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 1. ADMINISTRATION PART V. General Services Commission CHAPTER 113.Central Purchasing Division 1 TAC sec.113.11 The General Services Commission adopts amendments to sec.113.11 concerning delegated purchases. The amendment is adopted with changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10085). The amendment will allow for implementation of Senate Bill (S.B.) 1752 and House Bill (H.B.) 1805, 75th Leg., R.S. (1997) which streamline and enhance the efficiency of the state procurement system. The amendments also result from recommendations made by the staff in cooperation with state agencies in a cooperative study with the General Services Commission regarding delegated purchases previously reviewed by the Commission. In subsection 113.11(e)(1)(A) the phrase "all commodity purchases in excess of $2,000 and not over $5,000" was changed to "all commodity purchases in excess of $2,000 and not over $10,000". In subsection 113.11(e)(1)(A) the phrase "the agency must make a written notation on the spot purchase form of all reference sources used" was changes to read "the agency must make a written notation in the purchase file of all reference sources used". In subsection 113.11(e)(2)(A) the phrase "all purchases in excess of $5,000" was changed to read "all purchases in excess of $10,000". New language was added in sentences 3 through 7 of subsection 113.11(e)(4) to combine commodities and services. It was decided that the new language would be consistent with rule section 113.10 that contains the language requiring commodities. The amendments to section 113.11 will allow state agencies to purchase more effectively and in accord with new statutes and procedures. One comment was received. The state agency group requested that the formal bids limit be set at $10,000 instead of $5,000. Additionally, a request was made to clarify pricing requirements for catalogue purchasing to indicate that such purchases under $2,000 do not require such pricing. For - The Purchasing Subcommittee of the State Agency Coordinating Committee (SACC). The General Services Commission staff agrees to amend language in rule sec.113.11 to establish a floor of $10,000 for formal bids, and a range of $2,000 to $10,000 for informal bids. The Commission disagrees with the comment recommending an amendment to sec.113(C)(1), which was cited incorrectly, to read " competitive bidding is not required for purchases, including catalog purchases of $2,000 or less". The GSC catalogue program can be accomplished administratively without a rule change for GSC purchasers. GSC believes the new statutory $2,000 limit applies to catalogue purchases; but these GSC rules do not govern the exempt purchases that may occur. The amendment is adopted under the Texas Government Code, Title 10, Subtitle D, Section 2152.003 the was enacted by S. B. 1752, Acts of the 75th Legislature, R. S. (1997). sec.113.11. Delegated Purchases. (a) General delegation. The following purchasing functions are delegated to agencies: (1) commodity purchases of goods that do not exceed $25,000; (2)-(7) (No change.) (b) (No change.) (c) Provisions generally applicable to delegated purchases. (1) Competitive bidding is not required for purchases of $2,000 or less. (2)-(3) (No change.) (4) The commission must solicit formal bids from all eligible vendors on the centralized master bidders list (CMBL) when making purchases in excess of $25,000. The commission waives the requirement for state agencies to solicit bids from all eligible vendors on the list when making purchases under subsection (e) of this section. State agencies must solicit from all eligible vendors on the CMBL when making service purchases in excess of $100,000 that the commission has determined should be advertised and awarded by the agency. (5) (No change.) (6) For purchases over $100,000, agencies shall consult with and receive approval of the commission for use of factors for bid evaluation other than price and meeting specifications. (d) Withdrawal of delegated purchase authority. The commission will verify compliance with established procedures and will withdraw delegated purchase authority from an agency for continued violations after giving adequate warning. The commission will report to the governor, lieutenant governor, speaker of the house of representatives, and Legislative Budget Board the findings that a state agency has not followed the commission's rules or the laws related to the delegated purchases. (e) Provisions applicable to particular delegated purchases. (1) Commodity purchases. Commodity purchases may be made in accordance with the following provisions. (A) Agencies must attempt to obtain at least three informal bids, including a minimum of two bids from historically underutilized businesses (including at least one bid each from a minority-owned business and a woman-owned business), on all commodity purchases in excess of $2,000 and not over $10,000. Agencies must meet competitive bidding requirements and may supplement the list of bidders obtained from the CMBL and Historically Underutilized Business (HUB) Directory with non-CMBL bidders if the purchase price does not exceed $5,000. Agencies must attempt to obtain at least three formal bids, including a minimum of two bids from HUBs (including at least one bid each from a minority-owned business and a woman-owned business), on all commodity purchases in excess of $10,000 and not over $25,000. Agencies may refer to the commission's HUB Directory, which is maintained and accessible electronically, to locate historically underutilized businesses. If an agency is unable to locate a minority-owned business and/or a woman-owned business from the commission's HUB Directory or other available sources, the agency must make a written notation in the purchase file of all reference sources used. (B) All information required by the commission must be furnished on the approved commodity purchase form. (2) Emergency purchases. The commission will approve payment for emergency purchases in accordance with the following provisions. (A) At least three informal bids must be obtained whenever possible on all purchases in excess of $10,000. (B) For an emergency purchase of goods or services exceeding $25,000, an agency must send a full written explanation of the emergency along with other documentation required by the commission for prepayment approval. (C) The agency may contact the commission for advice and assistance in the handling of emergency purchases. The commission may not approve an invoice for an emergency purchase unless the agency has complied with the foregoing requirements. This rule does not apply to purchases made in accordance with the Texas Government Code, Chapter 418. (3) Perishable items. Purchases made under this authority must be obtained through competitive bids, and appropriate documentation must be forwarded to the commission for approval. (4) Services. Purchases of services estimated to cost no more than $100,000 per year are delegated and must be obtained through competitive bids, and appropriate documentation must be forwarded to the commission for approval. An agency is required to submit documentation to the commission for proprietary purchases of services over $25,000 and for purchases expected to cost more than $25,000 per year. Agencies must attempt to obtain at least three informal bids, including a minimum of two bids from HUBs (including at least one bid each from a minority-owned business and a woman-owned business), on all service purchases in excess of $2,000 and not over $10,000. Agencies must meet competitive bidding requirements and may supplement the list of bidders obt ained from the CMBL and Historically Underutilized Business (HUB) Directory with non-CMBL bidders if the purchase price does not exceed $5,000. Agencies must attempt to obtain at least three formal bids, including a minimum of two bids from HUBs (including at least one bid each from a minority-owned business and a woman-owned business), on all service purchases in excess of $10,000 and not over $25,000. Agencies may refer to the commission's HUB Directory, which is maintained and accessible electronically, to locate historically underutilized businesses. If an agency is unable to locate a minority-owned business and/or a woman-owned business from the commission's HUB Directory or other available sources, the agency must make a written notation in the purch ase file of all reference sources used. For purchases of services estimated up to $25,000, state agencies shall solicit a minimum of three bids (two must be HUBs, one minority and one woman-owned business) from CMBL and HUB Directory Vendors located in the agencies' geographic region. For purchases of services estimated more than $25,000 and less than $100,000, state agencies shall, as a minimum, solicit bids from all CMBL and HUB Directory Vendors located in the agencies' geographic region. For purchases of services estimated to cost more than $100,000 per year, the commission must review any proposed specifications or statements of work and determine whether the commission or the agency should make the advertisement and award. The commission may determine that the service should be advertised to the commission's bidders lists, in which case the commission will make the award in accordance with normal open market procedures. If no competitive advantage would be obtained by having the commission make the advertisement and award, the commission may permit the agency to do so. (5)-(7) (No change.) (f) (No change.) (g) Protest Procedures. State agencies shall adopt protest procedures and submit a copy to the commission during the post-payment audit of the agency's purchasing documents or upon request by the commission. (h) Procurement Plan. State agencies shall formulate an agency procurement plan that identifies an agency's management controls and purchasing oversight authority in accordance with the policy guidance contained in the Commission's Procurement Manual. An agency must submit a copy of the procurement plan during the commission's audit of the agency's purchasing documents or upon request by the commission. (i) Debarred Vendors. State agencies shall ensure that debarred vendors do not participate in state contracting and will establish procedures to ensure awards are not made to debarred vendors. (j) Reporting Purchasing Activity under Delegated Authority. State agencies will report to the commission, not later than May 1 of each year regarding the previous six-month period and on November 1 of each year regarding the preceding fiscal year, information related to delegated purchasing activity for goods and services in the form prescribed by the commission. 