ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 3. Life, Accident and Health Insurance and Annuities Subchapter X. Preferred Provider Plans 28 TAC sec.sec.3.3702, 3.3704, 3.3705 The Commissioner of Insurance adopts amendments to sec. sec.3.3702, 3.3704, and 3.3705, concerning health insurance policies that incorporate preferred provider plans. Section 3.3704 is adopted with changes to the proposed text as published in the December 15, 1995 issue of the Texas Register (20 TexReg 10740). Sections 3.3702 and 3.3705 are adopted without changes and will not be republished. These amendments are adopted to further address the Governor's directive that the Commissioner of Insurance enact rules to maintain quality of health care for all Texans at affordable prices and to establish procedures for fairness to health care providers. These amendments are based on a review of complaints concerning managed care plans and formal and informal public comment received by the department during the drafting and comment period for the amendments to this chapter adopted November 15, 1995. Protection of patients in the rapidly changing health care marketplace requires these updated regulations. These amendments are necessary to assist consumers in making informed choices among health care plans; to assure that consumers receive the type and extent of coverage they contracted for at the contracted-for price; and to assist the department in evaluating quality and costs of health care. The agency has deleted the proposed amendments to paragraph (6) of sec.3.3703 and paragraph (14) of sec.3.3704 and made changes to sec.3.3704(6). The agency's response to comments, including the specific changes to the sections and reasoned justification for the changes, are addressed in the paragraphs that follow. Amended sec.3.3702 adds a definition of "contract holder" because that term is used throughout the text of these sections. Amendments to sec.3.3704 enhance freedom of choice for the insured and assure that consumers receive the benefits they contracted for by clarifying that if covered services are not available through a preferred provider, the insurer will pay for services by a non- preferred provider at the preferred provider level of benefits. Section 3. 3705, as amended, requires that preferred provider contracts include an agreement by the preferred provider not to seek additional compensation for covered services from the insured patient. Several commenters support the sections in general and recommend adoption of the proposal with suggested changes. Some commenters believe the sections promote access to quality health care at an affordable price and address some of the problems experienced in managed care environments. Agency Response: The agency appreciates the comments received and the information provided at the hearing. The agency intends for these sections to promote accessibility and affordability of managed care and protect patients in the continually changing health care market. Section 3.3703(6). Several commenters support the filing of advertising as a necessary protection for consumers and believe it will assist consumers in making informed choices. A commenter believes the proposal will alleviate the problem created by some managed care organizations which have advertised plans using names of providers which are not under contract to that plan. A commenter states that the rule does not address the time frame in which the department will review the advertising. Some commenters recommend that the advertising be filed earlier than ten days before use. Several commenters oppose this provision as an unnecessary burden on insurers and the department and believe that the additional administrative requirements caused by this provision would increase costs to consumers. These commenters don't believe that the advertising filing requirement enhances effective regulation in the area and believe the provision is of little value. A commenter believes that the ten days requirement could limit employers and consumers access to preferred provider plans and would create difficulties not only for insurers but also for the potential customers. Some commenters argue that TDI has no statutory authority to require preferred provider plans to file advertising. Agency Response: The agency believes that it has statutory authority to require filing of advertising and initially proposed the paragraph to parallel the requirement for HMOs. The agency agrees with some commenters that requiring filing of all insurance advertising which contain PPO benefits would be burdensome for insurers and the agency and may not be the best way to prevent misleading and deceptive advertising at this time. Based on the comments received, concern that this provision may increase costs to consumers and delay access to insurance contracts with preferred provider plans by consumers as well as a review of the advertising for preferred provider plans, the agency has withdrawn sec.3.3703(6) from the adoption. The Medicare supplement advertising that would be used by indemnity carriers is required to be submitted and the agency already reviews this information. The agency has determined that advertisements promoting insured PPO products have not generated consumer complaints to date, nor has review of advertising by the agency indicated any serious problem with insured preferred provider plans. Any individual problems can be handled through enforcement of current rules and the Insurance Code, Article 21.21. The agency will consider further rulemaking if misleading advertising for insured preferred provider plans becomes a problem or clarification of prohibited advertising practices for insured preferred provider plans becomes necessary. Section 3.3704(6). Many commenters support consumer access to out-of-network providers when covered services are not available through preferred providers. A commenter suggests including language that ensures the covered individual does not incur additional costs for covered services which are not available through the preferred provider and are provided by an out-of-network provider. Some expressed concern that it applies only to covered necessary services and that non-preferred providers be allowed to decline to provide services if they do not wish to accept the compensation offered by the plan. Other commenters suggest that the paragraph provide for payment of non-preferred providers at the preferred provider level only if the provider agrees to accept the insurer payment as payment in full. A commenter suggests that the paragraph could encourage some providers to not participate in preferred provider plans and would require payment of the providers at the non-contracting provider's billed charges rather than the preferred provider rate and create a financial burden not only to the insurer but also to the insured whose coinsurance amount would be based on billed charges. Another commenter objects to this provision as being so broad that it would require reimbursement at a preferred provider level for non-preferred providers seen by an insured who has moved out of the plan service area and suggests modifying the paragraph to limit the application of referrals by preferred providers for specialized health care services to the situations where the specialized services cannot be obtained from another preferred provider. A commenter believes that the freedom of choice language is confusing and difficult to understand and suggests clarification that freedom of choice is an option. Agency Response: The essence of this provision, that all covered services must be reasonably available to the insured through the plan at the preferred provider level of benefits, is already in the rule. The amendment clarifies that if an insured must use a provider other than a preferred provider to receive medically necessary, covered services, the plan will pay for those services at the same level of benefits (that is, the same percentage of the bill) that it would have had the care been given by a preferred provider. This provision is not intended to specify the rate of reimbursement to the provider. The section is not intended to require reimbursement at the preferred provider level of benefits to an insured who resides out of the service area and chooses to see other than preferred providers solely for his or her own convenience. Language to that effect has been added to the paragraph for clarification. The agency does not believe that the language regarding freedom of choice is confusing and believes that the commenter is referencing language in the existing section and not the proposed amendment. Section 3.3704(14). Some commenters offer strong support for the ability of the contract holder to cancel due to a material change and believe it is an essential element to fair competition. Some commenters oppose the provision, believe the language is ambiguous and unnecessary and suggest that it be deleted, or if retained, it be clarified and made prospective only. Agency Response: The agency notes that it is currently standard practice in policies containing a preferred provider plan, to provide that either party has a right to cancel the policy. Therefore, the provision specifying the contract holder's right to cancel a policy containing a preferred provider plan is not necessary as it is for HMOs and may unnecessarily restrict current practice. Because the agency does not believe that paragraph (14) is necessary to prevent consumer harm, the agency has deleted this paragraph. However, it will be monitored and evaluated for future rulemaking should the standard practice change. Section 3.3705(9). Some commenters strongly support this provision and believe it provides protection from additional charges to consumers who have paid premiums for a particular level of coverage. One commenter supports the provision but expresses concern that a provider other than a preferred provider be able to decline to treat an insured if the provider is unwilling to accept the discounted fee. Agency Response: Paragraph (9) ensures that insureds pay the percentage of the bill which they agree to pay in their contract with the preferred provider plan. When a patient is billed based on the provider's full rate but the provider has agreed with the insurer to accept a discounted fee, the patient actually pays more than the agreed upon percentage. This paragraph is intended to apply whether the fee is discounted ahead of time or as the result of a retroactive "adjustment." In the case of an adjustment, the insured must be appropriately reimbursed. The section does not require a provider other than a preferred provider to accept a discounted rate. A provider may not, however, bill the patient to make up for any discount the provider agrees upon with the insurer. NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS. For: Consumers Union, Office of Public Insurance Counsel, Texas Association for Home Care, Texas Dental Association, Texas Psychological Association, The Center for Public Policy Priorities, Texas Dermatological Society, University of Texas System, Health Affairs, Texas Academy of Family Physicians, Texas Society of Medical Oncology, Texas Society of Plastic Surgeons, Private Health Care Systems, The Disability Policy Consortium, Texas Medical Association, Harris County Medical Society, Texas Society of Pathologists, Texas Business Group on Health and individual commenters. For with changes: Blue Cross and Blue Shield of Texas, Insurance Alliance of America, Texas Department on Aging, Texas Legal Reserve Officials Association, Texas Life Insurance Association, American National Insurance Company and Transport Life Insurance Company. The amendments are adopted under the Insurance Code, Articles 3.42(i) and (p) (as amended by Senate Bill 1637 enacted by the 74th Legislature); 3.51-6, sec.3 and sec.5; 3.70-2(B); 3.70-3(A)(9); 21.21, sec.3, sec.4(1) and (2) and sec.13; 21.21-6, sec.1 and sec.3 (as added by House Bill 1367 enacted by the 74th Legislature); 21.21-8, sec.2 (as added by House Bill 668 enacted by the 74th Legislature); 21.52; sec.13; 26.08; 26.71 (as amended by House Bill 369 enacted by the 74th Legislature); 26.75 (as amended by House Bill 369 enacted by the 74th Legislature), 1.03A and the Government Code, sec.sec.2001.004 et seq (Administrative Procedure Act). Article 3.42(i) authorizes the Commissioner of Insurance to disapprove any policy form which is unjust or which does not comply with the Insurance Code. Article 3.42(p) authorizes the commissioner to adopt reasonable rules to implement and accomplish the purposes of Article 3. 