the board will 
provide the program with a list of all disciplinary actions after each board 
meeting.
(12) The program may report to the board within 10 working days, the impaired 
nurse who has had a prior disciplinary action or has previously been admitted to 
a peer assistance program.
(b)  The approved program(s) will enter into a contractual agreement with the 
board to provide the services of an impaired professional program. Said contract 
can be withdrawn for noncompliance and is subject to review and renewal.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201697
Marjorie A. Bronk, R.N., M.S.H.P.
Executive Director
Board of Vocational Nurse Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 835-2071
       
22 TAC sec.239.15
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Board of 
Vocational Nurse Examiners or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The Board of Vocational Nurse Examiners proposes to repeal sec.239.15 concerning 
peer assistance programs and adopt new sec.239.16 as the same rule with no 
change in language. The rule is being renumbered in order to allow for 
continuity in the rules by adding the rule relative to defaulting on student 
loans in the sec.239.15 sequence.
Marjorie A. Bronk, executive director, has determined that for the first five-
year period the repeal is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the repeal.
Ms. Bronk also has determined that for each year of the first five years the 
repeal is in effect there will be no public benefit as the public is relatively 
unaffected by the section. There will be no effect on small businesses. There is 
no anticipated economic cost to persons who are required to comply with the 
repeal as proposed.
Comments on the proposal may be submitted to Marjorie A. Bronk, Executive 
Director, Board of Vocational Nurse Examiners, 9101 Burnet Road, Suite 105, 
Austin, Texas 78758, (512) 835-2071.
The repeal is proposed under Texas Civil Statutes, Article 4528c, sec.5(g), 
which provide the Board of Vocational Nurse Examiners with the authority to make 
such rules and regulations as may be necessary to govern its procedures and to 
carry in effect the purposes of the law.
sec.239.15. Peer Assistance Programs.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 5, 1992.
TRD-9201881
Marjorie A. Bronk, R.N., M.S.H.P.
Executive Director
Board of Vocational Nurse Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 835-2071
       
The Board of Vocational nurse Examiners proposes new sec.239.15, concerning 
licensure of persons who have defaulted on student loans as required by law.
Marjorie A. Bronk, executive director, has determined that for the first five-
year period the proposed amendment will be in effect, will be a possible 
increase in state revenues by individuals repaying their student loans.
Mrs. Bronk also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the benefit to the public of an enhancement of government funds 
by causing individuals to repay monies owed to the state on student loans. There 
will be no effect on small businesses. The anticipated economic cost to persons 
required to comply with the section as proposed will be the cost to repay their 
student loans.
Comments on the proposal may be submitted to Marjorie A. Bronk, Executive 
Director, Board of Vocational Nurse Examiners, 9101 Burnet Road, Suite 105, 
Austin, Texas 78758, (512) 835-2071.
The new section is proposed under Texas Civil Statutes, Article 4528c, sec.5(g) 
, which provide the Board of Vocational Nurse Examiners with the authority to 
make such rules and regulations as may be necessary to govern its procedures and 
to carry in effect the purposes of the law.
sec.239.15. Licensure of Persons Who Have Defaulted On A Student Loan With the 
Texas Guaranteed Student Loan Corporation.
(a) In review of a complaint alleging default on a guaranteed student loan by a 
respondent/applicant, the board shall consider the following evidence in 
determining the respondent's/applicant's present fitness to practice vocational 
nursing:
(1) a certificate issued by the student loan corporation certifying that the 
respondent/applicant has entered a repayment agreement on the defaulted loan; or
(2) a certificate issued by the student loan corporation certifying that the 
respondent/applicant is not in default on a loan guaranteed by the corporation.
(b) The burden to provide the foregoing documentation to the board shall be 
solely at the expense of the respondent/applicant.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 2, 1992.
TRD-9201698
Marjorie A. Bronk, R.N., M.S.H.P.
Executive Director
Board of Vocational Nurse Examiners
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 835-2071
       
Part XIII. Texas Board of Licensing for Nursing Home Administrators
Chapter 251. Disciplinary
22 TAC sec.sec.251.1-251.5
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas Board of 
Licensing for Nursing Home Administrators or in the Texas Register office, Room 
245, James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Texas Board of Licensure for Nursing Home Administrators proposes the repeal 
of 22 TAC sec.sec.251.1-251.5, concerning disciplinary procedures for nursing 
home administrators. The chapter describes the disciplinary procedures used by 
TBLNLHA, but does not describe the process so that an administrator can easily 
understand what will happen or how the process will proceed. The rules limit the 
involvement of the board to a role of approval of a final order from a hearings 
officer. This vests a great amount of authority with the executive director. 
Because only one person is vested with so much authority, the opportunity for an 
unbiased decision is enhanced.
Robert Conkright, executive director, has determined that for the first five-
year period the repeals are in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the repeals.
Mr. Conkright, also has determined that for each year of the first five years 
the repeals are in effect the public benefit anticipated as a result of 
enforcing the repeals will be the repeal of current rules which do not ensure 
due process in disciplinary procedures. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the repeal as proposed.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, TBLNHA, 4800 North Lamar Boulevard, Suite 310, Austin, Texas 78756.
The repeals are proposed under Texas Civil Statutes, Article 442d, sec.8, which 
provide TBLNHA with the authority to make rules and regulations not inconsistent 
with law as may be necessary or proper for the performance of its duties, and to 
take such other actions as may be necessary to enable the state to meet the 
requirements set forth in sec.1908 of the Social Security Act (42 United States 
Code, sec.1396g), the Federal rules and regulations promulgated thereunder, and 
other pertinent Federal authority; provided, however, that no rule shall be 
promulgated, altered, or abolished without the approval of a two thirds majority 
of the board.
sec.251.1. Prehearing Conferences.
sec.251.2. Consolidation.
sec.251.3. Hearing Officer Procedures.
sec.251.4. Department of Public Safety Information.
sec.251.5. Special Fees for Expert Witnesses.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 30, 1992.
TRD-9201738
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing home Administrators
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 458-1955
       
Subchapter A. General Provisions
The Texas Board of Licensure for Nursing Home Administrators proposes new 
sec.sec.251.1-251.37, concerning disciplinary procedures for nursing home 
administrators. The new procedures describe, in great detail, the disciplinary 
process to be followed by TBLNHA. A person having a complaint brought forth for 
disciplinary action to the agency will be able to quickly determine how the 
process works. The new procedures require that the Board be more active in the 
disciplinary process. The authority for disciplinary action is taken from one 
person and vests that authority with a Disciplinary Review Panel. Most decisions 
will be made by the Panel, thus increasing the opportunity for an unbiased 
decision.
Dr. Robert Conkright, executive director has determined that there will be 
fiscal implications as a result of enforcing or administering the section. There 
will be an estimated additional cost to state government of $11,200 for the 
first year (FY 1992) and $16,800 per year for the following four years (FY 1993-
1996) that the section will be in effect. There will be no fiscal impact on 
local government or large businesses.
Dr. Conkright, also has determined that for each year of the first five years 
the section as proposed is in effect, the public will benefit from the new rule 
because it will result in a fair, consistent, and clear method of handling all 
complaints against nursing home administrators These new rules also ensure due 
process for licensure. There will be no effect on small businesses. There will 
be no economic cost to persons who are required to comply with the rule as 
proposed for the first five year period the section will be in effect.
Comments on the proposal may be submitted to Robert Conkright, Executive 
Director, TBLNHA, 4800 North Lamar, Suite 310, Austin, Texas 78756. Comments 
will be accepted until March 20, 1992. A public hearing will be held on March 
11, 1992, at The Criss Cole auditorium, 4800 North Lamar, Austin, at 10 am.
22 TAC sec.sec.251.1-251.16
The new sections are proposed under Texas Civil Statutes, Article 4442d, sec.8, 
which provide TBLNHA with the authority to make rules and regulations not 
inconsistent with law as may be necessary or proper for the performance of its 
duties, and to take such other actions as may be necessary to enable the State 
to meet the requirements set forth in sec.1908 of the Social Security Act (42 
United States Code, sec.1396g), the federal rules and regulations promulgated 
thereunder, and other pertinent federal authority; provided, however, that no 
rule shall be promulgated, altered, or abolished without the approval of a two 
thirds majority of the board.
sec.251.1. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the content clearly indicate 
otherwise.
 Act-The Texas Nursing Home Administrators Licensure Act, Texas Civil Statutes, 
Article 4442d.
 APTRA-The Administrative Procedures and Texas Register Act, Texas Civil 
Statutes, Article 6252-13a.
 Applicant or petitioner-A party seeking a license or rule from the board.
 Board-The Texas Board of Licensure for Nursing Home Administrators.
 Board member-One of the members of the board, appointed pursuant to the Act.
 Contested case -A proceeding, including but not restricted to, licensing, in 
which the legal rights, duties, or privileges of a party are to be determined by 
the board after an opportunity for adjudicative hearing.
 Disciplinary review panel-A committee composed of the executive director, a 
person representing the Texas Department of Health Long Term Care Division, 
counsel to the board, and a licensed administrator and a chair appointed by the 
executive committee of the Board. The chair will be a board member, a licensed 
attorney, licensed administrator, or a volunteer member of the general public. A 
member of the investigative staff of the board will be a nonvoting member of the 
panel.
 Documents-Applications, petitions, complaints, motions, protests, replies, 
exceptions, answers, notices, or other written instruments filed with the board 
in a licensure proceeding or by a party in a contested case.
 Executive committee -The chair, vice-chair, and secretary-treasurer of the 
board.
 Executive director -The incumbent of the position designated executive director 
in accordance with the Act, or their designee if the incumbent is unavailable.
 Hearings examiner or examiner-A person assigned through the Administrative Law 
Judges Department of the Attorney General's Office.
 License-Includes the whole or part of any board permit, certificate, approval, 
registration, or similar form of permission required by law; specifically, a 
license and a registration.
 Licensing-Includes the board's process respecting the granting, denial, 
renewal, revocation, suspension, or probation of a license.
 Misdemeanors Involving Moral Turpitude-Any misdemeanor of which fraud, 
dishonesty, or deceit is an essential element, burglary, robbery, sexual 
offenses, theft, child molesting, and substance diversion or substance abuse.
 Party-Each person named or admitted as a party whether an applicant, 
protestant, petitioner, complainant, respondent or intervenor, and the board.
 Person-Any individual, partnership, corporation, association, governmental 
subdivision, or public or private organization of any character.
 Pleading-Written documents filed by parties, concerning their respective 
claims.
 Presiding officer -The chair, or a duly qualified successor in accordance with 
Robert's Rules of Order Newly Revised or board rules, a hearing examiner, or 
other person presiding over the board.
 Register-The Texas Register.
 Rule-Any agency statement of general applicability that implements, interprets, 
or prescribes law or policy, or describes the procedures or practice 
requirements of this board. The term includes the amendment or repeal of a prior 
section but does not include statements concerning only the internal management 
or organization of any agency and not affecting private rights or procedures. 
This definition includes substantive regulations.
 Secretary-The secretary-treasurer of the Board.
sec.251.2. Applicability.  These rules shall govern the procedures for the 
institution, conduct and determination of all causes and proceedings before the 
board. The purpose of these sections is to provide for a simple and efficient 
system of procedure before the board, to insure uniform standards of practice 
and procedure, public participation and notice of board actions, and a fair and 
expeditious determination of causes.
sec.251.3. Construction.  These rules shall not be construed so as to enlarge, 
diminish, modify or alter the jurisdiction, powers, or authority of the board or 
the substantive rights of any party. They shall be liberally construed, with a 
view towards the purpose for which they were adopted.
sec.251.4. Computation of Time.
(a) Computing time. In computing any period of time prescribed or allowed by 
these sections, order of the board, or any applicable statute, the period shall 
begin on the day after the act, event, or default in controversy and end on the 
last day of such computed period, unless it be a Saturday, Sunday, or legal 
holiday, in which event the period runs until the end of the next day which is 
neither a Saturday, Sunday, nor a state recognized holiday.
(b) Extensions. Unless otherwise provided by statute, the time for filing any 
document may be extended by agreement of the parties or order of the secretary 
or hearing examiner upon written verified motion duly filed prior to the 
expiration of the applicable time period, showing good cause for an extension of 
time and stating that the need therefor is not caused by the neglect, 
indifference or lack of diligence of the movant. A copy of any such motion shall 
be served upon all other parties of record to the proceeding contemporaneously 
with the filing thereof.
sec.251.5. Agreement to be in Writing. No stipulation or agreement between the 
parties, their attorneys or representatives, with regard to any matter involved 
in any proceeding before the board shall be enforced unless it shall have been 
reduced to writing and signed by the parties or their authorized 
representatives, or unless it shall have been dictated into the record by them 
during the course of a hearing, or incorporated in an order bearing their 
written approval. This section does not limit a party's ability to waive, 
modify, or stipulate any right or privilege afforded by these sections, unless 
precluded by law.
sec.251.6. Expiration of Licenses. When a licensee has made timely and 
sufficient application for the renewal of a license or a new license for any 
activity of a continuing nature, the existing license does not expire until the 
application has been finally determined by the agency, or unless it has been 
terminated according to statute and rule, and in case the application is denied 
or the terms of the new license limited, until the last day for seeking review 
of the agency order or a later date fixed by order of the reviewing court.
sec.251.7. Pleadings.
(a) Form. Pleadings shall be typewritten or printed upon paper 8 1/2 inches wide 
and 11 inches long with left and right margins at least one inch wide. Exhibits 
annexed thereto shall be folded to the same size and conform to sec.251.30(h) of 
this title (relating to Evidence). Reproductions are acceptable, provided all 
copies are clear and permanently legible.
(b) Content. Pleadings shall state their purpose, contain a concise statement of 
the facts in support thereof and a statement of the desired outcome.
(c) Signature and address. The original of every pleading shall be signed in ink 
by the party filing the paper, his or her attorney or by his or her authorized 
representative. Pleadings shall contain the name, address and telephone number 
of the party filing the document or the name, telephone number and business 
address of the representative.
(d) Certificate of service. A certificate of service by the party, attorney, or 
representative who files a pleading, stating that it has been served on the 
other parties, shall be prima facie evidence of such service. The following form 
of certificate will be sufficient in this connection: "I hereby certify that I 
have this ______ day of _________, 19__, served copies of the foregoing pleading 
upon all other parties to this proceeding, by (here state the manner of 
service). Signature." Service of pleadings on and by party shall be as specified 
in sec.251.12(c) of this title (relating to Service in Nonrulemaking 
Proceedings).
(e) Numbering and heading. In a contested case the complaint and each pleading 
shall be numbered with the licensee's license number, centered and underscored 
six lines down from the top of the first page. Double spaced below the number 
shall be the heading, as follows:
[graphic]
(f) Other pleadings. All pleadings for which no official form is prescribed 
shall contain:
(1) the name of the party seeking to bring or prevent action by the board;
(2) the names of all other known parties in interest;
(3) a concise statement of the facts relied upon by the pleader;
(4) a prayer stating the type of relief, action or order desired;
(5) any other matter required by statute; and
(6) a certificate of service, if required by sec.251.12(c) of this title 
(relating to Service in Nonrulemaking Proceedings).
(g) Amendments. Any pleading may be amended at any time upon motion or the 
filing of an amended application, complaint, or petition for which notice, if 
required, shall be issued pursuant to sec.251.8 of this title (relating to 
Notice of Adjudicative Hearing Proceedings).
(h) Incorporation by reference of agency records. Any pleading may adopt and 
incorporate, by specific reference thereto, any part of any document or entry in 
the official files and records of the agency. This section shall not relieve any 
applicant of the necessity of alleging in detail, if required, facts necessary 
to sustain his burden of proof imposed by law.
(i) Classification. Regardless of any error in the designation of a pleading, it 
shall be accorded its true status in the proceeding in which it is filed.
(j) Docketing. Upon receipt of a complaint, an application or other pleading 
which is intended to institute a proceeding before the board, the secretary, 
executive director or designee shall docket the same as a pending proceeding and 
serve notice thereon as specified in sec.251.12 of this title (relating to 
Service in Nonrulemaking Proceedings).
(k) Filing of documents. All documents relating to any proceeding pending or to 
be instituted before the board shall be filed with the secretary, executive 
director, or designee. Documents shall be deemed filed only when actually marked 
with the official stamp of the board, accompanied by the filing fee, if any, 
required by statute or board rules.
sec.251.8. Notice of Adjudicative Hearing Proceedings.
(a)  Notice. Before revoking, probating, or suspending any license or 
registration, or denying an application for a license or registration, or 
reprimanding any licensee or registrant, the board will afford all parties an 
opportunity for an adjudicative hearing after reasonable notice of not less than 
15 days.
(b) Content. Such notice of adjudicative hearing shall include:
(1) a statement of time, place, and nature of the hearing;
(2)  a statement of the legal authority and jurisdiction under which the hearing 
is held;
(3) a reference to the particular sections of the statutes and rules involved; 
and
(4) a short and plain statement of the matters asserted.
(c) More definite statement. If the board is unable to state the matters in 
detail at the time the notice is served, the initial notice may be limited to a 
statement of the issues involved. Thereafter, on a timely written application, a 
more definite and detailed statement must be furnished not less than three days 
prior to the date set for the hearing; however, the board shall not be required 
to plead its evidence in its complaint.
(d) Service. The notice of adjudicative hearing shall be served as specified in 
sec.251.12 of this title (relating to Service in Nonrulemaking Proceedings).
sec.251.9. Conduct and Decorum. Each person, party, witness, attorney, or other 
representative shall comport himself in all proceedings with proper dignity, 
courtesy and respect for the board, the executive director, the examiner, and 
all other parties. Disorderly or disruptive conduct will not be tolerated. 
Attorneys and other representatives of parties shall observe and practice the 
standards of ethical behavior prescribed for attorneys at law by the Texas State 
Bar.
sec.251.10. Classification of Parties. Regardless of errors as to designation of 
a party, parties shall be accorded their true status in the proceeding.
sec.251.11. Parties in Interest. Any party in interest may appear in any 
proceeding before the board. All appearances shall be subject to a motion to 
strike upon a showing that the party has no justiciable or administratively 
cognizable interest in the proceeding.
sec.251.12. Service in Nonrulemaking Proceedings.
(a) Personal service. Where personal service of notice by the board is required, 
the board shall serve in person or by mailing the notice of adjudicative 
hearing, certified or registered mail, return receipt requested, to the last 
address filed with the board by the person entitled to receive such notice.
(b)  Service by publication. Where personal service cannot be made as 
contemplated in subsection (a) of this section, then service of notice shall be 
by publication of the notice of adjudicative hearing in a newspaper of general 
circulation in the county in which the licensee was last known to have his or 
her other practice. Notice shall be made once each week for two consecutive 
weeks, with the last publication to be at least 15 days prior to the date of the 
hearing.
(c) Service of pleadings. A copy of any document filed by any party in any 
proceeding subsequent to the institution thereof shall be mailed or otherwise 
delivered to other party of record by the filing party. If any party has 
appeared in the proceeding by attorney or other representative authorized under 
these sections to make appearances, service shall be made upon such attorney or 
other representative. The willful failure of any party to make such service 
shall be sufficient grounds for the entry of an order by the presiding officer 
or hearings examiner striking the document from the record.
sec.251.13. Appearances Personally or by Representative.  Any party may appear 
and be represented by an attorney at law authorized to practice law before the 
highest court of this state. This right may be waived. Any person may appear on 
his own behalf or by a designated representative. A corporation, partnership, or 
association may appear and be represented by any bona fide officer, partner, or 
full-time employee.
sec.251.14. Filing Fees. <ol> Each application, petition or complaint which is 
intended to institute a proceeding before the board shall be accompanied by the 
filing fee, if any, prescribed by law and these sections.
sec.251.15. Forms.  Official forms for use in certain board proceedings are 
incorporated in the appendix to these sections. The previously-mentioned 
official forms shall be printed, when appropriate, under the supervision of the 
secretary or executive director who shall furnish copies thereof to any person 
upon request.
sec.251.16. Ex Parte Consultations. Unless required for the disposition of ex 
parte matters authorized by law, members or employees of the board assigned to 
render a decision or to make findings of fact and conclusions of law in a 
contested case may not communicate, directly or indirectly, in connection with 
any issue of fact or law with any party or his representative, except on notice 
and opportunity for all parties to participate.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201733
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 458-1955
       
Subchapter B. Prehearing
22 TAC sec.sec.251.17-251.24
The new section is proposed under Texas Civil Statutes, Article 4442d, sec.8, 
which provides TBLNHA with the authority to make rules and regulations not 
inconsistent with law as may be necessary or proper for the performance of its 
duties, and to take such other actions as may be necessary to enable the State 
to meet the requirements set forth in sec.1908 of the Social Security Act (42 
United States Code, sec.1396g), the federal rules and regulations promulgated 
thereunder, and other pertinent federal authority; provided, however, that no 
rule shall be promulgated, altered, or abolished without the approval of a two 
thirds majority of the board.
sec.251.17. Depositions.  The taking and use of depositions in any proceeding 
shall be governed by Administrative Procedure and Texas Register Act, sec.14.
sec.251.18. Subpoenas.
(a) Authority. Pursuant to the Act, 11. 02 and Administrative Procedure and 
Texas Register Act (APTRA) sec.14, the board has the authority to issue 
subpoenas to compel the attendance of witnesses and subpoena duces tecum to 
compel the production of books, records, or documents when requested by three 
party or on the board's own motion.
(b) Request. A party may request at any time during the pendency of a 
proceeding, including a contested case, that the board issue its subpoena or 
subpoena duces tecum upon a showing of good cause, the relevancy, and necessity 
of the testimony or documents, lack of undue inconvenience, imposition, or 
harassment of the party required to produce the testimony or documents, and the 
deposit of sums sufficient to insure payment of expenses incident to the 
subpoenas.
(1)  The party requesting the subpoena shall be responsible for the payment of 
any expense incurred in serving the subpoena, as well as reasonable and 
necessary expenses incurred by the witness who appears in response to the 
subpoena.
(2) The party requesting a subpoena duces tecum shall describe and recite with 
clarity, specificity, and particularity the books, records, documents to be 
produced.
(c) Ministerial act. When requested by a party to issue a subpoena or subpoena 
duces tecum the board is performing a ministerial act and shall do so in 
accordance with the law; however, the board shall not be responsible for 
inadequacies, insufficiencies, or lack of pleading by the requesting parties or 
consequences thereof.
(d) On its own motion, or on the written request of any party to a contested 
case pending before it, on a showing of good cause, and on the deposit of sums 
with the executive director/secretary that will reasonably insure payment of the 
amounts estimated to accrue under sec.251.17 of this title (relating to 
Depositions), the board shall issue a subpoena addressed to an authorized agency 
employee or sheriff or any constable, to require the attendance of witnesses and 
the production of books, records, pages, or other objects as may be necessary 
and proper for the purposed of the proceedings.
(e) Fees and travel. Usual and customary fees for required expert witnesses 
subpoenaed in disciplinary hearings are authorized over and above the amount 
specified in APTRA, sec.14, when such fees are quoted in writing and approved by 
the agency prior to the hearing.
sec.251.19. Show Compliance Conference. Prior to the institution of the board's 
proceedings to revoke, suspend, or probate any license, the board shall, through 
the Disciplinary Review Panel:
(1) give notice to the licensee of such proceedings as required by sec.251.12 of 
this title (relating to Service in Nonrulemaking Proceedings); and
(1) provide the licensee an opportunity to show compliance with the Act or the 
rules of the board which shall consist of the following:
(A) the licensee may present his or her evidence;
(B) the licensee may be represented by counsel;
(C)  the licensee may elect to have the show compliance proceeding reduced to 
writing at his or her expense;
(D) the licensee's testimony and evidence shall be under oath;
(E) the evidence may include records, x-rays, and other film recordings, 
diagrams, drawings, and other illustrative or explanatory matters relevant to 
the facts and the conduct of the licensee.
sec.251.20. Prehearing Conferences.
(a) Appearance. In any contested case the hearings examiner on his or her own 
motion or on the motion of a party, may direct the parties, their attorneys or 
representatives to appear before him or her at a specified time and place for a 
conference prior to the hearing for the purpose of discussing:
(1) formulating issues;
(2)  simplifying issues;
(3) matters to be officially noticed;
(4)  the possibility of making admissions of certain averments of fact or 
stipulations concerning the use by either or both parties of matters of public 
record, such as official records of the board to the end of avoiding the 
unnecessary introduction of proof;
(5) ruling on any previously filed motions;
(6) the procedure at a hearing;
(7) the possible limitation of the number of witnesses; and
(8) such matters as may aid in the simplification of the proceedings.
(b) Order. Action taken at the conference shall be recorded in an appropriate 
order by the hearings examiner.
sec.251.21. Motions.
(a) Any motion filed in a pending proceeding shall, unless made during a 
hearing:
(1) be in writing;
(2) set forth the specific grounds and reasons, and the relief sought;
(3) be distributed to all parties of record over a certificate of service as 
outlined in sec.251.7(d) of this title (relating to Pleadings) and sec.251.12(c) 
of this title (relating to Service in Nonrulemaking Proceedings);
(4) be filed with the hearing examiner not less than five days prior to the 
hearing date;
(5) if based on facts or matters which are not of record, be supported by an 
affidavit; and
(6) be ruled on by the hearings examiner at the prehearing conference or at the 
hearing.
(b)  Motions for continuance or for dismissal of complaint shall:
(1)  comply with subsection (a)(1)-(6) of this section;
(2) make reference to relevant prior motions filed in the same proceeding.
(c)  When a complaint has proceeded to its hearing date, pursuant to the notice 
issued therein, no continuance or dismissal shall be granted by the examiner 
without the consent of all parties involved.
sec.251.22. Consolidated Hearings. <ol> A motion for consolidation of two or 
more complaints, applications, petitions, or other proceedings shall comply with 
sec.251.21 of this title (relating to Motions). Proceedings shall not be 
consolidated unless the board shall find:
(1) that the proceedings involve common questions of law and fact;
(2) that separate hearings would result in unwarranted expense, delay, or 
substantial injustice.
sec.251.23. Place and Nature of Hearings. All hearings conducted in any 
proceedings shall be open to the public and shall be held in Austin.
sec.251.24. Informal Disposition. <ol> Pursuant to the Administrative Procedure 
and Texas Register Act, sec.13(e), informal disposition of any complaint or 
matter relating to this Act or of any contested case may be made by stipulation, 
agreed settlement, consent, order, or default.
(1) The Disciplinary Review Panel may determine that the public interest might 
be served by attempting to resolve a complaint or other matters pending before 
the board through an informal settlement conference prior to a formal 
disciplinary proceeding as described in Subchapter C of this chapter, concerning 
hearings.
(2) The following procedure shall be followed in informal settlement 
conferences.
(A) The Disciplinary Review Panel shall conduct the settlement conference as the 
board's representative.
(B) The board will provide the licensee with written notice of the time, date, 
and place of the settlement conference. Such notification shall inform the 
licensee of the nature of the alleged violation, that the licensee may be 
represented by legal counsel or by a representative of his or her choice, that 
the licensee may offer the testimony of witnesses, that the board will be 
represented by the Disciplinary Review Panel, that the licensee's attendance and 
participation is voluntary, and that the licensee may request in writing that 
the matter be considered according to procedures described in Subchapter C of 
this chapter, concerning hearings. A copy of the board's rules concerning 
informal disposition of cases shall be enclosed with the notice of the 
settlement conference. Notice of the settlement conference, with enclosures, 
shall be sent by certified mail, return receipt requested, to the current 
address of the licensee on file with the board.
(C) Notice of the settlement conference, with enclosures, shall be sent by 
certified mall, return receipt requested, to the complainant at his or her 
current address on file with the board. The complainant shall be afforded the 
opportunity to appear and testify or to submit a written statement for 
consideration at the settlement conference.
(D) The settlement conference shall be informal and will not follow the 
procedure established in this chapter for contested cases. The licensee, the 
licensee's attorney or representative, and representatives of the board and 
board staff may question witnesses, make relevant statements, present 
affidavits, letters, reports, or statements of persons not in attendance, and 
may present such other evidence as may be appropriate.
(E) The board's representative may question any witness, and shall afford each 
participant in the settlement conference the opportunity to make such statements 
as are material and relevant.
(F)  The board's representative shall prohibit or limit access to the board's 
investigative file by the licensee, the licensee's attorney or representative, 
and by the complainant.
(G) The board's representative may, at his or her discretion, direct that a tape 
recording be made of none or all of the informal settlement conference.
(H) The board's representative shall exclude from the settlement conference all 
persons except witnesses during their testimony, the licensee, the licensee's 
attorney or representative, the complainant, board members, disciplinary review 
panel members, and board staff.
(I) At the conclusion of the settlement conference, the board's representative 
may make recommendations to the licensee for resolution of the issues. Such 
recommendations may include any disciplinary actions authorized by the Act. The 
board representative may also conclude that the board lacks jurisdiction or that 
a violation of the Act or the board's rules has not been established, and may 
order that the investigation be closed or referred for further investigation.
(J) The licensee may either accept or reject the settlement recommendations 
proposed by the board representative. If the licensee accepts the 
recommendations, the licensee shall execute the settlement agreement as soon 
thereafter as is practical. If the licensee rejects the proposed agreement, the 
matter proceed to a formal hearing as outlined in Subchapter C of this Chapter, 
(relating to Hearings).
(K) Following acceptance and execution by the licensee of the settlement 
agreement, said agreement shall be submitted to the board for approval at the 
next meeting of the board. Upon an affirmative two-thirds majority vote, the 
board shall enter an order approving the proposed settlement agreement. Said 
order shall bear the signature of the officer presiding at such meeting and 
shall be included in the minutes of the board.
(L) If the board approves the proposed settlement agreement, the licensee and 
the complainant shall be so notified.
(M) If the board declines to approve any part or all of the proposed settlement 
agreement, the matter may be referred back to the board's representative and to 
the licensee for additional discussion, if appropriate. The board may also 
schedule the matter for a hearing as described in Subchapter C of this Chapter, 
(relating to Hearings).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201735
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 458-1955
       