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 December 5, 1997. TRD-9716323 Judy Ponder General Counsel General Services Commission Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-3960 PART XV. Texas Health and Human Services Commission CHAPTER 355. Medicaid Reimbursement Rates SUBCHAPTER A. Cost Determination Process 1 TAC sec.355.102-355.105, sec.355.111 The Texas Health and Human Services Commission ("HHSC" or "the commission") adopts amendments to sec.sec.355.102 - 355.104, 355.105, and 355.111, concerning Medicaid Reimbursement Rates, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10261). The text will not be republished. The adoption is submitted simultaneously with a proposal by the Texas Department of Human Services to amend corresponding provisions of Title 40, chapter 20, TAC. Justification for the amendments is that the proposed changes will enable providers of DHS services to submit more accurate cost reports by clarifying allowable and unallowable costs for cost reporting purposes. The proposed changes will also give providers more flexibility to document costs related to the 1997 transition year for the cost determination rules. The amendments will function by clarifying the intent of the cost determination rule provisions. The amendments will clarify current allowable and unallowable cost rules in certain areas including related party leases, losses due to theft, related party costs determined at actual costs, cost of private aircraft, and Medicaid as payor of last resort. Clarifications are also being made to the rules regarding the reporting of expenses and revenues, direct voucher payment systems, and reporting net interest income after offsetting interest income against interest expense. A provision requiring that supportive documentation for the 1997 cost report be dated by June 30, 1997 is being deleted. In addition, for community-based programs the amendments will, in the administrative contract violation section, streamline the appeals process for contract cancellation resulting from failure to submit a properly completed cost report. The amendments eliminate the informal reconsideration process while retaining the provider's right to a formal appeal of the contract cancellation. The commission received no comments regarding the adoption of the amendments. The amendments are adopted under the Human Resources Code, Title 2, Chapter 32, which authorizes the commission to administer the medical assistance program; and under Texas Government Code sec.531.021, which provides the commission with the authority to administer federal medical assistance funds. The amendments implement the Government Code sec.531.021 and sec.531.033, and Human Resources Code sec.sec.32.001-32.042. 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 December 8, 1997. TRD-9716448 Executive Deputy Commissioner Texas Health and Human Services Commission Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 424-6576 TITLE 16. ECONOMIC REGULATION PART I. Railroad Commission of Texas CHAPTER 9.Liquified Petroleum Gas Division SUBCHAPTER A.General Applicability and Requirements 16 TAC sec.sec.9.5, 9.6 The Railroad Commission of Texas adopts amendments to sec.sec.9.5 and 9.6, relating to licensing requirements, and examination requirements and renewal of certified status, without changes to the versions published in the October 24, 1997, issue of the Texas Register (22 TexReg 10488). Section 9.5 specifies licensing requirements, including courses required, and sec.9.6 specifies examination requirements for management and employees and procedures to renew certified status annually, including fees involved for these activities. In sec.9.5(i)(1)(B), the Commission adopts language requiring individuals who want to attend the 64-hour course to pay the course fee established by the Commission. In the past, the Commission charged fees for course attendance. The established fee at the time of this rulemaking is $275 per individual; however, the adopted language will allow that fee to fluctuate as needed to cover costs associated with holding the 64-hour course in any given location. For example, if the Commission schedules a 64-hour course in a location where a meeting room rental is required, the fee may be adjusted in order to cover the cost for holding the 64-hour course in that location. No substantive amendment is adopted in sec.9.6, and the requirements for the LP- gas industry will not change. The amendment is adopted in order to add some language to subsection (e)(1) to specify how the $25 annual renewal fee will be divided between the Commission's LP-Gas Section and the Alternative Fuels Research and Education Division (AFRED) according to House Bill 1, 75th Legislature, Regular Session, Article IX, section 112. The commission received no comments on the proposal. The amendments are adopted under the Texas Natural Resources Code, sec.113.051, which authorizes the Commission to adopt rules relating to any and all aspects or phases of the LP-gas industry that will protect or tend to protect the health, welfare, and safety of the general public. Texas Natural Resources Code, sec.113.051, is affected by the adopted amendments. 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 December 2, 1997. TRD-9716108 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 22, 1997 Proposal publication date: October 24, 1997 For further information, please call: (512) 463-7008 CHAPTER 15.Alternative Fuels Research and Education Division SUBCHAPTER D.Highway Signage Rebate Program 16 TAC sec.sec.15.305, 15.310, 15.320 The Railroad Commission of Texas adopts amendments to sec.sec.15.305, 15.310, and 15.320, relating to the Alternative Fuels Research and Education Division's highway signage rebate program, without changes to the versions published in the October 17, 1997, issue of the Texas Register (22 TexReg 10222). The commission adopts these amendments to broaden certain eligibility requirements, continue the program in effect past January 1, 1998, and update the office to which applications are to be mailed or hand-delivered. Changing the definition of "eligible signage" in sec.15.305 extends eligibility to highway signs constructed from standard- size materials. Deleting the definition of "program period" in sec.15.305 and amending subsection (b) of sec.15.310 continues the highway signage rebate program in effect past January 1, 1998. The amendment to sec.15.320 changes the room number of the commission office to which applications are to be mailed or hand- delivered. The commission received no comments on the proposed amendments. The commission adopts the amendments under Texas Natural Resources Code, sec.113.241, which authorizes the commission to adopt rules relating to educating the public regarding the use of LPG and other environmentally beneficial alternative fuels that are or have the potential to be effective in improving the quality of air in this state; Texas Natural Resources Code, sec.113.243(c)(2), which authorizes the commission to implement marketing and advertising programs relating to alternative fuels to make alternative fuels more understandable and readily available to consumers; and Texas Natural Resources Code, sec.113.243(c)(6), which authorizes the commission to use money in the Alternative Fuels Research and Education Fund, General Revenue-Dedicated, to implement programs necessary to promote the use of LPG or other environmentally beneficial alternative fuels. Texas Natural Resources Code sec.sec.113.241, 113.243(c)(2), 113.243(c)(6), 113.248, 113.249, and 113.250 are affected by the amendments. 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 December 5, 1997. TRD-9716376 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 463-7008 SUBCHAPTER E.Manufactured Housing Incentive Program 16 TAC sec.15.401, 15.405, 15.410, 15.415, 15.420, 15.425, 15.430, 15.435, 15.440, 15.445, 15.450 The Railroad Commission of Texas adopts new sec.sec.15.401, 15.405, 15.410, 15.415, 15.420, 15.425, 15.430, 15.435, 15.440, 15.445, and 15.450, relating to the establishment and administration of a marketing incentive program that provides for an incentive to be paid to manufactured housing retailers or salespeople selling manufactured housing units equipped with appliances that use propane (liquefied petroleum gas; LPG), without changes to the versions published in the October 17, 1997, issue of the Texas Register (22 TexReg 10223). More than one-third of all new single-family homes sold in Texas in 1995 were manufactured housing. Two-thirds of Texas manufacturers ship 75 percent or more of their units with all- electric resistance heating appliances, according to a recent Railroad Commission survey. The commission, in a study of the manufactured housing market, found that less than one-half of one percent of the units currently sold in Texas are equipped with both propane water heaters and furnaces. One-half of all new manufactured home purchases are made by families with annual household incomes of less than $20,000. These purchasers' principal source of information on fuel options is the manufactured housing salesperson, who typically prefers to sell all-electric units because all electric units are easier to install, as they require connections to only one energy source. Consequently, electric units are more readily available. The incentive is intended to encourage manufactured housing salespeople and retailers to educate consumers on the energy savings they could achieve with propane. A typical family purchasing a manufactured housing unit with a propane furnace and water heater can save approximately $500 a year over a comparable unit using electric resistance heating and water heating equipment. Actual savings will vary depending on the capacity of the appliances, the size of the manufactured housing unit, individual appliance efficiency and other factors. Purchasers of manufactured housing units with propane water heaters will be eligible to apply for the commission's consumer rebates. The commission expects to set the initial incentive to be paid to the manufactured housing retailer or salesperson at $150 per eligible manufactured housing unit sold. Participation in the incentive program is voluntary, and manufactured housing incentive payments are made entirely at the discretion of the Railroad Commission of Texas. No person has a legal entitlement or other right to an incentive payment under this program. The commission views the proposed manufactured housing incentive program as an innovative tool for encouraging manufactured housing retailers to inform Texas consumers about the cost savings and environmental benefits of propane, to advance the commission's statutory charge to increase public awareness and assist in marketing of environmentally beneficial alternative fuels. New sec.15.401 states the purpose of the program, and new sec.15.405 defines terms used in the rules. New sec.15.410 establishes the manufactured housing incentive program and authorizes the commission to terminate the program at any time. New sec.15.415 authorizes the commission to set the incentive amount and specifies the limitations on it. Eligibility requirements are described in new sec.15.420. New sec.15.425 outlines the application procedure. New sec.15.430 states the procedure for making incentive payments. New sec.15.435 outlines a procedure for assignment of an incentive payment from a manufactured housing dealer or salesperson to a propane dealer. The terms of compliance for participants, including both manufactured housing retailers and salespersons and propane dealers, and the commission's authority to conduct on-site investigations to enforce it, are found in new sec.15.440. New sec.sec.15.445 and 15.450 outline the division's procedure for handling complaints and the penalties for violations of commission rules by program participants. The commission received no comments on the proposed rules. The new sections are adopted under Texas Natural Resources Code, sec.113.241, which authorizes the commission to adopt rules relating to educating the public regarding the use of LPG and other environmentally beneficial alternative fuels that are or have the potential to be effective in improving the quality of air in this state. Texas Natural Resources Code, sec.113.243(c)(2), authorizes the commission to implement marketing and advertising programs relating to alternative fuels to make alternative fuels more understandable and readily available to consumers. Texas Natural Resources Code, sec.113.243(c)(7), authorizes the commission to use money in the Alternative Fuels Research and Education Fund, now Alternative Fuels Research and Education Fund Account 101, General Revenue- Dedicated, for costs relating to programs necessary to promote the use of LPG or other environmentally beneficial alternative fuels. Texas Natural Resources Code, sec.sec.113.248 and 113.249, prescribe civil penalties and establish an enforcement mechanism for violations of the Texas Natural Resources Code or commission rules. Texas Natural Resources Code, sec.sec.113.243(c)(2) and (7), 113.248, and 113.249 are affected by the new rules. sec.15.401. Purpose. The purpose of sec.sec.15.401, 15.405, 15.410, 15.415, 15.420, 15.425, 15.430, 15.435, 15.440, 15.445, and 15.450 of this chapter (relating to the Alternative Fuels Research and Education Division) is to establish a manufactured housing incentive program that increases public awareness and assists in the marketing of propane as an environmentally beneficial alternative fuel. These sections, referred to collectively as the manufactured housing incentive program rules, outline the commission's mechanisms for determining the eligibility of applicants; application requirements; administrative procedures; incentive amounts and adjustments; terms of compliance; penalties for violations; and program termination. 