42, concerning review and approval of policy forms. Article 3.51-6, sec.3 provides that a group accident and health policy may not require that a service be rendered by a particular hospital or person and sec.5 authorizes the commissioner to issue rules to carry out the provisions of Article 3.51-6, concerning group accident and health insurance. Article 3.70-3(A)(9) provides that payment of claims other than indemnity for loss of life or accrued indemnities remaining unpaid at the death of the insured shall be payable to the insured. Article 21.21, sec.3 and sec.4(1) and (2) prohibit untrue, deceptive or misleading statements with respect to the business of insurance and sec.13 authorizes the commissioner to promulgate rules as necessary to accomplish the purposes of Article 21.21, concerning unfair practices. Article 21.21-6, sec.1 and sec.3 define and prohibit unfair discrimination in the business of insurance. Article 21.21-8, sec.2 prohibits the making or permitting of any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees or rates charged for any policy of insurance, or in the benefits payable thereunder, or in any of the terms or conditions of the contract, or in any other manner whatever. Articles 3.70-2(B) and 21.52 require freedom of choice for the insured in selecting a practitioner under health and accident insurance policies. Article 26.08 provides that small employer health benefit plan carriers may use cost containment and managed care features in a small employer health benefit plan, including different benefits applicable to providers that participate or do not participate in restricted network arrangements, and provides that utilization review must comply with Article 21. 58A. Article 26.71 requires the fair marketing of small employer health benefit plans and authorizes the department to require submission of data concerning those plans. Article 26.75 authorizes the commissioner to adopt rules providing for the fair marketing and broad availability of small employer health benefit plans. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance. The Government Code, sec.sec.2001.004 et seq, authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. sec.3.3704. Freedom of Choice. Pursuant to the Insurance Code, Article 3.51-6, sec.3, and Article 3.70-3(A)(9), no health insurance policy may require that a service be rendered by a particular hospital or practitioner. A health insurance policy that includes different benefits from the basic level of coverage for use of preferred providers shall not be considered to unlawfully restrict freedom of choice in the selection of physicians or health care providers by insureds provided: (1)-(5) (No change.) (6) Physicians or health care providers may refer an insured to providers other than preferred providers, provided that the insured is advised that a different indemnity payment may apply. If covered services are not available through preferred providers, the insurer shall pay for medically necessary covered services by a non-preferred provider at the preferred provider level of benefits. Nothing in this section requires reimbursement at a preferred level of coverage solely because an insured resides out of the service area and chooses to receive services from providers other than preferred providers for the insured's own convenience. (7)-(13) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603735 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: June 1, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-6327 Chapter 11. Health Maintenance Organizations The Commissioner of Insurance adopts amendments to Chapter 11, concerning health maintenance organizations, by amending sec.sec.11.506, 11.603, and 11. 1600 and adding new sec.11.1502. Sections 11.506, 11.603, and 11.1600 are adopted with changes to the proposed text as published in the December 15, 1995, issue of the Texas Register (20 TexReg 10741). Section 11.1502 is adopted without changes and will not be republished. These amendments are adopted to further address the Governor's directive that the Commissioner of Insurance enact rules to maintain quality of health care for all Texans at affordable prices and to establish procedures for fairness to health care providers. These amendments are based on a review of complaints and formal and informal public comment concerning managed care plans received by the department during the drafting and comment period for the amendments to this chapter adopted November 15, 1995. Protection of patients in the rapidly changing health care marketplace requires these updated regulations. These amendments are necessary to assist consumers in making informed choices among health care plans; to assure that consumers receive the type and extent of coverage they contracted for at the contracted for price; and to assist the department in evaluating quality and costs of health care. The agency's response to comments, including the specific changes to the sections and reasoned justification for the changes, are addressed in the paragraphs that follow. Amended sec.11.506(4) requires that contracts between an HMO and a contract holder, group or individual, provide that the contract holder may cancel the contract based upon material changes to any provisions required by law or this chapter to be disclosed to contract holders or the enrollees after not less than 30 days written notice to the HMO. Section 11.506(17) assures that enrollees will receive all necessary covered services by requiring that HMOs allow referral to a non-network physician or provider if medically necessary covered services are not available through network physicians or providers. Section 11.603 requires HMOs which offer coverage to Medicare beneficiaries to file with the department all advertising for HMO plans related to such coverage marketed in Texas. Section 11.1502 provides that a contract between an HMO and a physician or provider may not contain a clause purporting to indemnify the HMO for any tort liability resulting from acts or omissions of the HMO. Amended sec.11.1600 requires disclosure of an agreement by providers not to bill patients for any amounts for covered services not set out in the evidence of coverage. General. Several commenters support the proposal with suggested changes and believe the sections will strengthen patient protection and oversight of managed care plans as well as ensure adequate access to health care services. One commenter disagrees with the fiscal note and believes that the potential cost implications of new tort liabilities to employers and all providers of health insurance could dramatically increase the cost of providing benefits. A few commenters suggest that Medicare HMOs should be required to inform prospective enrollees about issues (coverage and exclusions) before enrollees sign a Medicare HMO contract and recommend including more coverage for continuing care retirement community residents. One commenter expresses frustration in obtaining a needed referral from an HMO. Agency Response: The agency appreciates the comments received and the information provided at the hearing. The agency believes that the fiscal note is adequate and does not believe the sections will increase any tort liabilities. Disclosure requirements applicable to all HMOs in sec.11.1600 should address the commenters' concerns about information to prospective enrollees of Medicare HMOs. Medicare HMOs are required in sec.11.1603 to file advertising relating to coverages offered to Medicare beneficiaries. The agency will monitor complaints and market conduct of Medicare HMOs to evaluate whether additional rules are necessary. Section 11.506 Mandatory Provisions. Several commenters suggest inclusion of the definition of "contract holder" as was proposed in the preferred provider plan rules. They believe that since the term is used throughout the sections that it should be defined. One commenter feels there should be a clear definition of "contract holder" and suggests language which includes both organizations and individuals. One commenter believes that the proposed definition of contract holder is appropriate. Agency Response: The agency has not included the definition of "contract holder" in these sections because it has been included in sec.11.2(b)(8), adopted March 11, 1996, and it would be redundant to include the definition in this section. The commenter who believes the definition is appropriate is in all likelihood referring to those rules. Section 11.506(4). Some commenters strongly support the ability of the contract holder to cancel due to a material change as necessary protection for contract holders and enrollees. Others support the concept but suggest that "material change" be clarified or defined to avoid undue cancellations and administrative problems since in some cases material change could be beyond an HMO's control. Some commenters recommend that there be a specific notice period of 30 to 60 days before cancellation to provide a reasonable time period and suggest that the requirement be prospective only to prevent the administrative burden to HMOs to modify issued and outstanding contracts. Agency Response: The agency included paragraph (4) to address complaints by employers that they may be unable to cancel a contract even when there were material changes during the contract period. The most common concern raised by employers was that after the contract is signed, large numbers of providers become unavailable or are terminated from the network. The rule is intended to provide fairness by correcting the uneven playing field created by current sec.11.506 which specifies notice periods for cancellation of a contract by an HMO but does not specify any notice period or grounds for cancellation by the contract holder. Existing sec.11.506 has been interpreted by some HMOs to mean that the contract holder has no way out of the contract even if the HMO materially changes the terms of the contract on which the employer based its decision to enter into the agreement. The common law of contracts already provides remedies when one party materially breaches a contract, but the contract holder may be dissuaded from asserting these rights or feel forced to assert its rights through a lawsuit. The language in paragraph (4) clarifies the contract holder's rights and avoids litigation. The agency believes that "material change" should not be more specifically defined because what is material may vary widely among contract holders. Because changing coverage in the middle of a contract term causes significant upheaval for the contract holder and enrollees, the