Subchapter C. Hearing
22 TAC sec.sec.251.25-251.30
The new sections are proposed under Texas Civil Statutes, Article 4442d, sec.8, 
which provide TBLNHA with the authority to make rules and regulations not 
inconsistent with law as may be necessary or proper for the performance of its 
duties, and to take such other actions as may be necessary to enable the state 
to meet the requirements set forth in sec.1908 of the Social Security Act (42 
United States Code, sec.1396g), the federal rules and regulations promulgated 
thereunder, and other pertinent federal authority; provided, however, that no 
rule shall be promulgated, altered, or abolished without the approval of a two 
thirds majority of the board.
sec.251.25. Presiding Officer. <ol> When the board enbanc, or a committee or 
panel of the board, conducts a hearing pursuant to the Act, then the following 
apply.
(1) The hearing will be presided over by a hearings officer.
(2) The presiding officer shall have the authority to:
(A) administer oaths;
(B) examine witnesses;
(C)  rule on the admissibility of evidence;
(D) rule on motions;
(E) rule on amendments to pleadings;
(F) recess the hearing from day to day; and
(G) refer the hearing to a hearing examiner to be appointed by the board.
sec.251.26. Hearing Examiners.
(a) Authority. When the board appoints a hearing examiner pursuant to the Act, 
sec.11.02, then such hearings shall be conducted in accordance with the APTRA, 
the Act, the rules of this board, and all other applicable law.
(b) Duties. Except for accepting or rejecting proposed findings of fact or 
conclusions of law, issuing final orders on the merits, dismissing complaints, 
and making recommendations as to a licensee's discipline, the hearings examiner 
shall have all the authority which the board has regarding the conduct of 
hearings, including, without limitation, the following:
(1) to hold hearings and issue notices;
(2) to administer oaths and affirmations;
(3) to direct all parties to enter their appearance on the record;
(4) to subpoena and examine witness;
(5) to subpoena documents and other physical evidence;
(6) to hold conferences, including prehearing conferences, before or during the 
hearing to consider the matters specified in sec.251.20 of this title (relating 
to Prehearing Conferences);
(7) to regulate the course and conduct of the hearing, including, without 
limitation, setting the time and place of the hearing and/or continued hearings; 
fixing the time for filing of briefs and other documents; receiving relevant 
evidence; excluding evidence which is irrelevant, immaterial, repetitious, or 
cumulative; ruling upon offers of proof; regulating the manner of examination to 
prevent needless and unreasonable harassment, intimidation, expense, 
inconvenience, or embarrassment of any witness or party at a hearing; removing 
disruptive individuals; and ruling on motions;
(8) to submit in writing to the parties, a proposal for decision containing the 
elements specified in sec.251.31 of this title (relating to Proposals for 
Decision);
(9) to present and explain in person his or her proposal for decision to the 
board for its consideration and final action; and
(10) to dispose of any other matter that arises in the course of a hearing and 
to take any action authorized by these sections, the Act, the APTRA, and all 
other applicable law.
sec.251.27. Order of Proceeding.
(a) Hearings. In all proceedings, the petitioner, applicant or complainant, 
respectively, shall be entitled to open and close. Where several proceedings are 
heard on a consolidated record, the examiner shall designate who shall open and 
close. The examiner in all cases shall determine whether and at what stage 
intervenors shall be permitted to offer evidence. After all parties have 
completed the presentation of their evidence, the examiner may call upon any 
party or the board for further material or relevant evidence upon any issue, to 
be presented at further public hearing after notice to all parties of record.
(b)  Before the board. During proceedings before the board, enbanc, the order of 
proceeding shall be the following.
(1) The examiner shall present his or her proposal for decision and recommended 
order, explaining them as specified in sec.251.26(8) and (9) of this title 
(relating to Hearing Examiners).
(2)  The party adversely affected shall briefly state their reasons for being so 
affected supported by the evidence of record.
(3) The other party or parties shall be given the opportunity to respond.
(4) The board as complainant shall have the right to close.
(5) The president or a member of the board may question any party as to any 
matter relevant to the proceeding.
(6) At the end of any argument by the parties, the board shall deliberate the 
matter and announce its final decision in open meeting.
(c) Limitation. A party shall not inquire into the mental processes used by the 
board in arriving at its decision, nor be disruptive of the orderly procedure of 
the board's routine.
sec.251.28. Reporter and Transcripts.
(a) Option. A party has the option of furnishing his or her own stenographic 
reporter at his or her own expense or using the reporter on the staff of the 
board. If a party elects to provide his or her own reporter, then party shall 
notify the board prior to the commencement of the hearing.
(b) Original. The original transcript shall be delivered to the board as 
practicable. A stenographic reporter may sell copies of a transcript. If the 
respondent in the proceedings requests the original record (statement of fact) 
of the testimony and evidence of a disciplinary hearing, the costs for the final 
transcript shall be borne by the respondent (appellant). Any subsequent copies 
of the record (transcript) shall be borne any person requesting same.
(c) Corrections. Suggested corrections to the transcript of the record may be 
offered within 10 days after the transcript is filed in the proceeding, unless 
the board shall permit suggested corrections to be offered thereafter. Suggested 
corrections shall be served in writing upon each party of record, the official 
reporter, and the board. If suggested corrections are not objected to, board 
will direct the corrections to be made and the manner of making them. In case 
the parties disagree on suggested corrections, they may be heard by the board 
which shall then determine the manner in which the record shall be signed, if at 
all.
sec.251.29. Dismissal Without Hearing.
(a) The board may entertain motions for dismissal for the following reasons:
(1) failure to prosecute;
(2) unnecessary duplication of proceedings;
(3)  withdrawal;
(4) moot questions or stale petitions; or
(5)  lack of jurisdiction.
(b) Such motions must meet the criteria of sec.251.21 of this title (relating to 
Motions).
(c) These motions may be argued prior to the board ruling thereon.
sec.251.30. Evidence.
(a) Rules. The rules of evidence as applied in nonjury civil cases in the 
district courts of this state shall apply. In all cases, irrelevant, immaterial, 
or unduly repetitious evidence shall be excluded. When necessary to ascertain 
facts not reasonably susceptible of proof under those rules, evidence not 
admissible thereunder may be admitted, except where precluded by statute, if it 
is of a type commonly relied upon by reasonably prudent men in the conduct of 
their affairs. The board shall give effect to the rules of privilege recognized 
by law. Opportunity must be afforded all parties to respond and present evidence 
and argument of all issues involved.
(b) Objections. Objections to evidentiary offers shall be made and shall be 
noted in the record. Formal exceptions to rulings of the presiding officer 
during a hearing shall be unnecessary. It shall be sufficient that the party at 
the time any ruling is made or sought shall have made known to the presiding 
officer or the examiner the action which he or she desires.
(c)  Offer of proof. If evidence is excluded from the record by an exclusionary 
ruling of the examiner, the evidence may be included in the record by an offer 
of proof by the sponsoring party by dictating into the record or submitting in 
writing the substance of the evidence. An offer of proof shall be sufficient to 
preserve the evidence for review.
(d) Resident's records. When subpoenaed by the board, the records of nursing 
home resident's shall have stapled thereto an affidavit in the form approved and 
furnished by the board which contains the requisite elements to comply with the 
Texas Rules of Evidence, 902 (10)b, relating to form of affidavits.
(e) Documents. Subject to these requirements, if a hearing will be expedited and 
the interests of the parties will not be substantially prejudiced, any part of 
the evidence may be received in written form.
(1) Copies. Documentary evidence may be received in the form of copies or 
excerpts if the original is not readily available. On request, parties shall be 
given an opportunity to compare the copy with the original. When numerous 
documents are offered, the examiner may limit those admitted to a (number which 
are typical and representative and may, in his or her discretion, require the 
abstracting of the relevant data from the documents and the presentation of the 
abstracts in the form of an exhibit; provided, however, that before making such 
requirement the examiner shall require that all parties of record or their 
representatives be given the right to examine the documents from which such 
abstracts were made.
(2)  Prepared testimony. In all contested proceedings and after service of 
copies upon all parties of record at such time as may be designated by the 
examiner, the prepared testimony of witness upon direct examination, either in 
narrative or question and answer form, may be incorporated in the record as if 
read or received as an exhibit, upon the witness' being sworn and identifying 
the same. Such witness shall be subject to cross-examination and the prepared 
testimony shall be subject to a motion to strike in whole or in part.
(f)  Official notice. Official notice may be taken of all facts judicially 
cognizable and records of the board. The addition, notice may be taken of 
generally recognized facts within the area of the agency's specialized 
knowledge. Parties shall be notified either before or during the hearing or by 
reference in preliminary reports or otherwise, of the material officially 
noticed, including any staff memoranda or data, and the parties shall be 
afforded an opportunity to contest the material so noticed. The special skills 
or knowledge of the agency and its staff may be utilized in evaluating the 
evidence.
(g)  Limitations on number of witnesses. The examiner shall have the right in 
any proceeding to limit the number of witnesses whose testimony is merely 
cumulative.
(h) Exhibits.
(1) Form. Documentary exhibits shall be of such size as set forth in sec.251.7 
of this title (relating to Pleadings), or shall be eight inches by 14 inches in 
length, so as to not unduly encumber the files and records of the board. There 
shall be a brief statement on the first sheet of the exhibit of what the exhibit 
purports to show. Exhibits shall be limited to facts material and relevant to 
the issues involved in a particular proceeding.
(2) Marking and service. The original of each exhibit offered shall be marked 
sequentially for identification and tendered for inclusion in the evidentiary 
record. One copy shall be furnished to the examiner, and one copy to each party 
of record or his or her attorney or representative.
(i)  After hearing. No exhibit will be permitted to be filed in any proceeding 
after the conclusion of the hearing unless specifically directed by the 
examiner, presiding officer, or by the board with copies of the late-filed 
exhibit served on all parties of record.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201736
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 458-1955
       
Subchapter D. Posthearing
22 TAC sec.sec.251.31-251.37
The new sections are proposed under Texas Civil Statutes, Article 4442d, sec.8, 
which provide TBLNHA with the authority to make rules and regulations not 
inconsistent with law as may be necessary or proper for the performance of its 
duties, and to take such other actions as may be necessary to enable the state 
to meet the requirements set forth in sec.1908 of the Social Security Act (42 
United States Code sec.1396g), the federal rules and regulations promulgated 
thereunder, and other pertinent federal authority; provided, however, that no 
rule shall be promulgated, altered, or abolished without the approval of a two 
thirds majority of the board.
sec.251.31. Proposals for Decision.
(a) Elements. In addition to any other requirement of the Act or the APTRA, an 
examiner shall serve on the parties a proposal for decision which shall contain:
(1) a summary of the evidence adduced by each party;
(2) a statement of the examiner's reasons for the proposed decision;
(3) findings of fact expressed in clear, concise factual terms, either 
summarizing or reciting the evidence. Findings of fact must be based on the 
evidence and on matters officially noticed;
(4) conclusions of law necessary to the proposed decision; and
(5) a listing and explanation of all mitigating and aggravating circumstances 
necessary to a complete understanding of the case by the board;
(6) recommended disposition or discipline.
(b) Service. When a proposal for decision is prepared, a copy of the proposal 
shall be served forthwith by the examiner on each party, his or her attorney of 
record or representative, and the board. Service of the proposal or decision 
shall be in accordance with sec.251.7(d) of this title (relating to Pleadings) 
and sec.251.12(c) of this title (relating to Service in Nonrulemaking 
Proceeding).
(c) Statutory statement. If findings of fact are stated in statutory language, 
each finding must be accompanied by a concise and explicit statement of the 
facts supporting the finding.
(d) Proposed findings. Only when the examiner requests a party or parties to 
submit findings of fact will it be necessary for the examiner to rule on each 
proposed finding in the recommended order.
sec.251.32. Exceptions and Replies.
(a) Entitlement. Any party of record who is aggrieved by the examiner's proposal 
for decision shall have the opportunity to file exceptions to the proposal for 
decision within 20 days from the date of service of the proposal for decision. 
Replies to the exceptions may be filed by other parties within 10 days of the 
filing of the exceptions. Exceptions and replies shall be filed with the 
examiner. Any extensions of time shall be as provided by sec.251.4 of this title 
(relating to Computation of Time).
(b) Form. The form of exceptions and replies are as specified in sec.251.7 of 
this title (relating to Pleadings).
(c) Content. Each exception or reply to a finding of fact shall be concisely 
stated and summarize the evidence in support thereof. Arguments shall be logical 
and citations to authorities shall be complete.
(d) Briefs. Briefs shall be filed only when requested or permitted by the board, 
presiding officer or examiner.
(e) Service. Exceptions and replies shall be served upon every party of record 
by the filing party pursuant to sec.251.12 of this title (relating to Service in 
Nonrulemaking Proceedings).
sec.251.33. Oral Argument. <ol> Any party may request oral argument prior to the 
final determination of any proceeding, but oral argument shall be allowed only 
in the sound discretion of the board. A request for oral argument may be 
incorporated in exceptions, briefs, replies to exceptions, motions for rehearing 
or in separate pleadings.
sec.251.34. Final Decisions and Orders.
(a) Board action. The proposal for decision may be acted on by the board after 
the expiration of 10 days after the filing of replies to exceptions to the 
proposal for decision. Parties shall be notified either personally or by mail of 
any decision or order. On written request, a copy of the decision or order shall 
be delivered or mailed to any party and to his or her attorney of record.
(b) Recorded. All final decisions and orders of the board shall be in writing or 
stated in the record and shall be signed by the chair, the vice-chair, or the 
secretary-treasurer. A final order shall include findings of fact and 
conclusions of law, separately stated.
(c) Amended order. If the board modifies, amends, or changes the examiner's 
recommended order, the examiner shall prepare an order reflecting the board's 
changes as stated in the record.
(d) Administrative finality. A final order or board decision is administratively 
final:
(1) when absent the filing of a timely motion for rehearing upon the expiration 
of 20 days from the date the final order or board decision is entered; or
(2) when a timely motion for rehearing is filed and the motion for rehearing is 
overruled by hoard order or operation of law as outlined in sec.251.35 of this 
title (relating to Motions for Rehearing).
(e) Rendering of final decision or order. The final decision or order must be 
rendered within 60 days after the date the hearing is finally closed. In a 
contested case heard by an examiner, an extension of time for the issuing of a 
proposal for decision may be announced at the conclusion of the hearing.
sec.251.35. Motions for Rehearing.
(a) Filing times. A motion for rehearing must be filed within 20 days after a 
party has been notified, either in person or by mail, of the final decision or 
order of the board.
(b) Board action. Board action on the motion must be taken within 45 days after 
the date of rendition of the final decision or order. If board action is not 
taken within the 45-day period, the motion for rehearing is overruled by 
operation of law 45 days after the date of rendition of the final decision or 
order. The board may by written order extend the period of time for filing the 
motions and replies and taking board action, except that an extension may not 
extend the period for board action beyond 90 days after the date of rendition of 
the final decision or order. In the event of an extension, the motion for 
rehearing is overruled by operation of law on the date fixed by the order, or in 
the absence of a fixed date, 90 days after the date of the final decision or 
order. The parties may by agreement with the approval of the board provide for a 
modification of the times provided in this section.
sec.251.36. The Record. <ol> The record in a contested case shall include:
(1) all pleadings, motions, and intermediate rulings;
(2)  evidence received or considered;
(3) a statement of matters officially noticed;
(4) questions and offers of proof, objections, and rulings;
(5) proposed findings of fact, conclusions of law, exceptions, and replies;
(6) any decision, opinion, or report by the officer presiding at the hearing; 
and
(7) all staff memoranda or data submitted to or considered by the hearing 
officer or members of the agency who are involved in making the decision.
sec.251.37. Costs of Appeal. A party appealing a final decision of the board in 
a contested case may be ordered by the board to pay all or a part of the cost of 
preparation of the original or a certified copy of the record of the proceeding 
that is required to be transmitted to the reviewing court.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201737
Kim M. Foutz
Administrative Technician III
Texas Board of Licensure for Nursing Home Administrators
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 458-1955
       
TITLE 25. HEALTH SERVICES
Part I. Texas Department of Health
Chapter 229. Food and Drug
<nl>Licensing<ol> [Registration] of Wholesale Distributors of Drugs <nl>-
Including Good Manufacturing Practices
25 TAC sec.sec.229.251-229.254
The Texas Department of Health (department) proposes new  ssec.229.251-229.254, 
concerning licensing of wholesale distributors of drugs-including good 
manufacturing practices. The sections cover definitions; licensing fee and 
procedures; minimum standards for licensure; and refusal, revocation, or 
suspension of license.
The amendments will comply with requirements of Senate Bill 873, Acts of the 
72nd Legislature, 1991, and with the federal Prescription Drug Marketing Act of 
1987. In order to conform with Senate Bill 873, Acts of the 72nd Legislature and 
with the federal Prescription Drug Marketing Act of 1987, the amendments update 
and clarify the sections by replacing the word "registration" with the word 
"licensing" throughout the sections; clarify the definition of the location 
where drugs are distributed; add new definitions for "wholesale distribution" 
(of drugs) and "prescription drugs"; authorize licensure fees for in-state and 
out-of-state wholesale distributors of drugs and inserts the guidelines for 
licensure; and enumerates those entities which are exempt from licensing 
requirements.
The proposed amendments will enable the department to license and regulate 
wholesale drug distributors so as to conform with the federal Prescription Drug 
Marketing Act of 1987. The federal Act requires states to license wholesale drug 
distributors in an effort to reduce potential public health risks which might 
result from the diversion of prescription drugs from legitimate commercial 
channels. Failure to license out-of-state distributors would not only penalize 
drug distributors by precluding shipment into Texas, but would also possibly 
limit the availability of prescription drugs to Texas citizens. The Texas Food, 
Drug, and Cosmetic Act, Texas Health and Safety Code, Chapter 431, was amended 
during the 72nd Texas Legislative Session to enable the department to enact the 
provisions of the federal Act. Since the new state law went into effect on 
September 1, 1991, it is imperative that the proposed rules be passed so that 
licensing provisions may be enacted as expeditiously as possible.
Stephen Seale, Chief Accountant III, has determined that for the first five-year 
period the sections are in effect there will be fiscal implications as a result 
of enforcing or administering the sections. The effect on state government will 
be an estimated additional cost of $739,000 for each year of fiscal years 1992-
1996; however, there will be an estimated increase in revenue of $739,000 each 
year to offset this cost. There will be no effect on local government.
Mr. Seale also has determined that for each year of the first five years the 
proposed sections are in effect the public benefit anticipated as a result of 
enforcing or administering the proposed sections will be recovery of at least 
50% of the costs incurred by the department in the licensing, inspection, 
implementation, and enforcement of the law and the sections. The possible annual 
cost to small businesses and persons required to comply with the proposed rules 
for the next five years will be as set forth in the schedule of fees in sec.229. 
252. There will be no effect on local employment.
Comments on the proposal may be submitted to Dennis E. Baker, Director, Division 
of Food and Drugs, Texas Department of Health, 1100 West 49th Street, Austin, 
Texas 78756, ((512) 458-7248. Comments will be accepted for 30 days following 
the date of publication of these proposed rules in the Texas Register . In 
addition, a public hearing on the proposed rules will be held at 8:30 a.m., on 
Wednesday, February 26, 1992, in the Texas Department of Health Auditorium, 1100 
West 49th Street, Austin.
The amendments are proposed under Health and Safety Code, sec.431.241, which 
provides the department with the authority to adopt necessary regulations 
pursuant to the enforcement of this chapter; and sec.12.001, which provides the 
Texas Board of Health with the authority to adopt rules for the performance of 
every duty imposed by law on the Texas Board of Health, the Texas Department of 
Health and the commissioner of health.
sec.229.251. Definitions.  The following words and terms, when used in these 
sections, shall have the following meanings, unless the context clearly 
indicates otherwise.
   <nl>Place of business <ol> [Establishments]-Each location <nl>at which<ol> 
[where] drugs are distributed at wholesale as defined in <nl>The Health and 
Safety Code, Chapter 431.<ol> [Texas Civil Statutes, Article 4476-5, sec.27].
   <nl>Wholesale distribution -Distribution to a person other than a consumer or 
patient, including, but not limited to, distribution by a manufacturer, 
repacker, own label distributor, jobber, or wholesaler.
sec.229.252. <nl>Licensing  [Registration] Fee and Procedures.
(a) <nl>License<ol> [Registration] fee. All wholesale distributors of drugs 
<nl>who sell drugs<ol> in Texas shall <nl>obtain a license<ol> [register] 
annually on or before September 1 with the Texas Department of Health 
<nl>(department)<ol> and shall pay a  <nl>licensing<ol> [registration] fee for 
each wholesale distribution <nl>place of business<ol> [establishment] operated 
as follows:
(1) <nl>500<ol> [$100] per wholesale distributor having a gross annual volume of 
$0-<nl>$19,999,999.99 [$199,999.99];
(2)  <nl>$750<ol> [$200] per wholesale distributor having a gross annual volume 
<nl>greater than or equal to<ol> [of] <nl>$20,000,000 <ol> [$200,000-$999,999. 
99];
(3) <nl>$750<ol> [$300] per <nl>out-of-state<ol> wholesale distributor<nl>, 
unless an audited statement is provided which demonstrates<ol> [having] a gross 
annual volume of <nl>less than $20,000,000 which would require a licensing fee 
of $500 <ol> [$1,000,000-$2,999,999.99].
[(4) $400 per wholesale distributor having a gross annual volume of $3,000,000-
$4,999,999.99; and]
[(5) $500 per wholesale distributor having a gross annual volume of $5 million 
or above]
(b) <nl>License<ol> [Registration] forms. <nl>Licensing<ol> [Registration] forms 
may be obtained from the Texas Department of Health, Division of Food and Drugs, 
1100 West 49th Street, Austin, Texas, 78756.
(c) <nl>License<ol> [Registration] statement. The wholesale distributors' 
<nl>licensing<ol> [registration] statement shall be signed and verified, shall 
be made on the department furnished <nl>license<ol> [registration] form, and 
shall contain the following information:
(1)  the <nl>legal<ol> name under which the business is conducted;
(2)  the address of each place of business <nl>that is<ol> [in this state being 
registered] <nl>licensed <ol> [A "place of business" means each location where 
drugs are located for wholesale distribution];
(3) if a proprietorship, the name and <nl>residence <ol> [resident] address of 
the proprietor; if a partnership, the names and <nl>residence<ol> [resident] 
addresses of all partners; if a corporation, the date and place of incorporation 
and name and address of its registered agent in the state; or if any other type 
of association, then the names of the principals of such association;
(4)  the names and <nl>residence<ol> [resident] addresses <nl>and valid driver's 
license (if not applicable, a social security number)<ol> of those individuals 
in an actual administrative capacity which, in the case of 
proprietorship<nl>,<ol> shall be the managing proprietor; partnership, the 
managing partner; corporation, the officers and directors; or those in a 
managerial capacity in any other type of association;
(5) for each place of business [in the state], the  <nl>residence<ol> [resident] 
addresses of the individuals in charge thereof; and
(6) a list of categories [of gross annual volume] which must be marked and 
adhered to in the determination and paying of the fee.
(d) Two or more <nl>places of business<ol> [establishments]. If the wholesale 
distributor operates more than one <nl>place of business<ol> [establishment], 
the wholesale distributor shall <nl>license<ol> [register] each <nl>place of 
business <ol> [establishment] separately.
(e) Pre-<nl>licensing<ol> [registration] inspection. The applicant shall 
cooperate with any <nl>pre-licensing <ol> [pre-registration] inspection by the 
department of the wholesale distributor's facilities. <nl>The department may 
accept reports from authorities in other jurisdictions to determine the extent 
of compliance with the minimum standards in this chapter for applicants located 
out-of-state.
(f) Issuance of <nl>License<ol> [registration]. The department <nl>may<ol> 
[shall]  <nl>license<ol> [register] a wholesale distributor of drugs who meets 
the requirements of this section and  s229.253 of this title (relating to 
Minimum Standards for <nl>Licensing<ol> [Registration]).
<nl>(g) Exemption from licensing. Persons who engage only in the following types 
of wholesale drug distribution are exempt from the licensing requirements of 
this undesignated head, to the extent that it does not violate provisions of the 
Texas Dangerous Drug Act, Health and Safety Code; or the Texas Controlled 
Substances Act, Health and Safety Code, Chapter 481:
<nl>(1) intracompany sales;
<nl>(2) the purchase or acquisition by a hospital or other health care entity 
that is a member of a group purchasing organization of a drug for its own use 
from the group purchasing organization or from other hospitals or health care 
entities that are members of such organizations;
<nl>(3) the sale, purchase, or trade of a drug or an offer to sell, purchase, or 
trade a drug by a charitable organization, as described in the Internal Revenue 
Code of 1986, sec.501(c)(3), to a nonprofit affiliate of the organization to the 
extent otherwise permitted by law;
<nl>(4) the sale, purchase, or trade of a drug or an offer to sell, purchase, or 
trade a drug among hospitals or other health care entities that are under common 
control. For the purpose of this subsection, "common control" means the power to 
direct or cause the direction of the management and policies of a person or an 
organization, whether by ownership of stock, voting rights, contract, or 
otherwise;
<nl>(5) the sale, purchase, or trade of a drug or an offer to sell, purchase, or 
trade a drug for emergency medical reasons. For purposes of this section, 
"emergency medical reasons" includes transfers of prescription drugs by a retail 
pharmacy to another retail pharmacy to alleviate a temporary shortage;
<nl>(6) the sale, purchase, or trade of a drug, an offer to sell, purchase, or 
trade a drug, or the dispensing of a drug pursuant to a prescription;
<nl>(7) the distribution of drug samples by manufacturers' representatives or 
distributors' representatives; or
<nl>(8) the sale, purchase, or trade of blood and blood components intended for 
transfusion.
<nl>(h)<ol>[(g)] Renewal of <nl>license<ol> [registration].
(1) Each year, the wholesale distributor of drugs shall renew its 
<nl>license<ol> [registration] following the requirements of this section and 
sec.229.253 of this title (relating to Minimum Standards for <nl>Licensing<ol> 
[Registration]).
(2) The application for renewal and fee for each  <nl>place of business<ol> 
[establishment] shall be submitted to the department on or before September 1 in 
accordance with department procedures in this section.
(3) Failure to submit the renewal prior to September 1 may subject the wholesale 
distributor of drugs to the  <nl>enforcement<ol> [offense] provisions under 
<nl>The Health and Safety Code, Chapter 431 <ol> [Texas Civil Statutes, Article 
4476-5, sec.27] and also to the provision of sec.229.254 of this title (relating 
to Refusal, Revocation or Suspension of <nl>License<ol> [Registration]).
<nl>(i)  Amendment of license. A license that is amended, including a change of 
ownership or a notification of a change in the location of a licensed place of 
business required under the Health and Safety Code, sec.431.206 will require 
submission of fees as outlined in subsection (a) of this section.
<nl>(j)  Notification of change of location of place of business. Not fewer than 
30 days in advance of the change, the licensee shall notify the Commissioner of 
health (commissioner) or the commissioner's designee in writing of the 
licensee's intent to change the location of a licensed place of business. The 
notice shall include the address of the new location, and the name and residence 
address of the individual in charge of the business at the new location. Not 
more than 10 days after the completion of the change of location, the licensee 
shall notify the commissioner or the commissioner's designee in writing to 
verify the change of location, the address of the new location, and the name and 
residence address of the individual in charge of the business at the new 
address. Notice will be deemed adequate if the licensee provides the intent and 
verification notices to the commissioner or the commissioner's designee by 
certified mail, return receipt requested, mailed to the Texas Department of 
Health, 1100 West 49th Street, Austin, Texas.
sec.229.253. Minimum Standards for <nl>Licensure [Registration].
(a) Minimum standards. All wholesale distributors of drugs [in Texas] shall 
comply with the minimum standards specified in <nl>subsections<ol> [subsection] 
(b) <nl>and (c)<ol> of this section in addition to the existing statutory 
standards contained in  <nl>the Texas Health and Safety Code, Chapter 431 <ol> 
[the Texas Food, Drug and Cosmetic Act, Texas Civil Statutes, Article-4476-5].
(b) Current good manufacturing practices in manufacturing, processing, packing, 
or holding of drugs. The <nl>Texas Department of Health ( 
<ol>department<nl>)<ol> adopts by reference [the current good manufacturing 
practices in manufacturing, processing, packing or holding of drugs,] 
<nl>Title<ol> 21<nl>, <ol> Code of Federal Regulations, Part 210, sec.sec.210.1-
210.3 <nl>, as amended, titled "Current Good Manufacturing Practices in 
Manufacturing, Processing, Packing, or Holding of Drugs"; <ol> and Part 211,  
ssec.211.1-211.208<nl>, as amended, titled "Current Good Manufacturing Practice 
for Finished Pharmaceuticals". <ol> Copies are indexed and filed in the office 
of the Division of Food and Drugs, Texas Department of Health, 1100 West 49th 
Street, Austin, Texas 78756 and are available for inspection during normal 
working hours.
<nl>(c) Guidelines for licensing of wholesale prescription drug distributors. 
The department adopts by reference Title 21, Code of Federal Regulations, Part 
205, sec.sec.205.1-205.50, as amended, titled "Guidelines for State Licensing of 
Wholesale Prescription Drug Distributors". Copies are indexed and filed in the 
office of the Division of Food and Drugs, Texas Department of Health, 1100 West 
49th Street, Austin, Texas 78756 and are available for inspection during normal 
working hours. To the extent these sections conflict with Title 21, Code of 
Federal Regulations, Part 205, this section shall prevail. Prescription drug 
means any drug, human or veterinary, required by federal law or regulation to be 
dispensed only by a prescription, including finished dosage forms and active 
ingredients subject to the Federal Food, Drug, and Cosmetic Act, sec.503(b).
<nl>(d)<ol>[(c)] Buildings and facilities. All manufacturing, processing, 
packing or holding of drugs shall take place in buildings and facilities 
described in <nl>Title 21, Code of Federal Regulations, Part 211, Subpart C, as 
amended<ol> [Subpart C of Part 211, Code of Federal Regulations, Title 21]. No 
manufacturing, processing, packing, or holding of drugs shall be conducted in 
any personal residence.
<nl>(e)<ol>[(d)] Drug labeling. If a person, firm, or corporation labels a drug, 
the label shall meet the requirements of <nl>the Texas Health and Safety Code, 
Chapter 431<ol> [the Texas Food, Drug and Cosmetic Act, Texas Civil Statutes, 
Article 4476-5].
sec.229.254. Refusal, Revocation, or Suspension of <nl>License  [Registration].
(a) Basis. The <nl>Texas Department of Health (<ol>department <nl>)<ol> may, 
after providing opportunity for hearing, refuse to <nl>license<ol> [register] a 
wholesale distributor of drugs, or may revoke or suspend the <nl>license <ol> 
[registration] for violations of the requirements in sec.sec.229.251-229.253 of 
this title (relating to Definitions, <nl>Licensing<ol> [Registration] Fee and 
Procedures, and Minimum Standards for  <nl>Licensure<ol> [Registration]) or for 
any of the reasons described in  <nl>the Texas Health and Safety Code, Chapter 
431, <ol> [Texas Civil Statutes, Article 4476-5,-sec.27].
(b) Hearings. Any hearings for the refusal, revocation, or suspension of a 
<nl>license<ol> [registration] are governed by <nl>the department's formal 
hearing procedures in Chapter 1 of this title (relating to Texas Board of 
Health)<ol> [ ssec.1.21-1.32 of this title (relating to the department's Formal 
Hearing Procedures)]  <nl>and the Administrative Procedure and Texas Register 
Act, Texas Civil Statutes, Article 6252-13a.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201617
Deputy Commissioner
Robert A. MacLean, M.D.
Texas Department of Health
Proposed date of adoption: April 25, 1992
For further information, please call: (512) 458-7248
       