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 December 5, 1997. TRD-9716375 Mary Ross McDonald Deputy General Counsel, Office of General Counsel Railroad Commission of Texas Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 463-7008 PART III. Texas Alocholic Beverage Commission CHAPTER 33.Licensing Application Procedure 16 TAC sec.33.7 The Texas Alcoholic Beverage Commission adopts a new sec.33.7, with changes to the text as published in the October 17, 1997 edition of the Texas Register, (22 TexReg 10226-10227). This rule is adopted to implement Alcoholic Beverage Code, sec.104.06. That provision requires the Alcoholic Beverage Commission to determine which licensees and permittees, authorized to sell for on-premises consumption, receive 51 percent or more of their income from the sale of alcoholic beverages. This determination is used to assess compliance with the warning sign requirements of sec.31, Article 4413 (29ee) of the Revised Statutes, governing a license to carry a handgun. The commission determined that collection of this information is most efficiently accomplished by requiring licensees and permittees to furnish the relevant information at the time of license or permit application or renewal. The first sentence of paragraph (c) was modified from the text as originally published to make the language of the rule clearer. No comments were received regarding the adoption of the new section. The new section is adopted pursuant to the authority of Alcoholic Beverage Code, sec.5.31. Cross Reference to Statute: Alcoholic Beverage Code, sec.104.06, is affected by this rule. sec.33.7. Warning Sign Requirements. (a) This rule is adopted pursuant to sec.104.06 of the Alcoholic Beverage Code. (b) Each applicant for an original or renewal of a beer and wine retailer's permit, mixed beverage permit, private club registration permit, or retail dealer's on-premise license shall furnish sales data or, if not available, projection of sales for the location at which the license or permit is located or will be located. The projection or sales data should include a sufficient breakdown of sales into the categories of food, alcoholic beverages, and other major categories of sales at the location. (c) Holders of a food and beverage certificate are not subject to the provisions of this section, however, the holders of wine and beer retailer's permits and retail dealer's on-premise licenses are subject to record keeping provisions set forth in sec.33.5. 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 December 5, 1997. TRD-9716320 Doyne Bailey Administrator Texas Alcoholic Beverage Commission Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 206-3304 CHAPTER 37.Legal Rule of Practice 16 TAC sec.37.46 The Texas Alcoholic Beverage Commission adopts new sec.37.46, without changes to the text as published in the October 17, 1997, edition of the Texas Register, (22 TexReg 10227). The rule governs public participation in contested case hearings. This rule was adopted to implement the provisions of sec.5.431 of the Alcoholic Beverage Code. The rule allows members of the public a reasonable opportunity to appear in a contested case and speak on any relevant issue. Under the provisions of the rule, hearings examiners may still control the conduct of the hearing, the order of witnesses or No comments were received regarding the adoption of the new rule. The rule is adopted pursuant to the authority of the Alcoholic Beverage Code, Chapter 5, Subchapter B, sec.5.31 and sec.5.435. Cross Reference: Alcoholic Beverage Code, sec.75.435, is affected by this rule. 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 December 5, 1997. TRD-9716319 Doyne Bailey Administrator Texas Alcoholic Beverage Commission Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 206-3304 Penalties 16 TAC sec.37.61 The Texas Alcoholic Beverage Commission adopts a new sec.37.61 with changes to the proposed text as published in the October 17, 1997 edition of the Texas Register, (22 TexReg 10227-10228). The rule governs the conditions under which licenses and permits issued by the Alcoholic Beverage Commission can be suspended. This rule is adopted to implement the provisions of sec.11.64 of the Alcoholic Beverage Code, and to comply with the legislative directive contained in that statute to adopt a rule. Paragraph (a) of the rule lists the statutory violations for which the commission may deny a permittee or licensee the right to pay a civil fine in lieu of suspension. This paragraph was amended from the text as published to add a description of each cited offense. The commission concluded this amendment made the rule easier for those subject to the rule to understand. Paragraph (b) of the rule lists the factors the commission must consider in denying a licensee or permittee the right to pay a civil fine. These factors are a reflection of the statutory requirements. In response to a suggestion by the Texas Package Stores Association, the second clause of paragraph (b)(1) was added to the text as originally published. The commission concluded that the additional clause serves to explain why the license or permit held by the violating permittee or licensee is a factor to be considered in decisions governed by this rule. Paragraph (c) was adopted to give a partial explanation of the statutory phrase "aggravating or ameliorating circumstances." The Mothers Against Drunk Driving suggested that the phrase "or their employee" be added at the end of paragraph (c)(1). The commission disagreed with this suggestion because under sec.1.04(11) and (16) of the Alcoholic Beverage Code, the terms licensee and permittee includes employees of the license or permit holder. The Mothers Against Drunk Driving further suggested that paragraphs (b)(3) and (c)(2) were duplicative. The commission disagreed. Paragraph (b)(3) reflects a statutorily imposed factor to be considered by the commission in making decisions governed by this rule. Paragraph (c)(2) is adopted as one of several elements influencing the question of whether aggravating or ameliorating circumstances exist. Additionally, the commission concluded that considerations of the "number, kind and frequency" of past violations is substantively different than consideration of simply the "past record of violations." The Mothers Against Drunk Driving further expressed a concern that the inclusion of paragraph (c)(3) implied that suspensions would be imposed only on those industry members whose violations resulted in injury to or the death of another. The commission felt this concern was unwarranted. Paragraph (c)(3) is no more than one among several equal factors to be considered. This rule is adopted under the Alcoholic Beverage Code, Chapter 5, Subchapter B, sec.5.31 and Chapter 11, Subchapter A, sec.11.64. Cross Reference to Statute: The following provisions of the Alcoholic Beverage Code are affected by this rule: sec.sec.11.61, 11.64, 22.12, 28.11, 61.71, 61.74, 69.13, 71.09, 101.63, 106.03 and 106.06. sec.37.61. Suspensions. (a) The administrator may deny a licensee or permittee the option of paying a civil fine in lieu of a suspension of the license or permit if the licensee or permittee has violated one or more of the following provisions of the Alcoholic Beverage Code: (1) sec.11.61(b)(14): sale to an intoxicated person by a permittee; (2) sec.22.12: breach of the peace on the premises of a package store; (3) sec.28.11: breach of the peace on the premises of a mixed beverage permittee; (4) sec.61.71(a)(5): sale to a minor by a licensee; (5) sec.61.71(a)(6): sale to an intoxicated person by a licensee; (6) sec.61.74(a)(14): sale to a minor by a licensee; (7) sec.69.13: breach of the peace on the premises of an on-premise retail beer dealer; (8) sec.71.09: breach of the peace on the premises of an off-premise retail beer dealer; (9) sec.101.63: sale to an intoxicated person; (10) sec.106.03: sale to a minor; (11) sec.106.06: purchase of alcohol for a minor; (12) or any offense relating to gambling or prostitution. (b) In determining whether to deny a licensee or permittee the right to pay a civil penalty in lieu of a suspension, the administrator shall consider: (1) the type of permit or license held by the violating licensee or permittee and whether the sale of alcoholic beverages constitutes the primary or partial source of the licensee or permittee's business; (2) the type of violation or violations charged; (3) the licensee's or permittee's record of past violations; and (4) any aggravating or ameliorating circumstances. (c) Aggravating or ameliorating circumstances may include but are not limited to: (1) whether the violation was caused by intentional or reckless conduct by the licensee or permittee; (2) the number, kind and frequency of violations of the Alcoholic Beverage Code and rules of the commission committed by the licensee or permittee; (3) whether the violation caused the serious bodily injury or death of another; and/or (4) whether the character and nature of the licensee's or permittee's operation are reasonably calculated to avoid violations of the Alcoholic Beverage Code and rules of the commission. 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 December 5, 1997. TRD-9716318 Doyne Bailey Administrator Texas Alcoholic Beverage Commission Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 206-3304 TITLE 22. EXAMINING BOARDS PART IX. Texas State Board of Medical Examiners CHAPTER 161. General Provisions 22 TAC sec.161.1 The Texas State Board of Medical Examiners adopts an amendment to sec.161.1, concerning meetings, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10229) and will not be republished. The amendment is necessary because a new committee was created to oversee the practice of telemedicine. The amendment will outline the responsibilities of the committee. No comments were received regarding adoption of the amendment. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716171 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-7016 CHAPTER 163. Licensure 22 TAC sec.163.16, sec.163.17 The Texas State Board of Medical Examiners adopts new sec.163.16 and sec.163.17, concerning licensure, without changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9211) and will not be republished. The new sections are adopted as a result of Senate Bill 1295, 75th Legislature. The sections relate to licensure of certain international medical graduates who have successfully completed a fifth pathway program. No comments were received regarding adoption of the new rules. The new sections are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716172 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 305-7016 CHAPTER 165. Medical Records The Texas State Board of Medical Examiners adopts the repeal of sec.165.1 and sec.165.2 and new sec.sec.165.1-165.3, concerning medical records, patient access to diagnostic imaging studies in physician's office, and medical record release and charges. The repeal of sec.165.1 and sec.165.2 and new sec.165.2 and sec.165.3 are adopted without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10230) and will not be republished. New sec.165.1 is adopted with nonsubstantive changes. Senate Bill 1607, 75th Legislature, mandates that rules be written to define requirements for medical record retention. Reorganization of the chapter was felt necessary, therefore new sections are adopted with simultaneous repeals of existing language. No comments were received regarding adoption of the repeals. The following comments were received regarding sec.sec.165.1-165.3: One comment was received from Texas Medical Association (TMA). This organization requested the deletion of the provision in the rule requiring a physician to release billing records pertaining to medical treatment of a patient if specifically requested to do so. This organization maintained that billing records are different from medical records and therefore are not necessarily governed by the Medical Practice Act. This organization maintained that a billing record is a business record of a professional and is clearly distinguishable from records that are created and maintained relating to the clinical history and needs of a patient. This group commented that the decision whether or not to release business records should remain within the discretion of the physician. The following are the reasons why the Board disagrees with the submissions and proposals set forth above: The comments are not germane, as they do not pertain to a provision which is being altered. The referenced provision is already in effect under current board rules and will be unaffected by the proposed rule changes. 22 TAC sec.165.1, sec.165.2 The repeals are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 5, 1997. TRD-9716388 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-7016 22 TAC sec.sec.165.1-165.3 The new sections are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. sec.165.1. Medical Records. (a) Each licensed physician of the Board shall maintain an adequate medical record for each patient. For purposes of this section, "adequate medical record" shall mean any records documenting or memorializing the history, diagnosis, and treatment of any patient. (b) A licensed physician shall maintain adequate medical records of a patient for a minimum of seven years from the anniversary date of the date of last treatment by the physician. (c) If a patient was younger than 18 years of age when last treated by the physician, the medical records of the patient shall be maintained by the physician until the patient reaches age 21 or for seven years from the date of last treatment, whichever is longer. (d) A physician may not destroy medical records that relate to any civil, criminal or administrative proceeding if the physician knows the proceeding has not been finally resolved. (e) Physicians shall retain medical records for such longer length of time than that imposed herein when mandated by other federal or state statute or regulation. 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 December 5, 1997. TRD-9716387 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 29, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-7016 CHAPTER 166. Physician Registration 22 TAC sec.166.2 The Texas State Board of Medical Examiners adopts an amendment to sec.166.2, concerning continuing medical education, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10232) and will not be republished. The amendment defines which continuing medical education courses involve the study of medical ethics and/or professional responsibility. No comments were received regarding adoption of the amendment. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716173 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-7016 CHAPTER 174. Telemedicine 22 TAC sec.174.16 The Texas State Board of Medical Examiners adopts new sec.174.16, concerning registration requirements, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10233) and will not be republished. The new section will outline the annual registration and continuing medical education requirements for those persons who hold a special purpose license for practice of medicine across state lines. No comments were received regarding adoption of the new rule. The new section is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716174 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 305-7016 CHAPTER 175. Schedule of Fees and Penalties 22 TAC sec.175.1 The Texas State Board of Medical Examiners adopts an amendment to sec.175.1, concerning fees, without changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9213) and will not be republished. The amendment is adopted to increase physician annual registration fees by $10. In order to meet legislative requirements, the agency will need to generate additional revenue. No comments were received regarding adoption of the amendment. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495(b), sec.2.09(a) which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations, and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716175 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 305-7016 CHAPTER 179. Investigation Files 22 TAC sec.179.4 The Texas State Board of Medical Examiners adopts an amendment to sec.179.4, concerning other reports, without changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9213) and will not be republished. The amendment is necessary due to recently enacted legislation. Senate Bill 1566, 75th Legislature requires peer review committees on health care entities to report professional review action that adversely affects clinical privileges of the physician assistant or acupuncturist. No comments were received regarding adoption of the amendment. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495(b), sec.209(a) which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations, and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716176 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 305-7016 CHAPTER 185. Physician Assistants 22 TAC sec.sec.185.2, 185.4, 185.6, 185.19 - 185.23, 185.25 The Texas State Board of Medical Examiners adopts amendments to sec.sec.185.2, 185.4, 185.6, 185.19, 185.20, 185.22, 185.23, 185.25, the repeal of sec.185.21 and new sec.185.21, concerning physician assistants, without changes to the proposed text as published in the September 26, 1997, issue of the Texas Register (22 TexReg 9590) and will not be republished. The amendments update the definition for physician assistant; add documentation requirements for licensure; clarify documentation which shall be submitted as part of the renewal process; update grounds for denial of licensure and for disciplinary action; add reporting requirements for investigations and update Prehearing procedures. Section 185.21 is being repealed and replaced by new sec.185.21 in order to remove the existing language and to add new information regarding Administrative Penalty for Physician Assistants. No comments were received regarding adoption of the rules. The amendments and new rule are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495(b), sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations, and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act, and the Physician Assistant Licensing Act, Texas Civil Statutes, Article 4495b-1, sec.23, which authorizes the Texas State Board of Physician Assistant Examiners to adopt reasonable and necessary rules for the performance of its duties. 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 December 3, 1997. TRD-9716177 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 305-7016 22 TAC sec.185.21 The repeal is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495(b), sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations, and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act, and the Physician Assistant Licensing Act, Texas Civil Statutes, Article 4495b-1, sec.23, which authorizes the Texas State Board of Physician Assistant Examiners to adopt reasonable and necessary rules for the performance of its duties. 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 December 3, 1997. TRD-9716178 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 26, 1997 For further information, please call: (512) 305-7016 CHAPTER 193. Standing Delegation Orders The Texas State Board of Medical Examiners adopts the repeal of sec.sec.193.1- 193.5, 193.8, 193.9 and new sec.sec.193.1-193.7, concerning standing delegation orders, without changes to the proposed text as published in the September 12, 1997, issue of the Texas Register (22 TexReg 9216) and will not be republished. The sections are repealed and replaced to re-organize and renumber the sections in Chapter 193. The sections are re-organized in accordance with House Bill 2846 and Senate Bill 1566. The following comment was received regarding sec.193.6: The Coalition for Nurses in Advanced Practice - This organization recommended a change in the language regarding on site physician visits, sec.193.6(b)(2). This organization proposed the following language for the rule: "(2) visits the clinic at least once every ten days that the advanced practice nurse or physician assistant is on site providing care, and that the visits occur during regular business hours to observe and provide medical direction and consultation to include, but not limited to..." This organization comments that this change in language will avoid confusion about the required frequency of visits. This organization noted that the language in House Bill 2846 was specifically written to ensure that rules did not require the physician to be on site more frequently than the nurse practitioner or physician assistant. This organization noted that it is very important the rule clearly states that the frequency of physician visits is based on the number of days the nurse practitioner or physician assistant is at that site, rather than the number of days that the clinic is open. The following are the reasons why the Board disagrees with the submissions and proposals set forth above: The rule as proposed by the Board tracks the language of House Bill 2846. The primary change in the proposed Board Rule from the specific wording of House Bill 2846 is the addition of the phrase "during regular business hours." The additional language does not alter the plain meaning of the rule as originally written in House Bill 2846 and therefore the intent of that legislation is properly preserved. The addition of this language to the text as written in House Bill 2846 will not result in confusion regarding the required frequency of visits. 