agency believes it is unlikely that contract holders will cancel contracts for insignificant changes by the HMO which do not adversely affect services provided to enrollees. The agency agrees with commenters who suggested a specific notice period to give the HMO notice of the problem and to provide a transition period for the HMO and the enrollees and has changed subparagraph (C) to require not less than 30 days written notice. Section 11.506(17). Some commenters support the requirement for an out-of-network referral as necessary to ensure that enrollees receive appropriate care for covered services when services cannot be provided in network. Some suggest that the term "medically necessary" be deleted as it appears to modify and limit the rule, express concern that review would not be required if an HMO determined that services were not medically necessary and suggest a more precise description of when referrals could be denied and when review is required. Some commenters want the rule to include a detailed outline of how the process must be carried out, including the time frame and consideration of the specific patient's condition. Some commenters support the requirement that an HMO must provide for review by a specialist of the same or similar specialty as the provider to whom the referral is being made before the HMO can deny the referral. Some commenters are concerned that the requirement for review by a specialist would drive up costs and encourage providers to make inappropriate requests for referrals, including requests for referrals for uncovered services. A commenter recommends adding the word "licensed" before each reference to the term provider. A commenter feels the use of the phrase "not available" is vague; and questions how availability is measured and how is it determined that medically necessary covered services are not available. A few commenters believe there should be an appeals process such as dispute resolution, possibly subject to a final appeal to the department. A commenter believes that the phrase "similar specialty" is too broad and ambiguous in its intent. A commenter believes that inclusion of the word "provider" is problematic and should be deleted. A commenter is concerned that "non-network physician" is not defined and suggests clarifying the phrase to "designated non-network physician." A commenter suggests criteria to establish referral availability standards of: (1) medical necessity and emergency nature; (2) HMO physician was not reasonably available; and (3) HMO physician refused or failed to provide such services. A commenter feels the decision to refer outside the network should be made by a committee with recognized competency of patient specialist, in that a general practitioner should not be able to make the decision, and a non-network referral should be limited to a number of days that enables the HMO to review the case but does not put the enrollee in danger. In addition, the total review time should be limited to a certain number of days. Some commenters believe the review process and specialist selection should also be regulated. A commenter supports the consumer's right to a second opinion if an out-of-network referral is denied; recommends "prompt" review and notification of the consumer of the results of the second opinion and name and specialty of the consulting provider if still denied. A commenter feels that the review by a specialist goes beyond the requirements of Insurance Code, Article 21.58A and recommends deletion of the last sentence of paragraph (17) since the requirements of Article 21.58A are sufficient. Another commenter believes that the comment made regarding deleting the last sentence in this section because it conflicts with the appeals provisions of the Utilization Review Act is irrelevant, since the proposed rule applies to HMOs, which are exempt from the Utilization Review Act's appeal procedures. Some commenters want to be sure that an out-of-network provider would not bill the enrollee for amounts not paid by the HMO and recommend adding language that indicates the covered individual will not incur additional costs for covered services that are unavailable through existing preferred providers or networks and are eventually delivered by out-of-network providers. Some commenters support the proposed changes that ensure that the insurer will pay for medically necessary covered services from a non-preferred or out-of-network provider if a preferred or network provider is not available; however concern is expressed as to how out-of-network or non-preferred providers will be informed prior to service that they may only bill based on a discounted fee for a particular patient. A commenter believes these providers should have the discretion not to treat a patient if they are not willing to follow the provision that limits their ability to bill based on their full fee. Some commenters feel that amounts for out-of-network services should be reimbursed at the non-network physician's or provider's usual and customary rate, or agreed upon rate rather than the HMO's usual and customary rate, particularly since the HMO does not have these services available. Some commenters feel the proposed language could be interpreted to allow different levels of payment for services rendered by providers who may not be on contract with the HMO. A commenter suggests changing the term "network physicians or providers" to "contracted physicians or providers" and "non- network physician or provider" to "non-contract physician or provider." Agency Response: Paragraph (17) is intended to ensure that HMOs give appropriate consideration to network providers' requests that enrollees be referred to out-of-network providers. Obviously, referral is only required for medically necessary covered services that are not available through network providers, but a network provider who requests a referral must be presumed to have made the determination that the services are covered, necessary and unavailable in the network. Therefore, paragraph (17) requires review by a specialist before the HMO may deny it on any grounds. The rule has been modified to require review by a specialist of the same or similar specialty as the provider to whom referral is requested. The agency agrees that permitting or denying a referral should take place within a time appropriate to the circumstances, but does not believe that it is necessary in these sections to detail how the process must be carried out or set out specific time frames for review and denial. HMOs are expected to adopt procedures for reasonable compliance with the requirement. Adding the word "licensed" before each reference to the term provider is not necessary because the provider by definition in Article 20A.02 requires licensure or other authorization to practice in this state. The agency agrees the requirements of Article 21.58A are irrelevant to a determination of whether the last sentence of paragraph (17) should be deleted because the appeal provisions of Article 21.58A are not applicable to HMOs. The agency disagrees the word "provider" is problematic. If securing appropriate, timely referrals for out-of-network services remains a problem after adoption of these sections, the agency may use enforcement action as appropriate or propose clarifications to the rule. The paragraph has been changed to clarify that the HMO will fully reimburse an out-of-network provider so that there will be no balance billed to the enrollee. The agency disagrees the term "network physicians or providers" should be changed to "contracted physicians or providers" or "non-network physician or provider" to "non-contract physician or provider." The term "health maintenance organization delivery network" is defined in the Insurance Code, Article 20A. 02(u), as a health care delivery system in which an HMO arranges for health care services directly or indirectly through contracts and subcontracts with providers and physicians. The term "network physician or provider" means a physician or provider who is a participant in an HMO delivery network. Section 11.603. Several commenters support the filing of advertising with the department as a necessary consumer protection and believe it will assist consumers in making informed choices. A few commenters suggest that advertising should be filed more than ten days before use to give TDI staff adequate time for review and ensure that no advertising materials are disseminated to the public that are not in compliance with Texas law or are inconsistent with other documents. Some commenters support this section as published and agree with the department that it has the statutory authority for promulgating the requirement. Many commenters strongly oppose this provision as an unnecessary burden on HMOs which would create additional costs for consumers, an unfair restriction that would limit HMOs' ability to compete and an immense burden on the agency staff. Some commenters suggest narrowing the definition of advertising and deleting the requirement that advertising be filed ten days before use. Concern is expressed that the timing of submission of advertising will be difficult to administer as well as coordination with existing advertising regulations. Several commenters feel this provision is very broad and could be burdensome since filing is for information purposes only and does not require prior approval; they recommend deleting this section. If the requirement is implemented, commenters suggest tightening and more clearly defining "advertising material" to include only true print and electronic advertising, or alternatively narrowing the definition of advertisements requiring filing to those which will be used in mass media or other mass marketing efforts. Several commenters recommend deletion of the requirement for submission ten days prior to use. A commenter proposes leaving this provision as it previously existed and making no changes to this subchapter. A commenter feels the situation could arise where an HMO believes advertisements should be disseminated in an urgent manner; but the proposed "file and use" time period requirement would inhibit an HMO from such timely notification, and suggests inserting appropriate language to allow for such a special circumstance. One commenter urges additional language to the section or another section to prohibit misleading or alarming statements about Medicare and suggests inclusion of certain information in the advertising for Medicare products. Agency Response: The agency agrees that requiring filing of all advertising by all HMOs would be burdensome for HMOs and agency staff and may not be the best way to prevent misleading and deceptive advertising at this time. Based on comments received about this proposal and a review of experience with HMO advertising which indicates that most problems occur with advertising for HMOs which offer coverage to Medicare beneficiaries, the agency has changed the section to limit advertising filing requirements to invitations to inquire and invitations to contract published by HMOs that offer coverage to Medicare beneficiaries through the permitted alternatives to Medicare. In the Medicare area the agency receives complaints from people who do not understand what sort of coverage they have purchased and sees advertising that the agency believes may be deceptive. The agency has increased the filing time to 45 days before use to be consistent with the federal Health Care Financing Administration (HCFA) requirement, so it should not be burdensome since it is a required HCFA filing. This will also allow sufficient time