Part II. Texas Department of Mental Health and Mental Retardation
Chapter 40. System Administration
Subchapter B. Interagency Agreements
25 TAC sec.401.53
The Texas Department of Mental Health and Mental Retardation proposes amendments 
to Exhibit J, which is adopted by reference in sec.401.53, concerning the plan 
for new bed development in the Texas ICF/MR Program for fiscal years 1992-1993. 
The amendment would reallocate 78 level-of-care V beds (24 from the North, 12 
from the West, 24 from the East, and 18 from the South) and 12 level-of-care VI 
beds (six from the North and six from the East) to the Central Region. The 
reallocation has been approved by the Interagency Council on ICF/MR Facilities.
Leilani Rose, director, financial services department, has determined that there 
will be no significant fiscal implications for state or local government as a 
result of enforcing the section as proposed.
Jaylon Fincannon, deputy commisioner, mental retardation services, has 
determined that for the first five years the sections are in effect the public 
benefit anticipated as a result of enforcing the section will be the 
reallocation of ICF/MR beds to meet regional needs as evidenced by the 
applications received to establish ICF/MR facilities in the Central Region. 
Applicants must submit sufficient information to support the claim that a need 
exists for the facility. There will be no effect on small businesses. There is 
no anticipated economic cost to persons who are required to comply with the 
section as proposed. There is no significant local economic impact anticipated.
The amendment and the adoption by reference are proposed under Texas Civil 
Statutes, Article 5547-202, which provide the Texas Board of Mental Health and 
Mental Retardation with rulemaking powers.
sec.401.53. Plan for New Bed Development in the Texas ICF/MR Program.
(a)-(b)(No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 5, 1992.
TRD-9201802
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 465-4670
       
Chapter 404. Protection of Clients and Staff
Subchapter E. Rights of Persons Receiving Mental Health Services
25 TAC sec.sec.404.151-404.166
The Texas Department of Mental Health and Mental Retardation (TXMHMR) proposes 
new sec.sec.404.151-.166 of this title, concerning rights of persons receiving 
mental health services. A previous version of the proposed new rules, published 
in the October 25, 1991, issue of the Texas Register (16 TexReg 1626-1632) is 
subsequently withdrawn. The repeal of existing sec.sec.405.281-291, concerning 
mental health rights, was published in the October 25, 1991, issue of the Texas 
Register (16 TexReg 6032).
A preliminary version of Chapter 404, Subchapter E was distributed to field 
staff and advocacy organizations in early March. Several comments and 
recommendations were received and reflected in the sections proposed in October 
1991. A public hearing was held on the proposed rules on December 12, 1991, at 
which six people presented oral testimony. In addition, a number of written 
comments were received. All comments were considered in developing the current 
proposal.
The primary difference between the current proposed sections and the former 
proposal is that the current proposal expands the application of the rule to 
include private psychiatric facilities. As a result, a number of rights have 
been revised to specify references for department facilities, community centers, 
and private psychiatric facilities, where appropriate. A new section has been 
added outlining additional rights of individuals receiving mental health 
services in department facilities to easily identify those rights not applicable 
to private psychiatric facilities.
The proposed new sections include several new rights addressing an individual's 
ability to refuse certain treatments without compromising access to other 
treatments solely because of the refusal, as well as an individual's right to 
the provision of services without discrimination. The rights of persons 
voluntarily admitted to inpatient services have been revised to allow for oral 
requests for release and to require a physician's examination within 24 hours of 
requesting release. The proposed new rules also include a provision that an 
individual taken to a department facility, community center, or private 
psychiatric facility be examined immediately by a physician to determine whether 
further detention is necessary. The proposed sections also include a new section 
addressing the use of the Patient's Bill of Rights in private psychiatric 
hospitals.
Leilani Rose, director, Office of Financial Services, has determined that there 
will be no significant fiscal implications for state or local government or 
small businesses as a result of administering the sections as proposed. Local 
economic impact is anticipated to be insignificant.
Pam Carley, director, Office of Consumer Services and Rights Protection, has 
determined that the public benefit is the adoption of rules protecting and 
guaranteeing the rights of persons receiving mental health services.
Comments on the proposal may be submitted to Linda Logan, director, Policy 
Development, Texas Department of Mental Health and Mental Retardation, P.O. Box 
12668, Austin, Texas 78711-2668, within 30 days of publication.
These sections are proposed under Texas Civil Statutes, Article 5547-202, 
sec.2.11, which provides the Texas Board of Mental Health and Mental Retardation 
with rulemaking powers.
sec.404.151. Purpose.  The purpose of this subchapter is:
(1)  to provide to persons receiving mental health services:
(A) a listing of the specific rights guaranteed to them;
(B) the assurance that these rights must and will be made known to them, and, 
when applicable, to the persons having legal responsibility for them (i.e., 
parent of a minor, managing conservator, legal guardian of the person, limited 
legal guardian of the person); and
(C) assistance in exercising their rights in a manner which does not conflict 
with the rights of other persons;
(2) to require the development of rights handbooks and their distribution to 
persons receiving mental health services and, when applicable, to the persons 
with legal responsibility for them and other interested parties;
(3) to require the appointment of a rights protection officer at each department 
facility and community MHMR center which provides mental health services; and
(4) to ensure that department facility, community center, and private 
psychiatric hospital employees are aware of the rights of persons receiving 
mental health services.
sec.404.152. Application. The provisions of this subchapter shall apply to each 
of the following in which mental health services are provided:
(1)  facilities of the Texas Department of Mental Health and Mental Retardation 
and their respective community-based programs;
(2) community centers;
(3) private psychiatric hospitals licensed by the Texas Department of Mental 
Health and Mental Retardation; and
(4) any program contracting with these entities.
sec.404.153. Definitions. The following words and terms, when used in this 
subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise:
 Community center -A community mental health and mental retardation center 
organized pursuant to Section 3.01 of the Texas Mental Health and Mental 
Retardation Act, as amended, Texas Civil Statutes, Articles 5547-201 through 
5547-204, which provides mental health services.
 Department-The Texas Department of Mental Health and Mental Retardation.
 Department facilities -The state hospitals, state centers which provide mental 
health services, and their respective community-based programs.
 Emergency-A situation in which, in the opinion of the treating physician, the 
immediate use of medication, or, in the opinion of the treating physician or 
other appropriate professional, the immediate use of restrictive techniques is 
essential to interrupt imminent physical danger to self or others.
 Grounds privileges -Access, with or without supervision, to areas of the 
department facility or private psychiatric hospital away from an individual's 
living unit.
 Inpatient services -Residential services provided in a department facility, a 
licensed hospital unit, a licensed crisis stabilization unit, or a private 
psychiatric hospital.
 Mental health services-Includes all services concerned with research, 
prevention, and detection of mental disorders and disabilities and all services 
necessary to treat, care for, supervise, and rehabilitate mentally disordered 
and disabled persons, including persons mentally disordered and disabled from 
alcoholism and drug addiction.
 Office of Consumer Services and Rights Protection -The office located within 
the department's Central Office which maintains the toll-free telephone line (1-
800-252-8154) to receive rights-related complaints and which is responsible for 
assisting persons receiving mental health services with needed services and 
rights protection.
 Private psychiatric hospital-An establishment offering inpatient services, 
including treatment, facilities, and beds for use beyond 24 hours, for the 
primary purpose of providing psychiatric assessment and diagnostic services and 
psychiatric inpatient care and treatment for mental illness. Such services must 
be more intensive than room, board, personal services, and general medical and 
nursing care. Although substance abuse services may be offered, a majority of 
beds must be dedicated to the treatment of mental illness in adults and/or 
children. Services other than those of an inpatient nature are not licensed or 
regulated by the department and are considered only to the extent that they 
affect the stated resources for the inpatient components.
 Residential services -Twenty-four hour services provided and/or contracted by 
the department or a community center (e.g., structured group residential 
programs, halfway houses, hospital units providing mental health services, 
crisis stabilization units, etc.) or a private psychiatric hospital.
 Rights protection officer-An individual appointed by the head of a department 
facility or community center to protect and advocate for the rights of persons 
receiving mental health services.
sec.404.154. Rights of All Persons Receiving Mental Health Services.  Persons 
receiving mental health services from department facilities, community centers, 
and private psychiatric hospitals have the following rights:
(1) The rights, benefits, responsibilities, and privileges guaranteed by the 
constitutions and laws of the United States and the State of Texas unless they 
have been restricted by specific provisions of law. These rights include, but 
are not limited to, the right to impartial access to treatment, regardless of 
race, nationality, religion, sex, ethnicity, sexual orientation, age, or 
handicap; the right to petition for habeas corpus; the right to register and 
vote at elections; the right to acquire, use, and dispose of property including 
contractual rights; the right to sue and be sued; all rights relating to the 
granting, use, and revocation of licenses, permits, privileges, and benefits 
under law; the right to religious freedom; and rights concerning domestic 
relations.
(2) The right to presumption of mental competency in the absence of a judicial 
determination to the contrary. There may be limitations to this right found in 
department rules, including Chapter 404, Subchapter A of this title (relating to 
Abuse and Neglect of Persons Served by TXMHMR Facilities) , Chapter 404, 
Subchapter B of this title (relating to Client Abuse and Neglect in Community 
Mental Health and Mental Retardation Centers), and Chapter 404, Subchapter C of 
this title (relating to Patient Abuse in Private Psychiatric Facilities). 
Department facilities and community centers should also reference Chapter 405, 
Subchapter FF of this title (relating to Consent to Treatment with Psychoactive 
Medication). Any questions regarding applicability of this right or a limitation 
on it should be referred for appropriate legal advice.
(3)  The right to a humane treatment environment that ensures protection from 
harm, provides privacy to as great a degree as possible with regard to personal 
needs, and promotes respect and dignity for each individual.
(4) The right to appropriate treatment in the least restrictive appropriate 
setting available consistent with the protection of the individual and the 
protection of the community.
(5) The right to be informed of all rules and regulations of the department 
facility, community center, or private psychiatric hospital relating to 
expectations of the individual's conduct. Staff must document in the medical 
record that this information was received.
(6)  The right to communication in a language and format understandable to the 
individual for all services provided.
(7) The right to participate actively in the development and periodic review of 
an individualized treatment plan (extending to a parent or conservator of a 
minor, and the legal guardian of the person, when applicable); and the right to 
a timely consideration of any request for the participation of any other person 
in this process, with the right to be informed of the reasons for any denial of 
such a request. Staff must document in the medical record that the parent, 
guardian, conservator, or other person was notified to participate.
(8) The right to explanations of the care, procedures, and treatment to be 
provided; the risks, side effects, and benefits of all medications and treatment 
procedures to be used, including those that are unusual or experimental; the 
alternative treatment procedures that are available; and the possible 
consequences of refusing the treatment or procedure. This right extends to the 
parent or conservator of a minor, the legal guardian of the person, when 
applicable, and to any other person authorized by the individual served.
(9) The right to refuse particular treatments without prejudice to participation 
in other programs, or without compromising access to other treatments or 
services solely because of the refusal.
(10)  The right to meet with the professional staff members responsible for the 
individual's care and to be informed of their professional discipline, job 
title, and responsibilities. In addition, the individual has the right to an 
explanation of the justification involving any proposed change in the 
appointment of staff members responsible for the individual's care.
(11)  The right to request the opinion of a consultant at the individual's own 
expense and to be granted an in-house review of the individual treatment plan or 
specific procedure upon reasonable request as provided for in the written 
procedures of the department facility, community center, or private psychiatric 
hospital.
(12) The right to an explanation of the justification of any transfer of the 
individual to any program within or outside of the department facility, 
community center, or private psychiatric hospital.
(13) The right to participate actively in the development of a discharge plan 
addressing aftercare issues which include the individual's mental health, 
physical health, and social needs. This right extends to a parent or conservator 
of a minor, or the legal guardian of the person, when applicable. The individual 
also has the right to a timely consideration of any request for the 
participation of any other person in this discharge planning, with the right to 
be informed of the reasons for any denial of such a request. Staff must document 
in the medical record that the parent, guardian, conservator, or other person 
was notified to participate.
(14) The right to information, upon request, pertaining to the cost of services 
rendered (itemized when possible), the sources of the program's reimbursement, 
and any limitations placed upon the duration of services. At department 
facilities and community centers, no person will be denied services due to an 
inability to pay for them.
(15) The right to be free from unnecessary or excessive medication, which 
includes the right to give or withhold informed consent to treatment with 
psychoactive medication, unless the right has been limited by court order or in 
an emergency. In department facilities and community centers this right may only 
be limited in accordance with the provisions of Chapter 405, Subchapter FF.
(16) The right to give or withhold informed consent to participate in research 
programs without compromising access to services to which the individual is 
otherwise entitled.
(17) The right to give or withhold informed consent for the use or performance 
of any of the following (exceptions to this right must be in accordance with 
applicable laws, standards, or, for department facilities and community centers, 
department rules, and must be fully explained to the individual and the person 
authorized to give consent, if applicable):
(A)  surgical procedures;
(B) electroconvulsive therapy;
(C)  unusual medications;
(D) behavior therapy;
(D) hazardous assessment procedures;
(E) audiovisual equipment; and
(F)  other procedures for which consent is required by law.
(18)<ol>The right to withdraw consent at any time in any matter in which the 
person receiving services has previously granted consent, without limiting or 
compromising access to services or other treatment(s).
(19) The right to be informed of the current and future use and disposition of 
products of special observation and audiovisual techniques, such as one-way 
vision mirrors, tape recorders, television, movies, or photographs.
(20) The right to confidentiality of records and the right to be informed of the 
conditions under which information can be disclosed without the individual's 
consent. At department facilities and community centers, client-identifying 
information shall be disclosed in accordance with Chapter 403, Subchapter K of 
this title (relating to Client-Identifying Information). At private psychiatric 
hospitals, client-identifying information shall be disclosed in accordance with 
the provisions of the Texas Health and Safety Code, sec.sec.611.001-611.005 and 
42 Code of Federal Regulations, Part 2.
(21) The right to have access to information contained in one's own record, 
including the right to an independent review of any denial of access in 
accordance with Public Law 99-319 (Protection and Advocacy Act for Mentally Ill 
Individuals). The right extends to the parent or conservator of a minor (unless 
the minor has admitted himself/herself for chemical dependency services) and to 
the legal guardian of a person declared to be legally incompetent. Department 
facilities and community centers should also reference Chapter 403, Subchapter K 
regarding this right.
(22) The right to be free from mistreatment, abuse, neglect, and exploitation. 
See Chapter 404, Subchapter A, Chapter 404, Subchapter B, and Chapter 404, 
Subchapter C.
(23) The right to the provision of services in a way that does not discriminate 
on the basis of race, religion, sex, ethnicity, nationality, age, sexual 
orientation, or handicap.
(24) The right to protection of personal property from theft or loss. At 
department facilities, the head of the facility must institute procedures to 
protect and adequately secure the personal property of persons served, including 
clothing. Should theft or loss occur, the head of the facility must ensure 
prompt initiation of a claim against the state for reimbursement through the 
department's Office of Legal Services and may also seek reimbursement from other 
sources. Community centers and private psychiatric hospitals should develop and 
post procedures regarding protection and security of personal property of 
persons served.
(25) The right not to be secluded or have physical restraint applied to the 
individual unless it has been prescribed by a physician, except in emergency 
situations. If physical restraint or seclusion is utilized, the reason for the 
prescription, the length of time restraint or seclusion has been prescribed, and 
the behaviors necessary for the individual to be removed from restraint or 
seclusion shall be explained to the individual, and the restraint or seclusion 
shall be discontinued as soon as possible. Department facilities and community 
centers should reference Chapter 405, Subchapter F (relating to Restraint and 
Seclusion in Mental Health Facilities) for more information regarding this 
right.
(26) The right to fair compensation for labor performed for the department 
facility, community center, or private psychiatric hospital in accordance with 
the Fair Labor Standards Act. Persons receiving services at department 
facilities and community centers have the right to be informed of the 
availability of employment opportunities at the department facility or in the 
community which may lead to competitive employment, as outlined in the Texas 
Health and Safety Code, sec.533.008 ( the Texas Mental Health and Mental 
Retardation Act,sec.2.17A).
(27) The right to initiate a complaint. At department facilities and community 
centers, this includes the right to be informed of how to contact the facility 
or center rights protection officer, the facility or center public 
responsibility committee, and the Office of Consumer Services and Rights 
Protection in Central Office (toll free telephone number 1-800-252-8154). At 
private psychiatric hospitals, this includes the right to be informed of how to 
contact the Office of Standards and Quality Assurance in Central Office (toll 
free number 1-800-LET-MHMR).
(28) The right of any individual to make a complaint regarding denial of rights 
without any form of retaliation.
(29) The right to have these rights and any additional rights explained aloud in 
a way the person served can understand within 24 hours of admission to services 
(refer to sec.404.163 of this title (relating to Communication of Rights to 
Individuals Receiving Mental Health Services) and upon request.
sec.404.155. Rights of Persons Receiving Residential Mental Health Services.
(a) The following rights shall be provided to all persons receiving residential 
mental health services.
(1) The right to communicate with persons outside the department facility, 
community center, or private psychiatric hospital, including:
(A) receiving visitors at reasonable times and places, allowing for as much 
privacy as possible;
(B)  making phone calls at reasonable times, allowing for as much privacy as 
possible; and
(C) communicating by uncensored and sealed mail with others, including, but not 
limited to, legal counsel, the department, the courts, and the attorney general 
of the state, except in the following situations.
(i) When there is reason to suspect that the mail contains items such as illicit 
drugs or weapons which may present imminent risk of harm to the individual or 
others, the treating physician may authorize opening of the mail by writing a 
specific order into the individual's chart explaining the potential harm, the 
reason for suspicion, and what mail is to be opened. The mail may then be opened 
by two members of the individual's treatment team in the presence of the 
individual. After inspecting the mail and removing any items which might present 
imminent risk of harm to the individual or others, the mail shall be given to 
the individual; those opening the mail may not read it.
(ii)  If the individual is unable to open personal mail because of a physical 
limitation, a staff member may assist if documentation of the need for 
assistance is provided in the individual's record and if the individual requests 
or agrees to such assistance. An order authorizing this assistance must be 
signed by the treating physician and must be reviewed every seven days, except 
in the case of an individual with a chronic physical limitation, when the order 
may remain in effect until there is an improvement in the individual's 
condition. Other orders may be renewed as long as the condition exists. Any cash 
or articles received shall be recorded in the individual's record and placed in 
appropriate safekeeping. Staff members may offer to read mail to individuals 
unable to read because of illiteracy, blindness, or other reason, but staff 
members may not read the mail if the individual declines the offer.
(iii)  Employees may observe the opening of packages received by individuals 
deemed not capable of protecting personal property. An order authorizing this 
limitation must be signed by the treating physician and must be reviewed every 
seven days, except in the case of an individual with a chronic physical 
limitation, when the order may remain in effect until there is an improvement in 
the individual's condition. Other orders may be renewed as long as the condition 
exists. Any cash or articles received shall be recorded in the individual's 
record and placed in appropriate safekeeping.
(iv) Under no circumstances may mail from the attorney of the person served or 
from a court be censored (withheld in part or in whole from the person served).
(2) The right to have unrestricted visits from attorneys, internal advocates, 
representatives of Advocacy, Inc. with the consent of the person served, private 
physicians, or other mental health professionals at reasonable times and places. 
At department facilities, this right shall also include unrestricted visits from 
public responsibility committee members at reasonable times and places. There 
shall be no limitation on communication between an individual and an attorney.
(3) The right to be informed in writing and by any other means necessary for 
communication, at the time of admission to and discharge from inpatient services 
and upon request, of the existence and purpose of the protection and advocacy 
system in this state under the federal Protection and Advocacy for Mentally Ill 
Individuals Act of 1986 (Public Law 99-319). The notice must include the 
protection and advocacy system's telephone number and address. In Texas, the 
system is called Advocacy, Inc.
(4) The right to keep and use personal possessions. This includes the right to 
wear one's own clothing and religious or other symbolic items. This right may 
only be limited if the use of the possession is determined by the treatment team 
to present imminent risk of harm, to present a security risk, or to prevent the 
individual from participating in the treatment plan. A clinical justification 
must exist and be documented in the individual's record if access to or the use 
of any personal possession is limited.
(5) The right to wear suitable clothing which is neat, clean, and well fitting. 
At department facilities and community centers, clothing will be obtained and 
provided for individuals not having such clothing.
(6) The right to have an opportunity for physical exercise and for going 
outdoors with or without supervision at least daily. A physician's order 
limiting this right must be reviewed and renewed, if necessary, at intervals no 
longer than every three days and the findings of the review must be documented 
in the individual's record.
(7) The right to have grounds privileges, with or without supervision, at 
frequent and regular intervals.
(8) The right to religious freedom. No person shall be forced to attend or 
engage in any religious activity.
(9) The right to have opportunities for suitable interactions with individuals 
of the opposite sex, with or without supervision, as appropriate for the 
individual.
(10) The right to a timely consideration of a request for transfer to another 
room if another person in the room is unreasonably disturbing the individual, 
with the right to be informed of any reasons for any denial of such a request.
(11) The right to receive appropriate treatment of any physical ailments 
essential to the treatment of a mental disorder and for a physical disorder 
arising in the course of an individual's inpatient psychiatric care. The manner 
in which these physical disorders are treated is the decision of the physician, 
consistent with good professional judgment. If the physician determines the 
procedures required for treatment to be elective rather than essential, the 
individual has the right to consult with a provider outside the facility for 
treatment at the individual's own expense.
(12) The right of each adult individual admitted to an inpatient program to have 
the department facility, community center, or private psychiatric hospital 
notify the person of the individual's choice of the admission if the individual 
grants permission. Documentation of the individual's granting or denial of that 
permission must be entered into the individual's clinical record. If such 
notification is refused upon admission, the individual served shall be 
reinformed of this right as the individual's condition changes.
(13) The right of each adult individual admitted to an inpatient program to have 
the department facility, community center, or private psychiatric hospital 
notify the individual's family prior to discharge or release if the individual 
grants permission. Documentation of the individual's granting or denial of that 
permission must be entered into the individual's clinical record.
(b) For persons receiving inpatient services, and unless otherwise noted, these 
rights may be limited by the treating physician, acting as the agent of the head 
of the facility, community center, or private psychiatric hospital, when the 
exercise of the right endangers the physical and/or emotional condition of the 
individual or other individuals, in which case the reasons for the limitation 
shall be made a part of the clinical record of the individual and fully 
explained to the individual. The treating physician may write an order imposing 
special limitations on the recommendation of the treatment team when the 
limitations are justified by psychiatric necessity or security. The written 
order must be reviewed at least every seven days, and if renewed, it must be 
renewed at least every seven days in writing. The treatment team should consider 
strategies to help the individual regain or resume the practice of the right.
(c) Except for the general rules of the program, there is no provision for 
limiting these rights for persons voluntarily admitted to a residential program 
other than an inpatient unit.
sec.404.156. Additional Rights of Persons Receiving Residential Mental Health 
Services at Department Facilities. In addition to the rights listed in 
sec.404.155 of this title (relating to rights of persons receiving residential 
mental health services, persons receiving residential mental health services at 
department facilities have the following rights:
(1) The right to be advised of the availability of trust fund accounts and other 
safekeeping for funds and articles of value. This right shall extend to the 
family of the person receiving services, who shall be informed of the existence 
of the trust fund as a means of protecting personal funds for the person served, 
and who shall be advised to send all monies, either checks or cash, to the 
cashier, and not to individual or ward employees. Families shall be informed 
that the department facility is not responsible for funds mailed directly to the 
person served. The method of advising persons served and their families of this 
right is to be determined by each department facility.
(2) The right of each individual admitted to an inpatient program of a 
department facility to have the state pay the cost of transportation home upon 
discharge or furlough unless the individual or someone responsible for the 
individual is able to do so.
(3) The right of each individual admitted to an inpatient program of a 
department facility other than for substance abuse to be informed in writing at 
admission and upon discharge of the existence of the court monitor of the RAJ v. 
<ol> Jones settlement and to be informed of how to contact the monitor's office, 
the plaintiff's counsel, and organizations which provide free legal assistance.
sec.404.157. Rights of Persons Voluntarily Admitted to Inpatient Services.
(a) All persons voluntarily admitted to inpatient services for treatment of 
mental illness or chemical dependency or the person who requested admission on 
the individual's behalf have the right to request discharge. Any such person 
expressing a request for release shall be given an explanation of the process 
for requesting release and afforded the opportunity to request release in 
writing. When a written request for release is signed or presented to any direct 
care staff of the department facility, community center, or private psychiatric 
hospital, it should be witnessed and dated and timed. Oral statements of the 
desire to be discharged shall be treated as written requests for release and 
shall be reduced to writing by staff. Without regard to whether the individual 
agrees to sign paperwork requesting discharge from services, the request will be 
documented and processed by staff. The refusal or inability of the individual to 
sign the request for discharge will be documented on the unsigned written 
request. All written or prepared requests for discharge will be timed, dated, 
and signed by two staff, who shall provide information to the individual that 
pursuant to law, during the ensuing period of up to 24 hours, the individual 
will be observed and evaluated to determine the clinical appropriateness of 
seeking an involuntary commitment to services. The form and format for 
requesting release and the information to be provided may be prescribed by the 
department.
(b) All persons voluntarily admitted to inpatient services for treatment of 
mental illness or chemical dependency have the right to be examined in person by 
a physician and assessed for discharge readiness within 24 hours of the filing 
of a request for release, with results of the assessment and recommendation 
resulting documented in the medical record and disclosed to the individual. All 
such persons have the right not to be detained unless:
(1) the person who filed the request for release files a written withdrawal of 
the request;
(2) the person served, in the physician's clinical judgment, meets the criteria 
for involuntary commitment outlined in the Texas Health and Safety Code, 
sec.573.022, and an application for court-ordered mental health services, 
chemical-dependency services or emergency detention will be filed within 96 
hours of the filing of the request for release and the individual is detained 
under the provisions of the relevant statute; or
(3) the person receiving inpatient treatment for chemical dependency is a minor 
admitted with the consent of the parent, guardian, or conservator, and the 
individual who gave that consent objects in writing to the release of the minor 
after consultation with personnel of the department facility, community center, 
or private psychiatric hospital.
(c) Each of these persons has the right not to have an application for court-
ordered mental health or chemical dependency services filed while a voluntary 
patient unless, in the opinion of the head of the department facility, community 
center, or private psychiatric hospital, the voluntary patient meets the 
criteria for court-ordered services as outlined in the Texas Health and Safety 
Code, sec.573.022 and either:
(1)  is absent without authorization; or
(2) refuses or is unable to consent to appropriate and necessary psychiatric or 
chemical dependency treatment.
sec.404.158. Rights of Persons Apprehended for Emergency Detention for Inpatient 
Mental Health Services (Other Than for Chemical Dependency). The rights of each 
person apprehended for emergency detention for inpatient mental health services 
at a department facility, community center, or private psychiatric hospital are 
granted under the relevant sections of the Texas Mental Health Code (Texas Civil 
Statutes, Article 5547-1 et seq).
(1) Each person apprehended or detained, but not yet admitted, has the following 
rights.
(A) The right to be advised of the location of detention, the reasons for 
detention, and that detention could result in a longer period of involuntary 
commitment.
(B)  The right to contact an attorney of the person's own choosing with 
opportunities to contact that attorney.
(C) The right to be transferred back to the location of apprehension, or other 
suitable place, if not admitted for emergency detention, unless the person is 
arrested or objects to the return.
(D) The right to be released if the head of the department facility, community 
center, or private psychiatric hospital determines that any one of the criteria 
for emergency detention no longer applies.
(E) The right to be informed that anything the person says to the personnel of 
the department facility, community center, or private psychiatric hospital may 
be used in the proceeding for further detention.
(F) The right to a preliminary examination by a physician conducted immediately 
upon arrival at the department facility, community center, or private 
psychiatric facility following apprehension to determine whether the person 
meets the criteria for admission for emergency detention.
(2) If the person is accepted for treatment on an emergency detention, the 
personnel of the department facility, community center, or private psychiatric 
hospital shall immediately advise the person of the following additional rights:
(A) The right not to be detained for more than 24 hours after the hour of 
initial detention unless an order for further detention is obtained, except that 
if the 24-hour period ends on a Saturday or Sunday or a legal holiday or before 
4 p.m. on the first business day succeeding the Saturday, Sunday, or legal 
holiday, the period of detention shall end no later than 4 p.m. of the first 
succeeding business day.
(B) The right to be released if the head of the department facility, community 
center, or private psychiatric hospital determines that any one of the criteria 
for emergency detention, as outlined in the Texas Health and Safety Code, 
sec.573.022, no longer applies.
(C) The right to be returned to the location of apprehension, place of 
residence, or other suitable place if released from emergency detention, unless 
the person is arrested or objects to the return.
(D) The right to be informed that if a petition for court-ordered treatment is 
filed, the person is entitled to a judicial probable cause hearing no later than 
the 72nd hour after the hour of which detention begins under an order of 
protective custody.
(E) The right to have an attorney appointed if the person does not have an 
attorney when application for court-ordered services is filed.
(F) The right to communicate with the attorney at any reasonable time and to 
have assistance in contacting the attorney.
(G) The right to present evidence and to cross-examine witnesses who testify on 
behalf of the petitioner at a hearing.
sec.404.159. Rights of Persons Apprehended for Emergency Detention for Inpatient 
Chemical Dependency Services. The rights of each person apprehended for 
emergency detention for inpatient chemical dependency services at a department 
facility, community center, or private psychiatric hospital are granted under 
the relevant sections of the Texas Alcohol and Drug Abuse Services Act (Texas 
Civil Statutes, Article 5561c-2).
(1) Each person apprehended or detained, but not yet admitted, for emergency 
detention has the following rights.
(A) The right to be advised of the location of detention, the reasons for 
detention, and that detention could result in a longer period of involuntary 
commitment.
(B) The right to contact an attorney of the person's own choosing with 
opportunities to contact that attorney.
(C) The right to be transported back to the location of apprehension, or other 
suitable place, if not admitted for emergency detention, unless the person is 
arrested or objects to the return.
(D) The right to be released if the head of the department facility, community 
center, or private psychiatric hospital determines that any one of the criteria 
for emergency detention, as outlined in the Texas Health and Safety Code, 
sec.573.022, no longer applies.
(E) The right to be informed that anything the person says to the personnel of 
the department facility, community center, or private psychiatric hospital may 
be used in proceedings for further detention.
(F) The right to have a preliminary examination by a physician conducted 
immediately upon arrival at the department facility, community center, or 
private psychiatric hospital following apprehension to determine whether the 
person meets the criteria for admission for emergency detention.
(2) If a person is accepted for treatment on an emergency detention, the 
personnel of the department facility, community center, or private psychiatric 
hospital shall immediately advise the person of the following additional rights.
(A)  The right not to be detained for more than 24 hours after the hour of 
initial detention unless an order for further detention is obtained, except that 
if the 24-hour period ends on a Saturday or a Sunday or legal holiday or before 
4 p.m. on the first business day succeeding the Saturday, Sunday, or legal 
holiday, the period of detention shall end no later than 4 p.m. of the first 
succeeding business day.
(B) The right to be released if the head of the department facility, community 
center, or private psychiatric hospital determines that the criteria for 
emergency detention, as outlined in the Texas Health and Safety Code, 
sec.573.022, no longer applies.
(C) The right to be transferred back to the location of apprehension, or other 
suitable place, if released from emergency detention, unless the person is 
arrested or objects to the return.
(D) The right to be informed that no later than the 24th hour after the hour of 
initial detention, the head of the department facility, community center, or 
private psychiatric hospital may file a petition for court-ordered treatment.
(E) The right to be informed that if a petition for court-ordered treatment is 
filed, the person is entitled to a judicial probable cause hearing no later than 
the 72nd hour after the hour on which detention begins under an order of 
protective custody to determine whether the person should remain detained in the 
department facility, community center, or private psychiatric hospital.
(F) The right to have an attorney appointed if the person does not have an 
attorney, when application for court-ordered services is filed.
(G) The right to communicate with the attorney at any reasonable time and to 
have assistance in contacting the attorney.
(H) The right to be informed that anything the person says to the personnel of 
the department facility, community center, or private psychiatric hospital may 
be used in making a determination relating to detention, may result in the 
filing of a petition for court-ordered treatment, and may be used at a court 
hearing.
(I) The right to present evidence and to cross-examine witnesses who testify on 
behalf of the petitioner at a hearing.
(J) The right to refuse medication unless there is an imminent likelihood of 
serious physical injury to the person or others if the medication is refused.
(K) The right to be informed that beginning on the 24th hour before a hearing 
for court-ordered treatment, the person may refuse to take medication unless the 
medication is necessary to save the person's life.
(L) The right to request that a hearing be held in the county of which the 
person is a resident, if within the state.
sec.404.160. Rights Handbooks for Persons Receiving Mental Health Services at 
Department Facilities and Community Centers.
(a) The department will publish a rights handbook which will contain 
interpretations written in simple and non-technical language of the various 
rights afforded individuals receiving mental health services, an explanation of 
the circumstances under which those rights may be limited, and an explanation of 
the appeals process. This handbook will be revised by the Office of Consumer 
Services and Rights Protection as necessary.
(b) Only the handbook published by the department will be distributed to 
individuals admitted to department facilities and their community programs. 
Community centers may distribute the handbook published by the department or may 
choose to publish their own version. Handbooks published by community centers 
must contain all rights outlined in the handbook published by the department and 
must be approved by the Office of Consumer Services and Rights Protection prior 
to their distribution.
(c) Each handbook distributed must include the toll free number of the Office of 
Consumer Services and Rights Protection in Central Office (1-800-252-8154), the 
toll free number of Advocacy, Inc. (1-800-223-4206), the name, telephone number, 
and mailing address of the rights protection officer, and the mailing address of 
the public responsibility committee for the facility or community center which 
distributes it.
(d) Immediately upon admission into services, each individual and the parent or 
conservator of a minor and the legal guardian of the person, when applicable, 
must be given the appropriate rights handbook. All handbooks must be printed in 
English and Spanish, and must be made available in any other language used by a 
significant percentage of the service area's population. Copies of the rights 
handbook must be displayed prominently at all times in all areas frequented by 
persons receiving services (e.g., dayrooms, recreational rooms, waiting rooms, 
lobby areas). A sufficient number of copies will be kept on hand in each of 
these areas in order that a copy may be made readily available to anyone 
requesting one. The head of each department facility and community centers shall 
appoint an individual responsible for ensuring that these requirements are met.
(e)  Nothing in this section shall preclude the distribution of additional 
brochures prepared by advocacy organizations.
sec.404.161. Patient's Bill of Rights for Individuals Receiving Mental Health 
Services at Private Psychiatric Hospitals.
(a) The department will publish a Patient's Bill of Rights, which is herein 
adopted by reference as Exhibit A of this subchapter, with copies available from 
the Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, 
Austin, Texas 78711-2668, which will contain interpretations written in simple 
and non-technical language of the various rights afforded individuals receiving 
mental health services, an explanation of the circumstances under which those 
rights may be limited, and organizations individuals may contact in the event of 
rights violations. The Patient's Bill of Rights will be revised as necessary.
(b) Only the Patient's Bill of Rights published by the department will be 
distributed to individuals admitted to private psychiatric hospitals.
(c) The Patient's Bill of Rights must be printed in English and Spanish, and 
must be made available in other languages of primary use by individuals admitted 
to each private psychiatric hospital.
(d) Immediately upon admission into services, each individual must be given the 
Patient's Bill of Rights. A copy must also be given to the individual's parent 
or conservator of a minor and the legal guardian of the person, when applicable, 
and to any other person requested by the individual.
(e) Copies of the rights handbook must be displayed prominently at all times in 
all areas frequented by persons receiving services (e.g., dayrooms, recreational 
rooms, waiting rooms, lobby areas). A sufficient number of copies will be kept 
on hand in each of these areas in order that a copy may be made readily 
available to anyone requesting one.
(f)  Nothing in this section shall preclude the distribution of additional 
brochures prepared by advocacy organizations.
sec.404.162. Communication of Rights to Individuals Receiving Mental Health 
Services.
(a) In addition to receiving a rights handbook, each newly admitted individual, 
the parent or conservator of a minor, and the guardian of the person, shall be 
informed orally of all rights in his or her primary language using plain and 
simple terms within 24 hours of admission into services. The notification will 
also include an explanation of the circumstances under which those rights may be 
limited, and an explanation of the appeals process. This notification also must 
occur at least annually and upon any changes to this information. The method 
used to communicate the information should be designed for effective 
communication, tailored to meet each person's ability to comprehend, and 
responsive to any visual or hearing impairment.
(b) Oral communication of rights shall be documented on a form bearing the date 
and signatures of the individual and/or the parent, conservator, or guardian, 
and the staff member who explained the rights. The form should be filed in the 
individual's chart. Private psychiatric hospitals should use the form provided 
on the Patient's Bill of Rights.
(c) When the individual receiving services is unable or unwilling to sign the 
document which confirms that rights have been orally communicated, a brief 
explanation of the reason should be entered onto that document along with the 
signatures of the person who explained the rights and a third-party witness.
(d) If the individual does not appear to understand the rights explanation, 
staff will attempt to provide another explanation periodically until 
understanding is reached or until discharge. The necessity for repeating the 
rights communication process will be documented, signed, and dated by staff.
sec.404.163. Rights Protection Officer at Department Facilities and Community 
Centers.
(a) The head of each department facility and each community center shall appoint 
a rights protection officer for the facility or center.
(b) The name, telephone number, and mailing address of the rights protection 
officer must be prominently posted in every program or residential area 
frequented by service recipients, including community outreach or contract 
programs. Individuals desiring to contact the rights protection officer must be 
allowed access to facility or center telephones to do so.
(c) Duties required of the rights protection officer are specified at the 
discretion of the head of the facility or center, but must include the 
following:
(1) receiving complaints of violations of rights or inadequate provision of 
services and requests for advocacy from service recipients, their families, 
their friends, service providers, other facility or center personnel, other 
agencies, the general public, and the Office of Consumer Services and Rights 
Protection;
(2) thoroughly investigating each such complaint received;
(3) representing the expressed desires of the individuals served and advocating 
for the resolution of their grievances;
(4) reporting the results of investigations and advocacy to service recipients 
and the complainants, consistent with the protection of the service recipients' 
right to have any identifying information remain confidential;
(5) ensuring that the rights of individuals receiving services have been 
thoroughly explained to facility and center personnel through periodic training. 
The rights protection officer may provide the training directly or by consulting 
with facility or center training personnel; and
(6) reviewing all policies, procedures, behavior therapy programs, and rules 
which affect the rights of persons receiving services.
sec.404.164. Staff Training in Rights of Persons Receiving Mental Health 
Services. <ol> This subchapter shall be thoroughly and periodically explained to 
all employees of each department facility, community center, and private 
psychiatric hospital as follows.
(1) All new employees shall receive the instruction on the content of this 
subchapter during their orientation training and prior to beginning work.
(2) Within 60 days after the effective date of this subchapter, all current 
employees shall be briefed on its contents by the head of the department 
facility, community center, or private psychiatric hospital or designee.
(3) All supervisory personnel shall have a continuing responsibility to keep 
employees informed about rules governing rights of persons receiving mental 
health services and shall ensure that each employee receives training on the 
subject not less than once each calendar year. At department facilities and 
community centers, such training shall be reported to the department facility or 
community center's office for staff development. Private psychiatric hospitals 
shall develop an appropriate means for maintaining training records.
(4) A record shall be kept by the private psychiatric hospital or the department 
facility or community center's office for staff development on each employee 
receiving orientation, annual training, or additional instruction in compliance 
with this section, including the date training was provided and the name of the 
individual conducting the training.
sec.404.165. References.  Reference is made to the following Texas laws, federal 
laws, departmental rules, and other standards:
(1) Texas Department of Mental Health and Mental Retardation (Texas Health and 
Safety Code, Chapters 531-535);
(2) Texas Mental Health Code (Texas Health and Safety Code, sec.sec.572.003, 
573.025, 576.001-576.024, and 611.002);
(3)  Treatment of Chemically Dependent Persons (Texas Health and Safety Code, 
Chapters 461 and 462);
(4) 42 Code of Federal Regulations, Part 2;
(5) Public Law 99-319, The Protection and Advocacy Act for Mentally Ill 
Individuals (42 United States Code sec. s10802, et seq);
(6) Chapter 403, Subchapter K of this title (relating to Client-Identifying 
Information);
(7) Chapter 404, Subchapter A of this title (relating to Abuse and Neglect of 
Persons Served by TXMHMR Facilities);
(8) Chapter 404, Subchapter B of this title (relating to Client Abuse and 
Neglect in Community Mental Health and Mental Retardation Centers);
(9) Chapter 405, Subchapter FF of this title (relating to Consent to Treatment 
With Psychoactive Medication);
(10) Fair Labor Standards Act;
(11) Joint Commission on the Accreditation of Healthcare Organizations, 
Consolidated Standards Manual (1991);
(12) Joint Commission on the Accreditation of Healthcare Organizations, 
Accreditation Manual for Hospitals (1991);
(13)  TDMHMR Mental Health Community Services Standards (1991), Chapter 3; and
(14) RAJ v.<ol> Jones settlement agreement.
sec.404.166. Distribution.
(a) This subchapter shall be distributed to members of the Texas Board of Mental 
Health and Mental Retardation, the medical director, deputy commissioners, 
associate deputy commissioners, assistant deputy commissioners, and directors of 
Central Office; superintendents and directors of all TXMHMR mental health 
facilities; and executive directors and chairpersons of the boards of all Texas 
community mental health and mental retardation centers; chief executive officers 
of all private psychiatric hospitals in Texas, Advocacy Inc.; the Texas Mental 
Health Consumers; the Texas Alliance for the Mentally Ill; the Mental Health 
Association in Texas; and other interested advocacy organizations.
(b) The superintendent or director of each facility and the executive director 
of each community center shall provide a copy of this subchapter to the facility 
or center rights officer; the chair of the facility's or center's public 
responsibility committee; all appropriate staff; each contract agency which 
provides direct services; and any other person who requests a copy.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 5, 1992.
TRD-9201803
Ann K. Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 465-4670
       