22 TAC sec.sec.193.1 - 193.5, 193.8, 193.9 The repeals are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716179 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 305-7016 22 TAC sec.sec.193.1-193.7 The new sections are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provides the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716180 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: September 12, 1997 For further information, please call: (512) 305-7016 22 TAC sec.193.7 The Texas State Board of Medical Examiners adopts the repeal of sec.193.7, relating to registration requirements for radiological technologists, without changes to the proposed text as published in the August 26, 1997, issue of the Texas Register (22 TexReg 8521) and will not be republished. In order to implement provisions of the Medical Radiologic Technologists Certification Act, Texas Civil Statutes, Article 4512m, extensive rewrite of the section was felt necessary. In addition, the new sections are adopted as a new Chapter 194, sec.sec.194.1-194.11. No comments were received regarding adoption of the repeal. The repeal is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716181 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: August 26, 1997 For further information, please call: (512) 305-7016 CHAPTER 194. Non-Certified Radiologic Technicians 22 TAC sec.sec.194.1-194.11 The Texas State Board of Medical Examiners adopts new sec.sec.194.1-194.11, regarding non-certified radiologic technicians, without changes to the proposed text as published in the August 26, 1997, issue of the Texas Register (22 TexReg 8521) and will not be republished. The new sections were contemporaneously proposed in the emergency section of the August 26, 1997, issue of the Texas Register (22 TexReg 8480). The new sections outline the requirements for registration and disciplinary action relating to persons who perform radiologic procedures under the supervision of licensed physicians. The new sections are adopted to implement the provisions of the Medical Radiologic Technologist Certification Act, Texas Civil Statutes, Article 4512m. The adoption is submitted with simultaneous repeal of board sec.193.7, regarding radiologic technologists. No comments were received regarding adoption of the new rules. The new sections are adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this Act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this Act. 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 December 3, 1997. TRD-9716182 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: December 23, 1997 Proposal publication date: August 26, 1997 For further information, please call: (512) 305-7016 TITLE 25. HEALTH SERVICES PART XVI. Texas Health Care Information Council CHAPTER 1301. Health Care Information Collection and Reporting of Race, Ethnicity and Patient Identifying Information; Definition of Provider 25 TAC sec.sec.1301.11, 1301.12, 1301.14-1301.19 The Texas Health Care Information Council (Council) adopts amendments to sec.sec.1301.11, 1301.12, and 1301.14-1301.19, concerning procedures hospitals must follow to report discharge data, and, in certain circumstances, to obtain exemptions from discharge data reporting requirements. Amended Sections 1301.11, 1301.16, 1301.18 and 1301.19 are adopted with changes to the proposed text as published in the September 19, 1997, issue of the Texas Register (22 TexReg 9427). Amended sec.sec.1301.12, 1301.14, 1301.15 and 1301.17 are adopted without changes and will not be republished. The amended sections are adopted, in part, to implement the requirements of Senate Bill 802 enacted by the 75th Texas Legislature. The amended sections also clarify inconsistencies in the Council's original hospital discharge data rules published in the August 12, 1997, issue of the Texas Register (22 TexReg 7490). Changes in the adopted amendments respond to public comments or otherwise reflect non-substantive variations from the proposed amendments. The Council's representative from the Office of the Attorney General has advised that the changes affect no new persons, entities, or subjects other than those given notice and that compliance with the adopted sections will be less burdensome than under the proposed sections. Accordingly, republication of the adopted sections as proposed amendments is not required. Amended sec.1301.11 defines the terms "Data format," "Ethnicity," "Health benefit plan," "Other exempted provider," "Race," "Risk adjustment," and "Severity adjustment," and amends the definitions of the terms "Provider," "Rural provider" and "Uniform patient identifier." The amendments to sec.1301.12 recognize that hospitals are to send revised bills to the Council if they have issued revised bills to payers and recognize that the Texas Department of Health (TDH) is the Council's agent in the event that the audit of hospital data is necessary. Amended sec.1301.14 reflects a punctuation correction and submission formatting requirements for nine track tapes. The amendments to sec.1301.15 clarify when hospitals who have lost their exemptions as rural providers or other exempted providers must begin reporting discharge data. The amendments to this section also allow hospitals to obtain exceptions from reporting discharge data in standard formats upon demonstrating that their alternative formats are uniformly accepted by payers or others to whom the hospitals report data for complementary purposes. The amendments to sec.1301.16 are non substantive and self explanatory. The amendments to sec.1301.17 authorize hospitals, physicians, or other health providers to submit written comments relating to services they have delivered prior to the release by the Council of public use data. Amended sec.1301.18 describes certain codes and identifiers to be used for the creation of the public use data file, describes the data elements in each public use data file, eliminates statistical compilation requirements, and provides for making comments relating to professional services available at the Council's offices and on its Internet site. Finally, the amendments to sec.1301.19 describe acceptable electronic and paper formats for submitting hospital discharge data, add patient race, ethnicity, Social Security Number, and street address to the list of required reporting, and assign sources of payment codes. The Council conducted a public hearing on the proposed amendments in Austin, Texas, on October 9, 1997. Additionally, the Council received written comments on the proposed amendments. All comments are addressed in this preamble. Consumer's Union expressed general support for the amendments, except as specifically noted below. The Council appreciates the comments of State Representative Glen Maxey. His comments and the Council's responses are noted in the discussions of sec.1301.11 "Rural provider," sec.1301.15(a)(4) and sec.1301.18. Preamble. Costs of Compliance One commenter stated that the total cost of compliance, to both health care institutions and to the Council, was underestimated. The commenter states that the Council's projected cost of $522,667 set out in the proposed amendments' preamble does not include the technical costs associated with collecting race, ethnicity, Social Security or reporting the source of payment codes. This commenter suggested that their hospital would estimate technical costs for the first year at $13,000 to $15,000 (64,000 discharges per year calculates to approximately 20-23 cents per discharge) with subsequent yearly costs of $4,000 to $5,000 (6-8 cents per discharge). The commenter assumed that if each of 330 hospitals spend equal amounts for technical costs the estimated costs for all the hospitals would be at least $4.29 million for the first year and $1.32 million for subsequent years. The Council disagrees with this comment. While the commenter's technical cost of 20-23 cents per discharge may be reasonable, the projected cost of $4.29 million for 330 Texas hospitals is not. For the cost to reach this figure, the 330 Texas hospitals would need 21,120,000 discharges. This figure is approximately 9.4 times the number of Texas discharges in 1995, according to the statistics of the American Hospital Association. The Council is aware that the number of discharges has been decreasing annually for the past several years. Accordingly, it is reasonable to assume that the total discharges in the first year of the amendments will be less than 2.24 million. If we assume 2.24 million discharges at a cost of 23 cents per discharge, the total technical costs for the first year could not exceed $515,200. If these technical costs are added to the $522,667 annual compliance costs determined by the Council in the preamble to the proposed amendments, the total compliance cost to hospitals should not exceed $1,037,867 in the first year and $701,867 ($522,667 + (8 cents times 2.24 million discharges)) in the second through fifth years. This commenter suggested that the Council significantly underestimated the costs the Council would incur to implement and maintain the data collection system and noted that it expects the Council to reimburse it for its actual costs in submitting data to the Council, pursuant to the Texas Health & Safety Code, sec.241.154. The Council disagrees. The Council lacks statutory authority to reimburse hospitals for their costs of providing records. One commenter suggested that the Council could defray some of the projected costs, by allowing those hospitals with the resources and ability to do so, to submit their discharge data in a "clean" format. The Council believes that all hospitals who are required to submit discharge data should furnish identical data to the Council. Memorial Hospital System commented against the Preamble's cost projections. sec.1301.11. Definitions. Race and Ethnicity One commenter requested that the rules not require hospitals to furnish ethnicity information if the patients neither furnished the information nor were required to furnish it by law. This commenter also objected to singling out a single ethnic class--Hispanic. The Council disagrees. Texas Health & Safety Code, sec.108.009(k) requires the Council to collect health care data elements relating to the racial and ethnic background of patients. The Council believes that the classification of Texas patients according to their status relative to a Hispanic background is a reasonable one and notes that the United States Department of Commerce, Bureau of the Census classifies Hispanic origin as the single ethnic category. The 1990 Census lists Texas as having 4,339,905 persons of Hispanic origin out of 16,986,510 people, roughly 25.5% of the Texas population. One commenter recommended expanding the patient race and ethnicity categories to include Hispanic because Hispanic people would not be appropriately identified. The Council disagrees. The US Department of Commerce, Bureau of the Census classifies Hispanic origin as a distinct category. The 1990 Census of Texas has people of Hispanic origin subcategorized by race: White - 2,483,082 Black - 45,272 American Indian, Eskimo or Aleut - 13,074 Asian or Pacific Islander - 15,634 Other race - 1,782,843 Another commenter suggested that collecting ethnicity would cause the hospital to program in an additional field to all their registration screens. The Council agrees this may occur with some hospital systems but notes that the Council is required by statute to collect race and ethnicity data. One commenter recommended that the Council delete ethnicity as a required data element. The Council disagrees. The Council is required to collect the race and ethnic background of patients. The Council understands that collecting the additional data elements creates additional expenses -programming of computer systems, additional time (data collection and entry) and personnel- upon the hospitals. The Council chose formats and media that were currently in use by the Medicare and Medicaid programs (roughly 55% of the claims). One commenter recommended that race and ethnicity be included only in a research file or suppressed in the public use file to have a low incidence level to protect patient confidentiality. The Council disagrees. Other sections of these rules adequately protect patient confidentiality. For example, sec.1301.18 requires the deletion of patient identifying information before releasing the public use data file. One commenter currently reports patient race and ethnicity as follows: A = Asian, B = Black, H = Hispanic, l = American Indian, W = White, 0 = Other. Changing to another code list would be a massive and costly undertaking which could delay their ability to report as scheduled. The Council agrees that changing to another code list may be costly. Senate Bill 802 requires the Council to collect race and ethnic background on patients. The Council is unable to