for review by the agency. A phrase has been added to clarify that advertising produced by HMO agents must also be filed by the HMO. The agency intends to carefully monitor the advertising filed as well as other HMO advertising it receives from HMOs. If, based on its own observations or complaints, other HMO advertising becomes of further concern to the agency it will evaluate further rulemaking in this area. The agency has deleted subsection (b) of sec.11.603 because specific filing instructions are in 28 TAC sec.21.120. This change significantly reduces the filings required under the section without reducing consumer protection because it continues to require filing in the area where the agency knows there is a serious problem, Medicare HMOs. Other problems will be handled by enforcement as they are now with an eye to future rulemaking if necessary. By referring to existing sec.21.120 instead of establishing separate filing requirements for HMOs, the rules are streamlined and filing of a third copy of advertising is eliminated. Section 11.1502. Several commenters strongly support prohibiting an HMO from using a contract provision that purports to indemnify it for liability resulting from its own acts or omissions and believe the section to be a necessary protection for consumers and providers that the HMOs not shift responsibility for their own actions onto providers. Other commenters support the section if the provision means that each party is responsible for its own actions. A commenter objects to this proposal stating that the department should not dictate contractual language, that indemnification clauses are standard in contracts and routinely signed by physicians, that such a mandate would increase tort liability, be in direct conflict with the goals of tort reform legislation, and increase costs. Another commenter states that the section is unnecessary because no HMO contracts contain such a provision. A commenter states that if in fact there are entities attempting to require contracted providers to indemnify the HMO for acts of the HMO then those types of contractual provisions should be disallowed, and that every party should be responsible for its own actions. Agency Response: The section does prohibit only indemnification for liability resulting from the HMO's own acts or omissions. There is disagreement among the commenters who object to the section as to whether or not such provisions exist in contracts. The agency believes that there are provisions in existing contracts which an HMO might argue indemnify it for any harm resulting to the enrollees from services rendered or denied. The section prevents any such indemnification clauses in future contracts and forecloses the argument that existing clauses totally indemnify the HMO. The section does not prohibit reciprocal indemnification clauses by which each party indemnifies the other from liability resulting from its own negligence-that is, each party bears responsibility for its own acts or omissions. The agency believes that the provision is clear. Section 11.1600. Some commenters support disclosure of a hold harmless clause so that enrollees will know that providers should not be billing them for additional compensation for covered services. Some supporters urge that HMO contracts be required to contain hold harmless clauses and disclose the information because hold harmless provisions are already a standard industry practice since HMOs that do not use them must meet higher reserve requirements. Agency Response: Enrollees should know if providers have agreed that they will accept payment from the HMO as payment in full for covered services. Virtually all HMO contracts include such a provision because it results in significantly lower reserve requirements for the HMOs. To make such a provision mandatory, as suggested by several commenters, would require major amendments to rules regarding the financial requirements of HMOs and would serve no purpose as the provision is already in virtually all HMO contracts. The agency has added the word "covered" to clarify that the "hold-harmless" clause applies only to covered services. NAMES OF THOSE COMMENTING FOR AND AGAINST THE SECTIONS. For: Consumers Union, Harris Methodist Health System, M. D. Anderson Cancer Center, Texas Heart Institute/St. Lukes Episcopal Hospital, Office of Public Insurance Counsel, PCA Health Plans, Texas Dental Association, Texas Medical Association, Texas Psychological Association, The Center for Public Policy Priorities, The Disability Policy Consortium, Texas Society of Pathologists, Harris County Medical Association, Texas Dermatological Society, University of Texas System Health Affairs, Texas Academy of Family Physicians, Texas Society of Medical Oncology, Texas Society of Plastic Surgeons, Private Health Care Systems and individual commenters. For with changes: Blue Cross and Blue Shield of Texas, Kaiser Permanente, Texas Association for Home Care, Texas Business Group on Health, Texas Department on Aging, Texas HMO Association and The Prudential Insurance Company. Subchapter F. Evidence of Coverage 28 TAC sec.11.506 The amendments to the Administrative Code, Chapter 11, are adopted under the Insurance Code, Articles 20A.22; 20A.05(b) and (d); 20A.14(a), (b) and (c); 21.21, sec.sec.3, 4(1) and (2) and 13; 21.21-6, sec.sec.1 and 3 (as added by House Bill 1367 enacted by the 74th Legislature); 26.08; 26.71 (as amended by House Bill 369 enacted by the 74th Legislature); 26.75 (as amended by House Bill 369 enacted by the 74th Legislature); 1.03A and the Government Code sec.sec.2001.004 et seq (Administrative Procedure Act). The Insurance Code, Article 20A.22 provides that the Commissioner of Insurance may promulgate such reasonable rules and regulations as are necessary and proper to carry out the provisions of the Texas HMO Act. Article 20A.05(b) sets forth the determinations the commissioner and the Texas Board of Health must make prior to granting a certificate of authority to an HMO. Article 20A.05(d) provides a certificate of authority shall continue in force as long as the person to whom it is issued meets the requirements of the HMO Act or until suspended or revoked by the commissioner or terminated at the request of the certificate holder. Article 20A.14(a) provides that no HMO, or representatives thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. Article 20A.14(b) provides that Article 21.21 applies to HMOs. Article 21.21, sec.3 and sec.4(1) and (2) prohibit untrue, deceptive or misleading statements with respect to the business of insurance. Article 21.21, sec.13 authorizes the commissioner to promulgate rules as necessary to accomplish the purposes of Article 21.21, concerning unfair practices. Article 20A.14(c) provides that an enrollee may not be canceled or not renewed except for the failure to pay the charges for such coverage, or for such other reason as may be promulgated by rule of the commissioner. Article 21.21-6, sec.1 and sec.3 define and prohibit unfair discrimination in the business of insurance, including HMOs. Article 26.08 provides that small employer health benefit plan carriers may use cost containment and managed care features in a small employer health benefit plan. Article 26.71 requires the fair marketing of small employer health benefit plans and authorizes the department to require submission of data concerning those plans. Article 26.75 provides that the commissioner may adopt rules setting forth additional standards to provide for the fair marketing and broad availability of small employer health benefit plans to small employers in this state. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by statute. The Government Code, sec.sec.2001.004 et seq authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. sec.11.506. Mandatory Provisions: Group and Non-Group Contract and Group Certificate. Each group and non-group contract 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 Texas Department of Insurance for such provisions. (1)-(3) (No change.) (4) Cancellation-A statement specifying the following grounds for cancellation of coverage and the minimum notice period that will apply. The notice period will be as described in subparagraphs (A) through (C) of this paragraph. (A) Cancellation by an HMO of an enrollee, or if a subscriber, the subscriber and subscriber's enrolled dependents, in the case of: (i)-(vi) (No change.) (B) Cancellation by an HMO of a group, in the case of: (i)-(iii) (No change.) (C) Cancellation by a group or individual contract holder in the case of a material change by the HMO to any provisions required to be disclosed to contract holders or enrollees pursuant to this chapter or other law, the contract may be canceled after not less than 30 days written notice to the HMO. (5)-(16) (No change.) (17) Out-of-network services-Each contract between an HMO and a contract holder must provide that, if medically necessary covered services are not available through network physicians or providers, the HMO must, upon the request of a network physician or provider, within a reasonable time period, allow referral to a non-network physician or provider and shall fully reimburse the non-network physician or provider at the usual and customary or an agreed upon rate. Each contract must further provide for a review by a specialist of the same or similar specialty as the type of physician or provider to whom a referral is requested before the HMO may deny a referral. (18) Schedule of charges-A statement that discloses the HMO's right to change the rate charged with 30 days written notice pursuant to the Texas Insurance Code, Article 3.51-10. (19) Service area-A map or clear description of the service area indicating major primary and emergency care delivery sites. A zip code map and a provider list may be used to meet this requirement. (20) Termination due to attaining limiting age: (A) Medicare-A provision describing the effect of becoming eligible for Medicare on the part of the subscriber or a dependent; and (B) Handicapped child-A provision that a child's attainment of a limiting age does not operate to terminate the coverage of the child while that child is incapable of self-sustaining employment due to mental retardation or physical handicap, and chiefly dependent upon the subscriber for support and maintenance. The subscriber may be required to furnish proof of such incapacity and dependency within 31 days before the child's attainment of the limiting age and subsequently as required, but not more frequently than annually following the child's attainment of such limiting age. (21) 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. (22) Conformity with Medicare supplement minimum standards and long-term care minimum standards-Each group and non-group agreement and group certificate must comply with Chapter 3, Subchapter T of this title (relating to Medicare Supplement Minimum Standards), referred to in this paragraph as Medicare supplemental rules, and Chapter 3, Subchapter Y 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. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603737 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: June 1, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-6327 Subchapter G. Advertising and Sales Material 28 TAC sec.11.603 The amendments to the Administrative Code, Chapter 11, are adopted under the Insurance Code, Articles 20A.22; 20A.05(b) and (d); 20A.14(a), (b) and (c); 21.21, sec.sec.3, 4(1) and (2) and 13; 21.21-6, sec.sec.1 and 3 (as added by House Bill 1367 enacted by the 74th Legislature); 26.08; 26.71 (as amended by House Bill 369 enacted by the 74th Legislature); 26.75 (as amended by House Bill 369 enacted by the 74th Legislature); 1.03A and the Government Code sec.sec.2001.004 et seq (Administrative Procedure Act). The Insurance Code, Article 20A.22 provides that the Commissioner of Insurance may promulgate such reasonable rules and regulations as are necessary and proper to carry out the provisions of the Texas HMO Act. Article 20A.05(b) sets forth the determinations the commissioner and the Texas Board of Health must make prior to granting a certificate of authority to an HMO. Article 20A.05(d) provides a certificate of authority shall continue in force as long as the person to whom it is issued meets the requirements of the HMO Act or until suspended or revoked by the commissioner or terminated at the request of the certificate holder. Article 20A.14(a) provides that no HMO, or representatives thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. Article 20A.14(b) provides that Article 21.21 applies to HMOs. Article 21.21, sec.3 and sec.4(1) and (2) prohibit untrue, deceptive or misleading statements with respect to the business of insurance. Article 21.21, sec.13 authorizes the commissioner to promulgate rules as necessary to accomplish the purposes of Article 21.21, concerning unfair practices. Article 20A.14(c) provides that an enrollee may not be canceled or not renewed except for the failure to pay the charges for such coverage, or for such other reason as may be promulgated by rule of the commissioner. Article 21.21-6, sec.1 and sec.3 define and prohibit unfair discrimination in the business of insurance, including HMOs. Article 26.08 provides that small employer health benefit plan carriers may use cost containment and managed care features in a small employer health benefit plan. Article 26.71 requires the fair marketing of small employer health benefit plans and authorizes the department to require submission of data concerning those plans. Article 26.75 provides that the commissioner may adopt rules setting forth additional standards to provide for the fair marketing and broad availability of small employer health benefit plans to small employers in this state. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by statute. The Government Code, sec.sec.2001.004 et seq authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. sec.11.603. Filings. Any HMO licensed to do business in Texas which offers coverage to Medicare beneficiaries under the provisions of Subchapter XVIII of 42 United States Code, Health Insurance for the Aged and Diabled, shall file with the department a copy of each advertisement related to such coverage which is produced by the HMO or its agents and which is an invitation to inquire or invitation to contract as defined in sec.21.113 of this title (relating to Rules Pertaining Specifically to Accident and Health Insurance Advertising and Health Maintenance Organization Advertising) no later than 45 days prior to its use. Material shall be filed in accordance with sec.21.120 of this title (relating to Filing for Review). Material filed under this paragraph is not to be considered approved but may be subject to review for compliance with Texas law and consistency with other documents. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603734 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: June 1, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-6327 Subchapter P. Prohibited Practices 28 TAC sec.11.1502 The amendments to the Administrative Code, Chapter 11, are adopted under the Insurance Code, Articles 20A.22; 20A.05(b) and (d); 20A.14(a), (b) and (c); 21.21, sec.sec.3, 4(1) and (2) and 13; 21.21-6, sec.sec.1 and 3 (as added by House Bill 1367 enacted by the 74th Legislature); 26.08; 26.71 (as amended by House Bill 369 enacted by the 74th Legislature); 26.75 (as amended by House Bill 369 enacted by the 74th Legislature); 1.03A and the Government Code sec.sec.2001.004 et seq (Administrative Procedure Act). The Insurance Code, Article 20A.22 provides that the Commissioner of Insurance may promulgate such reasonable rules and regulations as are necessary and proper to carry out the provisions of the Texas HMO Act. Article 20A.05(b) sets forth the determinations the commissioner and the Texas Board of Health must make prior to granting a certificate of authority to an HMO. Article 20A.05(d) provides a certificate of authority shall continue in force as long as the person to whom it is issued meets the requirements of the HMO Act or until suspended or revoked by the commissioner or terminated at the request of the certificate holder. Article 20A.14(a) provides that no HMO, or representatives thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. Article 20A.14(b) provides that Article 21.21 applies to HMOs. Article 21.21, sec.3 and sec.4(1) and (2) prohibit untrue, deceptive or misleading statements with respect to the business of insurance. Article 21.21, sec.13 authorizes the commissioner to promulgate rules as necessary to accomplish the purposes of Article 21.21, concerning unfair practices. Article 20A.14(c) provides that an enrollee may not be canceled or not renewed except for the failure to pay the charges for such coverage, or for such other reason as may be promulgated by rule of the commissioner. Article 21.21-6, sec.1 and sec.3 define and prohibit unfair discrimination in the business of insurance, including HMOs. Article 26.08 provides that small employer health benefit plan carriers may use cost containment and managed care features in a small employer health benefit plan. Article 26.71 requires the fair marketing of small employer health benefit plans and authorizes the department to require submission of data concerning those plans. Article 26.75 provides that the commissioner may adopt rules setting forth additional standards to provide for the fair marketing and broad availability of small employer health benefit plans to small employers in this state. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by statute. The Government Code, sec.sec.2001.004 et seq authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603742 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: June 1, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-6327 Subchapter Q. Other Requirements 28 TAC sec.11.1600 The amendments to the Administrative Code, Chapter 11, are adopted under the Insurance Code, Articles 20A.22; 20A.05(b) and (d); 20A.14(a), (b) and (c); 21.21, sec.sec.3, 4(1) and (2) and 13; 21.21-6, sec.sec.1 and 3 (as added by House Bill 1367 enacted by the 74th Legislature); 26.08; 26.71 (as amended by House Bill 369 enacted by the 74th Legislature); 26.75 (as amended by House Bill 369 enacted by the 74th Legislature); 1.03A and the Government Code sec.sec.2001.004 et seq (Administrative Procedure Act). The Insurance Code, Article 20A.22 provides that the Commissioner of Insurance may promulgate such reasonable rules and regulations as are necessary and proper to carry out the provisions of the Texas HMO Act. Article 20A.05(b) sets forth the determinations the commissioner and the Texas Board of Health must make prior to granting a certificate of authority to an HMO. Article 20A.05(d) provides a certificate of authority shall continue in force as long as the person to whom it is issued meets the requirements of the HMO Act or until suspended or revoked by the commissioner or terminated at the request of the certificate holder. Article 20A.14(a) provides that no HMO, or representatives thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. Article 20A.14(b) provides that Article 21.21 applies to HMOs. Article 21.21, sec.3 and sec.4(1) and (2) prohibit untrue, deceptive or misleading statements with respect to the business of insurance. Article 21.21, sec.13 authorizes the commissioner to promulgate rules as necessary to accomplish the purposes of Article 21.21, concerning unfair practices. Article 20A.14(c) provides that an enrollee may not be canceled or not renewed except for the failure to pay the charges for such coverage, or for such other reason as may be promulgated by rule of the commissioner. Article 21.21-6, sec.1 and sec.3 define and prohibit unfair discrimination in the business of insurance, including HMOs. Article 26.08 provides that small employer health benefit plan carriers may use cost containment and managed care features in a small employer health benefit plan. Article 26.71 requires the fair marketing of small employer health benefit plans and authorizes the department to require submission of data concerning those plans. Article 26.75 provides that the commissioner may adopt rules setting forth additional standards to provide for the fair marketing and broad availability of small employer health benefit plans to small employers in this state. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by statute. The Government Code, sec.sec.2001.004 et seq authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirement of available procedures and prescribes the procedures for adoption of rules by a state administrative agency. sec.11.1600. Information to Prospective Group Contract Holders and Enrollees. (a) (No change.) (b) The written plan description must be in a readable and understandable format, by category, and must include a clear, complete and accurate description of these items in the following order: (1)-(5) (No change.) (6) an explanation of enrollee financial responsibility for payment of premiums, copayments, deductibles, and any other out of pocket expenses for noncovered or out-of-plan services, and, if applicable, an explanation that network physicians and providers have agreed to look only to the HMO and not to its enrollees for payment of covered services except as set forth in this description of the plan. (7)-(12) (No change.) (c) (No change.) This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603733 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: June 1, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-6327 TITLE 31. NATURAL RESOURCES AND CONSERVATION Part XVI. Coastal Coordination Council Chapter 506. Council Procedures for Federal Consistency with Coastal Management Program Goals and Policies 31 TAC sec.506.28 The Coastal Coordination Council (council) adopts an amendment to sec.506. 