TITLE 28. INSURANCE
Part I. Texas Department of Insurance
Chapter 11. Health Maintenance Organizations
Subchapter A. General Provisions
28 TAC sec.11.1, sec.11.2
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.11.1 and sec.11.2, concerning general provisions regarding 
health maintenance organizations (HMOs). The amendments are necessary to add 
definitions and to make editorial changes. The amendment to sec.11.1 makes 
editorial changes only. The amendment to sec.11.2 adds definitions of "admitted 
assets," "agent," "excess surplus," and "surplus."
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on local employment or 
local economy.
Ms. Kennedy also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be the conformity of this subchapter to legislative revisions 
of the Texas Health Maintenance Organization Act. There will be no effect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Act.
sec.11.1. Purpose and Scope.<nl> This chapter<ol> [The following subchapter] 
implements the Texas Health Maintenance Organization Act, Senate Bill 180, 
enacted by Acts 1975, 64th Legislature, [p. 514-530,] Chapter 214,  <nl>pages 
514-530,<ol> first effective December 1, 1975, as amended, codified as the 
<nl>Texas<ol> Insurance Code <nl>, Chapter<ol> [chapter] 20A.
(1) Severability. Where any terms or sections of this <nl>chapter<ol> 
[subchapter] are determined by a court of competent jurisdiction to be 
inconsistent with the Texas Health Maintenance Organization Act, as identified 
by <nl>this section<ol> [these sections], the Act will apply, but the remaining 
terms and provisions of <nl>this chapter<ol> [these sections] will continue in 
effect.
(2) Effect of rules. The sections <nl>in this chapter<ol> [set forth herein] are 
prescribed to govern the performance of appropriate statutory and regulatory 
functions and are not to be construed as limitations upon the exercise of 
statutory authority by the State Board of Insurance, the commissioner of 
insurance, or the Texas Department of Health.
(3) <nl>Violation of rules. <ol> A violation of the lawful rules, regulations, 
or orders of the commissioner or board made pursuant to <nl>this chapter<ol> 
[these sections] constitutes a violation of the Texas Health Maintenance 
Organization Act.
sec.11.2. Definitions.
(a) The definitions found in [sec.2 of] the Texas Health Maintenance 
Organization Act, <nl>sec.2,<ol> as amended, codified as the <nl>Texas<ol> 
Insurance Code, Article 20A.02, are hereby incorporated in this <nl>chapter<ol> 
[subchapter].
(b) The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise.
(1)  ]Act-The Texas Health Maintenance Organization Act, Senate Bill 180, 
enacted by Acts 1975, 64th Legislature,[p. 514-530,] Chapter 214, <nl>pages 514-
530<ol>, first effective December 1, 1975, as amended, codified as the 
<nl>Texas<ol> Insurance Code<nl>, Chapter <ol> [chapter] 20A.
<nl>   Admitted assets -All assets as defined by generally accepted accounting 
principles, except those specifically excluded by the Act and this chapter.
(2)  (No charge.)
(3) Agent-<nl>Any<ol> [A] <nl>person who solicits on behalf of any<ol> health 
maintenance organization <nl>(HMO) or who takes or transmits other than for 
himself or who advertises or otherwise gives notice that he will receive or 
transmit or who shall receive or transmit agreements or contracts for health 
care services to be provided by any HMO<ol> [agent as defined in the Act, 
sec.15(a)].
(4) (No charge.)
(5) Code-The <nl>Texas<ol> Insurance Code, 1951, as amended.
(6) -(9) (No charge.)
<nl>   Excess surplus -The surplus, net of uncovered liabilities, that is in 
excess of the minimum surplus required by the Texas Insurance Code, Article 
20A.13, excluding from surplus those assets a health maintenance organization 
finds necessary for its operations as set forth in  s11.803(5) of this title 
(relating to Investments, Loans, and Other Assets).
(10)  Primary care physician-A physician who is responsible for providing 
initial and primary care to patients, maintaining the continuity of patient 
care, and initiating referral for [specialist] care. [Primary care physicians 
usually include general practitioners, internists, pediatricians, 
obstetrician/gynecologists, and family practitioners.]
(11) Qualified HMO-An entity which has been federally approved under Title XIII 
of the Public Health Service Act,  <nl>Public Law<ol> [P.L.] 93-222, as amended.
(12)  Rules-All <nl>sections<ol> [rules] under <nl>this <ol> chapter [11 
relating to HMOs].
(13) Schedule of charges-<nl>The<ol> [An exhibit showing:
[(A) the capitation and any formulas which are used by the HMO as the basis for 
computing the chargeable rate, or
[(B) the] specific rates or premiums to be charged for a single enrollee, a two-
member family, three-member family, etc.
(14)-(15) (No charge.)
<nl>   Surplus-The net admitted assets minus uncovered liabilities.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201714
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter B. Name Reservation Procedure
28 TAC sec.sec.11.101, 11.102, 11.106, 11.107
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.101, 11.102, 11.106, and 11.107, concerning name 
reservation procedures for health maintenance organizations (HMOs). The 
amendments are necessary to amplify or clarify the requirements of the sections. 
The amendment to sec.11.101 provides the complete address to which requests for 
reservation of name forms should be directed. The amendment to sec.11.102 makes 
an editorial change to the wording. The amendment to sec.11.106 provides that a 
requested name is reserved for 365 days from the date the name is accepted, 
rather than approved, by the commissioner of insurance. The amendment to sec.11. 
107 clarifies the date on which a name reservation is cancelled in the event of 
denial of a certificate of authority.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections is a clearer, more concise statement of requirements concerning 
procedures for name reservations. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 49104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Act.
sec.11.101. How to Obtain Forms. The  <nl>name reservation<ol> [Reservation of 
Name] form and all other HMO forms may be obtained by contacting the [office of 
the] HMO  <nl>Unit, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104<ol> [coordinator].
sec.11.102. Information Required. <ol> The <nl>name reservation <ol> 
[reservation of name] form (HMO Form #1) may be submitted with or at any time 
prior to submission of the application for certificate of authority.
(1)-(3) (No change.)
sec.11.106. Time Limits; Renewal Requirements. The following time limits and 
renewal requirements have been established for names reserved for use by a 
proposed HMO.
(1) The requested name is reserved for 365 days from the date the name is 
<nl>accepted<ol> [approved] by the commissioner.
(2)-(6) (No change.)
sec.11.107. Effect of Filing for or Receiving Certificate of Authority.  <ol> 
Once an application for a certificate of authority has been filed, the name 
reservation no longer must be renewed. If a certificate of authority is denied, 
the name reservation is cancelled on the date [of] the denial order <nl>becomes 
final<ol>. If a certificate of authority is granted, the name is reserved for 
use by the HMO as long as the certificate of authority is in effect.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201717
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call: (512) 463-6328
       
Subchapter C. Application for Certificate of Authority
28 TAC sec.sec.11.201, 11.203-11.206, 11.208
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.201, 11.203-11.206, and 11.208, concerning requirements 
with respect to applications for certificate of authority for health maintenance 
organizations (HMOs). The amendments are necessary to clarify procedures 
followed in connection with review of an application for certificate of 
authority to become an HMO.
The amendment to sec.11.201 adds a reference to the board's rule governing 
regulatory fees.
The amendment to sec.11.203 clarifies the timing of the application review 
process in the event of required revisions.
The amendment to sec.11.204 clarifies and make changes to the requirements for 
the contents of an application for certificate of authority and delete the 
provision that authorizes the commissioner to require additional information 
relating to the itemized contents.
The amendment to sec.11.205 makes editorial changes.
The amendment to sec.11.206 deletes some specific steps in the application 
review process and refers the reader to the board's rules concerning notice and 
processing periods for permit applications.
The amendment to sec.11.208 adds a statutory reference with respect to delay of 
final action on an application.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on local employment or 
local economy.
Ms. Kennedy also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be clear, concise application of legislative amendments to the 
Texas Health Maintenance Organization Act. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, director of insurance 
related activities section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Act.
sec.11.201. Filing Fee. <ol> The filing fee required by the <nl>Texas<ol> 
Insurance Code, Article 20A.32(a) <nl>, as determined by sec.7. 1301 of this 
title (relating to Regulatory Fees),<ol> must accompany the application. The fee 
is not returnable.
sec.11.203. Revisions during Review Process.
(a) Revisions during the review of the application must be addressed to: HMO 
<nl>Unit<ol> [Section], <nl>Mail Code 106-3A, Texas Department of Insurance <ol> 
[State Board of Insurance], <nl>333 Guadalupe, P.O. Box 149104, <ol>[1110 San 
Jacinto Street], Austin, Texas <nl>78714-9104<ol> [78701-1988]. The applicant 
must include an original and one copy of the transmittal letter, plus the number 
of copies of any revision specified in this subchapter [, and plus a completed 
HMO Form 6, certification of corrections, referred to in sec.11. 1001(7) of this 
title (relating to Forms Adopted by Reference)].
(b)-(c) (No change.)
(d) If [substantial] revisions are <nl>required as a result of the Texas 
Department of Health's review or the Texas Department of Insurance's qualifying 
examination, the application process as defined in Chapter 1, Subchapter G of 
this title (relating to Notice and Processing Periods for Permit Applications) 
will begin again<ol> [submitted less than 30 days prior to the date scheduled 
for the hearing, the statutory time limit must be waived by the applicant in 
order to provide a minimum of 30 days from date of receipt of the additional 
information until the date of the hearing. The hearing will be reset 
accordingly. The commissioner may, in his discretion, set the hearing anytime 
within the 30 days].
sec.11.204. Contents.  Contents of the application must include the following 
items in the order [as] listed:
(1) a completed HMO Form #1, <nl>name reservation <ol> [reservation of name], 
along with any certificate of reservation of corporate name issued by the 
secretary of state;
(2)-(5) (No change.)
(6) <nl>separate<ol> [a general narrative description of the HMO's delivery 
system and personnel and three] organizational charts <nl>or lists<ol>, as 
described <nl>in subparagraphs (A)-(C) of this paragraph<ol> [following]:
(A)-(C) (No change.)
(7) <nl>fidelity bond or deposit for officers and employees, which<ol> [the 
originals or notarized certification that the copy is a true, accurate, and 
complete copy of the original bond for officers and employees. The bonds] must 
comply with <nl>either subparagraph (A) or subparagraph (B) of this paragraph, 
as appropriate.<ol> [the following:]
(A) <nl>A bond must be in compliance with the Texas Insurance Code, Article 
20A.30, and must be either the original bond or a copy of the bond with 
notarized certification bearing the original signature of an officer of the 
applicant that the copy is a true, accurate, and complete copy of the original 
bond. <ol> [The commissioner may approve a fidelity bond, in an amount not less 
than $100,000 or in an amount prescribed by the commissioner, with a three-year 
discovery period and with a 90-day cancellation or termination provision, and 
written in accordance with the requirements of the Texas Health Maintenance 
Organization Act, sec.30.]
(B) <nl>A cash deposit must be held under a joint control agreement, acceptable 
to the commissioner, in the same amount and subject to the same conditions as a 
bond<ol> [Upon a showing by the applicant of its inability to obtain the 
fidelity bond listed in subparagraph (A) of this paragraph, the commissioner may 
approve as meeting or exceeding the requirements of the Texas Health Maintenance 
Organization Act, sec.30, a filing of both of the following:
[(i) a fidelity bond in an amount not less than $100,000 or in an amount 
prescribed by the commissioner, with a one-year discovery period and with a 15-
day cancellation or termination provision. The fidelity bond shall obligate the 
surety according to the provisions of the Texas Health Maintenance Organization 
Act, sec.30(d); and
[(ii)  a provision by the applicant for a joint control agreement, in form 
acceptable to the commissioner, whereby the applicant agrees to deposit $100,000 
in cash in a bank insured by the Federal Deposit Insurance Corporation, subject 
to the joint control of the applicant and the commissioner. Such agreement must 
survive for a period of three years in the event the HMO goes out of business, 
is sold, is voluntarily liquidated, or becomes bankrupt, as provided for in the 
Texas Health Maintenance Organization Act,  s30(b).
[(C) any fidelity bond filed must be written by an insurance company holding a 
certificate of authority to do business in Texas. Bond forms approved by the 
State Board of Insurance must be used and the bond must be issued in the name of 
the applicant;]
(8) <nl>information related to out-of-state licensure and service of legal 
process for all applicants.<ol> [if the applicant is licensed as an HMO in 
another state:]
(A)  <nl>An applicant licensed as an HMO in another state must furnish a<ol> [A] 
copy of the certificate of authority from the domiciliary state's licensing 
authority, and [B] <nl>a<ol> [A] power of attorney executed by the applicant 
appointing the commissioner and his or her successors in office, or a duly 
authorized deputy, as the attorney of such applicant in and for the state, upon 
whom all lawful processes in any legal action or proceedings against the HMO on 
a cause of action arising in this state may be served.
<nl>(B) All applicants must furnish a statement acknowledging that all lawful 
process in any legal action or proceeding against the health maintenance 
organization on a cause of action arising in this state is valid if served in 
accordance with the Texas Insurance Code, Article 1.36.
(9)  [a description of the procedure by which enrollees are afforded the 
opportunity to participate in matters of policy and operation;
[(10)]  the evidence of coverage to be issued to enrollees, and any group 
agreement which is to be issued to employers, unions, trustees, or other 
organizations as described in Subchapter F of this chapter (relating to Evidence 
of Coverage);
<nl>(10) financial information, consisting of the following:
<nl>(A) a current financial statement, including balance sheet reflecting assets 
and liabilities, statement of income and expenses, and sources and application 
of funds;
(B)  <nl>projected financial statements for the 18-month period from the start 
of operations using quarterly balance sheet projections based on calendar 
quarters, quarterly cash flow schedules reflecting capital expenditures, and 
monthly revenue and expense projections, which financial statements must include 
the identity and credentials of the person making the projections; and
<nl>(C) the most recent audited financial statements of any sponsoring 
organization;
(11) the schedule of charges as defined in sec.11.2 of this title (relating to 
Definitions) to be used through the first 12 months of operation [and the 
estimated revenue per member per month until one year following break even];
(12) (No change.)
(13) [a description of the proposed method of marketing the plan;]
[(14)] a sample copy of the form of any contract executed or to be executed 
between the applicant and:
(A) any person listed on the officers and directors page;
(B) any physician, medical group[,] or association of physicians, or any other 
provider, plus a sample copy of the <nl>subcontract<ol> [contract] between the 
medical group, [or] physicians' association, [and] any [individual] 
physician<nl>, or provider, who has contracted with any physician, medical 
group, association of physicians, or any other provider to provide health care 
services.<ol> If such contracts include a hold-harmless provision, it shall be 
no less favorable <nl>to enrollees<ol> than that outlined in sec.11.1102 of this 
title (relating to Hold-Harmless Clause).  <nl>Such contracts must be in accord 
with the Texas Department of Health rules, and will be furnished by Texas 
Department of Insurance to the Texas Department of Health for their review and 
certification;
(C) any exclusive agent or agency; and
(D) any person who will perform management, marketing, administrative, [or] data 
processing services, <nl>or claims processing services. A bond or deposit 
meeting the requirements of the Texas Insurance Code, Article 20A.18, is 
required for management contracts. If a bond, the original must be submitted, or 
a copy of the bond must be accompanied by notarized certification that the copy 
is a true, accurate, and complete copy of the original<ol>;
<nl>(14)<ol>[(15)] a description of the quality assurance program, including a 
peer review program <nl>required by the Texas Insurance Code, Article 
20A.05.<ol> [to meet the quality of health care requirements outlined in the 
Act, sec.5(a)(2)(B).] Arrangements for sharing pertinent medical records between 
physicians <nl>and/or <ol> [and] providers <nl>contracting or subcontracting 
pursuant to paragraph (13)(B) of this section with<ol> [within] the HMO and 
assuring the record's confidentiality must be explained;
[(16) financial information:
[(A) a current financial statement including: balance sheets, statement of 
income and expenses, sources and application of funds, assets and liabilities;
[(B) projected financial statements for the period from the start of operations 
until the organization has had a net income for 12 consecutive months, including 
quarterly balance sheet projections based on a calendar year plus a balance 
sheet for the month during which the maximum cumulative loss is reached, 
quarterly cash flow schedules reflecting capital expenditures, and monthly 
revenue and expense projections for the first 12 months and quarterly thereafter 
until the HMO reaches a breakeven, and then monthly for the 12 months following 
breakeven. All other projected financial statements shall be on an annual basis. 
The identity and credentials of the person making the projections must be 
included;
[(C) the most recent audited financial statements of any sponsoring 
organization.]
<nl>(15)<ol>[(17)]  insurance and other protection against insolvency:
(A) <nl>any<ol> [a] reinsurance agreement described in the <nl>Texas Insurance 
Code, Article 20A.05(b)(2)(C)(iii) <ol> [Act, sec.5(b)(2)(c) (iii)], covering 
excess of loss, stop-loss, and/or catastrophes. The agreement must provide that 
the commissioner  <nl>and HMO<ol> will be notified no less than 60 days prior to 
cancellation or reduction of coverage <nl>by the insurer<ol>;
(B) <nl>any<ol> [a] conversion policy or policies which will be offered by an 
insurer to an HMO enrollee in the event of the HMO's insolvency;
(C) any other arrangements offering protection against insolvency;
[(D) with respect to a single health care service plan HMO the following 
applies:
[(i) a reinsurance agreement as described in subparagraph (A) of this paragraph 
must be secured if it is reasonably available or becomes reasonably available;
[(ii) a conversion policy as described in subparagraph (B) of this paragraph 
must be secured if it is available or becomes reasonably available;]
<nl>(16)<ol>[(18)]  authorization for disclosure to the commissioner of the 
financial records of the applicant. Disclosure of financial records of 
affiliates may also be required. The individual to be contacted for a qualifying 
examination must be identified<nl>.<ol> [;]
[(19) the commissioner may require additional information relating to paragraphs 
(1)-(18) of this section as needed for proper consideration.]
sec.11.205. Documents to be Available During Qualifying Examination and/or the  
23>Texas Health Department Visit. The following documents must be available for 
inspection at the time of the qualifying <nl>examination <ol> at the 
administrative offices <nl>and the Texas Health Department visit<ol> of the 
applicant:
(1)-(3) (No change.)
(4) a list of physicians, hospitals, and other providers to be used by the 
applicant inside the service area as follows:
(A) for physicians, indicate:
(i)  medical <nl>specialty <ol> [speciality];
(ii)-(iv) (No change.)
(v)  <nl>any<ol> hospitals at which primary care physicians have staff 
privileges;
(B) for hospitals contracting with or to be used by the applicant, indicate:
(i)-(ii)  (No change.)
(iii)  <nl>JCAHO/AOA<ol> [JCAH/AOA] accreditation status, if applicable;
(iv)-(v) (No change.)
(C) (No change.)
(5)-(6) (No change.)
sec.11.206. Review of Application. [The application is considered received as of 
the date on which all material required by sec.11.204 of this title (relating to 
Contents) is filed with the HMO Coordinator.]
<nl>(a)<ol>[(1)] <nl>The application will be processed pursuant to Chapter 1, 
Subchapter G of this title (relating to Notice and Processing Periods for Permit 
Applications)<ol> [The coordinator will provide one copy of the application to 
the Department of Health].
<nl>(b) <ol>[(2)] After completion of the <nl>Texas Department of Insurance<ol> 
[State Board of Insurance] review and certification by the Department of Health 
under the Act, sec.5(a)(3), the HMO <nl>Unit<ol> [coordinator shall provide the 
applicant with a written list of deficiencies and] shall schedule a prehearing 
conference with the applicant.
[(A) The purpose of such conference is to discuss any deficiencies in the 
application.
[(B) From the date of such conference, the time period for review shall be held 
in abeyance until such applicant submits corrections to such deficiencies or 
files a letter stating that it is the applicant's intention to proceed to 
hearing without correcting such deficiencies.
[(i)  Corrections to deficiencies shall be accompanied by a certification by an 
officer of the applicant that only those deficiencies outlined by the HMO 
Section have been corrected and that unrelated changes in the application have 
not been made. (Note: certain deficiencies may require corrections in relating 
provisions under evidence of coverage or other sections of application).
[(ii) Corrections to deficiencies shall be filed under the provisions of 
sec.11.203 of this title (relating to Revisions During Review Process) with 
sufficient detail in the cover letter to identify any changes in documents or 
sections of documents that were necessary to correct the deficiencies.
[(3) ]The qualifying examination shall be conducted  <nl>prior to date of 
hearing <ol> [after the provisions of paragraph (2) of this section are met]. 
For an applicant that is a foreign HMO, in lieu of a qualifying examination, a 
copy of the report on the most recent [latest] examination performed by the 
regulatory agency of its state of domicile may be requested.
<nl>(c)<ol>[(4)] A hearing will be scheduled under the provisions of the 
<nl>Texas Insurance Code, Article 20A.05,<ol> [Act, sec.5,] following the 
completion of the qualifying examinations.
sec.11.208. Request to Extend Review Period.
(a) (No change.)
(b) The commissioner may grant a delay of final action to an applicant who has 
demonstrated a need therefor<nl>, pursuant to the Texas Insurance Code, Article 
20A.05 <ol>.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201718
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption:
For further information, please call: (512) 463-6328
       