design categories that will be the least costly to all hospitals. The Council has chosen a list that closely resembles the United States Department of Commerce, Bureau of the Census, coding system. The system chosen by the Council is also used in California. The Council believes that overall the race and ethnicity categories it has chosen will provide useful data at a reasonable cost of compliance. The following entities commented against this amendment: The Texas Department of Mental Health and Mental Retardation, Brazosport Memorial Hospital, Memorial Healthcare System and Dallas-Fort Worth Hospital Council. Rural Provider Three commenters requested a clarification of the definition for "rural provider." The Council agrees. The definition as proposed omitted several words where used in Senate Bill 802. The Council has also added language to track the statute's definition. The Texas Hospital Association, Gonzales County Hospital District and Representative Maxey commented against the definition as proposed. Risk Adjustment and Severity Adjustment One commenter stated that the rules fail to identify a specific mechanism and/or algorithm that will be used by the Council to calculate risk adjustment or severity adjustment. The Council is unaware of a statutory requirement that this information is to be included in the rules. The commenter stated that the rules do not state whether the calculation will be performed by the Council or by the submitting facility. The Council disagrees. Section 1301.18(c) states that risk and severity adjustment scores utilizing an algorithm approved by the Council shall be added. The Executive Director or the Director's agent shall perform the calculation. The commenter stated that the rules fail to identify the submitted information in the discharge data that is submitted to the Council and which information upon which the calculations for risk and severity adjustment are to be based. The Council is unaware of a statutory requirement that this information is to be included in the rules. Memorial Hospital System commented against the proposed amendment. Inpatient One commenter recommended that skilled nursing facility (SNF) units in acute care hospitals should not be required to report hospital discharge data -- unless free standing SNF's are required to report to the Council. The Council disagrees with the commenter. Legislation is necessary to require free standing SNF's to report to the Council. Methodist Hospital commented against this amendment. sec.1301.12. Collection of Hospital Discharge Data. One hospital commented that the Council lacks authority to collect patient names and patient-identifying information. This commenter expresses the view that had the Legislature intended to for the Council to collect patient names and other patient-identifying information, the Legislature would have specifically identified such a requirement in the law. The hospital noted that health care information which identifies patients is protected from disclosure "to any person...without the written consent of the patient..." (Citing Texas Health & Safety Code Annotated, sec.241.152(a) West 1997, as amended by Senate Bill 975). The Council disagrees. Health & Safety Code Annotated, sec.241.153(9) authorizes hospitals to release patient health care information to state agencies without the patient's consent "to the extent authorized or required by law." The Council further notes that under sec.108.013(b) of its enabling legislation, the Council is to develop "uniform patient identifiers." Patient identifying information is needed by the Council for it to develop these unique numbers. Additionally sec.108.013(c)(1), (d), (e), and (g) protect the confidentiality of patient identifying information in the Council's possession. If the legislature had not contemplated that the Council would come into possession of patient identifying information, then no need would have existed for the legislature to protect the information from disclosure by the Council. This hospital also noted that the Council has not presented any reason that substantiates the inclusion of patient identifying information. The Council responds as follows: (1) The Council is charged with the responsibility of developing uniform patient identifier numbers. Patient identifying information is needed to develop the identifiers. (2) Patient identifying information is needed to track subsequent hospital admissions for related conditions. (3) The possibility exists that a hospital might submit altered data if allowed to mask data in some fashion. In this connection the Council notes that sec.108.007 of the Council's enabling legislation authorizes the Council, through the Department of Health, to inspect documents and records and to compel providers to provide accurate documents and records. The Council believes that the furnishing of patient identifying information is one safeguard, along with others set out in its rules, for assuring the receipt of unaltered data. Three commenters also commented that 42 United States Code, sec.290dd-2(a) prohibits hospitals from releasing records of substance abuse patients to the Council. The Council disagrees. The Council is obligated by sec.108.006(9)(D) of its enabling legislation to furnish reports to the governor, the legislature and the public on "the quality and effectiveness of health care and access to health care for all citizens of this state." If the Council is unable to collect information regarding substance abuse patients, it will be unable to comply with its statutory obligation noted above. Additionally, on May 16, 1997 the Council, through its then acting Executive Director, Jim Loyd, requested clarification of the impact of the federal law, 42 United States Code 290dd-2, and the federal confidentiality regulations, 42 Code of Federal Regulations (CFR) Part 2, on the Texas effort to collect comprehensive hospital discharge data. On June 25, 1997, Mr. David Mactas, Director, Center for Substance Abuse Treatment, United State Department of Health & Human Services wrote the Council and advised that if the State is collecting the data for "research or evaluation" purposes, "patient identifying information" may be disclosed. Mr. Mactas enclosed a written opinion dated in 1995 from Karen S. Wagner, Senior Attorney, Office of the General Counsel, Office of the Secretary, for the United States Department of Health and Human Services, to Mr. John Bryant, Acting Assistant Secretary for Alcohol, Drug Abuse and Mental Health, Florida Department of Health and Rehabilitative Services, which concluded that substance abuse programs may report patient social security numbers to the State of Florida, under the "audit and evaluation" exception of 42 CFR sec.2.52. The Council concludes that its statutory authority under sec.108.007 of its enabling legislation to inspect documents and records and to compel providers to provide accurate documents and records bring the State of Texas under the "audit and evaluation" exception as well. Accordingly Texas programs may submit patient identifying information for substance abuse treatment without risk of violating federal law. One commenter suggested that the hospitals should have the option of submitting a single discharge file, irrespective of the number of interim bills submitted, to reduce the cost and complexity of data submission. The Council disagrees and believes that the submission of all patient bills is a reasonable safeguard to insure data integrity. The Council will consolidate the interim, revised and final bills and create a single consolidated discharge file for the reporting quarter. One commenter suggested that the Council should consider alternatives to the collection of patient identifiers such as Social Security Number, name, and street address. The commenter recommended encryption of patient identifiers prior to the submission of the data to the Council. The encryption software would have to be standardized and should be furnished to providers by the Council. The Council believes that its enabling legislation contains adequate safeguards to protect the confidentiality of patient identifying information. Further, the Council lacks sufficient funding to purchase the encryption software for all hospitals. One commenter requested that the Council clarify hospital and provider liability, specific to breaches of patient confidentiality and data security which occur after hospitals furnish data to the Council. The Council is unable to address this issue which is not specific to the proposed amendments. One commenter recommended that the uniform patient identifier not be included in the Public Use Data file because of the potential linking, misuse, and possible loss of patient confidentiality. The Council notes that sec.108.002 of the Council's enabling legislation defines "Public Use Data" and requires that patients be identified by use of uniform patient identifiers. One commenter suggested a grammatical change to clarify whether or not the Department of Health is the agent of Council in collecting and verifying the accuracy of data. The Department of Health will be acting as the Council's agent in the process, and the amendment as proposed makes this relationship clear. The Texas Hospital Association, Memorial Healthcare Systems, Methodist Hospital, and the Dallas-Fort Worth Hospital Council commented against this section. Consumers' Union also commented on this section: Its comment is best characterized as neither for nor against but as seeking clarification. No comments were received regarding adoption of sec.1301.14 sec.1301.15. Exemptions from Filing requirements. Several commenters supported and recommended the adoption of sec.1301.15(a)(4) citing that it recognizes the legislative intent of sec.108.009(h) in Senate Bill 802 of the 75th Texas Legislature. The Council agrees with the commenters and believes that the proposed amendment implements legislative intent in accepting universally accepted electronic formats. The Council recognizes the HCFA UB-92 Electronic Format (Versions 004.1 and 004.0) and ANSI X.12 form 837 as the only two universally accepted electronic formats. The Council reminds the hospitals that sec.1301.12(c) requires all hospitals to file electronically, unless they receive an exemption from the Council. One commenter supports the language in sec.1301.15(a)(4) mandating hospitals submitting discharge reports to submit the same required data elements as those submitting electronically, so as to obtain a full picture of health care needs in Texas. The Council recognizes the need to obtain the same data elements from all providers regardless of the format or media of submission. One commenter sought clarification regarding the time of filing initial discharge reports when hospitals lose their exemption from filing. The initial discharge report will be due 90 days after the Hospital receives notice from the executive director that the exemption has been lost. The following entities or organizations commented for the proposed amendment: Texas Conference of Catholic Health Facilities, Dallas-Fort Worth Hospital Council, The Texas Hospital Association and Consumers' Union. sec.1301.16 Acceptance of Discharge Reports and Correction of Errors. One commenter wanted clarification as to how discharge reports that require correction would be returned to the provider. The Council agrees with the commenter and has added language to sec.1301.16(b) providing that the executive director shall return the rejected discharge report in the same approved format and media that the discharge report were originally submitted to the Council. Methodist Hospital commented on this section. sec.1301.17 Certification of Discharge Reports. One commenter acknowledged the safeguards incorporated into the September 1997 Hospital Discharge