28 of this title (relating to General Consistency Agreements for Federal Activities; Interagency Coordination Groups for Federal Development Projects), with changes to the proposed text as published in the December 15, 1995, issue of the Texas Register (20 TexReg 10745). The amendment corrects a cross-referencing error and adds more precise language to the text. The phrase "in lieu of council review under sec.506.26 of this title" is added to clarify that sec.506.28(b) applies to certain projects rather than sec.506.26. This section shall be implemented and become enforceable at a date to be established by the council in the future. The council shall publish notice of the implementation date in the Texas Register at least 30 days prior to such implementation date. One comment was received regarding adoption of the amendment. The Port of Houston Authority pointed out that the parenthetical reference to the subject heading of the section referred to in sec.506.28 was incorrect. Based on this comment, the amendment is adopted with the parenthetical heading corrected. A takings impact assessment of this rule adoption shows that the purpose of the rule is to clarify the applicability of sec.506.28 and to more clearly distinguish it from sec.506.26. This section deals exclusively with procedures for the council's review of federal agency actions. The section has no applicability to nor impact on private real property. Therefore, it has been determined that the adoption of this rule will not constitute a taking, as that term is defined in Texas Government Code, Chapter 2007. The amendment is adopted pursuant to the Coastal Coordination Act, Texas Natural Resources Code, Chapter 33, Subchapter C and F, and is adopted under the council's authority to promulgate rules pursuant to those subchapters. sec.506.28. General Consistency Agreements for Federal Activities; Interagency Coordination Groups for Federal Development Projects. (a) The council may issue a general consistency agreement with respect to a federal activity other than a development project. Prior to issuance of a general consistency agreement, the council shall request and consider public comments on the matter. If the conditions of a general consistency agreement are satisfied, the federal activity is deemed consistent, to the maximum extant practicable, with the CMP goals and policies and will not be subject to council review under sec.506.26 of this title (relating to Referral of Federal Agency Activities). (b) The council shall, in lieu of council review under sec.506.26 of this title (relating to Referral of Federal Agency Activities), issue a consistency agreement for a federal development project for which: (1) the federal agency has elected to establish an interagency coordination group whose duties include advising the federal agency on the consistency of the project; (2) the interagency coordination group includes among its voting members a minimum of three council members from natural resource agencies or their representatives; (3) the interagency coordination group, including a majority of the council members or their representatives on the interagency coordination group, finds that the federal development project is consistent, to the maximum extent practicable, with the CMP goals and policies; and (4) the federal agency adopts the finding of the interagency coordination group and submits it to the council as its consistency determination for the project. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603725 Garry Mauro Chairman Coastal Coordination Council Effective date: April 8, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 305-9129 TITLE 34. PUBLIC FINANCE Part I. Comptroller of Public Accounts Chapter 3. Tax Administration Subchapter O. State Sales and Use Tax 34 TAC sec.3.293 The Comptroller of Public Accounts adopts an amendment to sec.3.293, concerning food; food products; meals; food service, without changes to the proposed text as published in the December 15, 1995, issue of the Texas Register (20 TexReg 10748). The amendment reflects the repeal made by House Bill 462, 74th Legislature, 1995, of the exemption for food products, meals, soft drinks, and candy sold to prison inmates and a change brought about by Senate Bill 640, 74th Legislature, 1995, which raised the maximum age of eligible members of certain nonprofit groups who can make exempt food sales from 17 to 18. The comptroller received several comments from an Austin attorney regarding the proposed rule. The majority of the comments concerned minor grammatical changes in subsections not being amended at this time. The comptroller declined to make any of the changes at this time, but will consider these comments with the next revision of the rule. The term "correctional facility" was not defined in House Bill 462, 74th Legislature, 1995. The attorney suggested providing a definition in subsection (a) of the rule. The comptroller declined to make this change recognizing the definition of correctional facilities in the Penal Code, sec.1.07. The amendment is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The amendment implements the Tax Code, sec.151.313. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 13, 1996. TRD-9603560 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: April 3, 1996 Proposal publication date: December 15, 1995 For further information, please call: (512) 463-4028 34 TAC sec.3.300 The Comptroller of Public Accounts adopts an amendment to sec.3.300, concerning manufacturing; custom manufacturing; fabricating; processing, without changes to the proposed text as published in the December 1, 1995, issue of the Texas Register (20 TexReg 10182). The reason for amending the rule is to incorporate changes enacted by Senate Bill 640, 74th Legislature, 1995, that provide an exemption for items leased for longer than one year, clarify the exemptions available for semiconductor cleanrooms, and expand the exemption for items used in moving the product and other materials necessary to the process. No comments relating to the proposed text published for amendment were received. One Austin attorney wrote in with comments regarding style and grammar and other changes or amendments to other parts of the rule that were not being amended at this time. The comptroller declined to make any of the changes at this time, but will consider these comments with the next revision of the rule. The amendment is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The amendment implements the Tax Code, sec.151.318. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 13, 1996. TRD-9603562 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: April 3, 1996 Proposal publication date: December 1, 1995 For further information, please call: (512) 463-4028 34 TAC sec.3.362 The Comptroller of Public Accounts adopts new sec.3.362, concerning labor relating to increasing capacity in a production unit in a petrochemical refinery or chemical plant, with changes to the proposed text as published in the October 20, 1995, issue of the Texas Register (20 TexReg 8598). The new section implements legislation included in Senate Bill 640, 74th Legislature, 1995. Services that provide increased capacity in the production unit are excluded from the definition of "real property repair and remodeling services" under the Tax Code, sec.151.0047. The changes consist of expanding the definition under subsection (a)(3) of "chemical plant" to include those that do batch processing; amending subsection (a)(6) to distinguish between quality control equipment that is included in the definition of "manufacturing or processing production unit" and research and development equipment that is not included; and amending the definition of "petrochemical refinery" in subsection (a)(8) to include more examples of the refining processes. Comments were received from the law firm of Scott, Douglass, Luton and McConnico on behalf of the Texas Chemical Council (TCC); and from The Dow Chemical Company (Dow), The Coastal Corporation (Coastal), and the Associated General Contractors (AGC). TCC and Coastal commented on the need for clarification of the phrase "single continuous operation" in the term "chemical plant." The batch processing language was added to include that type of operation. TCC, Coastal and AGC also commented that the definition of "new product" was too restrictive and should include products with either different physical or different chemical characteristics instead of both different properties and a different application. Coastal commented that the examples contradicted the definition because anhydrous sulfuric acid has both different product properties and commercial applications from technical sulfuric acid and also that the refining industry considers different grades of gasoline as different products. However, the comptroller will continue to view a new product as one that is intended for a different purpose from the previous product rather than one with refinements or enhanced qualities that is simply an improved product. TCC also recommended eliminating from the rule the provisions requiring the service provider to separately state the charges for taxable services from nontaxable increased capacity work whenever the two are performed under a single contract and the charge attributable to taxable services exceeds 5.0% of the total charge. Dow commented that the 5.0% provision should be included in subsection (b)(5) in addition to subsection (b)(4). TCC, Dow and AGC commented that the comptroller should not require the service provider to document that the work increased the production capability. They stated that the contractor may not have sufficient information to determine the nature of the work and that in most cases the work is done under an existing long-term contract covering work in general and there will be no separation of taxable and nontaxable services in the contract. The comptroller believes that the law requires sellers to be able to show that receipts are not taxable. Furthermore, the rule allows the service provider to accept an exemption certificate from the customer who has documentation that the work will result in increased capacity. Dow also commented that after-the-fact documentation should be allowed. The rule provides that evidence can be presented to the comptroller by either party at a later time that establishes the portion of the work that was taxable and the portion that increased the production capacity. TCC commented that quality control laboratories should be included as part of the processing unit. The processing unit definition has been amended to include quality control equipment used during the manufacturing process, but to exclude research and development laboratory equipment or other quality control equipment used after the processing operation. Coastal suggested that the terms "waste product" and "by-product" be defined, but the terms are given their ordinary meaning and do not require additional definition. Coastal also commented that the provision concerning increasing a unit's ability to produce needed additional clarification because it appears that work done to restore or repair a unit that has failed qualifies because its ability to produce is increased and because the definition does not address work performed on idle units. Idle units are not specifically addressed because they receive no special treatment. Simply repairing a unit to former production capacity does not qualify as increased capacity. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.151.0047. sec.3.362. Labor Relating to Increasing Capacity in a Production Unit in a Petrochemical Refinery or Chemical Plant. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Allied chemical product-A consumer or end-user product manufactured from basic or intermediate chemicals. Examples include drugs, soaps, detergents, paints and agricultural chemical formulations. (2) Basic or intermediate chemical-Basic chemicals are the initial building blocks or raw materials that are processed and combined to manufacture intermediate chemicals. Intermediate chemicals are products that are manufactured from basic chemicals and other intermediate chemicals and are manufactured into finished chemical products. Examples of basic chemicals include alkalies, chlorine, nitrogen, sulfur, benzene, ethylene, propylene methane, and sodium carbonate. Examples of intermediate chemicals include synthetic fibers, polymers, resins, elastomers, dyes, and pigments. (3) Chemical plant- (A) A facility that in a single continuous operation or using a batch processing method manufactures a basic or an intermediate chemical. (B) A chemical plant may be either a single facility existing by itself or a facility within a chemical plant complex consisting of a number of separate chemical plants each of which produces a single basic or intermediate chemical product. A chemical plant complex may include any combination of distinct facilities that manufacture basic chemicals, intermediate chemicals, or allied chemical products. In a chemical plant complex, each facility is considered individually to determine whether it qualifies as a chemical plant. (C) The term does not include: (i) a facility that manufactures "allied chemical products"; or (ii) a facility, other than one that produces a basic or an intermediate chemical, that generates any chemical as a waste product or a by-product. (4) Crude oil-A mixture of hydrocarbons that exists in liquid phase in underground reservoirs and remains liquid at atmospheric pressure after passing through surface-separating facilities. The term includes liquid condensate and liquid hydrocarbons produced from tar sands, gilsonite, and oil shale. Drip gases are also included, but topped crude oil (residual oil) and other unfinished oils are excluded. Liquids produced at natural gas processing plants and mixed with crude oil are likewise excluded where identifiable. (5) Increased capacity- (A) Increasing the capability of the manufacturing or processing production unit to produce: (i) more of the same product measured by units per hour or units per year; or (ii) a new product. (B) Increasing a unit's capability to produce more of an existing product and less of another existing product is not increasing the unit's capacity unless the overall production unit capability is increased. For example, if a production unit that produces 50 units of product X and 50 units of product Y is modified so that it produces 60 units of product X and 40 units of product Y, the production unit's capacity has not been increased. (6) Manufacturing or processing production unit-A group of manufacturing and processing machines and ancillary equipment that together are necessary to create or produce a physical or chemical change beginning with the first processing of the raw material and ending with a finished product. Examples of such equipment include reactors, distillation columns, catalytic crackers, fractionators, or other primary process equipment, and ancillary equipment such as heat exchangers, cooling towers, computer control units, piping, valves, and actuators. Another example of ancillary equipment is quality control equipment that is used during the manufacturing process, but not equipment used to test products before the process begins or after it is completed. The production unit does not include maintenance equipment; research and development laboratory equipment; waste handling or treatment equipment; equipment for the storage of feedstock, catalysts, or finished products; loading and unloading equipment; or any other equipment that is not used in the actual processing or manufacturing operation. (7) New product-A product that has different product properties and a different commercial application than the product previously manufactured or processed by that production unit. Examples of new products include chlorine produced from sodium chloride; styrene from benzene; aqueous hydrogen chloride (HCl) from anhydrous HCl; and soft polyethylene from hard polyethylene if the soft polyethylene is used to manufacture different end products than the hard polyethylene. Producing gasoline with a 91-octane rating instead of an 89-octane rating for use in motor vehicle engines is not producing a new product. Changes caused by straining or purifying an existing product or cosmetic changes such as adding or removing color or odor to or from an existing product will not create a new product. For example, the manufacture of a different grade of the same product, such as technical sulfuric acid which is colored and contains impurities and anhydrous 100% sulfuric acid which is colorless and odorless, does not qualify one as a new or different product from the other. (8) Petrochemical refinery-A facility that manufactures finished petroleum products from crude oil, unfinished oils, natural gas liquids, other hydrocarbons, and oxygenates. Products of these refineries include gasoline, diesel, kerosene, distillate fuel oils, liquefied petroleum gas (LPG), residual fuel oils, lubricants, and other products refined through alkylation, coking, cracking, dewaxing, desulphurization, distillation, hydrotreating, isomerization, polymerization, or other chemical processes. These facilities also produce petrochemical feedstock for use by chemical plants. The term does not include facilities at an oil or gas lease site that remove water or other impurities and merely make the product more marketable. (b) Tax responsibilities of persons who make improvements to a manufacturing or processing production unit of a petrochemical refinery or chemical plant. (1) Persons who repair, remodel, restore, or modify a manufacturing or processing production unit of a petrochemical refinery or chemical plant to increase the capacity in the production unit are not performing a taxable real property repair and remodeling service. Such persons are governed by the provisions of sec.3.291 of this title (relating to Contractors). (A) Contractors performing lump-sum contracts as defined in sec.3.291 of this title (relating to Contractors) are consumers of all materials, consumable items, and equipment used or incorporated into a customer's property. As a consumer, a contractor must pay tax to on all such all materials, consumable items, and equipment. See sec.3.291 of this title (relating to Contractors) for more information on lump-sum contracts. Contractors performing lump-sum contracts for persons having direct payment permits may not accept a direct payment exemption certificate from those persons. When performing lump-sum contracts for a direct payment permit holder, the contractor must pay sales tax to the supplier or accrue and remit sales tax on incorporated materials removed from a tax-free inventory for incorporation into the direct payment permit holder's realty. Direct payment permit holders cannot authorize the contractor or any other person to purchase any taxable item using their permit. See sec.3.288 of this title (relating to Direct Payment Procedures and Qualifications). (B) Contractors performing separated contracts as defined in sec.3.291 of this title (relating to Contractors) are considered retailers of all materials physically incorporated into the realty being improved. As a retailer, a contractor must collect tax from the customer based upon the agreed contract price of the incorporated materials. See sec.3.291 of this title (relating to Contractors) for more information on separated contracts. Contractors performing separated contracts for persons having direct payment permits may accept a direct payment exemption certificate from those persons in lieu of tax for all tangible personal property incorporated into customer's realty. A direct payment exemption certificate may not be accepted for tax liability incurred by the contractor on machinery or equipment rented or leased by the contractor and used in the performance of the contract. See sec.3. 288 of this title (relating to Direct Payment Procedures and Qualifications). (2) Repairs, remodeling, restorations, or modifications other than to the processing production unit or that do not increase the capacity of the processing production unit are governed by the provisions of sec.3.357 of this title (relating to Labor Relating to Nonresidential Real Property Repair, Remodeling Restoration, Maintenance, New Construction, and Residential Property). (3) Persons who perform repair, remodeling, maintenance, or restoration services on tangible personal property are governed by the provisions of sec.3. 292 of this title (relating to Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property). These services may be exempt under the Tax Code, sec.151.3111, that exempts services performed on tangible personal property if the property is exempt because of the nature of the property, its use, or a combination of its nature and its use. (4) Where increased capacity improvements and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5.0% of the total charge, the total charge is presumed to be taxable. The presumption may be overcome by the service provider at the time the transaction occurs by separately stating to the customer a reasonable charge for the taxable services. However, if the charge for the taxable portion of the services is not separately stated at the time of the transaction, the service provider or the purchaser may later establish for the comptroller, through documentary evidence, the percentage of the total charge that relates to nontaxable unrelated services. Examples of acceptable documentation include written contracts detailing the scope of work, bid sheets, tally sheets, schedules of values, and blueprints. (5) When both increased capacity improvements and taxable services are being performed under the same contract, the parties to the contract should separately identify taxable from nontaxable labor in a contract and the charges applicable to each or the entire contract will be presumed to be for taxable services. Documentation which clearly defines the work being performed should be retained by both parties to show that had the increased capacity improvements and taxable services been done independently of each other, the cost of each would be reasonably near the allocation of charges. Examples of acceptable documentation include written contracts which detail the scope of work, bid sheets, tally sheets, schedules of values, and blueprints. If there is not a written contract signed by both parties clearly showing agreement as to the taxable and nontaxable work being performed, the customer and the service provider must prepare, at the time of the transaction, a written certification verifying the allocation of charges for increased capacity improvements and taxable services. The comptroller may recalculate the charges if the allocation appears unreasonable and either party may be held responsible for the additional tax due. (6) A service provider's customer must be able to substantiate by way of documentary evidence that repair, remodeling, restoration, or modification services performed on a production unit increase the unit's capacity as defined in subsection (a)(5) of this section. If the person performing the service does not have the certification set out in paragraph (5) of this subsection, the service provider must presume that the service is taxable and collect tax. If the service provider's customer has documentation to prove that the labor increases the capacity of a production unit, the customer may issue an exemption certificate in lieu of paying tax to the service provider. The certificate must state that the labor increases the production unit's capacity as defined in subsection (a)(5) of this section, and that the customer will be liable for any additional tax due in the event that it is determined that taxable services were performed. A service provider who accepts such a certificate should follow the guidelines set out in paragraph (1) of this subsection and sec.3.291 of this title (relating to Contractors). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 13, 1996. TRD-9603561 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: April 3, 1996 Proposal publication date: October 20, 1995 For further information, please call: (512) 463-4028 Subchapter HH. Mixed Beverage Tax 34 TAC sec.3.1001 The Comptroller of Public Accounts adopts new sec.3.1001, concerning the mixed beverage gross receipts tax, without changes to the proposed text as published in the January 12, 1996, issue of the Texas Register (21 TexReg 303). Administration of this tax, including the tax reports, audits, and responsibility for obtaining security instruments for the tax transferred from the Texas Alcoholic Beverage Commission to the Comptroller's Office January 1, 1994. This transfer resulted from the enactment of House Bill 1445, 73rd Legislature, 1993, which repealed the Alcoholic Beverage Code, Chapter 202, and created new Tax Chapter 183, Mixed Beverage Tax under Tax Code, Title 2. This new section includes mixed beverage permit definitions and an allowance for bad debts as enacted in House Bill 1419 and Senate Bill 643, 74th Legislature, 1995. The new section is intended to define the tax, provide definitions for terms in both the Alcoholic Beverage Code and Chapter 183, define what is included in and what is excluded from the tax base, and to reference sales and use tax taxability issues for some of the receipts common to holders of mixed beverage tax permitholders. No comments were received regarding adoption of the new section. The new section is adopted under the Tax Code, sec.111.002, which provides the comptroller with the authority to prescribe, adopt, and enforce rules relating to the administration and enforcement of the provisions of the Tax Code, Title 2. The new section implements the Tax Code, sec.183.001 and sec.183.021. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on March 13, 1996. TRD-9603563 Martin Cherry Chief, General Law Comptroller of Public Accounts Effective date: April 3, 1996 Proposal publication date: January 12, 1996 For further information, please call: (512) 463-4028 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part VI. Texas Department of Criminal Justice Chapter 151. General Provisions 37 TAC sec.sec.151.4, 151.6, 151.51, 151.53, 151.71 The Texas Department of Criminal Justice (TDCJ) adopts an amendment to sec.151.4 and new sec.sec.151.6, 151.51, 151.53, and 151.71, concerning general provisions, without changes to the proposed text as published in the January 23, 1996, issue of the Texas Register (21 TexReg 575). The amendment to sec.151.4 incorporates a new subsection (a), adds changes to former subsection (c), and adds new subsections (e)-(g) to the original rule which was effective February 15, 1993, (18 TexReg 590). The amendment was proposed in order to comply with Government Code, sec.492.007, which requires opportunity for public appearance before the Board of Criminal Justice, balanced against the constraint of the Open Meetings Act, specifically Government Code, sec.551.042, which prohibits deliberation on issues raised before the Board but not posted for deliberation. New sec.151.6 covers the steps required to petition the agency for adoption of a rule, as required by Texas Government Code, sec.2001.021. New sec.151.51 establishes guidelines and eligibility criteria for authorizing custodial officer certification and hazardous duty pay to employees of the Texas Department of Criminal Justice under the authority of Texas Government Code, sec. sec.659.062, 813.506, and 815. 505; and House Bill 1, General Appropriations Act, 74th Legislature, 1995. New sec.151.53 provides procedures regarding applications for and administration of multiple employments with the State of Texas by employees of the Texas Department of Criminal Justice, as required by Texas Government Code, Chapter 574, to comply with Texas Constitution, Article XVI, sec.40. Finally, new sec.151.71 concerns the marking of state vehicles of the Department of Criminal Justice in accordance with Article 6701m-1, Texas Civil Statutes. Adoption of these rules will increase accountability of the Department of Criminal Justice and clarify procedures for meetings of the Board. No comments were received regarding adoption of the amendment and new sections. The amendment and new sections are adopted under the Government Code, sec.492.013, which grants general rulemaking authority to the Board; Texas Government Code, Chapter 574, and sec. sec.492.007, 551.042, 659.062, 813.506, 815. 505, and 2001.021; House Bill 1, General Appropriations Act, 74th Legislature, 1995; and Texas Civil Statutes, Article 6701m-1. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603708 Carl Reynolds General Counsel Texas Department of Criminal Justice Effective date: April 8, 1996 Proposal publication date: January 23, 1996 For further information, please call: (512) 463-9693 37 TAC sec.151.21 The Texas Department of Criminal Justice adopts new sec.151.21, concerning prohibition on carrying weapons, with changes to the proposed text as published in the January 23, 1996, issue of the Texas Register (21 TexReg 578). The new section was proposed in response to the passage of Article 4413(29ee), Revised Statutes, and authorized by Penal Code, sec.30.05, Attorney General Opinion Number DM-363 (August 30, 1995), and Attorney General Letter Opinion Number 95-058 (September 15, 1995). The adoption will enhance safety on property owned by TDCJ and clarity of notice to handgun license holders of the rights of the property owner. A comment was received from a State Representative, a sponsor of Senate Bill 60 in the 74th Legislature, creating Article 4413(29ee), Revised Statutes. The comment stated that the proposal violates the legislative intent of the enactment, in two ways: it ignores the removal by the legislature of language in Senate Bill 60 that would have prohibited carrying licensed handguns in any government buildings; and it ignores the specific definition of the "premises" of a correctional facility as not including driveways, parking lots, etc. The Board made on adjustment to the proposal in response to this comment, the addition of subsection (c)(5), which provides an exception for a handgun licenseholder who secures his weapon in the trunk of his vehicle prior to entering "TDCJ property" as defined in the rule. This balances TDCJ's safety concerns against the practical concern reflected in the comment that a licenseholder traveling across the state to visit a prison has no legal recourse upon arrival. The Board's public safety concerns over agency property force it to rely on the legal authority of Attorney General Opinion Number DM-363 and Letter Opinion Number 95-058, interpreting the law that did ultimately pass, to the extent that this authority differs from individual legislator's expressions of intent. The specific wording of the proposed signs in subsection (d)(2) was also taken out of the rule in order to allow for flexibility in implementation, in response to an internal TDCJ comment. The new section is adopted under the Government Code, sec.492.013, which grants general rulemaking authority to the Board. The proposal was in response to Article 4413(29ee), Revised Statutes, and authorized by Penal Code, sec.30. 05, Attorney General Opinion Number DM-363, and Attorney General Letter Opinion Number 95-058. sec.151.21. Prohibition on Carrying Weapons. (a) Policy. (1) It is criminal trespass for a person to enter or remain on property of the Texas Department of Criminal Justice (TDCJ) with a deadly weapon on his person or in his vehicle. (2) It is a felony under Penal Code, sec.46.035, for a person licensed to carry a handgun under Article 4413(29ee), Revised Statutes, to carry a handgun on the premises of a correctional facility, regardless of whether the handgun is concealed. (3) In addition to the prohibitions in paragraphs (1) and (2) of this subsection, an employee of TDCJ is prohibited from carrying a firearm in a state-owned vehicle, except as provided in the Use of Force Plan or other applicable agency policies, no employee may use or carry a firearm on his person or in his vehicle while on duty . (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Deadly weapon-A firearm or anything manifestly designed, made, or adapted for the purpose of inflicting death or serious bodily injury, or anything that in the manner of its use or intended use is capable of causing death or serious bodily injury. (2) Exempt employee-An employee in the position of warden, assistant warden, or an administrative position eligible for custodial officer certification and hazardous duty pay under sec.151.51(d)(1)(D) of this title (relating to Custodial Officer Certification and Hazardous Duty Pay Guidelines) . (3) Firearm-Any device designed, made, or adapted to expel a projectile through a barrel by using the energy generated by an explosion or burning substance or any device readily convertible to that use. (4) Handgun-Any firearm that is designed, made, or adapted to be fired with one hand. (5) Property of TDCJ- (A) land owned or leased by TDCJ; (B) a building owned, leased, contracted for, or operated by TDCJ, including a correctional facility, parole office, and office space; and (C) an area controlled or owned by TDCJ that is appurtenant to a building owned, leased, contracted for, or operated by TDCJ, such as a driveway, parking lot, walkway, or sidewalk. (c) Exceptions. (1) An exempt employee may carry a firearm in his vehicle for purposes of responding to emergency situations involving inmates or confinees, or on his person in the event of an actual emergency situation. (2) State-owned housing, other than Bachelor Officers' Quarters, is excepted from this rule, only to the extent that weapons are secured under lock and key within the house. (3) A person who is authorized by law, other than Article 4413(29ee), Revised Statutes, to carry a firearm, is excepted from this rule, including a security officer who has a defense to prosecution for Unlawful Carrying Weapons, sec.46.02, Penal Code. (4) The written consent of the executive director or his designee to an individual is effective to create an exception from this rule. (5) A person who is licensed under Article 4413(29ee), Revised Statutes, to carry a handgun, does not trespass on TDCJ property with the handgun if the gun is secured in the locked trunk of a vehicle, or a locked compartment of a vehicle if the vehicle does not have a trunk, before the vehicle enters TDCJ property. (d) Duties of the Executive Director. (1) The executive director shall ensure that agency policies are consistent with this rule. Policies adopted to ensure the safety and security of correctional facilities may be more restrictive than this rule and may encompass weapons not covered by this rule. (2) The executive director shall ensure that signs are posted in English and Spanish to provide adequate notice of the substance of this section. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603706 Carl Reynolds General Counsel Texas Department of Criminal Justice Effective date: April 8, 1996 Proposal publication date: January 23, 1996 For further information, please call: (512) 463-9693 Chapter 155. Reports and Information Gathering Subchapter B. Site Selection and Facility Names 37 TAC sec.155.21 The Texas Department of Criminal Justice (TDCJ) adopts new sec.155.21, concerning naming of TDCJ units and facilities, without changes to the proposed text as published in the January 23, 1996, issue of the Texas Register (21 TexReg 578). Adoption of the new rule will enable clear guidance for a community interested in influencing the name of a facility in the community. No comments were received regarding adoption of the new section. The new section is adopted under the Government Code, sec.492.013, which grants general rulemaking authority to the Board. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on March 18, 1996. TRD-9603707 Carl Reynolds General Counsel Texas Department of Criminal Justice Effective date: April 8, 1996 Proposal publication date: January 23, 1996 For further information, please call: (512) 463-9693