Subchapter D. Regulatory Requirements for an HMO Subsequent to Issuance of a 
Certificate of Authority
28 TAC sec.sec.11.301-11.306
State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.301-11.306, concerning regulatory requirements for a 
health maintenance organization (HMO) subsequent to issuance of a certificate of 
authority. The amendments conform the subchapter to legislative revisions to the 
Texas HMO Act and provide for clarification of the regulatory process subsequent 
to the issuance of a certificate of authority.
amendment to sec.11.301 provides for the filing of additional information for 
approval with respect to management contracts, certain dividends, notice of 
loans, and amendments to organizational documents. The amendments provide that 
changes in the principal administrative office, and certain financial and 
solvency information must be filed for information. There are also editorial 
changes made to this section relating to form numbers and the number of copies 
of certain documents to be filed; and clarifying that any changes in certain 
documents should be filed.
11.302 is amended to provide that items filed with respect to service area 
expansion requests should be filed either for approval or for information as 
determined in sec.11.301 and adds new requirements for the filing of financial 
information and information related to protection against insolvency, as well as 
providing for the filing of the formula or method for calculating the schedule 
of charges for any new or amended evidence of coverage.
11.303 is amended to provide that the expenses of examinations, both by the 
Texas Department of Insurance and the Texas Department of Health, are offset 
against premium taxes. That section also provides that the documents set out in 
sec.11.205 shall be available on site unless the HMO has authority to move 
documents out of state. If such authority exists, the expenses of examination of 
those out-of-state records are not allowed as an offset against premium taxes. 
The amendment also provides that electronic access to documents meets the 
requirements of this section except that the Texas Department of Insurance or 
the Texas Department of Health have the authority to request paper copies of 
such records be produced within a reasonable time period.
11.304 is amended to clarify the filing processes for the HMO's annual 
statement, the annual audited financial report where required by Texas Insurance 
Code, Article 1.15A, and an annual audit report of the sponsoring organization 
for those HMOs who have such an organization. An amendment to this section 
requires that all HMOs file quarterly reports. This section is also amended to 
provide for the payment of premium taxes and maintenance taxes to the Texas 
Department of Insurance pursuant to Texas Insurance Code, Articles 4.11, 20A.32 
and 20A.33 and the regulations promulgated thereunder and the tax forms 
promulgated by the board. The premium taxes are subject to the adjustments set 
forth in the amendment.
changes are made to sec.11.305.
11.306 is amended to provide clarification and notice that failure to comply 
with the Act, regulations, or orders of the commissioner or board are subject to 
actions authorized under the Texas Insurance Code, Article 1.10. Supervision, 
conservation, or receivership for failure to comply with the Act are also 
available remedies described in sec.11.306.
Kennedy director of insurance related activities, has determined that, for the 
first five-year period the sections are in effect, there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on local employment or 
local economy.
Kennedy, also has determined that for each year of the first five years the 
sections are in effect, the public benefit anticipated as a result of enforcing 
the sections is a clearer, more concise statement of requirements for an HMO 
subsequent to issuance of a certificate of authority, in accordance with 
legislative revisions to the Texas HMO Act. The anticipated economic cost to 
persons who are required to comply with the proposed sections is the cost for 
filing. These costs will be those costs set by Texas Insurance Code, Article 
20A. 32 and regulations promulgated thereunder. The costs will vary between $50-
100 for each item filed on an as needed basis. The anticipated annual cost will 
vary depending upon each organization's need to make changes for each of the 
first five years the amendments are in effect. The cost of the annual audit 
report for sponsoring organizations will not exceed $15.00 per year for 
transmittal costs for each of the first five years the amendments are in effect, 
as the organizations already have such annual audit reports. On the basis of 
costs per hour of labor, there will be no difference in cost of compliance 
between small businesses and larger businesses.
on the proposal may be submitted to Joan Kennedy, Director of Insurance Related 
Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Act.
sec.11.301. Filing Requirements. <ol> Subsequent to the issuance of a 
certificate of authority, each health maintenance organization (HMO) is required 
to file certain information with the commissioner, either for approval prior to 
effectuation or for information only, as outlined in paragraphs (4) and (5) of 
this section and in sec.11.302 of this title (relating to Service Area Expansion 
Requests). These requirements include filing any changes necessitated by federal 
law or regulation.
(1) (No change.)
(2) Identifying <nl>form<ol> numbers required. Each item required to be filed 
pursuant to paragraphs (4) and (5) of this section must be identified by a 
unique <nl>form<ol> number, adequate to distinguish it from other items. Such 
identifying <nl>form<ol> numbers shall be composed of <nl>a <ol> total of no 
more than <nl>12<ol> [twelve] letters, numbers, symbols, and spaces.
(A) The identifying <nl>form<ol> number must appear in the lower left-hand 
corner of the page. In the case of a multiple page document, the identifying  
<nl>form<ol> number must appear on the lower left-hand corner of the first page. 
Page numbers should appear on subsequent pages.
(B) If an item is to be replaced or revised subsequent to issuance of a 
certificate of authority, a new identifying <nl>form<ol> number must be 
assigned. A new edition date added to the original identifying <nl>form<ol> 
number is an acceptable way of revising the number so that it is identifiable 
from any previously approved item<nl>;<ol>[.] [(]e.g., if G-100 was the 
originally approved number, the revision may be numbered G-100 12/79. Changing 
the case of the suffix is not considered to be a change in the number, e.g., 
"ED" and "ed" or "REV" and "rev" are the same for form numbering purposes.[)]
(3) Attachments for filings. The filings required in paragraphs (4) and (5) of 
this section must be accompanied by [an HMO form 5 and] the following:
(A) <nl>four<ol> [three] copies of an HMO Form <nl>#5 and #8<ol> for each new, 
revised, or replaced <nl>item<ol> [evidence of coverage, as described in 
sec.11.503(1) of this title (relating to Filing Requirements Subsequent to 
Receipt of Certificate of Authority)];
(B) <nl>four<ol> [three] copies of a transmittal letter including a statement of 
any prior approved forms to be replaced, with any applicable form number; [and]
(C) <nl>four<ol> [three] copies of such supporting documentation as considered 
necessary by the commissioner for review of the filing<nl>; and<ol> [.]
<nl>(D) the applicable filing fee as required by the Texas Insurance Code, 
Article 20A.32, as determined by sec.7.1301 of this title (relating to 
Regulatory Fees).
(4) Filings requiring approval. An HMO shall file with the commissioner a 
written request to <nl>implement or<ol> modify the following [previously 
approved] operations or documents and receive the commissioner's approval prior 
to effectuating such modifications:
(A)-(B) (No change.)
(C) the form of all contracts described in <nl> s11.204(13)[sec.11.204
(14) ], subparagraphs (A), (C), and (D) of this title (relating to 
Contents)<nl>, including any amendments to contracts described in sec.11.204 
subparagraph (A) and subparagraph (C) and prior approval of the cancellation of 
any management contracts in subparagraph (D) of sec.11.204(13) of this title;
(D)-(E) (No change.)
<nl>(F) dividends which do not meet the requirements of sec.11.807 of this title 
(relating to Dividends);
<nl>(G)<ol>[(F)] a notice of any intention to make a loan or to make multiple 
loans, or to make any amendments thereto, to a medical group or to a corporation 
under the control of the HMO. If the total amount loaned is incidental to the 
HMO's operation and does not exceed an amount <nl>expected to be<ol> equal to 
the charges to be paid to that medical group or corporation for contractual 
services to be provided for a 30-day period immediately following  <nl>and 
provided that termination of services may not take place during that period of 
time, then<ol> such notice need not be filed <nl>;
<nl>(H) a copy of any amendments to basic organizational documents which are 
proposed. Following approval by the commissioner a copy of the approved 
amendments must be filed with the secretary of state and an original, or a copy 
of such documents with notarized certification bearing the original signature of 
an officer that it is a true, accurate, and complete copy of the original file 
marked by the secretary of state, shall be filed with the commissioner;
<nl>(I) a copy of any amendments to bylaws of the HMO, with a notarized 
certification bearing the original signature of an officer of the company that 
it is a true, accurate, and complete copy of the original;
<nl>(J) any name, assumed name, service mark, or trademark on a reservation of 
name form, HMO Form #1; and
<nl>(K) any agreement by which an affiliate agrees to handle an HMO's 
investments under sec.11.804 of this title (relating to Investment Management by 
Affiliate Companies) <ol>.
(5) Filings for information. Material filed under this paragraph is not to be 
considered approved but may be subject to [official] review <nl>for compliance 
with Texas law and consistency with other HMO documents <ol>. Each item filed 
under this paragraph must be accompanied by a completed HMO Form <nl>#<ol>7 -
Certification of Compliance, referred to in sec.11.1001(8) of this title 
(relating to Forms Adopted by Reference[.]) <nl>in addition to those attachments 
required under paragraph (3) of this section.<ol> Within 30 days of the 
effective date, an HMO must file with the commissioner, for information only, 
additions, deletions, and modifications to the following previously approved 
<nl>or filed<ol> operations and documents:
(A) the list of officers and directors and a biographical data sheet for each 
person listed under the <nl>Texas Insurance Code, Article 20A.4(a)(3), <ol> 
[Act, sec.4(a)(3)]  <nl>on HMO Form #3 and #4 referred to in  s11.204(5)(A) and 
(B) of this title (relating to Contents);
(B) <nl>a copy of<ol> any <nl>notice of cancellation of bonds, new bonds, or 
<ol>amendments to bonds for officers and employees, including notarized 
certification by an officer that the material is true, accurate, and 
complete<nl>, as described in sec.11.204(7) and (13)(D) of this title (relating 
to Contents)<ol>;
[(C) the sources of financial support;]
<nl>(C)<ol>[(D) ]the  <nl>formula or method for calculating the<ol> schedule of 
charges as <nl>defined <ol> [described] in Subchapter <nl>A,<ol> [H]  
<nl>sec.11.2(b) of this title <ol> [chapter] (relating to <nl>General 
Provisions<ol> [Schedule of Charges]);
<nl>(D)<ol>[(E)] any change in the <nl>principal administrative office within 
the approved service area(s) of the HMO<ol> [registered agent or registered 
office];
<nl>(E)<ol>[(F)] <nl>any change of<ol> the certificate of authority from the 
domiciliary state's licensing authority and a power of attorney, if the HMO is a 
foreign-licensed HMO;
<nl>(F)<ol>[(G)] <nl>any new or any substantive change in the sample copy<ol> 
[the form] of all contracts between the HMO and any physicians, or other 
providers [plus a sample copy of the form of any contract], described in 
<nl>sec.11.204(13)(B) [sec.11.204(14)(B)] of this title [(relating to Contents)] 
, whether utilized with all contracts or on an individual basis; <ol>[.]
<nl>(G)<ol>[(H)] <nl>any new or amendments to insurance or other protection 
against insolvency, including<ol> the stop-loss or reinsurance agreements if 
changing the carrier or description of coverage <nl>as described in 
sec.11.204(15) of this title<ol> [(this requirement is only necessary if the 
agreements are obtainable)]; and
<nl>(H) any change in the affiliate chart as described in sec.11.204(6)(A) of 
this title;
[(I) the officers' and employees' bonds, including notarized certification by an 
officer that the material is true, accurate, and complete, if all bonds are to 
be cancelled or if the bonding company is to be changed].
(6) (No change.)
sec.11.302. Service Area Expansion Requests. If any of the following items are 
changed by a service area expansion request, the new item or any amendments to 
an existing item must be submitted <nl>for approval or filed for information, as 
applicable under sec.11.301 of this title (relating to Filing Requirements):
(1) (No change.)
(2) a sample of any new contracts or of the amendment of any existing contracts 
[with physicians and/or other providers] in the new area, as described in 
<nl>sec.11.204(13) <ol> [sec.11.204(14)] of this title (relating to Contents);
(3) a list of all physicians, hospitals, and/or other providers to be used to 
provide services in the new area with all information required by sec.11. 205(4) 
of this title (relating to Documents to Be Available During Qualifying 
Examination and/or the Health Department Visit)<nl>;<ol>[.]
(4) (No change.)
(5) biographical data sheets for any new management staff assigned to the new 
area<nl>; <ol>[.]
[(6) a certification that the enrollee participation plan includes the new area;
[(7) a description of the proposed method of marketing the plan;
<nl>(6)<ol>[(8)] <nl>any new or amendments to any<ol> evidence of coverage to be 
used in the new area, in accordance with the requirements of Subchapter F of 
this chapter (relating to Evidence of Coverage);
<nl>(7)<ol>[(9)] the  <nl>formula or method for calculating the schedule of 
charges for any new or amended evidence of coverage in accordance with 
Subchapter H of<ol> <nl>this chapter (relating to Schedule of Charges)<ol> 
[through 12 months following breakeven and actuarial certification];
<nl>(8)<ol>[(10)] copies of leases, loans, and contracts to be used in the 
proposed new area as described in sec.11.301(4)(C), (E)<nl>, <ol>and  
<nl>(G)<ol> [(F)] of this title (relating to Filing Requirements);
<nl>(9)<ol>[(11)] separate and combined sources of financing and financial 
projections as described in <nl>sec.11.204(10) <ol> [sec.11.204] of this 
title<nl>;<ol> [.]
<nl>(10)<ol>[(12)] any  <nl>new or<ol> amendments to officers and employees 
bonds<nl>, in accordance with sec.11.204(7) and (13)(D) of this title<ol>;
<nl>(11)<ol>[(13)] any  <nl>new or<ol> amendments to reinsurance agreements<nl>, 
insurance or other protection against insolvency as specified in sec.11.204(15) 
of this title<ol>; <nl>and
<nl>(12)<ol>[(14)] a description of the method by which the complaint procedure 
will be made reasonably available in the new service area or division including 
a toll free call <nl>and the information and complaint telephone number required 
by Texas Insurance Code, Article 21.71, where applicable. For HMOs covered by 
Article 21.71, the toll free call required by this rule and the toll free 
information and complaint number required by Texas Insurance Code, Article 
21.71, may be the same number.<ol> [; and]
[(15) The HMO shall provide such other information as the commissioner may 
consider necessary relating to items described in paragraphs (1) through (14) of 
this section.]
sec.11.303. Examination.
<nl>(a) The commissioner is authorized to make a complete examination of the 
affairs of each  <nl>HMO<ol> [health maintenance organization] as often as is 
deemed necessary, but not less frequently than once every three years. Expenses 
of the examination must be paid by the HMO examined<nl>, and such expenses shall 
be offset against premium taxes as provided in the Texas Insurance Code, Article 
4.11, and in sec.11.304 of this title (relating to Annual Reports, Other 
Reports, and Taxes).
<nl>(b) Quality of health care services examinations may be conducted under 
rules of the Texas Department of Health. Expenses of such examinations shall be 
paid by the HMO as provided in rules of the Texas Department of Health and shall 
be offset against premium taxes as provided by the Texas Insurance Code, Article 
20A.32, and by sec.11.304 of this title.
<nl>(c) Documents enumerated in sec.11.205 of this title (relating to Documents 
to be Available During Qualifying Examination and/or the Texas Department of 
Health's visit) shall be available on site unless an HMO has obtained authority 
to move documents out of state under provisions of the Texas Insurance Code, 
Article 1.28. Expenses of examination of those records moved out of state shall 
not be allowed as an offset against premium taxes as provided in the Texas 
Insurance Code, Article 1.28. Electronic access to documents shall meet the 
requirements of this section, except that the Texas Department of Insurance or 
Texas Department of Health shall have authority to request that paper copies of 
records be produced in a reasonable time period.
sec.11.304. Annual  23>Reports, [and] Other Reports<nl>, and Taxes <ol>.
(a) Annual reports.
(1) <nl>Annual statement. On or before March 1 of each year, each HMO must file 
the original of its annual statement with the Financial Analysis Unit of the 
Texas Department of Insurance and must file a copy with the Texas Department of 
Health. The annual statement must be on forms prescribed by the State Board of 
Insurance. This statement<ol> [Each HMO must file an annual report and an annual 
financial statement with the commissioner on or before March 1 of each year. 
This report], covering the preceding calendar year, must be verified by at least 
two officers of the HMO and accompanied by the filing fees specified in Texas 
Insurance Code, Article 20A.32(b).
(2) <nl>Audited financial report. On or before December 31 of each year, each 
HMO shall designate an accountant, and on or before June 30 of each year, each 
HMO shall file an annual financial report, if required by, and in compliance 
with, the Texas Insurance Code, Article 1.15A <ol>[The annual report must be on 
forms prescribed by the State Board of Insurance, and the annual statement must 
be certified by an independent public accountant] .
(3) <nl>Sponsoring organization audited reports. Each HMO with a sponsoring 
organization shall file the annual audited report certified by a certified 
public accountant of such organization within 30 days of the issuance by the 
sponsoring organization. The filing shall be made with the Financial Analysis 
Unit of the Texas Department of Insurance<ol> [The original must be filed with 
the Corporate Activity Division of the State Board of Insurance. In addition, 
photocopies, including all attachments, must be sent to both the Health 
Department and the HMO coordinator].
(b) Other reports.
(1) <nl>HMOs<ol> [Until the HMO has experienced 12 consecutive months of net 
operating income, it] must file quarterly reports on forms prescribed by the 
State Board of Insurance within 45 days of the end of the quarter.
(2) (No change.)
(3) The quarterly reports need not be audited. The original must be submitted to 
the <nl>Financial Analysis Unit<ol> [Corporate Activities Division] of the 
<nl>Texas Department of Insurance<ol> [State Board of Insurance][, with 
photocopies to the HMO coordinator].
(4) (No change.)
(5) Subsequent to the issuance of a certificate of authority, on or before March 
1 of each calendar year, each HMO must file two copies of an updated list of 
physicians and other providers, providing all information required in 
sec.11.205(4) of this title (relating to Documents <nl>to<ol> [To] <nl>be<ol> 
[Be] Available during Qualifying Examination <nl>and/or the<ol> [And/Or The] 
Health Department Visit). One copy must be sent to the HMO <nl>unit <ol> 
[coordinator] and one copy must be sent to the <nl>Texas<ol> Department of 
Health, HMO Program Section.
<nl>(c) Taxes.
<nl>(1) Subject to the adjustments provided for by the Texas Insurance Code, 
Article 4.11, and by the Texas Insurance Code, Article 20A.32, each HMO must pay 
premium taxes to the Texas Department of Insurance pursuant to the Texas 
Insurance Code, Article 20A.33 and the rules and tax forms promulgated by the 
State Board of Insurance.
<nl>(2) Each HMO must pay maintenance taxes to the Texas Department of Insurance 
pursuant to the Texas Insurance Code, Article 20A.33, and the rules and tax 
forms promulgated by the State Board of Insurance.
sec.11.305. Site Visits.
(a)-(b) (No change.)
(c) The HMO must make available during such visits all books and records 
relating to its operations including, but not limited to, the following specific 
information:
(1)-(2) (No change.)
(3) a log or list of all written complaints and responses which shall be 
retained for at least three years and shall classify each complaint by type and 
detail its disposition[; and]
[(4) the minutes of all meetings of enrollee committees or panels].
sec.11.306. Penalties.  Failure to comply with the Act or these sections or 
other regulations or orders of the commissioner or State Board of Insurance may 
result in:
(1) additional reporting requirements<nl>; and/or<ol> [or]
<nl>(2) monetary forfeiture; and/or
<nl>(3)<ol>[(2)] a cease and desist order<nl>; and/or<ol> [or]
<nl>(4)<ol>[(3)] suspension or revocation of the certificate of 
authority<nl>;<ol>  <nl>and/or
<nl>(5) supervision, conservation, or receivership; and/or;
<nl>(6) actions prescribed under the Texas Insurance Code, Article 1.10.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201719
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call: (512) 463-6328
       
Subchapter E. Licensing and Regulation of HMO Agents
28 TAC sec.sec.11.403-11.409
The State Board of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.11.403 and new sec.sec.11.404-11.409, concerning licensing and 
regulation of health maintenance organization (HMO) agents. The amendment and 
new sections are necessary to conform the requirements of this subchapter to 
legislative revisions of the Texas HMO Act and to provide clearer and more 
effective regulation. The proposal of new sec.sec.11.404-11.409 is simultaneous 
with the proposed repeal of present sec.sec.11.404-11.411. Notice of the 
proposed repeal appears elsewhere in this issue of the <nl>Texas Register<ol>.
The amendment to sec.11.403 clarifies terminology regarding nonresident 
individuals who are licensed to act as an agent for one or more HMOs in their 
state of residency and provides that individuals who reside in an adjoining 
state may be licensed as resident agents if their principal business office is 
to be maintained in Texas.
Proposed sec.11.404 replaces existing sec.11.405, concerning license application 
requirements, and adds provisions with respect to corporate applicants.
Proposed sec.11.405 replaces existing sec.11.406, concerning the written license 
examination, and provides that, unless the examination is scheduled within nine 
months of the date an application is approved, the applicant must reapply.
New sec.11.406 would replace old sec.11.407, concerning renewal of licenses, and 
would delete the provision that allows an individual whose license has expired 
to renew within one year without retaking the examination, at the commissioner's 
discretion.
Proposed sec.11.407 replaces existing sec.11.408, concerning additional 
appointments and unauthorized agents, and adds a provision regarding payment of 
a percentage of an HMO's revenues, net income, or profit to persons under 
contract with the HMO for administrative, management, or health care services.
Proposed sec.11.408 replaces old sec.11.409, concerning termination of HMO 
agents' appointments, and additionally provides for suspension of the license of 
an HMO agent with no outstanding valid appointments.
Proposed sec.11.409, concerning suspension or revocation of license, replaces 
existing sec.11.410. The proposed new section adds a showing of financial 
irresponsibility by an applicant or agent to the enumerated grounds for denial, 
suspension, or revocation of a license and adds requirements regarding notice of 
hearing on a license.
Jack Evins, deputy commissioner, license group, has determined that, for the 
first five-year period the proposed sections will be in effect, there will be no 
fiscal implications for state or local government, but there will be fiscal 
implications for small businesses as a result of enforcing or administering the 
sections, and there will be no effect on local employment or local economy.
Jack Evins, deputy commissioner, license group, has also determined that, for 
each year of the first five years the amendment and new sections are in effect, 
the public benefit anticipated as a result of enforcing the sections is the more 
effective regulation of HMO agents and protection of the consumer through the 
requirements for financial ability to pay claims by corporate agents. There is 
no anticipated economic cost to persons who are required to comply with the 
proposed sections, except for corporate agents. The anticipated economic cost to 
corporate agents who do not already have an errors and omissions policy is 
between $275-$1,000 for a premium for an errors and omissions policy to $25,000 
for a cash deposit if the corporate agent chooses that option for meeting the 
financial accountability provisions or if the agent is unable to obtain an 
errors and omissions policy or a bond. There is no difference in the cost for 
small businesses and larger businesses on a cost per hour of labor basis.
Comments on the proposal may be submitted to Joan Kennedy, director of insurance 
related activities section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendment and new sections are proposed under the Texas Insurance Code, 
Article 1.04, which provides the State Board of Insurance with the authority to 
determine policy and rules in accordance with the laws of this state; and under 
the Texas Insurance Code, Article 20A.22, which authorizes the board to 
promulgate rules to carry out the provisions of the Texas Health Maintenance 
Organization Act; and Texas Insurance Code, Articles 20A.15 and 20A.15A which 
authorize the board to adopt reasonable rules necessary to provide for the 
licensing of agents under those articles.
sec.11.403. Nonresident Licenses.
<nl>(a) An individual who is not a resident of Texas may be licensed as an HMO 
agent upon compliance with the provisions of the Texas HMO Act and <nl>this 
subchapter <ol> [these sections], provided that the state in which the 
individual resides accords the same privilege to a citizen of Texas, that the 
applicant has no place of business in Texas for the transaction of business as 
an HMO agent, and that the applicant <nl>holds a current license, under which 
the applicant is eligible<ol> [is currently licensed] <nl>to act as an agent for 
one or more HMOs<ol> [as an HMO agent] in the applicant's state of residency. 
The commissioner is authorized to enter into reciprocal agreements with the 
appropriate official of any state whereby any examination of any applicant from 
such other state is waived, provided that:
(1) a written examination is required of applicants for <nl>a<ol> [an HMO 
agent's] license <nl>to act as an agent for an HMO<ol> in the other state;
(2) the appropriate official of the other state certifies that the applicant 
holds a currently valid license <nl>authorizing the applicant to act as an agent 
for an HMO<ol> [as an HMO agent] in such state by passing a written examination 
or holds a currently valid license issued because of the applicant's exemption 
from the requirements of an examination;
(3)-(4) (No change.)
<nl>(b) Individuals who reside in an adjoining state may be licensed as resident 
agents if their principal business office is to be maintained in this state, 
provided such adjoining state makes similar accommodations available for Texas 
resident agents.
sec.11.404. License Application Requirements.
(a) In applying for a license as an HMO agent, each applicant must submit the 
following:
(1) a completed application, signed by an officer of the HMO which officer may 
not be the applicant;
(2) the license fee; and
(3) the initial appointment fee.
(b)  A corporation applying for license shall have the ability to pay any sums 
up to $25,000 which it might become legally obligated to pay on account of any 
claim made against it by any customer and caused by any negligent act, error, or 
omission of the corporation or any person for whose acts the corporation is 
legally liable in the conduct of its business under the Act. The term "customer" 
as used herein shall mean any person, firm, or corporation to whom such 
corporation sells or attempts to sell an HMO contract or from whom such 
corporation accepts an application for enrollment. Such ability shall be proven 
in one of the following ways:
(1) an errors and omissions policy insuring such corporation against errors and 
omissions in at least the sum of $100,000 with no more than a $10,000 deductible 
issued by an insurance company authorized to do business in the State of Texas 
or, if a policy cannot be obtained from a company authorized to do business in 
Texas, a policy procured by a licensed surplus lines agent in compliance with 
the Texas Insurance Code, Article 1.14-2, on filing an affidavit with the 
commissioner of insurance stating the inability to obtain coverage and receiving 
the commissioner's approval; or
(2) a bond executed by such corporation as principal and a surety company 
authorized to do business in this state, as surety, in the principal sum of 
$25,000, payable to the Texas Department of Insurance for the use and benefit of 
customers of such corporation, conditioned that such corporation shall pay any 
final judgment recovered against it by any customer; or
(3) a deposit with the State Treasurer of cash or securities of the class 
authorized by the Texas Insurance Code, Article 2.08 and Article 2.10, having a 
fair market value of at least $25,000, upon the following terms and conditions:
(A) the State Treasurer is authorized and directed to accept and receive such 
deposit and hold it exclusively for the protection of any customer of such 
corporation recovering a final judgment against such corporation;
(B)  such deposit may be withdrawn only upon filing with the commissioner 
evidence satisfactory to the commissioner that the corporation has withdrawn 
from business and has no unsecured liabilities outstanding, or that such 
corporation has provided for the protection of its customers by furnishing an 
errors and omissions policy or a bond as otherwise provided in this subsection; 
and
(C) securities so deposited may be exchanged from time to time for other 
qualified securities.
(c) A binding commitment to issue an errors and omissions policy, as described 
in subsection (b)(1) of this section; a binding commitment to issue a bond, as 
described in subsection (b)(2) of this section; or the tender of cash or 
securities, as described in subsection (b)(3) of this section, shall be 
sufficient in connection with any application for license.
(d) A corporation which has filed an errors and omissions policy with the Texas 
Department of Insurance in connection with another license, need not file a 
separate policy under these rules.
(e) A corporation which applies for a license as an HMO agent under either the 
Texas Insurance Code, Article 20A.15 or Article 20A.15A, must meet the 
requirements of the Texas Insurance Code, Article 20A.15(n)-(u).
sec.11.405. Written Examination. <ol> The commissioner is authorized to issue an 
applicant a license as an HMO agent, after the applicant has passed a written 
examination approved by the commissioner, unless the applicant is exempt from 
examination requirements as provided in sec.11.403 of this title (relating to 
Nonresident Licenses).
(1) The examination shall cover the Texas HMO Act, rules and regulations for 
HMOs issued by the State Board of Insurance and by the Texas Department of 
Health, and pertinent sections of the Texas Insurance Code and the rules adopted 
thereunder.
(2) A content outline is available from the contracted testing service and is 
the sole source of examination questions. The content outline, the testing 
service, and the examination may be changed at any time.
(3) The examination is given at the same times and places as other agent 
examinations.
(A) Each applicant is mailed a schedule showing places and dates on which 
examinations are conducted and an examination reservation request form.
(B) Unless the examination is passed within nine months after the date an 
application is filed; the application shall be closed, and the applicant, if 
interested, must reapply as provided under sec.11. 404 of this title (relating 
to License Application Requirements).
(4) The applicant is notified if the applicant fails the examination.
(5) A new examination fee must be paid for each re-examination.
sec.11.406. Renewal.  An HMO agent's license expires two years after the date of 
issue unless a completed renewal application and a renewal fee are filed with 
the Texas Department of Insurance on or before the expiration date of the 
license.
(1) Prior to the expiration date, a notice of the renewal date is mailed to the 
agent at the address on file in the Agents License Section, Texas Department of 
Insurance. The agent must immediately notify the Agents License Section, in 
writing, of any address change.
(2) When an agent renews a license, all appointments then in effect are 
automatically renewed, assuming all other requirements of law are met.
sec.11.407. Additional Appointments; Unauthorized Agents.
(a)  An HMO agent may be appointed to represent more than one HMO upon the 
submission of an additional appointment form and payment of the appointment fee.
(b) No HMO doing business in this state may pay, directly or indirectly, any 
commission or other valuable consideration in lieu of commission, for any reason 
or purpose to any person, for services as an HMO agent within this state, unless 
such person holds a currently valid license to act as an HMO agent as required 
by the laws of this state and is appointed by such HMO under that license; nor 
may any person, other than a duly licensed HMO agent, accept any such commission 
or other valuable consideration; provided, however, that the provisions of this 
subsection shall not prohibit the payment or receipt of renewal or other 
deferred commissions to or by any person solely because such person has ceased 
to hold a license to act as an HMO agent, nor shall the provisions of this 
subsection prohibit the payment of compensation calculated as a percentage of an 
HMO's revenues, net income, or profit to a person or the employee of any person 
who has contracted to provide administrative, management, or health care 
services to an HMO in compliance with the Texas Insurance Code, Article 20A.18.
(c) Except as provided in subsection (b) of this section, no HMO agent may pay, 
allow, give, or offer to pay, allow, or give, directly or indirectly, any rebate 
of premiums payable, any commission, or any paid employment or contract for 
service of any kind or anything of value whatsoever, or any valuable 
consideration or inducement whatever, not specified in the policy or contract 
for health services, for or on account of the solicitation or negotiation of 
such contracts or policies, other than to another HMO agent.
sec.11.408. Termination of Appointment.
(a) Upon terminating the appointment of an HMO agent, the HMO must immediately 
file a completed "Notice of Cancellation of Appointment" form which may be 
obtained from the Agents License Section, to acknowledge the appointment 
cancellation of that agent. The notice of cancellation form must be mailed to 
the Agents License Section, Mail Code 107-1A Texas Department of Insurance, 333 
Guadalupe Street, P. O. Box 149104, Austin, Texas 78714-9104. The appointment is 
cancelled as of the date on which the cancellation notice is received in the 
Agents License Section, License and Investigations Program, unless the license 
was terminated or expired prior to the date the notice is received.
(b) The license of any agent shall be suspended during any period in which the 
agent has no outstanding valid appointments. The suspension shall end upon 
receipt by the State Board of Insurance of an acceptable notice of a valid 
appointment.
sec.11.409. Suspension or Revocation of License.  The commissioner may suspend, 
revoke, or refuse to renew an HMO agent's license for any statement or action 
which is untrue, unfair, misleading, deceptive, or which constitutes 
misrepresentation. Grounds and procedures for such actions are outlined as 
follows.
(1) A license may be denied, or a license duly issued may be suspended or 
revoked, or the renewal thereof refused by the commissioner if, after notice and 
hearing provided, the commissioner finds that the applicant or licensee:
(A) has willfully violated any provision of the HMO or insurance laws of this 
state; or
(B) has intentionally made a material misstatement in the application for such 
license; or
(C) has obtained, or attempted to obtain, such license by fraud or 
misrepresentation; or
(D) has misappropriated or converted to his or the HMO's own use or illegally 
withheld money belonging to an HMO or to an enrollee; or
(E) has shown himself or herself to be financially irresponsible or has 
otherwise demonstrated lack of trustworthiness or competence to act as an HMO 
agent; or
(F) has been guilty of fraudulent or dishonest practices; or
(G)  has materially misrepresented the terms and conditions of HMO contracts; or
(H) has made or issued, or caused to be made or issued, any statement 
misrepresenting or making incomplete comparisons regarding the terms or 
conditions of any health coverage contract issued by an insurer or HMO, for the 
purpose of inducing or attempting to induce the owner of such contract to 
forfeit or surrender such contract or allow it to lapse for the purpose of 
replacing such contract with an HMO contract; or insurance contract; or
(I) has obtained, or attempted to obtain, such license, not for the purpose of 
holding himself or herself out to the general public as an HMO agent, but 
primarily for the purpose of soliciting, negotiating, or procuring contracts 
covering the agent or members of the agent's family or the agent's business 
associates; or
(J) is not of good character or reputation.
(2) Before any license is denied, except for failure to pass a required written 
examination, or is suspended or revoked, or the renewal thereof refused, the 
following procedure will occur.
(A) The commissioner will give reasonable notice of the intention to deny, 
revoke, or refuse the renewal of a license, by certified mail, to either of the 
following, as appropriate:
(i)  to the applicant for such license and to the HMO who desires that the 
applicant be licensed; or
(ii) to the licensee and to any HMO with whom the agent holds an appointment and 
whose business is directly involved in the subject matter of any allegations of 
wrongdoing leveled against the agent.
(B) Such notice shall set a date not less than 20 days from the date of mailing 
the notice when the applicant or licensee and a duly authorized representative 
of the HMO may appear to be heard and produce evidence.
(C) The hearing to deny, revoke or refuse the renewal of a license will be held 
in accordance with the provisions of the Administrative Procedure and Texas 
Register Act, Texas Civil Statutes, Article 6252-13(a), and Chapter 1, 
Subchapter A of this title (relating to Rules and Practice and Procedure).
(D) Upon termination of such hearing, findings will be reduced to writing and, 
upon approval by the commissioner, filed in the commissioner's office and notice 
of the findings sent by certified mail to the applicant or licensee at such 
applicant's or licensee's last known address and to the HMO concerned, if any.
(3) No applicant or licensee whose license has been denied, refused, or revoked 
under this section, except for failure to pass a required written examination, 
is entitled to file another application for a license as an HMO agent within one 
year from the effective date of such denial, refusal, or revocation, or, if 
judicial review of such denial, refusal, or revocation is sought, within one 
year from the date of final court order or decree affirming such action. Such 
application, when filed after one year, may be refused by the commissioner 
unless the applicant shows good cause why the denial, refusal, or revocation of 
the license should not be considered a bar to the issuance of a new license.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201715
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call: (512) 463-6328
       