Data Rules that will prevent and/or eliminate the submission of "bad" or "fraudulent" information in sec.sec.1301.12(b), 1301.12(g) and 1301.17(b). The Council agrees with the commenter that these sections will provide safeguards against the incidence of "bad" or "fraudulent" data. A commenter recommended that the Council issue a certification upon the release of data to the public. The Council disagrees with the commenter because the Council is required by sec.108.010(c) to give the providers reasonable review and allow for comments to be added before the initial release of the provider quality data and sec.108.011(f) requires the Council to give the providers reasonable review and allow for comments to be added before reports that involve the provider are released to the public. One commenter noted that the provider comments section specified in sec.1301.17(e) contained no length limitation and the impact of comments could be significant on computer disk space. The Council is aware that sec.108.010(e) and sec.108.011(e) of its enabling legislation authorize it to adopt rules providing for "concise written comments." The Council chooses at this time, however, not to place length limitations on the comments. If experience shows that the comments are unduly lengthy or that they tend to negatively impact the value of the provider quality or public use data, the Council will consider placing reasonable length limitations in its rules at a later date. One commenter welcomed the additional opportunity to respond to the data and submit comments prior to public release. The commenter stated that hospitals favor including severity scores, risk scores and teaching hospital identifiers. The Council has not determined how the data will be presented back to the providers for comment or whether severity scores, risk scores and teaching hospital identifiers will be attached. The Dallas-Fort Worth Hospital Council commented in favor of this section. Memorial Healthcare Systems commented for this section as it relates to providing safeguards against the submission of bad data. Memorial commented against this section regarding the lack of limitations on comment length. Methodist Hospital commented against this section. sec.1301.18. Hospital Discharge Data Release. A commenter stated that the creation of codes of geographic regions, payers and providers for the public use tape may limit access unless the Council provides a key to the codes. The Council agrees and has added language in sec.1301.18(b)(2), (3), and (4), respectively, to indicate that zip codes, payer codes and facility identifiers shall be included with each public release. One commenter stated that the Council has not yet identified the computer hardware, software, or the security system that it will use to maintain the hospital discharge data database. Neither has the Council determined whether it will maintain one large data base, with public access being limited to one portion of it, or whether there will be two data bases, with public access limited to the data base modified by the Council pursuant to sec.1301.18(c). The Council agrees that the these systems are not established. The Council is deliberating the question and receiving bids for the data warehouse operation. A commenter suggested that making data available on the Internet increases the risk of intentional or inadvertent release of patients' confidential information. The Council agrees and is establishing measures to protect patient confidentiality. Sections 108.011(g) and 108.010(e) of the Council's enabling legislation require the Council to utilize the Internet. Several commenters expressed concern about breaching patient confidentiality of Psychiatric and Substance Abuse patients, citing that the Council's records are "public record" and indicating patients that were treated in psychiatric or substance abuse hospitals would be in violation of federal statutes. The Council is unaware of a confidentiality statute that prevents providers from furnishing psychiatric records to the Council. The Council disagrees. The Council is obligated by sec.108.006(9)(D) of its enabling legislation to furnish reports to the governor, the legislature and the public on "the quality and effectiveness of health care and access to health care for all citizens of this state." If the Council is unable to collect information regarding substance abuse patients, it will be unable to comply with its statutory obligation noted above. Additionally, on May 16, 1997 the Council , through its then acting Executive Director, Jim Loyd, requested clarification of the impact of the federal law, 42 United States Code 290dd-2, and the federal confidentiality regulations, 42 CFR Part 2, on the Texas effort to collect comprehensive hospital discharge data. On June 25, 1997, Mr. David Mactas, Director , Center for Substance Abuse Treatment, United State Department of Health & Human Services wrote the Council and advised that if the State is collecting the data for "research or evaluation" purposes, "patient identifying information" may be disclosed. Mr. Mactas enclosed a written opinion dated in 1995 from Karen S. Wagner, Senior Attorney, Office of the General Counsel, Office of the Secretary, for the United States Department of Health and Human Services, to Mr. John Bryant, Acting Assistant Secretary for Alcohol, Drug Abuse and Mental Health, Florida Department of Health and Rehabilitative Services, which concluded that substance abuse programs may report patient social security numbers to the State of Florida, under the "audit and evaluation" exception of 42 CFR sec.2.52. The Council concludes that its statutory authority under sec.108.007 of its enabling legislation to inspect documents and records and to compel providers to provide accurate documents and records bring the State of Texas under the "audit and evaluation" exception as well. Accordingly Texas programs may submit patient identifying information for substance abuse treatment without risk of violating federal law. A commenter suggested that the Council should address the responsibilities and the methodology for ensuring the both patient confidentiality and accuracy of data release in sec.1301.18. The Council released a Request for Offers for the data warehouse project on November 18 and will be receiving applications until December 15, 1997. The selection of a contractor is expected to occur January 15, 1998 with the system implemented by March 15, 1998. The Council will be able to provide a more detailed response to the responsibilities and methodologies of ensuring patient confidentiality and accuracy of the data at a later date. Two commenters stated that the rules fail to identify a specific mechanism and/or algorithm that will be used by the Council to calculate risk adjustment or severity adjustment. One commenter recommended that the Council choose a risk and severity adjustment scoring methodology that appropriately accounts for the severity of cases that academic medical centers receive from rural and other urban hospitals and that statistical outliers be handled in an acceptable manner. The Council agrees with the commenters. The Council does not agree, however, that the specific mechanism or algorithm must be included in the rules. The rules need only to establish the methodology and review process. The Council assigned the Quality Methods and Consumer Education Technical Advisory Committee (QM&CE TAC) responsibility to recommend an appropriate risk and severity adjustment system. The QM&CE TAC recommended the 3M Corporation All Patient Refined-Diagnosis Related Grouper (APR-DRG), and the Council accepted the recommendation. The Council is making the necessary arrangements to have this product installed and utilized for public release of data. The Council is also required by sec.108.010(f) of its enabling legislation to adopt a methodology for measuring quality that includes case-mix qualifiers, severity adjustment factors, adjustments for medical education and research, and any other factors necessary to accurately reflect provider quality. The Council plans to have the QM&CE TAC and the Health Information Systems Technical Advisory Committee (HIS TAC) address these topics and include how "outliers" will be handled. One commenter suggested that the Council consider alternative ways (that ensure patient confidentiality) of reporting the geographic identifier of individual patients. The commenter stated that the method mandated by the legislature of aggregating individual patient zip code severely limits the consumer's ability to do market share research, utilization studies and strategic planning. The Council notes that this subject is a matter for the legislature. One commenter recommended that the date for release of information to the public be adjusted, to ensure the credibility of the Council's database. The Council notes that the date for public release was chosen by the Council when the original hospital discharge data rules were adopted on July 29, 1997. The date is not a subject of these proposed amendments. One commenter suggested that the Executive Director should delete Social Security Number along with the Patient's and Insured Name, address and certificate data elements (for example: patient control number and medical record number) from the public use data file. The Council agrees with the commenter and has added language to sec.1301.18(c)(1) to delete Social Security Number in order to protect patient confidentiality. A commenter recommended that codes for identifying geographic regions, providers, and payers be attached to the public use data information. The Council agrees with the commenter and has added language to sec.sec.1301.18(b)(2), 1301.18(b)(3), and 1301.18(b)(4) to ensure that geographic regions, providers and payers are able to be identified. Two commenters opposed the deletion of the reference to the term "statistical compilations" in sec.1301.18(g), stating that its inclusion does not obligate the Council to additional requirements. The Council responds that it does not wish to portray to the public the ability to perform statistical compilations not required by statute. The Council at the present time has neither the funding nor the staff to perform these compilations. A commenter expressed concern that the Council was attempting through these amendments to make matters confidential in the public use data file that were not declared to be confidential in the Council's enabling legislation. The Council responds that only matters declared confidential by statute will be treated as confidential in the public use data file. A commenter noted clerical errors in the lettering and numbering of the subsections following subsection (d) in sec.1301.18. The Council agrees. The amended section corrects the errors. Consumers' Union, Dallas-Fort Worth Hospital Council, Memorial Hospital System, Methodist Hospital, and one individual commented against this section. sec.1301.19. Discharge Reports - Records, Data Fields and Codes. Three commenters recommended that a coding system be used to identify the reason a patient does not have a Social Security Number. The Council agrees with the commenters and has added language and a coding system to reduce space needed for comments and to allow ease of data submission and analysis. The Council is including these acceptable codes: F = Foreign National, N = Newborn, O = Other, R = Patient refused to answer or respond. These codes will be placed in Form Locator 2 on the HCFA 1450 paper format and in Record Type 22, Field 6, Beginning Position 56 for the UB-92 Electronic Format (Version 004.1 or 004.0). One commenter suggested that the patients should be the only ones to answer the question about their race and ethnic background; another commenter wanted to know whether the hospital