28 TAC sec.sec.11.404-11.411
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department of Insurance or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The State Board of Insurance of the Texas Department of Insurance proposes the 
repeal of sec.sec.11.404-11.411, concerning the licensing and regulation of 
health maintenance organization (HMO) agents. The repeal of these sections is 
necessary to provide implementation of legislative revisions to the Texas HMO 
Act and to provide clearer and more effective regulation. The proposed repeal of 
the sections enables the board simultaneously to propose new sections which 
replace these repealed sections with similar provisions with clearer language in 
conformance with amended statutory language, except for sec.11.411 relating to 
temporary licenses which has not been replaced. No temporary licenses will be 
allowed for HMO agents after the effective date of the repeal of these sections. 
Notification appears elsewhere in this issue of the Texas Register of proposal 
of the new sections which would substantially replace these sections proposed 
for repeal.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the repeals are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the repeals, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy also has determined that, for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals is the conformity of this subchapter to legislative revisions of the 
Texas HMO Act. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the repeals 
as proposed.
Comments on the proposal may be submitted to Joan Kennedy, director, insurance 
related activities section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The repeals are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organization Act.
sec.11.404. Application for License prior to Certificate of Authority.
sec.11.405. License Application Requirements.
sec.11.406. Written Examination.
sec.11.407. Renewal.
sec.11.408. Additional Appointments; Unauthorized Agents.
sec.11.409. Termination of Appointment.
sec.11.410. Suspension of License.
sec.11.411. Temporary Licenses.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201716
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call: (512) 463-6328
       
Subchapter F. Evidence of Coverage
28 TAC sec.sec.11.502-11.504, 11.506, 11.509
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.502-11.504, 11.506, and 11.509, concerning requirements 
for evidences of coverage of health maintenance organizations (HMOs). The 
amendments are necessary to conform the subchapter to legislative revisions to 
the Texas HMO Act and to clarify existing regulations to provide better 
regulation.
The amendments to sec.11.502 contain references to form numbers, provide that 
any discrepancy between the language or form numbers of the final print and 
approved draft is grounds for revocation of the certificate of authority, 
provide for forms which are referenced in sec.11.1001(10), and make minor 
editorial changes.
The amendments to sec.11.503 provide for an additional form and require four 
rather than three copies of the transmittal letter.
The amendments to sec.11.504 add references to Articles 21.21A, 21.21-1 and 21. 
21-3 and provide that violations of such statutes are grounds for disapproval of 
an evidence of coverage.
The amendments to sec.11.506 make changes in the mandatory provisions for both 
group and non-group agreements and certificates covering formatting, use of the 
legislatively mandated toll free number, variable co-payments or deductibles, 
cancellation and cancellation time limits, conversion and continuation of 
coverage provisions; eligibility requirements, including those of dependents, 
and mandating coverage of certain dependents; changes to rates; service area 
descriptions; conformity with state law and with Medicare Supplement Minimum 
Standards and Long-Term Care Minimum Standards and other miscellaneous 
provisions dealing with mandatory provisions.
The amendments to sec.11.509 make certain editorial changes; provide that the 
subrogation provision may include a statement that the HMO may recover 
attorneys' fees and court costs, and contain rules which must be followed by an 
HMO which chooses to provide coverage for work-related injuries or illness.
Joan Kennedy, director of insurance related activities, has determined that, for 
the first five-year period the proposed sections will be in effect, there will 
be no fiscal implications for state or local government as result of enforcing 
or administering the sections, and there will be no effect on local employment 
or local economy.
Ms. Kennedy, also has determined that, for each year of the first five years the 
amendments are in effect, the public benefit anticipated as a result of 
enforcing the sections is a clearer, more concise statement of requirements for 
evidences of coverage of HMOs, in accordance with legislative revisions to the 
Texas HMO Act. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the 
proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, director of insurance 
related activities section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Act.
sec.11.502. Filing Requirements with Application for Certificate of Authority. 
Filing requirements for the evidence of coverage and all related forms <nl>,<ol> 
when filed as part of the application for a certificate of authority, are as 
follows: [.]
(1)-(2) (No change.)
(3) during the review period, applicant must submit two copies of each new page 
or form reflecting any revisions. [All deficiencies must be corrected and 
submitted not less than 15 working days prior to the public hearing.]
(4) an approval or disapproval order will be issued based on the content of 
final typed drafts. Printing must comply with the specifications described in 
sec.11.505 of this title (relating to Specifications for the Evidence of 
Coverage). Any discrepancy between the <nl>language or form numbers of the<ol> 
final print and the approved draft form is grounds for revocation of certificate 
of authority.
(5) Three copies of the final print must <nl>be submitted to<ol> the HMO 
<nl>Unit<ol> [Section] within 30 days following printing and must be certified 
by an officer of the HMO as being the same language as has been approved <nl>on 
an HMO Form #9 referred to in sec.11.1001(10) of this title (relating to Forms 
Adopted by Reference) <ol>. One copy will be stamped with the original approval 
order number and date and returned to the HMO for its permanent file.
sec.11.503. Filing Requirements Subsequent to Receipt of Certificate of 
Authority.  Subsequent to receipt of a certificate of authority, no evidence of 
coverage may be amended or altered in any manner<nl>,<ol> and no new evidence of 
coverage may be used<nl>, <ol> unless the proposed new or revised evidence of 
coverage has been filed for review and has received the approval of the 
commissioner.
(1) Four copies of HMO <nl>Form #5 and <ol>Form #8 must accompany any form or 
forms submitted for approval. All submissions must be addressed to the HMO 
<nl>Unit <ol>[coordinator]. <nl>Four copies of a <ol> [A] transmittal letter 
must list each form submitted and show the form's number and title or 
description.
(2)-(4) (No change.)
(5) Three copies of the final print must be submitted to the HMO <nl>Unit 
<ol>[Coordinator] within 30 days following printing and must be certified by an 
officer of the HMO as being the same language as has been approved. One copy 
will be stamped with the original approval order number and date and returned to 
the HMO for its permanent file.
(6)-(8) (No change.)
sec.11.504. Disapproval of an Evidence of Coverage.
(a) If any portion of any evidence of coverage is disapproved, the commissioner 
will specify the reason for the disapproval. The commissioner is authorized to 
disapprove any form or withdraw any previous approval if:
(1) -(2) (No change.)
(3) it contains any statements that are unclear, untrue, unjust, unfair, 
inequitable, misleading, or deceptive or that violate the Texas Insurance Code, 
Article<nl>s<ol> 21.21<nl>, 21.21A, 21.21-1, <ol> [or Article] 21.21-2, <nl>or 
21.21-3, 21.21-5, or 21.55 with respect to out-of-area or emergency claims in 
accordance with Article 20A.09(i)<ol> or any regulations thereunder or any other 
applicable law; or
(4) -(8) (No change.)
(b)-(c) (No change.)
sec.11.506. Mandatory Provisions: Group and Non-Group Agreement and Group 
Certificate.  Each group and <nl>non -group<ol> [nongroup] agreement and group 
certificate must contain the following provisions. Use of the standard language 
for each provision as presented in Subchapter L of this chapter (relating to 
Standard Language for Mandatory and Other Provisions) shall exempt from review 
that portion of the evidence of coverage where standard language is contained. 
Such standard language shall not be the only language accepted by the State 
Board [board] of Insurance for such provisions.
(1)  The name, address, and phone number of the HMO, <nl>the toll free number 
referred to in Texas Insurance Code, Article 21.71, where applicable,<ol> and 
notice of any provision requiring arbitration, indicating the location of such 
provisions within the evidence of coverage, must appear on the face page.
(A) The face page of an agreement is the first page that contains any written 
material.
(B) If the agreements or certificates are in booklet form the first page inside 
the cover is considered the face page.
<nl>(C) The information regarding the toll fee number referred to in Article 
21.71 must be in accordance with sec.1.601 of this title (relating to Notice of 
Toll-Free Telephone Numbers) .
<nl>(D) HMOs who wish to be exempt from Article 21.71 requirements for fiscal 
year 1991 must have filed for the exemption in accordance with the 
Commissioner's Bulletin of August 31, 1991. Exemptions will be governed by Texas 
Insurance Code, Article 21.71, sec.1.601 of this title (relating to Notice of 
Toll-Free Telephone Numbers) and the information contained in the instructions 
for the filing of the Annual Statement.
(2)  Arbitration-a <nl>statement<ol> [description] of any required arbitration 
procedure<nl>.<ol> <nl>If<ol> [if] enrollee complaints and grievances are 
resolved through a specified arbitration agreement, the arbitration must be 
conducted pursuant to the Texas Arbitration Act, Texas Civil Statutes, Articles 
224-238;
(3) Benefits-a schedule of all health care services that are available to 
enrollees under the health care plan or single health care service plan, 
including any <nl>copayments <ol> [co-payments] or deductibles and a description 
of where and how to obtain services. <nl>A variable copayment or deductible 
schedule may be used. The copayment schedule must clearly indicate the benefit 
to which it applies.
(4)  Cancellation-a statement specifying the grounds for cancellation of 
coverage and the minimum notice period that will apply. The notice period will 
be [not less than 60 days, except] as described below:
(A) for an enrollee<nl>, or if a subscriber, the subscriber and subscriber's 
enrolled dependents, <ol> in the case of:
(i)-(iii) (No change.)
(iv)  failure to meet eligibility requirements, coverage may be cancelled 
immediately <nl>, subject to continuation of coverage and conversion privilege 
provisions<ol>;
(v)-(vi) (No change. )
(B) For a group, in the case of:
(i) (No change.)
(ii) fraud on the part of the group, after 15 days written notice <nl>; or
<nl>(iii)<nl> any cancellation other than described in (i) or (ii) above, the 
HMO must give the group at least 60 days prior notice<ol>.
(5) Claim filing procedure-a provision that sets forth the procedure for filing 
claims, including:
(A) any required notice to the HMO of a claim;
(B) how, when and where to obtain claim forms, if required;
(C)  requirements for filing proper proofs of loss;
(D)  any time limit for payment of claims <nl>which must be in accordance with 
Texas Insurance Code, Article 21.55 and Article 20A.09(i);<ol> [and]
(E) notice of any requirement for arbitration of disputed claims.
(6) Complaint procedure-a description of the HMO's method for resolving enrollee 
complaints, including the address <nl>,<ol> [and] phone number to which 
complaints must be directed<nl>, and toll free telephone number required by 
Article 21.71, where applicable;<ol> and notice of time limits, appeal 
procedures, and any requirement for arbitration.
(7) Conversion privilege-group and <nl>non -group<ol> [nongroup] agreements and 
group certificates for an HMO <nl>must contain a conversion privilege which 
provides that, upon termination of eligibility for membership, each enrollee who 
resides in the service area has the right to convert within 31 days to a non-
group agreement issued by the HMO<ol> without presenting evidence of 
insurability. No conversion privilege is required when the entire group 
withdraws from the HMO <nl>or is cancelled by the HMO<ol> or for any member 
whose coverage is cancelled pursuant to paragraph (4)(A),(i),(ii),(iii), (v), or 
(vi) of this section <nl>or for any enrollee covered under a Medicare Risk or 
Medicare Cost Contract<ol>.
(8)-(10) (No change.)
(11) Eligibility-a statement of the eligibility requirements for membership, 
including:
(A)  <nl>that the subscriber must live in the service area and the permanent 
legal residence of any enrolled dependents must be the same as the subscriber, 
or the subscriber must live in the service area and the residence of any 
enrolled dependents must be:
<nl>(i) <nl> in the service area with the person having temporary or permanent 
conservatorship or guardianship of such dependents, where the subscriber has 
legal responsibility for the health care of such dependents; or
<nl>(ii)<nl> in the service area under other circumstances where the subscriber 
is legally responsible for the health care of such dependents; or
<nl>(iii)<nl> in the service area with the subscriber's spouse;
<nl>(B) the conditions under which dependent enrollees may be added to those 
originally covered;
<nl>(C)<ol>[(B)] any limiting age for subscriber and dependents, including 
effects of Medicare eligibility; [and]
<nl>(D)<ol>[(C)] a clear statement regarding the coverage of newborn children. 
No evidence of coverage may contain any provision excluding or limiting coverage 
for a newborn child of the subscriber or the subscriber's spouse. Congenital 
defects must be treated the same as any other illness or injury for which 
coverage is provided. The HMO may require that the subscriber notify the HMO 
during the initial 31 days after the birth of the child and pay any premium 
required  <nl>to continue<ol> [for] coverage for the newborn child<nl>;<ol> [.]
<nl>(E) a clear statement regarding the coverage of the subscriber's 
grandchildren under the conditions under which such coverage is required by 
Texas Insurance Code, Article 3.70-2, Subsection (L).
(12)-(15) (No change.)
(16)  <nl>Incontestability<ol> [Incontestibility]-In the absence of fraud, all 
statements made by a subscriber are considered representations and not 
warranties<nl>. During<ol> [during] the first two years, coverage can be voided 
for material misrepresentation contained in a written application. After two 
years, coverage can be voided only in the event of a fraudulent misstatement 
contained in the written application. A copy of the written application must 
have been furnished to the subscriber if the terms of the application or 
enrollment form are to be applied.
(17) Schedule of charges.
[(A)] A statement that discloses the HMO's right to change the rate charged 
<nl>with 30 days written notice pursuant to the Texas Insurance Code, Article 
3.51-10<ol> [and indicates the amount of prior notice which must be given;].
[(B) pursuant to the Act, sec.9(a)(3)(B)(iv), a provision disclosing the total 
amount of payment for health care services or a single health care service which 
the enrollee is obligated to pay if covered by a nongroup agreement, and an 
indication in the certificate of whether the plan is contributory or 
noncontributory if coverage is through a group. This requirement may be 
satisfied by inclusion of this information on the nongroup application for 
membership or group subscriber enrollment form.]
(18) Service area-a map or clear description of the service area indicating 
major primary and emergency care delivery sites. <nl>A zip code map and a 
provider list may be used to meet this requirement.
(19) (No change.)
<nl>(20) Conformity with state law-A provision that if the agreement or 
certificate contains any provision not in conformity with the Act or other 
applicable laws it shall not be rendered invalid but shall be construed and 
applied as if it were in full compliance with the Act and other applicable laws.
<nl>(21) Conformity with Medicare supplement minimum standards and long-term 
care minimum standards -Each group and non-group agreement and group certificate 
must comply with Subchapter T of Chapter 3 of this title (relating to Medicare 
Supplement Minimum Standards), referred to in this paragraph as Medicare 
Supplement Rules, and Subchapter Y of Chapter 3 of this title (relating to Long-
Term Care Minimum Standards), referred to in this paragraph as long-term Care 
Rules, where applicable. If there is a conflict between the Medicare Supplement 
Rules and/or the long-term Care Rules and the HMO Rules, the Medicare Supplement 
Rules or long-term Care Rules shall govern to the exclusion of the conflicting 
provisions of the HMO Rules. Where there is no conflict, both the Medicare 
Supplement Rules and/or the long-term Care Rules and the HMO Rules shall be 
followed where applicable.
sec.11.509. Optional Provisions. <ol> Group and <nl>non -group<ol> [nongroup] 
agreements and group certificates may contain the following optional provisions.
(1) Coordination of benefits-a provision that the value of any benefits or 
services provided by the HMO may be coordinated with any other type of group 
insurance plan or coverage under governmental programs so no more than 100% of 
eligible expenses incurred is paid.
(A)-(B) (No change.)
[(C) Group and nongroup plans may not coordinate benefits with automobile 
coverage.]
<nl>(C)<ol>[(D)] Requirements of the <nl>Texas<ol> Insurance Code and rules 
promulgated by the State Board of Insurance relating to coordination of benefits 
by insurers should be followed by HMOs that wish to coordinate benefits.
(2) Subrogation-a provision that the HMO receives all rights of recovery 
acquired by an enrollee against any person or organization for negligence or any 
willful act resulting in illness or injury covered by HMO benefits, but only to 
the extent of such benefits. Upon receiving such benefits from the HMO, the 
enrollee is considered to have assigned such rights of recovery to the HMO and 
to have agreed to give the HMO any reasonable help required to secure the 
recovery. <nl>The provision may include a statement that the HMO may recover 
attorney fees and court costs.
<nl>(3) Sale of substitutes to Workers' Compensation Insurance -If an HMO 
chooses to market a product which provides coverage for on -the-job injuries or 
illness, the following provisions shall apply:
<nl>(A) No person, agent, or entity may represent any nongroup or group 
agreement or other evidences of coverage as a substitute for a policy of 
workers' compensation insurance nor may any person, agent, or entity represent 
to an employer that purchase of a nongroup or group agreement or other evidence 
of coverage providing benefits to the employer's employees:
<nl>(i)<nl> provides the same benefits for either the employee or the employer 
as are provided by workers' compensation insurance; or
<nl>(ii)<nl> limits such employees to a claim for benefits under such agreements 
as the employees' sole remedy against the employer in the event the employee 
suffers a job related injury or disease.
<nl>(B) All nongroup or group agreement or other evidences of insurance coverage 
which provides benefits to employees and which are marketed to or through 
employers that have elected, or may in the future elect, to be nonsubscribers to 
the workers' compensation system shall include the following statement in 10 -
point bold-face type on the first page of the agreement and on the first page of 
all materials used in advertising, marketing, and explaining the agreement: 
"THIS IS NOT A POLICY OF WORKERS' COMPENSATION INSURANCE. THE EMPLOYER DOES NOT 
BECOME A SUBSCRIBER TO THE WORKERS' COMPENSATION SYSTEM BY PURCHASING THIS 
AGREEMENT, AND IF THE EMPLOYER IS A NON-SUBSCRIBER, THE EMPLOYER LOSES THOSE 
BENEFITS WHICH WOULD OTHERWISE ACCRUE UNDER THE WORKERS' COMPENSATION LAWS. THE 
EMPLOYER MUST COMPLY WITH THE WORKERS' COMPENSATION LAW AS IT PERTAINS TO NON-
SUBSCRIBERS AND THE REQUIRED NOTIFICATIONS THAT MUST BE FILED AND POSTED."
<nl>(C) The group agreements described in subsection (b) of this section shall 
include the following statement in 10-point bold-face type on the certificate or 
other evidence of coverage issued to the employees: "THE GROUP AGREEMENT UNDER 
WHICH THIS CERTIFICATE IS ISSUED IS NOT A POLICY OF WORKERS' COMPENSATION 
INSURANCE. YOU SHOULD CONSULT YOUR EMPLOYER TO DETERMINE WHETHER YOUR EMPLOYER 
IS A SUBSCRIBER TO THE WORKERS' COMPENSATION SYSTEM."
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201720
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call: (512) 463-6328
       
Subchapter G. Advertising and Sales Material
 28 TAC sec.11.602, sec.11.603
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.11.602 and sec.11.603, concerning the coverage of HMOs by the 
Texas Insurance Code, Articles 21.21, 21-21-1, and 21.21-2, and filings of 
advertisements. The amendments are necessary to clarify the requirements of the 
sections.
The amendment to sec.11.602 adds Article 21.21-1 as a statute to which an HMO is 
subject; and the amendment to sec.11.603 re-titles the section "Filings" to 
indicate that the required filings which are to be made are not necessarily 
filings subsequent to certificate of authority.
Joan Kennedy, director of insurance related activities, has determined that, for 
the first five-year period the sections are in effect, there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy, also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections is a clearer, more concise statement of requirements concerning 
advertising. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the 
proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organization Act.
sec.11.602. Health Maintenance Organizations Subject to the Texas Insurance 
Code, Articles 21.21, 21.21-1 and Article 21.21-2, and Related Rules.  Health 
maintenance organizations must comply with the Texas Insurance Code, Article 
21.21, 21.21-1 and Article 21.21-2, and [all advertising guidelines and] rules 
promulgated by the State Board of Insurance, pursuant to the Texas Insurance 
Code, Article 21.21, 21-21-1, and Article 21.21-2, to the extent these rules may 
be applied[,] in the same manner as insurance companies.
sec.11.603. Filings. [Subsequent to Certificate of Authority].
(a) -(d) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201721
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Proposed date of adoption: March 13, 1992
For further information, please call:(512) 463-6328
       
Subchapter H. Schedule of Charges
28 TAC sec.sec.11.701-11.707
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.701-11.704 and new sec. s11.705, 11.706, and 11.707, 
concerning the schedule of charges for enrollee coverage by health maintenance 
organizations (HMOs). The amendments and new sections are necessary to conform 
the subchapter to legislative revisions to the Texas HMO Act and to provide 
clarification of the regulations related to the schedule of charges. The 
amendment to sec.11.701 provides for the filing of the formula or method for 
calculating the schedule of charges and the required supporting documentation 
and clarifies the contents of the schedule of charges. The amendment to sec.11. 
702 provides that the formula or method for calculating the schedule of charges 
must be accompanied by certification of a qualified actuary that it is 
appropriate to produce rates that are not excessive, inadequate, or unfairly 
discriminatory. The amendment to sec.11.703 provides that each formula or method 
for calculating the schedule of charges must be accompanied by adequate detail 
including assumptions to justify that the charges produced are not excessive, 
inadequate, or unfairly discriminatory. That amendment also provides that the 
calculations must be available in the HMO's office and that any changes in the 
assumptions in the formula or method for calculating the schedule of charges for 
a particular group need not be filed but justification of the variances must be 
retained at the HMO's office. The amendments to sec.11.704 establish the 
standards for establishing conversion rates and prohibit charges based on any 
individual's health status. New sec.11.705 establishes requirements concerning a 
one-time enrollment fee or a reinstatement fee for lapsed contracts. Section 11. 
706 provides standards for determining reasonableness of HMO rates with respect 
to benefits. Section 11.707 requires review of an HMO's formula or method for 
calculating its schedule of charges after a one-year period. Proposal of new 
sec.11.705 and sec.11.706 is simultaneous with the proposed repeal of existing 
sec.11.705 and sec.11.706, concerning rate variations and schedule of charges 
projected in application for certificate of authority. Notice of the proposed 
repeal appears elsewhere in this issue of the Texas Register.
Joan Kennedy, director of insurance related activities, Bob Long, actuary, and 
Bill Beversdorff, examiner, have determined that for the first five-year period 
the sections are in effect fiscal implications to state or local government or 
small businesses will be a slight increase in the cost of group health coverage 
in some cases in order to offset decreases in individual conversion health 
coverage rates to affordable amounts, otherwise there will be no adverse fiscal 
implications for state or local government or small businesses as a result of 
enforcing or administering the sections, and there will be no effect on the 
local employment or the local economy.
Ms. Kennedy, Mr. Long, and Mr. Beversdorff have determined that for each year of 
the first five years the sections are in effect, the public benefit anticipated 
as a result of enforcing the sections will be a clearer, more concise statement 
of requirements concerning an HMO's schedule of charges, in accordance with the 
amendments to the Texas HMO Act; a more affordable individual conversion 
coverage cost; assurance of some benefit to the consuming public as a result of 
the HMO's efforts to hold down health care costs by negotiating lower fees with 
providers; and an incentive to HMOs to encourage negotiations for discounts of 
health care service costs. There is some anticipated economic cost to persons 
who are required to comply with the proposed sections as actuarial reviews of 
rates are required once a year. Such costs will depend upon size, type, and 
complexity of the HMO but will range from $1,000 to $50,000 per year. Most HMOs 
have already provided for such reviews. Also, there would be an economic cost to 
HMOs which would otherwise charge rates in excess of that allowable by these 
sections, but because it does not appear there are any HMOs that could not 
comply with these sections without a decrease in revenue, no economic costs from 
loss of revenue are anticipated.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments and new sections are proposed under the Texas Insurance Code, 
Article 1.04, which provides the State Board of Insurance with the authority to 
determine policy and rules in accordance with the laws of this state; and under 
the Texas Insurance Code, Article 20A.22, which authorizes the board to 
promulgate rules to carry out the provisions of the Texas Health Maintenance 
Organization Act.
sec.11.701. Must Be Filed Prior to Use.
(a) No <nl>formula or method for calculating the<ol> schedule of charges for 
enrollee coverage, as defined in <nl>sec.11.2(b)<ol> [sec.11.2(b)(13)] of this 
title (relating to Definitions), may be used until a copy of such <nl>formula or 
method for calculating the <ol> schedule of charges <nl>with the required 
supporting documentation as defined in sec.11.703 of this title (relating to 
Supporting Documentation)<ol> has been filed with the commissioner.
<nl>(b)  The schedule of charges governed by this section includes all charges 
made for group or individual coverage except that any fee collected as an 
administrative service only fee, whereby the HMO assumes no risk, shall not be 
governed by this section.
<nl>(c) Each filing must be accompanied by HMO Form #6 (SC#1) as referenced in 
sec.11.1001 of this title (relating to Forms Adopted by Reference). This 
information may be submitted in the form of a computer printout.
sec.11.702. Actuarial Certification. <ol> Each <nl>formula or method for 
calculating the <ol> schedule of charges must be accompanied by the 
certification of a qualified actuary that, based on reasonable assumptions, the 
<nl>formula is appropriate to produce rates that are not excessive, inadequate, 
or unfairly discriminatory<ol> [rates to be charged are appropriate]. An actuary 
is considered qualified if he or she:
(1)-(2) (No change).
sec.11.703. Supporting Documentation. <ol> Each <nl>formula or method for 
calculating the <ol> schedule of charges must be accompanied by <nl>adequate 
detail including assumptions<ol> [supporting documentation adequate] to justify  
<nl>that<ol> the <nl>charges produced by the formula or method are not 
excessive, inadequate, or unfairly discriminatory as defined in sec.11.706 of 
this title (relating to Factors to be Considered in Determination of 
Reasonability of Rates)<ol> [rates to be charged].
<nl>(1) The calculations used to produce any schedule of charges as defined in 
sec.11.2(b)(14) (A) of this title (relating to Definitions) must be available at 
the HMO's office.
<nl>(2) Any changes in the assumptions in the formula or method for calculating 
the schedule of charges due to special characteristics of a particular group 
need not be filed, but justification of the variances must be retained at the 
HMO's office so that compliance with sec.11.706 of this title (relating to 
Factors to be Considered in Determination of Reasonability of Rates) may be 
checked.
sec.11.704. Charges  23>for Individuals [May not be Based on Health Status].
<nl>(a) Charges for any individual's coverage may not be based on the 
individual's health status.
<nl>(b) The charge by an HMO for individual coverage which has been converted 
from group coverage shall not exceed 120% of the HMO's group community rate for 
comparable coverage. The phrase "group community rate" as used herein is the 
rate which would be charged all persons in the service area if all persons were 
members of one group, within the parameters set out in sec.11.706 of this title 
(relating to Factors to be Considered in Determination of Reasonability of 
Rates). The conversion rate is, therefore, based on the experience of all 
persons in the service area and not on the converting individual's 
characteristics.
sec.11.705. Enrollment Fees. <ol> An HMO may charge a one-time enrollment fee or 
a reinstatement fee for lapsed contracts to offset the costs of initial 
enrollment or reinstatement, but said fee shall not exceed:
(1) for basic health care plans, the monthly rate attributable to administrative 
costs for a period of one month; or
(2) for single service health care plans, two months' premium.
sec.11.706. Factors to be Considered in Determination of Reasonability of Rates. 
<ol> HMO benefits must be reasonable with respect to the rates produced by the 
formula or method for calculating the schedule of charges. Rates shall be 
considered reasonable if charges are not excessive, inadequate, or unfairly 
discriminatory.
(1) A rate is presumed to be inadequate if the premium revenue expected to be 
earned from rates charged will result in a ratio of cost of benefits incurred to 
premiums earned of greater than 90%, unless total revenues plus all other 
sources of funds exceeds total expenses. An HMO may include any contributions of 
financial support from a parent company, sponsoring organization, or any other 
outside source in ascertaining the rate to be charged, but any rate that is 
reduced due to such support must be disclosed to the prospective contract 
holders and subscribers before execution of a contract or enrollment.
(2) A rate is presumed to be excessive if said rate is projected to produce a 
ratio of cost of benefits incurred to premiums earned of less than:
(A) 75% on evidence of coverage issued on a group basis by a basic health care 
plan including all riders issued in conjunction with said evidences of coverage;
(B) 65% on evidences of coverage issued on a individual by a basic health care 
plan including all riders issued in conjunction with said evidences of coverage;
(C) 65% on evidences of coverage issued on a group basis by a single service 
health care plan including all riders issued in conjunction with said evidences 
of coverage;
(D) 55% on evidences of coverage issued on an individual basis by a single 
service health care plan including riders issued in conjunction with said 
evidences of coverage.
(3) The calculation of a projected ratio of incurred benefit costs to premium 
revenue earned may not include fees by providers which are greater than usual 
and customary fees.
(4) The enrollment fees outlined in sec.11.705 of this title (relating to 
Enrollment Fees) may be excluded as an element of revenue in calculating the 
ratio of incurred benefit costs to premium revenue earned.
(5) Instead of actual costs, at the HMO's option, health care benefit costs 
incurred may be equivalent to the usual and customary fees expected to be paid 
if the same coverage were provided on a private pay basis (less any copayments 
or other charges that are the responsibility of the enrollee), considering 
community average rates for such services and benefits within the service area 
of the plan, but if an HMO claims that its charges negotiated and/or paid to 
physicians or other health care providers are less than the usual and customary 
fees, it shall be the responsibility of the HMO to prove that the negotiated 
fees are, actually in fact, less than usual and customary fees. Any proven 
savings resulting from the difference of negotiated fees being less than usual 
and customary fees must be divided whereby no less than 50% is directed towards 
the benefit of the contract holders or subscribers through decreases in rates. 
In no event, though, may premiums exceed the anticipated actual costs of health 
care benefits by more than 250%. An HMO may not include as a basis in its rate 
calculations usual and customary charges for discounted physician or other 
health care services when the HMO has included physician or other health care 
provider fee discounts to patients as benefits in evidences of coverage or 
otherwise advertised said discounts to the public in selling its products. The 
HMO may not recoup, in premium or by other charge to the contract holders, 
subscribers or enrollees, any amounts representing physician or other health 
care provider discounts to patients which are included as benefits in evidences 
of coverage or otherwise advertised to the public.
(6) The presumptions set out in paragraphs (1) and (2) of this section may be 
overcome by a showing that for a particular HMO the rates within the parameters 
set forth in this section do not generate rates that are reasonable with respect 
to the benefits provided.
(7) The phrase usual and customary fee as used in this section refers to the 
usual and customary fee for services provided by similar practitioners within 
the service area.
sec.11.707. Subsequent Review of the Formula or Method for Calculating the 
Schedule of Charges. If the formula or method for calculating the schedule of 
charges is to be continued beyond a one-year period, the HMO must file with the 
commissioner, by each anniversary of the effective date of that original filing, 
an actuarial statement stating that the previously filed formula or methodology 
has been consistently applied and the rates charged have proven and are expected 
to continue to be adequate, not excessive, nor unfairly discriminatory. This 
statement must be accompanied by HMO Form #6.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201712
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter H. Schedule of Charges
28 TAC sec.11.705, sec.11.706
(Editor's note: The text of the following sections proposed for repeal will not 
be published. The sections may be examined in the offices of the Texas 
Department Insurance or in the Texas Register office, Room 245, James Earl 
Rudder Building, 1019 Brazos Street, Austin.)
The State Board of Insurance of the Texas Department of Insurance proposes the 
repeal of sec.11.705 and sec.11.706, concerning rate variations and schedule of 
charges projected in an application for certificate of authority. The repeal of 
these sections is necessary to provide implementation of legislative revisions 
to the Texas HMO Act and to provide clarification of the regulations under that 
Act. The proposed repeal of the sections enables the board simultaneously to 
propose new sections which replace these repealed sections. Notification appears 
elsewhere in this issue of the Texas Register of proposal of the new sections 
which would replace these sections proposed for repeal.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the repeals are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the repeals, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy also has determined that for each year of the first five years the 
repeals are in effect, the public benefit anticipated as a result of enforcing 
the repeals will be the conformity of this subchapter to legislative revisions 
of the Texas HMO Act. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the repeals 
as proposed.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The repeals are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organizational Act.
sec.11.705. Rate Variations.
sec.11.706. Schedule of Charges Projected in Application for Certificate of 
Authority.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201713
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter I. Financial Requirements
28 TAC sec.11.801
The State Board of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.11.801, concerning financial requirements. The amendment adds a 
new subsection (e) related to foreign HMOs and is necessary to provide clearer 
and more effective regulation of foreign health maintenance organizations. The 
amendment to sec.11.801 provides that foreign HMOs seeking admission to this 
state which are actively conducting business in other states and are applying 
for a certificate of authority shall be required to maintain only the minimum 
surplus requirement net of uncovered liabilities and may hold assets allowed 
existing certified HMOs at the time of the qualifying examination, because an 
existing HMO cannot be examined in the same way as a prospective HMO which 
cannot conduct business without a certificate of authority. This change is made 
to recognize the financial situation of an HMO which is currently conducting 
business as opposed to a prospective HMO which is not currently conducting 
business.
Bill Beversdorff, financial examiner, has determined that for the first five-
year period the section is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the section, 
and there will be no effect on local employment or local economy.
Mr. Beversdorff also has determined that for each year of the first five years 
the section is in effect, the public benefit anticipated as a result of 
enforcing the section will be a more equitable treatment of foreign HMOs who are 
actively conducting business. There will be no effect on small businesses. There 
is no anticipated economic cost to persons who are required to comply with the 
proposed section.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendment is proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Act.
sec.11.801. Capitalization.
(a)-(d) (No change.)
<nl>(e) Notwithstanding the provision of subsection (c) of this section, 
existing foreign health maintenance organizations seeking admission to this 
state which are actively conducting business in other states shall be required 
to maintain only the minimum surplus requirement net of uncovered liabilities 
and may hold assets allowed existing certified HMOs at the time of the 
qualifying examination.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201708
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter J. Requirements of the Texas Department of Health
28 TAC sec.11.901
The State Board of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.11.90l, concerning requirements of the Texas department of 
health with respect to health maintenance organizations. The amendment is 
necessary to change a numerical reference to regulations of the Department of 
Health and to make editorial changes.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy also has determined that, for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the provision of correct, current information to health 
maintenance organizations concerning regulations that apply to them. There will 
be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the proposed section.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendment is proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organization Act.
sec.11.90l. Health Department May Request Additional Information or Make 
Additional Requirements. <ol> The Texas Department of Health has certain 
statutory responsibilities in the certification and regulation of <nl>HMOs <ol> 
[health maintenance organizations]. In addition to <nl>this chapter<ol> [these 
sections] promulgated by the Texas Department of Insurance,  <nl>HMOs<ol> 
[health maintenance organizations] must comply with rules adopted by the Texas 
Department of Health, with the concurrence of the commissioner of insurance, 
pursuant to the Texas Insurance Code, Article 20A.05(a)(2)(B) and (C). (Note: 
Rules for <nl>HMOs<ol> [health maintenance organizations] issued by the Texas 
Department of Health are <nl>found at 25 Texas Administrative Code<ol> [25 TAC  
s119.1-119.12]).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201722
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter K. Forms Adopted by Reference
28 TAC sec.11.1001
The State Board of Insurance of the Texas Department of Insurance proposes an 
amendment to sec.11.1001, concerning forms adopted by reference for use by 
health maintenance organizations (HMOs). The amendment is necessary to change 
the names of three forms and to add a revision date to the form numbers. The 
amendment changes the names of the forms referred to in paragraphs (1), (7), 
(8), and (10) and adds the notation "Rev. 7/90" to each form number.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section, and there will be no effect on the local employment 
or local economy.
Ms. Kennedy also has also determined that, for each year of the first five years 
the secion is in effect the public benefit anticipated as a result of enforcing 
the section will be the provision of current, correct information to HMOs 
concerning requirements that apply to them. There will be no effect on small 
businesses. There is no anticipated economic cost to persons who are required to 
comply with the proposed section.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendment is proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organization Act.
sec.11.1001. Forms Adopted by Reference. The Texas Department of Insurance 
adopts by reference certain application and filing forms, instructions, 
checklists, and other blanks to be used in conjunction with the rules adopted 
under this chapter. Copies of these forms may be obtained by contacting the HMO 
<nl>Unit<ol> [Section], <nl>Mail Code 106-3A, Texas Department of Insurance <ol> 
[State Board of Insurance], <nl>333 Guadalupe, P.O. Box 149104<ol> [1110 San 
Jacinto Street], Austin, Texas <nl>78714-9104<ol> [78701-1998]. Each HMO or 
other person or entity shall use such form or forms as are required by the rules 
adopted in this chapter and as are appropriate to its particular <nl>activities 
<ol> [activity]. The forms which are adopted by reference are more specifically 
identified as follows:
(1) HMO Form <nl>#1 Rev. 7/90 <ol> [1]-<nl>Name reservation <ol> [Reservation of 
name];
(2) HMO Form <nl>#2 Rev. 7/90 <ol> [2]-Application for a certificate of 
authority to do business in the State of Texas;
(3) HMO Form <nl>#3 Rev. 7/90 <ol> [3]-State of Texas officers and directors 
page;
(4) HMO Form <nl>#4 Rev. 7/90 <ol> [4] -Biographical data for the Texas 
[Insurance] Department of Insurance;
(5) HMO Form <nl>#4A Rev.7/90 <ol> [4a]-Instructions for completion of 
biographical data forms;
(6) HMO Form <nl>#5 Rev. 7/90 <ol> [5]-Texas certified HMO, Article 20A.04(b) 
filing;
(7) HMO Form <nl>#6 Rev. 7/90 <ol> [6]-<nl>Reconciliation of benefits to 
schedule of charges<ol> [certification of corrections];
(8)  HMO Form <nl>#7 Rev. 7/90 <ol> [7]-<nl>Certification<ol> [certificate] 
<nl>(<ol>of compliance<nl>)<ol>;
(9) HMO Form <nl>#8 Rev.7/90<ol> [8]-Texas Department of Insurance transmittal 
form for [evidence of coverage] submissions; and
(10) HMO Form <nl>#9 Rev. 7/90 <ol> [9]-<nl>Certification<ol> 
[certification]<nl> (<ol>of language<nl>) <ol>.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201709
Linda K. von Quintur-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter N. Health Maintenance Organization Solvency Surveillance Committee 
Plan of Operation
28 TAC sec.sec.11.1301-11.1306
The State Board of Insurance of the Texas Department of Insurance proposes 
amendments to sec.sec.11.1301-11.1306, concerning the health maintenance 
organization (HMO) solvency surveillance committee plan of operation. The 
amendments are necessary to conform the subchapter to legislative amendments to 
the Texas HMO Act and to make editorial changes. The amendments delete the 
article designation in the title of each section. In addition, the amendment to 
sec.11.1302 adds provisions concerning membership on the committee and meetings 
of the committee.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the sections, and there will be no effect on local employment or 
local economy.
Ms. Kennedy also has determined that, for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be a clear, concise application of legislative amendments to 
the HMO Act. There is no anticipated economic cost to persons who are required 
to comply with the proposed sections.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The amendments are proposed under the Texas Insurance Code, Article 1.04, which 
provides the State Board of Insurance with the authority to determine policy and 
rules in accordance with the laws of this state; and under the Texas Insurance 
Code, Article 20A.22, which authorizes the board to promulgate rules to carry 
out the provisions of the Texas Health Maintenance Organization Act.
sec.11.1301. [Article I;] Plan of Operation. (No change.)
sec.11.1302. [Article II;] Solvency Surveillance Committee.
(a)  Members. <nl>There shall be nine members of the committee appointed by the 
commissioner of insurance. A member is a Texas licensed health maintenance 
organization as defined in the Act or a public representative. Five of the 
members shall represent health maintenance organizations or their holding 
company system. The remaining four members shall be public representatives. The 
commissioner of insurance shall appoint the HMO members along with the officers 
or employees of the members who shall serve on the committee.<ol> The <nl>HMO 
<ol> members shall be appointed <nl>, based on plan characteristics.<ol> [by the 
board in accordance with the provisions of the Act, sec.36]. <nl>Of the HMO 
members, one shall be a single health care service plan as defined in the Act. 
The remaining HMO members shall be selected by the commissioner of insurance 
with due consideration of factors deemed appropriate including, but not limited 
to, the varying categories of premium income and geographical location. No two 
HMO members may be employees or officers of the same health maintenance 
organization or holding company system. Public representatives may not be 
officers, directors, or employees of a health maintenance organization, health 
maintenance organization agents, or any other business entities regulated by the 
State Board of Insurance; or persons required to register with the Secretary of 
State under the Government Code, Chapter 305, or related to persons described in 
this subsection within the second degree of the affinity or consanquinity.
(1) The <nl>HMO<ol> members' terms shall last for three years unless otherwise 
appointed by the <nl>commissioner <ol> [board] and shall be staggered with three 
appointments expiring each year. <nl>A member's term shall terminate if the 
member leaves the plan whose characteristics were the basis for appointment. The 
plan shall not automatically continue as a member.
(2) (No change.)
(3) A member shall serve until a successor is appointed unless such member's 
term is in conflict with the Act <nl>, or unless a member misses two or more 
consecutive meetings or engages in willful misconduct, in which case the 
commissioner may remove the member. <ol>If a member's term is in conflict with 
the Act, the committee shall make recommendations to the commissioner and the 
board to fill this vacancy. The committee may at such other times make 
recommendations to the commissioner and the board regarding vacancies which may 
arise from time to time. Members shall not receive any remuneration or emolument 
of office.
(4)  (No change.)
(b) (No change.)
(c) Meetings. On a day determined by the members, the committee shall hold 
meetings at the office of the commissioner of insurance no less frequently than 
quarterly [of] each year unless the officers, upon 10 days' notice, shall 
designate some other date or place. Such notice can be oral or written.  
<nl>Notice of regular meetings shall be provided by the chairman or other 
officer acting on his behalf.<ol> At each such meeting the committee may:
(1)-(2) (No change.)
(3) <nl>consider and provide for collection of assessments for operating 
expenses of the committee;
<nl>(4)<ol>[(3)]  consider facts relevant to, and provide for, the collection of 
assessments as determined by the commissioner;
<nl>(5)<ol>[(4)] consider any extension of funding for the expenses of 
supervision, rehabilitation, or conservation of an HMO beyond the statutory 150 
days;
<nl>(6)<ol>[(5)]  review latest financial statements of each HMO <nl>.<ol> [;] 
<nl>Committee members shall be provided with reports regarding the financial 
condition of Texas licensed health maintenance organizations and regarding the 
financial condition, administration, and status of health maintenance 
organizations in rehabilitation, liquidation, supervision, or conservation at 
meetings. Committee members shall not reveal the condition of nor any 
information secured in the course of any meeting of the committee with regard to 
any corporation, form, or person examined by the committee.
<nl>(7)<ol>[(6)] advise the commissioner on actions necessary to prevent 
financial impairment;
<nl>(8)<ol>[(7)] receive reports and advise the commissioner regarding 
management of HMO impairments and insolvencies;
<nl>(9)<ol>[(8)] authorize appropriate legal action to recover unpaid 
assessments;
<nl>(10)<ol>[(9)] review, consider, and act on the powers given the committee 
for a special meeting as outlined in [Article II of the plan of operation and 
set out herein as] subsection (d)(1)-(3) [,] of this section; and
<nl>(11)<ol>[(10)] review, consider, and act on other matters deemed by it to be 
necessary and proper for the administration of the committee.
(d)-(g) (No change.)
sec.11.1303. [Article III;] Operations.
(a)-(d) (No change.)
sec.11.1304. [Article IV;] Records and Reports.
(a)  Written record. A written record of the proceedings of each committee 
meeting shall be made. The original of this record shall be retained by the 
commissioner with copies being furnished to each member <nl>, and to the State 
Board of Insurance. <ol> Such record [as maintained by the commissioner] shall 
be subject to the pertinent provisions of law including those as to the 
confidentiality of the proceedings of the committee.
(b) (No change.)
sec.11.1305. [Article V;] Appeals.
(a)-(b) (No change.)
sec.11.1306. [Article VI;] Conformity of Statute.<nl> Texas Insurance Code, 
Article 20A.36,<ol> [The Act,] as written, and as may be amended, is 
incorporated as a part of this plan.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201710
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
Subchapter O. Administrative Procedures
28 TAC sec.11.1401, sec.11.1402
The State Board of Insurance of the Texas Department of Insurance proposes new 
sec.11.1401 and sec.11.1402, concerning the ability of the commissioner to 
require additional information, and the necessity for HMOs to provide an annual 
20-day period each calendar year during which providers and physicians may apply 
to participate in providing health care services or medical care. The new 
sections are necessary to amplify and clarify the requirements of the Texas 
Health Maintenance Organization Act, Texas Insurance Code, Chapter 20A, meet new 
statutory requirements, and provide for more effective regulation under such 
Act.
Joan Kennedy, director of insurance related activities, has determined that for 
the first five-year period the sections are in effect there will be no fiscal 
implications for state or local government, local employment, or local economy.
Ms. Kennedy also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
sections will be more effective regulation. The anticipated economic cost to 
persons who are required to comply with proposed sec.11.1402 is $25 to $35 per 
publication of the notice of the application period and approximately $50 for 
filing the required information with the HMO Unit, for each of the first five 
years the amendment is in effect. There will be no difference in costs between 
large and small businesses.
Comments on the proposal may be submitted to Joan Kennedy, Director of Insurance 
Related Activities Section, Mail Code 106-3A, Texas Department of Insurance, 333 
Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
The new sections are proposed under the Texas Insurance Code, Article 1.04, 
which provides the State Board of Insurance with the authority to determine 
policy and rules in accordance with the laws of this state; and under the Texas 
Insurance Code, Article 20A.22, which authorizes the board to promulgate rules 
to carry out the provisions of the Act.
sec.11.1401. Commissioner's Authority to Require Additional Information.  The 
commissioner may require additional information as needed to make any 
determination required by the Texas Insurance Code, Chapter 20A, or these rules.
sec.11.1402. Notification to Providers.
(a) A health maintenance organization that provides coverage for health care 
services or medical care through one or more providers or physicians is required 
by the provisions of Texas Insurance Code, Article 20A.14(h), to provide a 20 
calendar day period each calendar year during which any provider or physician in 
the geographic service area may apply to participate in providing health care 
services or medical care under the terms and conditions established by the 
health maintenance organization for the provision of such services and the 
designation of such providers and physicians. Article 20A.14(h) may not be 
construed to:
(1) require that a health maintenance organization utilize a particular type of 
provider or physician in its operation;
(2) require that a health maintenance organization accept a provider or 
physician of a category or type that does not meet the practice standards and 
qualifications established by the health maintenance organization; or
(3) require that a health maintenance organization contract directly with such 
providers or physicians. In order to effectively notify providers or physicians 
of the opportunity to apply to provide services, after January 1, 1992, an HMO 
which is covered by the Texas Insurance Code, Article 20A.14(h) must publish a 
notice of an application period to physicians and providers in the public notice 
section of at least one major newspaper with general circulation in each of its 
service areas. The notice must be published for five consecutive days during the 
period of January 2- January 23 of each calendar year and must include: this 
caption in bold type: Notice to Physicians and Providers; the name and address 
of the HMO; and what type of services the HMO provides; and the specific dates 
of the 20 day period during which physicians and providers may make application 
to be a participating physician or provider.
(b) A health maintenance organization must notify a physician or provider of 
acceptance or non-acceptance, in writing, no later than 90 days from receipt of 
an application for participation by that physician or provider.
(c) A health maintenance organization must file a copy of the published notice 
with the HMO Unit, for information, within 15 days of publication. The filing 
must include the following:
(1)  the name of the newspaper; and
(2) the beginning and ending date of the publication.
(d) During the year 1992, HMOs must publish a notice meeting the requirements of 
this section within 60 days of the effective date of this section, and file a 
copy of the notice with the HMO Unit in accordance with subsection (c) of this 
section and must comply with subsection (b) of this section.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201711
Linda K. von Quintus-Dorn
Chief Clerk
Texas Department of Insurance
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-6327
       
TITLE 34. PUBLIC FINANCE
Part I. Comptroller of Public Accounts
Chapter 7. Administration of State Lottery Act
Subchapter C. Practice and Procedure
34 TAC sec.sec.7.201-7.227
The Comptroller of Public Accounts proposes new sec.sec.7.201-7.227, concerning: 
intent and scope of rules; construction of rules; contested cases; 
representation and participation; initiation of a hearing; extensions of time; 
content of request for hearing; preliminary conferences; motion to dismiss 
petition or set for hearing; notice of setting; administrative law judge to hear 
case; filing of documents; continuances (postponement of hearings); conduct of 
hearing; rules of evidence; oral evidence, witnesses, and penalty for false 
statements; evidence by official notice; proposed decision; comptroller's 
decision; motion for rehearing; computation of time; service; discovery; joint 
hearings; dismissal of case; burden of proof; and definitions. The purpose of 
the rules is to: state the intent and scope of the rules; provide for the 
construction of the rules; define what constitutes a contested case under the 
State Lottery Act; declare policy regarding representation and participation in 
administrative hearings; set forth the procedures for initiating a hearing on 
the denial of an application, or the revocation or suspension of a license; 
state policy concerning extensions of time to make certain filings in an 
administrative proceeding; set forth the requirements for the contents of a 
request for hearing and to allow a party to amend his pleadings with permission 
of the administrative law judge, at any time before a comptroller's decision 
becomes final; state policy concerning a preliminary conference between the 
party and the agency; state policy concerning motions to dismiss or set for 
hearing, or to request an extended hearing; state policy regarding the notice of 
setting in an administrative hearing; state policy, concerning the 
administrative law judge's being designated to hear contested case; state policy 
concerning the filing of documents in contested cases; state policy concerning 
continuances; state policy concerning the conduct of a contested case hearing; 
state policy concerning the rules of evidence applied during contested case 
hearings; state policy concerning oral evidence, witnesses, and the penalty for 
false statements; state policy concerning official notice of contested cases 
taken of all nonprivileged records of the agency; state policy concerning the 
proposed decision in a contested case; state policy concerning the comptroller's 
decision in a contested case; state policy concerning the motion for rehearing 
in a contested case; state policy concerning the computation of time in 
contested case matters; state policy concerning service of documents in a 
contested case hearing; state policy concerning discovery procedures in a 
contested case proceeding; state policy concerning joint or consolidated 
hearings; state policy concerning dismissals of contested case proceedings; 
state policy concerning the burden of proof in contested case; and reflect the 
organizational structure at the comptroller's department as it relates to the 
State Lottery Act and defines terms used in the rules of practice and procedure 
from the comptroller's Lottery Division.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the sections are in effect there will be no significant revenue impact on 
state or local government as a result of enforcing or administering the 
sections. The sections are proposed under the State Lottery Act, sec.2.02, and 
do not require a statement of fiscal implications for small businesses.
Dr. Plaut also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be in allowing the comptroller to implement the lottery in a 
regulated and timely manner. There is no anticipated economic cost to persons 
who are required to comply with the proposed sections as proposed.
Comments on the new sections may be submitted to Nora Linares, Director, Lottery 
Division, 111 East 17th Street, Austin, Texas 78701.
The new sections are proposed under the State Lottery Act, sec.2.02, which 
provides the comptroller with the authority to adopt all rules necessary to 
administer the State Lottery Act.
sec.7.201. Intent and Scope of Rules. The rules of practice and procedure are 
intended to provide fair methods for hearing and resolving an applicant's or 
licensee's disagreement with certain official actions of the Comptroller of 
Public Accounts. These rules govern all contested case proceedings before the 
administrative law judges regarding the State Lottery Act.
sec.7.202. Construction of Rules. These rules will be given their most 
reasonable meaning taken in their total context, and will be construed to secure 
a just resolution or decision for every controversy. They will not be construed 
to limit or repeal rights afforded or requirements imposed by law. Unless 
otherwise expressly provided, the past, present, or future tense each includes 
the other; the masculine, feminine, or neuter gender each includes the other; 
and the singular and plural number each includes the other. Definitions of some 
of the words used in these rules are contained in sec.7.227 of this title 
(relating to Definitions).
sec.7.203. Contested Cases.
(a) A contested case is a proceeding in which the legal rights, duties, or 
privileges of an applicant or licensee are to be determined by the agency after 
an opportunity for adjudicative hearing. It includes a request for relief from 
actions initiated by the agency to deny, revoke, or suspend licenses 
administered by the agency regarding the state lottery with the exception of 
summary suspension proceedings described in subsection (b) of this section. 
Contested cases are within the jurisdiction of the administrative law judges.
(b) If the comptroller summarily suspends a license:
(1) the comptroller will notify the licensee in writing by registered or 
certified mail, return receipt requested, that the license has been summarily 
suspended and will state the reasons for the action. That notification shall 
also state the date, time, and place for a preliminary hearing on the summary 
suspension, which date shall not be later than 10 days after the date of the 
summary suspension, unless the parties agree to a later date;
(2) at the preliminary hearing, the licensee must show cause by a preponderance 
of the evidence why the license should not remain suspended pending a final 
hearing on the suspension or revocation of the license;
(3) the preliminary hearing will be held by the assigned administrative law 
judge and shall be governed by the principles of fundamental fairness. 
Preliminary hearings are not open to the public; and
(4) the final hearing will be held pursuant to the procedures for a contested 
case.
sec.7.204. Representation and Participation. A party may represent himself at 
any stage of a contested case or may be represented by an authorized 
representative, such as an attorney or other person of his choice. Hearings on 
contested cases are not open to the public. Any person desiring to observe or 
participate at any stage of a contested case who is not a party, not employed by 
a party, or not called as a witness, must obtain the permission of the assigned 
administrative law judge and the agreement of all parties.
sec.7.205. Initiation of a Hearing.
(a) Denial, suspension, or revocation of application.
(1) If the director of the Lottery Division determines that an applicant is not 
eligible for a license, he will notify the applicant, in writing, by personal 
service or by registered or certified mail, return receipt requested, that the 
application has been denied and will state the reasons for the denial. The 
applicant may, within 15 days of the date of the notice of denial, make a 
written request for a hearing to contest the denial. If the applicant does not 
request a hearing within 15 days of the date of the notice of denial, the 
hearing is waived and a final decision will be issued.
(2) The comptroller will notify the licensee in writing, by personal service or 
by registered or certified mail, return receipt requested, that the license will 
be suspended or revoked and will state the reasons for the action. The licensee 
may, within 15 days of the date of the notice of suspension or revocation, make 
a written request for a hearing to contest the action. If the licensee does not 
request a hearing within 15 days of the date of the notice of suspension or 
revocation, the hearing is waived and a final decision will be issued.
(b) Court reporters and transcripts.
(1) At such time as an applicant or licensee requests a hearing, he shall 
deposit with the comptroller an amount sufficient to cover the cost of the court 
reporter.
(2) In the event that the applicant or licensee or the agency determines to have 
a written transcript prepared by the court reporter, the applicant or licensee 
shall pay the cost of the original transcript as well as the cost of a copy for 
the agency.
sec.7.206. Extensions of Time.
(a) Motions for extension of the due date for submitting a request for hearing 
on the denial of an application or on the proposed suspension or revocation of a 
license may be granted in case of emergency or extraordinary circumstances. 
Motions for extension will not be routinely granted and each request will be 
closely scrutinized to insure that the applicant or licensee has made every 
effort to comply with the original deadline. Motions filed after the expiration 
of the original due date will not be considered. Motions must be directed to the 
chief administrative law judge or his designee, who will grant or deny the 
motion.
(b) A motion for an extension of any other deadline in these sections will not 
be granted unless good cause is established and the need for the extension is 
not due to the party's neglect, indifference, or lack of diligence. A motion 
must be made in writing at least seven days prior to the expiration of the time 
period. In the event of an emergency, a motion may be accepted if it is 
postmarked, sent by facsimile transmission, or deposited with a private mail or 
courier service, postage or delivery charges paid, not later than the date of 
the original deadline.
sec.7.207. Content of Request for Hearing.
(a) A request for hearing must contain the reasons the applicant or licensee 
disagrees with the action of the agency. The applicant or licensee must list and 
number the items, individually or by category, with which he disagrees, and list 
and number the factual and legal grounds why the action of the agency should be 
reversed. Legal authority must be cited if the applicant or licensee disagrees 
with the agency's interpretation of the law.
(b) Evidence regarding issues raised in the request for hearing may be obtained 
through:
(1) a preliminary conference; and
(2) discovery as discussed in these rules.
(c)  Time limits on discovery or preliminary conferences will be set by the 
assigned administrative law judge if the parties cannot reach agreement.
(d) A request for hearing may be amended up to the time that the hearing date is 
set, and not later, unless by permission of the assigned administrative law 
judge, and unless all evidence upon which the applicant or licensee intends to 
rely and which was not previously filed is filed with the amended request for 
hearing.
sec.7.208. Preliminary Conference. <ol> If both the applicant or licensee and 
the agency agree a preliminary conference would be beneficial, a conference will 
be scheduled as soon as is practical.
sec.7.209. Motion to Dismiss; Request for Extended Hearing.
(a)  The agency may move to dismiss the hearing on the ground that the request 
for hearing was not timely filed or on the ground that it did not comply with 
the requirements of the sections of this subchapter.
(b) An applicant or licensee that believes it will require more than two hours 
for a hearing must file a written request for an extended hearing at the time 
the request for hearing is filed, and state the reasons why more time will be 
required; however, any party may later request an extended hearing for good 
cause shown.
sec.7.210. Notice of Setting. Upon receipt of a timely and sufficient request 
for hearing, the assigned administrative law judge will send a notice to the 
parties giving:
(1) the date, time, place, and nature of the oral hearing;
(2) the legal authority and jurisdiction under which the hearing is to be held;
(3) a reference to the particular statutes and rules involved;
(4) a short, plain statement of the matters asserted; and
(5) upon request, briefing and evidentiary prefiling dates, and other 
appropriate orders.
sec.7.211. Administrative Law Judge to Hear Case.  Hearings will be conducted by 
an assigned administrative law judge who has authority to examine witnesses, to 
rule on motions, and to rule upon the admissibility of evidence. The 
administrative law judge has the authority to continue or recess any hearing, to 
control the record, and to propose decisions to the Comptroller of Public 
Accounts. If for any reason the assigned administrative law judge cannot 
continue on a contested case, another administrative law judge will become 
familiar with the record and perform any function remaining to be performed 
without the necessity of repeating any previous proceedings in the case.
sec.7.212. Filing of Documents. All documents submitted after the notice of 
setting has been issued must be filed with the assigned administrative law judge 
with a copy to each party. In addition to any other order by the assigned 
administrative law judge, the time limit for filing documents with the 
administrative law judge and an opposing party shall be not later than 10 days 
prior to the hearing.
sec.7.213. Continuances (Postponement of Hearing). A motion for continuance of a 
contested case set for oral hearing must be in writing and filed with the 
assigned administrative law judge at least seven days prior to the date that the 
matter is to be heard. If an emergency occurs less than seven days prior to the 
hearing date, a motion for continuance may be filed. The motion must show that 
there is good cause for the continuance and that the need is not caused by 
neglect, indifference, or lack of diligence. A copy of the motion must be served 
upon all other parties of record at the time of filing.
sec.7.214. Conduct of Hearing. The hearing will be convened by the assigned 
administrative law judge, appearances will be noted, any motions or preliminary 
matters will be taken up, and then each party will have the opportunity to 
present its case, generally on an issue-by-issue basis, by calling and examining 
witnesses, offering documentary evidence, and making legal arguments. Each party 
will have the opportunity to cross-examine opposing witnesses on any matter 
relevant to the issues even though the matter was not covered in direct 
examination. Any objection to testimony or evidentiary offers must be stated 
timely, along with the basis for the objection. The administrative law judge may 
question any party or any witness. The parties may agree to the order of 
proceeding or the administrative law judge may establish it, but in all cases, 
an applicant or licensee is entitled to conclude in presenting evidence and 
argument. The length of each hearing is limited to two hours; each party may use 
one hour to present its case. Upon a showing of good cause, the administrative 
law judge may schedule a hearing for a period longer than two hours. The 
administrative law judge is responsible for closing the record and may hold it 
open for stated purposes. Parties may submit proposed findings of fact and 
conclusions of law at any time after notice of setting and prior to the closing 
of the record. In an oral hearing, the administrative law judge may hold the 
record open to allow the parties to file proposed findings of fact and 
conclusions of law.
sec.7.215. Rules of Evidence. The Rules of Evidence promulgated by the Supreme 
Court of Texas apply to all oral hearings, except as provided by Texas Civil 
Statutes, Article 6252-13a, Administrative Procedure and Texas Register Act, 
sec.14.
sec.7.216. Oral Evidence, Witnesses, and Penalty for False Statements.  Any 
party may request the assigned administrative law judge to subpoena witnesses or 
require the production of documents related to the subject matter of the 
hearing, or the administrative law judge may do so independently. The 
administrative law judge may require the parties to indicate the persons they 
expect to call as witnesses. The testimony of witnesses will be made under oath 
or affirmation and the making of false statements may subject a person to 
criminal prosecution under the Texas Penal Code.
sec.7.217. Evidence by Official Notice. The assigned administrative law judge 
may take official notice, on request of a party or acting independently, of 
matters which trial judges can judicially notice and of facts within the 
specialized knowledge of the agency. The taking of official notice must be 
stated on the record, and the parties must have an opportunity to contest the 
material noticed. A party requesting the official notice must give sufficient 
information to enable the administrative law judge to comply.
sec.7.218. Proposed Decision. <ol> The assigned administrative law judge will 
prepare a proposed decision within 30 days after the record is closed. The 
proposed decision will set out each finding of fact and conclusion of law 
necessary to the decision. The proposed decision will be served on the parties, 
and any party may file exceptions and briefs within 15 days, serving copies on 
all parties. If a party files exceptions, the other parties will have 15 days 
after the filing to reply. The proposed decision will be reviewed after 
considering the exceptions, briefs, and replies.
sec.7.219. Comptroller's Decision. <ol> The proposed decision of the assigned 
administrative law judge must be approved by the Comptroller of Public Accounts 
before it is given effect. The comptroller's decision will be sent to the 
applicant or licensee and any authorized representative. It is final 20 days 
from the date mailed, unless a motion for rehearing is filed on or before 
midnight of the 20th day. If the motion for rehearing is granted, the decision 
is vacated pending a subsequent decision upon rehearing. If the motion for 
rehearing is overruled, whether by order or operation of law, the decision is 
final on the date it is overruled.
sec.7.220. Motion for Rehearing. A motion for rehearing may be filed by any 
party with the assigned administrative law judge within 20 days from the date 
the comptroller's decision is mailed. The motion must state each specific ground 
upon which the party believes the comptroller's decision is erroneous. Any reply 
to a motion for rehearing must be filed within 30 days after the date the 
decision is mailed. The motion will be acted on within 45 days after the date 
the decision is mailed, or the motion will be overruled by operation of law. 
These times may be varied as provided by Texas Civil Statutes, Article 6252-13a, 
Administrative Procedure and Texas Register Act, 16(e) and (f) . If a rehearing 
is granted, a notice will be issued to the parties setting out all pertinent 
information.
sec.7.221. Computation of Time. In computing any period of time prescribed or 
allowed by these rules, by order of the assigned administrative law judge, or by 
any applicable statute, the period begins on the day after the act, event, or 
default identified and concludes on the last day of the computed period, unless 
it is a Saturday, Sunday, or legal holiday, in which event the period runs until 
the end of the next day which is neither a Saturday, Sunday, nor a legal 
holiday. Documents required to be filed or served are considered filed or served 
when actually received or are deemed filed or served when deposited with the 
United States Postal Service or private mail service, postage or delivery 
charges paid, or sent by facsimile transmission. The postmark, shipping, or 
transmission date indicated on a document is presumed to be the date of service, 
but this is a rebuttable presumption.
sec.7.222. Service.  Any document required to be served on other parties may be 
served by personal delivery or by mailing the document addressed to the party or 
the authorized representative at the last known address, postage paid. Facsimile 
transmission is acceptable. The document must indicate on its face that copies 
have been served on parties of record. Filings with the administrative law 
judges may be made by facsimile transmission, personal delivery, or public or 
private mail service.
sec.7.223. Discovery.
(a) Discovery. Texas Civil Statutes, Article 6252-13a, Administrative Procedure 
and Texas Register Act, as amended, applies to matters of discovery.
(b) Scope of discovery. Except for the exemptions from discovery provided in 
Texas Rules of Civil Procedure, Rule 166b(3), unless further limited by order of 
the assigned administrative law judge, the scope of discovery is as follows: 
parties may obtain discovery regarding any non-confidential matter relevant to 
the subject matter in the pending action.
(c) Protective orders. Texas Rules of Civil Procedure, Rule 166b(5), is 
incorporated herein for the protection of the party from whom discovery is 
sought under this section.
(d) Objections. On or prior to the date on which a response to a discovery 
request is due, a party may serve written objections to a specific request or 
portions thereof. Objections served after the date on which the response to a 
discovery request is due are waived unless an extension of time has been 
obtained by agreement or order of the assigned administrative law judge for good 
cause shown for failure to object within such period; however, objections by the 
comptroller to discovery requests requiring the disclosure of confidential 
information cannot be waived. Responses only to those discovery requests or 
portions thereof to which objection is made are deferred until the objections 
are ruled upon, and for such additional time thereafter as the administrative 
law judge may direct. Either party may request a hearing on objections at the 
earliest possible time.
(e)  Interrogatories to parties. Any party may serve upon any other party 
written interrogatories to be answered by the party served, or, if the party 
served is a public or private corporation or partnership or association, by an 
officer or agent who must furnish such information as is available to the party. 
Interrogatories may be served at any time after filing of a request for hearing. 
Interrogatories served upon the comptroller may be answered by his designee.
(1) Interrogatories and answers to interrogatories. Service of interrogatories 
and answers to interrogatories must be made on and by the authorized 
representative of a party unless service upon the party is ordered by the 
administrative law judge.
(2) Time to answer. The party upon whom the interrogatories have been served 
must serve answers on the party submitting the interrogatories within 30 days 
after the service of the interrogatories, unless the parties agree in writing to 
a longer or shorter period of time. The administrative law judge, on a showing 
of good cause, may lengthen or shorten the time for serving answers or 
objections.
(3) Number of interrogatories. The number of questions including subsections in 
a set of interrogatories must not require more than 30 answers. No more than two 
sets of interrogatories may be served by a party, except by order of the 
assigned administrative law judge. Interrogatories must be answered separately 
and fully in writing under oath. Answers to interrogatories must be preceded by 
the questions or interrogatories to which the answer pertains. Copies of the 
interrogatories, and answers and objections thereto, must be served on all 
parties or their representatives. The answers must be signed and verified by the 
person making them.
(f) Subpoenas, depositions, and orders to allow entry. The assigned 
administrative law judge, acting independently or on motion by any party, may:
(1) subpoena any person to appear and testify and to produce certain documents 
or other tangible items at an oral hearing;
(2)  commission the taking of an oral deposition in the witness' county of 
residence or county where the witness does business and require production of 
certain documents or other tangible items at the time of deposition; and
(3) order any party to allow entry upon property under the party's control for 
the purpose of doing any act or making any inspection not protected by privilege 
and reasonably calculated to lead to the discovery of evidence material to the 
contested case.
sec.7.224. Joint Hearings. <ol> An applicant or licensee may file a written 
motion to have two or more cases involving only that person joined for purposes 
of hearing; or the assigned administrative law judge, acting independently, may 
join two or more such cases.
sec.7.225. Dismissal of Case.
(a) If a motion to dismiss is filed upon agreement between the applicant or 
licensee and the agency, or upon the applicant's or licensee's decision to 
abandon the case, a decision will be issued that conforms with such disposition.
(b) The Lottery Division may move to dismiss a case based upon agreement reached 
between the applicant or licensee and the agency or for want of prosecution. The 
motion must be served on the applicant or licensee and its authorized 
representatives at its last address of record. If there is no reply from the 
applicant or licensee to the Lottery Division's motion to dismiss within 15 
days, a decision will be issued denying the relief sought by the applicant or 
licensee.
(c) All motions to dismiss that are based upon a representation that both 
parties have agreed to dismiss a contested case on the basis that all issues 
have been settled, shall be in writing and signed by both parties or their 
authorized representatives.
sec.7.226. Burden of Proof. In all contested cases, not including preliminary 
hearings described in sec.7.205 of this title (relating to Initiation of a 
Hearing), the agency has the burden of proving a prima facie case; the burden of 
proof then shifts to the applicant or licensee, with the standard of proof being 
by a preponderance of the evidence.
sec.7.227. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
 Administrative law judge-An individual appointed by the comptroller to conduct 
hearings on matters within the comptroller's jurisdiction and to prepare 
proposed decisions to properly resolve such matters.
 Agency-The Office of the Comptroller of Public Accounts.
 Applicant-A party seeking a lottery license.
 Authorized representative -An individual who represents a party in a contested 
case or in a preliminary hearing, and may be any individual other than the 
party.
 Hearings attorney -An attorney assigned to represent the lottery division in a 
contested case or a preliminary hearing.
 License-The whole or any part of a license, permit, certificate, approval, 
registration, or similar form of permission, the issuance, renewal, amendment, 
suspension, or revocation of which is within the jurisdiction of the agency, 
regarding the operation of the lottery.
 Licensee-A person who has been issued a license by the lottery division.
 Licensing-The agency process respecting the granting, denial, renewal, 
revocation, suspension, annulment, withdrawal, or amendment of a license.
 Lottery division -The division within the agency responsible for the operation 
of the lottery.
 Party-Any person who has filed a request for hearing, or the lottery division 
of the Comptroller's Office.
 Person-Any individual, partnership, corporation, association, governmental 
subdivision, or public or private organization of any character. It may also 
include an estate, trust, receiver, assignee for benefit of creditors, trustee, 
trustee in bankruptcy, assignee, or any other group or combination acting as a 
unit.
 Pleading-Any document filed by a party concerning the position or assertions in 
a contested case or preliminary hearing.
 Request for hearing-A request by an applicant or licensee for official action 
by the agency regarding the denial, revocation, or suspension of its license 
under the lottery laws of this state.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201636
Charles Johnstone
Senior Legal Counsel, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
Chapter 9. Property Tax Administration
Subchapter C. Appraisal District Administration
34 TAC sec.9.401
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.401, concerning the 
application form for a charitable organization property tax exemption. The new 
section is necessary because the 72nd Legislature, 1991, First Called Session, 
added a new function to the type of charitable activities that may qualify for 
the exemption. In addition, the legislature transferred responsibility for 
adopting property tax rules to the comptroller, effective November 24, 1991. The 
new section establishes requirements for the contents of a charitable 
organization property tax exemption application form and adopts by reference a 
model application form.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no significant revenue impact on 
the state or local government as a result of enforcing or administering the 
section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect there would be no significant public cost or benefit. There 
will be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.11.43 and sec.11.44, which 
provides the comptroller with the authority to prescribe the contents of 
property tax exemption applications and contents of the notice of exemption 
requirements.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201627
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.9.402
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.402, concerning the 
application forms for special use appraisals. The new section is necessary 
because the 72nd Legislature, 1991, First Called Session, added a new use to the 
types of uses that qualify as an agricultural use of land. In addition, the 
legislature transferred responsibility for adopting property tax rules to the 
comptroller, effective November 24, 1991. The new section adopts by reference a 
model application for each available special use appraisal.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.11.43 and sec.11.44, which 
provides the comptroller with the authority to prescribe the contents of the 
property tax exemption applications and contents of the notice of exemption 
requirements.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201629
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.9.403
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.403, concerning 
application forms for miscellaneous property tax exemptions. The new section is 
necessary because the 72nd Legislature, 1991, First Called Session, created 
three new property tax exemptions. In addition, the legislature transferred 
responsibility for adopting property tax rules to the comptroller, effective 
November 24, 1991. The new section establishes general requirements for 
miscellaneous property tax exemption forms and adopts 11 property tax exemption 
application forms by reference.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be no significant public cost or benefit. There will be no effect 
on small businesses. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.11.43 and sec.11.44, which 
provides the comptroller with the authority to prescribe the contents of each 
exemption application form and the notice of exemption application requirements.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201631
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.9.404
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.404, concerning the 
application form for a property tax exemption for goods exported from Texas. The 
new section is necessary because the 72nd Legislature, 1991, First Called 
Session, changed the qualification requirements for the exemption. In addition, 
the legislature, transferred responsibility for adopting property tax rules to 
the comptroller, effective November 24, 1991. The new section prescribes the 
contents of the application form for exemption of goods exported from Texas, and 
adopts the form by reference.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.11.43 and sec.11.44, which 
provides the comptroller with the authority to prescribe the contents of each 
property tax exemption form and the notice of exemption requirements.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201633
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.9.405
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.405, concerning the 
application form for a residence homestead property tax exemption. The new 
section is necessary because the 72nd Legislature, 1991, First Called Session, 
transferred responsibility for adopting property tax rules to the comptroller, 
effective November 24, 1991. The new section establishes requirements for the 
contents of a residence homestead property tax exemption application form and 
adopts by reference a model application form.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the proposed section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.11.43 and sec.11.44, which 
provides the comptroller with the authority to prescribe the contents of 
property tax exemption applications and contents of the notice of exemption 
requirements.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201635
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
Subchapter D. Appraisal Review Board
34 TAC sec.9.801
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.801, concerning property 
tax receipts. The new section is necessary because the 72nd Legislature, 1991, 
First Called Session, added elements of information required on a notice of 
protest form. In addition, the legislature transferred responsibility for 
adopting property tax rules to the comptroller, effective November 24, 1991. The 
new section establishes requirements for a notice of protest form, including a 
provision giving the property owner an opportunity to request a copy of the 
appraisal review board's hearing procedures.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.5.07, which provides the 
comptroller with the authority to prescribe the contents of all forms necessary 
for the administration of the property tax system, and sec.41.44, which provides 
the comptroller with the authority to prescribe the contents of a form for 
notice of protest.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201623
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
34 TAC sec.9.802
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.802, concerning the 
affidavit to be signed by an appraisal review member hearing a property owner's 
protest. The new section is necessary because the 72nd Legislature, 1991, First 
Called Session, required this affidavit of appraisal review board members. In 
addition, the legislature transferred responsibility for adopting property tax 
rules to the comptroller, effective November 24, 1991. The new section 
prescribes the contents of the appraisal review board member's affidavit stating 
that the member has not communicated with another person concerning the property 
under protest or any matter related to the property owner's protest.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.5.07, which provides the 
comptroller with the authority to prescribe the contents of all forms necessary 
for the administration of the property tax system.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201625
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
Subchapter E. Tax Office Administration
34 TAC sec.9.1001
(Editor's Note: The Comptroller of Public Accounts proposes for permanent 
adoption the new section it adopts on an emergency basis in this issue. The text 
of the new section is in the Emergency Rules section of this issue.)
The Comptroller of Public Accounts proposes new sec.9.1001, concerning property 
tax receipts. The new section is necessary because the 72nd Legislature, 1991, 
First Called Session, added two elements of information required on a property 
tax receipt. In addition, the legislature transferred responsibility for 
adopting property tax rules to the comptroller, effective November 24, 1991. The 
new section establishes requirements for current and delinquent property tax 
receipts, including a provision requirement that the receipt show the tax rate 
and taxable value for the property for each year for which the receipt is 
requested.
Tom Plaut, chief revenue estimator, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section.
Dr. Plaut also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be in providing new information regarding tax responsibilities. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Barbara Truesdale, Manager, 
Property Tax Division, 4301 Westbank Drive, Austin, Texas 78746-6565.
The new section is proposed under the Tax Code, sec.31.075, which provides the 
comptroller with the authority to prescribe the description of property required 
on a property tax receipt.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 3, 1992.
TRD-9201620
Martin Cherry
Chief, General Law Section
Comptroller of Public Accounts
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 463-4028
       
Part V. Texas County and District Retirement System
Chapter 105. Creditable Service
34 TAC sec.105.3
The Texas County and District Retirement System (System) proposes an amendment 
to sec.105.3, concerning definition of periods of "organized conflict or 
crisis." The amendment would add August 2, 1990-March 31, 1992 to the other 
periods during which military service is recognized as having been performed in 
a time of organized conflict or crisis.
J. Robert Brown, director of the system, has determined that for the first five-
year period the section is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the section.
Mr. Brown also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the section will be the recognition by the System of military service during the 
Persian Gulf Crisis for satisfaction of length-of-service requirements. There 
will be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to J. Robert Brown, Director, Texas 
County and District Retirement System, 400 West 14th Street, Austin, Texas 
78701.
The amendment is proposed under the Texas Government Code, sec.845.102, which 
provides the board of trustees of the Texas County and District Retirement 
System with the authority to adopt rules necessary or desirable for effective 
administration of the system.
sec.105.3. Definition of Periods of "Organized Conflict or Crisis. " Military 
service performed between April 6, 1917, and November 11, 1919, <nl>and<ol> [or] 
between October 16, 1940, and October 31, 1974, <nl>and between August 2, 1990, 
and March 31, 1992,<ol> shall be recognized as military service performed during 
periods of organized conflict or crisis within the meaning of <nl>the Texas 
Government Code, sec.843.601<ol> [Acts 1975, 64th Legislature, Chapter 239].
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201724
J. Robert Brown
Director
Texas County and District Retirement System
Earliest possible date of adoption: March 13, 1992
For further information, please call: (512) 476-6651
       
TITLE 40. SOCIAL SERVICES AND ASSISTANCE
Part I. Texas Department of Human Services
Chapter 29. Purchased Health Services
Subchapter D. Medicaid Home Health Program
40 TAC sec.29. 304, sec.29.306
The Texas Department of Human Services (DHS) proposes amendments to sec.29. 304 
and sec.29.306, concerning limitations on home health services and program 
exclusions in its Purchased Health Services rule chapter. The purpose of the 
amendments is to allow the Medicaid program to reimburse home health agencies 
for medically necessary physical therapy services provided in the home. The 
amendments were mandated by the Texas Legislature in its last session.
Services must be ordered by a physician and included in the patient's plan of 
care. Physical therapy benefits are available only for treatment of acute 
musculoskeletal or neuromuscular conditions or acute exacerbations of chronic 
musculoskeletal or neuromuscular conditions. All physical therapy services 
provided through a home health agency must be prior authorized before payment 
can be made to the home health agency for these services. These services are 
covered under the Purchased Health Services insured arrangement, and current 
premium amounts are sufficient to cover the additional costs.
Burton F. Raiford, interim commissioner, has determined that for the first five-
year period the proposed sections are in effect there will be fiscal 
implications as a result of enforcing or administering the sections. The effect 
on state government for the first five-year period the sections will be in 
effect is an estimated additional cost of $335,743 for fiscal year 1992; $707, 
046 for fiscal year 1993; $720,757 for fiscal year 1994; $723,937 for fiscal 
year 1995; and $722,943 for fiscal year 1996. There will be no fiscal 
implications for local government or small businesses as a result of enforcing 
or administering the sections.
Mr. Raiford also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be that home health patients will have access to physical 
therapy services through the home health agency. Previously, to obtain physical 
therapy services, patients had to leave the home and obtain care through a 
physician's office, physical therapist's office, or hospital. There is no 
anticipated economic cost to persons who are required to comply with the 
proposed amendments.
Questions about the content of the proposal may be directed to Penny Kendall at 
(512) 338-6521 in DHS's Purchased Health Services Section. Comments on the 
proposal may be submitted to Nancy Murphy, Agency Liaison, Policy and Document 
Support-026, Texas Department of Human Services E-503, P.O. Box 149030, Austin, 
Texas 78714-9030, within 30 days of publication in the Texas Register.
The amendments are proposed under the Human Resources Code, Title 2, Chapters 22 
and 32, which provides the department with the authority to administer public 
and medical assistance programs.
sec.29.304. Limitations on Home Health Services. Home health services are 
limited to:
(1)-(7) (No change.)
<nl>(8)  services by a licensed physical therapist or physical therapist 
assistant under the direction of a licensed physical therapist.
(A) To be payable as a home health benefit, services must be:
<nl>(i)<nl> medically necessary;
<nl>(ii)<nl> ordered by the physician;
<nl>(iii) <nl> included in the physician's plan of care;
<nl>(iv)<nl> for the treatment of an acute musculoskeletal or neuromuscular 
condition or an acute exacerbation of a chronic musculoskeletal or neuromuscular 
condition; and
<nl>(v)<nl> expected to significantly improve the patient's condition in a 
reasonable and generally predictable period of time, based on the physician's 
assessment of the patient's restorative potential after any needed consultation 
with the therapist.
<nl>(B) Benefits are not provided when the patient has reached the maximum level 
of improvement. Repetitive services designed to maintain function once the 
maximum level of improvement has been reached are not a benefit. Services 
related to activities for the general good and welfare of patients such as 
general exercises to promote overall fitness and flexibility and activities to 
provide diversion or general motivation are not reimbursable under the Texas 
Medical Assistance Program. To receive Medicaid payment for physical therapy 
through a home health agency, the client must meet all other requirements for 
receipt of home health services.
sec.29.306. Program Exclusions. <ol>Program benefits do not include payment for:
(1)-(2) (No change.)
(3) speech [and physical] therapy.
(4)-(11) (No change.)
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201755
Nancy Murphy
Agency liaison, Policy and Document Support
Texas Department of Human Services
Proposed date of adoption: April 1, 1992
For further information, please call: (512) 450-3765
       
Chapter 72. Memoranda of Understanding with Other State Agencies
Memorandum of Agreement Concerning the Texas Department on Aging Options for 
Independent Living Program
40 TAC sec.72.2001
The Texas Department of Human Services (DHS) proposes an amendment to sec.72. 
2001, concerning Memorandum of Agreement Concerning the Texas Department on 
Aging (TDoA) Options for Independent Living Program, in its Memoranda of 
Understanding with Other State Agencies chapter. The purpose of the amendment is 
to renew the memorandum of agreement that concerns TDoA's Options for 
Independent Living Program.
Burton F. Raiford, interim commissioner, has determined that for the first five-
year period the section is in effect there will be no fiscal implications for 
state or local government as a result of enforcing or administering the section.
Mr. Raiford also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be improved coordination of services and less duplication of 
effort. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the proposed section.
Questions about the content of this proposal may be directed to Jim Essler at 
(512) 450-3223 in DHS's Long Term Care Department. Comments on the proposal may 
be submitted to Nancy Murphy, Policy and Document Support-030, Texas Department 
of Human Services E-503, P.O. Box 149030, Austin, Texas 78714-9030, within 30 
days of publication in the Texas Register .
The amendment is proposed under the Human Resources Code, Title 2, Chapters 22 
and 32, which authorizes the department to administer public and medical 
assistance programs.
sec.72.2001. Memorandum of Agreement with the Texas Department on Aging.
(a) Introduction and purpose.
(1) The Texas Department on Aging's "Options for Independent Living" (Options) 
Program was established by the 71st Legislature, with enactment of Senate Bill 
482<nl>, amended by Senate Bill 1249 in the 72nd Legislature<ol>. Its purpose is 
to help elderly persons remain at home despite limited self-care capacities,<nl> 
and to prevent institutionalization, <ol>through provision of short-term support 
services for the purposes of: restoring functional capacities after illness or 
hospitalization; and educating and preparing elderly persons and their 
caregivers to provide self-care.
(2) Through <nl>House Bill 1 (the Appropriations Act of 1992-1993 <ol>[Senate 
Bill 222 (the Appropriations Act of Fiscal Year 1990-1991)], the <nl>72nd 
<ol>[71st] Legislature appropriated general revenue funds to The Texas 
Department on Aging (TDoA) for the options program and, in Rider 8, stated that: 
"It is the intent of the legislature that, in establishing the Options for 
Independent Living Program, the Texas Department on Aging will complete a 
memorandum of agreement with the Texas Department of Human Services (DHS) which 
specifies that there will be no duplication of services to elderly clients 
served by the 'Options' program and elderly clients served by the Texas 
Department of Human Services."
(3) In accordance with the requirements of the Appropriations Act of Fiscal Year 
<nl>1992-1993 <ol>[1990-1991], enacted by the <nl>72nd <ol>[71st] Legislature 
and signed by the governor, the Texas Department of Human Services and the Texas 
Department on Aging hereby enter into this memorandum of agreement, concerning 
TDoA's Options for Independent Living Program.
(b) Location of options projects and services provided.
(1) The terms of this memorandum of agreement shall apply in those areas of the 
state in which TDoA, through area agencies on aging (AAAs), has established 
options projects. In Fiscal Year <nl>1992-1993 <ol>[1990-1991], Options projects 
are located within, and serve one or more counties within, the service areas of 
the following AAAs: Alamo, Central Texas, Concho Valley, [Deep East Texas,] East 
Texas, [Harris County,] Houston-Galveston, Lower Rio Grande Valley, North 
Central Texas,  <nl>North Texas, <ol>Panhandle, South East Texas, South Plains, 
[Tarrant County,] and Texoma. This agreement will apply to any additional 
Options Projects established by TDoA in FY <nl>1992-1993 <ol>[1990-1991].
(2) Each options project is responsible for providing or arranging for the 
following services: case management, homemaker (including personal care), 
residential repair <nl>and <ol>[/] home modification, benefits counseling, 
respite care, emergency response, education and training for caregivers, home- 
delivered meals, [and] transportation <nl>, and other available public and 
private services appropriate to the elderly person's needs identified by the 
case manager and client through the assessment and care planning process <ol>.
(c) Persons to be served through options. As stated in 40 TAC sec.292.7, 
services of the Options program will be available to persons age 60 and over 
[whose income or resources disqualify them for entitlement programs, yet are 
insufficient to purchase needed support services]. Priority will be given to 
those who:
(1) have recently suffered a major illness or health care crisis or have 
recently been hospitalized;
(2) live in rural areas;
(3) have insufficient caregiver support; [and]
(4) have a mild to moderate impairment or a temporary severe impairment<nl>; and  
<ol>[.]
<nl>(5) are in great economic or social need, with particular attention to low-
income minority older persons.
(d)-(e) (No change.)
(f) Effective date and duration of agreement. This memorandum of agreement shall 
be effective upon approval by the Board of the Texas Department of Human 
Services and the Texas Board on Aging, and will remain in effect through August 
31, <nl>1993 <ol>[1991].
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on February 4, 1992.
TRD-9201756
Nancy Murphy
Agency liaison, Policy and Document Support
Texas Department of Human Services
Proposed date of adoption: April 15, 1992
For further information, please call: (512) 450-3765