staff must ask the patient verbally about their race and ethnicity or could they request the information by having the patient fill out a questionnaire. The amended section as adopted allows hospitals to choose either method. If the patient is unresponsive or chooses not to give an answer, the hospital staff should use its best judgement. For example, if there is a high degree of confidence regarding race and ethnicity then staff should record its estimate; if there is a low degree of confidence, the field should be left blank. One commenter recommended that the rules should recognize a primary and secondary payment source. The Council agrees but refrains from making the change in the adopted amendment because counsel has advised that the change is a substantive one requiring notice to affected entities. The Council will consider the proposal of an amended rule at a later date. The same commenter also recommended that the category "Charity/Self Pay" should be two distinct categories. The Council agrees with this comment and has created two separate categories for reporting this data. The code will be "Z" for Charity pay. Nonstandard codes will be reported in Record 22, Field 9, Position 111. The Council has changed all references to 22 in the Record Type in the adopted amendment. The adopted amendment also directs the line placement for paper submissions. These changes are not in response to comments. A commenter suggested that the Council is collecting data that duplicates the information collected by other state agencies and the Joint Commission on Accreditation of Healthcare Organization (JCAHO). The commenter stated that the Council is prohibited by sec.108.006(a)(4) of the Council's enabling legislation from duplicating other data collection required by state or federal law, by an accreditation organization, or by board rule. The Council disagrees that the data to be reported to it duplicates existing data collection efforts. The currently recognized collection efforts do not provide all information that the Council is mandated to collect and report on: For example, Hospitals submit aggregated data to the JCAHO ORYX database. Each hospital is allowed to choose one of ninety-nine (JCAHO) approved systems on which to submit the data. Therefore, while some data may be duplicative, all essential elements would not. Race and ethnicity elements required to be collected by Senate Bill 802 would not necessarily be reported to JCAHO. Also, the data would not allow for assigning uniform patient or physician identifiers, tracking patients between hospitals, or making valid comparative information available to the Legislature, Governor or the Public unless all the hospitals chose the same system to report to JCAHO. Additionally, the Council disagrees with the commenters interpretation of sec.108.006(a)(4). The Council is unaware of any other collection efforts required by federal or state law, by an accreditation organization, or by Board rule that duplicates the Council's data collection undertaking. Accordingly, the Council believes that its program builds on and does not duplicate other data collection programs. The aforementioned commenter also stated that the hospitals are required to submit the amount of charity care information from each facility to the State of Texas and this would be duplication of data submission. Hospitals are required to submit the amount of charity care to the Texas Department of Health. This information is aggregated data and contains collective charges for each facility. The data submitted does not include many essential data elements, including number of cases, diagnoses, treatment procedures, and length of stay that are required to fulfil the Legislative mandates of the Council's enabling legislation. Therefore, the Council disagrees with the commenter. Two commenters recommended that the Council delete all patient identifying information from sec.1301.19(e). The Council disagrees and believes that collecting patient identifying information is necessary for creating a uniform identifier as required by the definition of "Public Use Data" in sec.108.002(14) and for compliance with sec.108.009(l)(5) of the Council's enabling legislation to identify individuals and populations at risk. Finally, this patient identifying information is necessary to track subsequent hospitalizations for related or identical conditions. Memorial Healthcare System, Dallas-Fort Worth Hospital Council, and Methodist Hospital, Baylor Health Care System, and the Texas Hospital Association, commented against this section. The effective date is 90 days after the date hereof, December 2, 1997. The amendments are adopted under the Health and Safety Code, sec.108.006(a), sec.108.009, and sec.108.010. The Council interprets sec.108.006(a) as authorizing it to adopt rules necessary to carry out Chapter 108, including rules concerning data collection requirements and rules to obtain exemptions from data reporting requirements, and to prescribe by rule the process for providers to submit data. The Council interprets sec.108.009 as authorizing it to adopt rules for collecting data elements relating to payer types, and patient race and ethnicity. The Council interprets sec.108. 010 as authorizing it to make provider comments relating to provider quality available at its offices and on the Internet. The Council also interprets sec.108.010 as directing it to release provider quality information on certain providers in aggregate form with uniform patient and physician identifiers. sec.1301.11. Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Data format - The sequence or location of data elements on a paper form or electronic record according to prescribed specifications. Ethnicity - The status of patients relative to Hispanic background. Health benefit plan - A plan provided by a health maintenance organization or an approved nonprofit health corporation certified under the Medical Practice Act, sec.5.01(a) that holds a certificate of authority issued by the Commissioner of Insurance under Article 21.52F of the Insurance Code. Other exempted provider - A hospital exempt from state franchise, sales, ad valorem, or other state and local taxes that does not seek or receive reimbursement for providing health care services to patients from any source, including the patient or any person legally obligated to support the patient; a third party payer; or Medicaid, Medicare, or any other federal, state or local program for indigent health care. Provider - A physician or health care facility. Race - A division of patients according to traits that are transmissible by descent and sufficient to characterize them as distinctly human types. Hospitals shall report this data element according to the following racial types: American Indian, Eskimo, or Aleut; Asian or Pacific Islander; Black; White; or Other. Risk adjustment - A statistical method to account for a patient's severity of illness at the time of admission and the likelihood of development of a disease or outcome, prior to any medical intervention. Rural provider - A health care facility located in a county with a population of not more than 35,000 as of July 1 of the most recent year according to the most recent United States Bureau of the Census estimate; or located in a county with a population of more than 35,000 but with 100 or fewer licensed hospital beds and not located in an area that is delineated as an urbanized area by the United States Bureau of the Census; and is not state owned, or not managed or directly or indirectly owned by an individual, association, partnership, corporation, or other legal entity that owns or manages one or more other hospitals. A health care facility is not a rural provider if an individual or legal entity that manages or owns one or more other hospitals owns or controls more than 50% of the voting rights with respect to the governance of the facility. Severity adjustment - A method to stratify patient groups by degrees of illness and mortality. Uniform patient identifier - A unique number assigned by the Council to an individual patient and composed of numeric, alpha, or alphanumeric characters, which remains constant across hospitals and inpatient admissions. The relationship of the identifier to the patient-specific data elements used to assign it is confidential. sec.1301.16. Acceptance of Discharge Reports and Correction of Errors. (a) (No change.) (b) Upon receipt of a discharge report, the executive director shall determine if it satisfies minimum criteria for processing. If it does not, the executive director shall return the discharge report in the same submission format and media that is approved for that provider and state the deficiencies in writing within ten days of receipt. The hospital shall resubmit the report within ten days of notification by the executive director. A discharge report does not meet minimum standards for processing under the following circumstances as shown in paragraphs (1)-(3) of this subsection. (1)-(2) (No change.) (3) The file structure does not conform to the specifications in sec.1301.19 of this title (relating to Discharge Reports - Records, Data Fields and Codes), unless the hospital has received a letter from the Council authorizing filing in another format. (c)-(e) (No change.) sec.1301.18. Hospital Discharge Data Release. (a) (No change.) (b) Creation of codes and identifiers. The executive director shall develop the following codes and identifiers, as listed in paragraphs (1)-(4) of this subsection, required for creation of the public use data file and for other purposes. (1) The executive director shall create a process for assigning uniform patient identifiers, uniform physician identifiers and uniform other health professional identifiers using data elements collected. This process is confidential and not subject to public disclosure. Any documents or records produced describing the process or disclosing the person associated with an identifier are confidential and not subject to public disclosure. (2) The executive director shall create a process for assigning geographic identifiers to each discharge record. Each geographic identifier shall be composed of two or more postal five digit zip codes. The identity of the zip codes included in each geographic identifier is public information. The zip codes for each geographic region shall be included with each public release of this information. (3) The executive director shall create a process for assigning uniform payer identifiers to each discharge record. The identity of the payer associated with each payer identifier is public information. The executive director shall also create codes designating primary source of payment. The payer codes shall be included with each public release of this information. (4) The executive director shall create a process for assigning a uniform facility identifier to each health care facility and other provider submitting data. The identity of the health care facility or other provider associated with each facility identifier is public information. These facility identifier shall be included with each public release of this information. (c) Creation of public use data file. The executive director will create a public use data file by creating a single record for each inpatient discharge and adding, modifying or deleting data elements in the following manner as listed in paragraphs (1)-(12) of this subsection: (1) delete patient, and insured name, Social Security Number, address and certificate data elements, if submitted; delete patient control and medical record numbers. Assign uniform identifiers and county codes; (2) convert patient birth date to age; (3) convert admission and discharge dates to a length of stay measured in days and a code for the day of the week of the admission; (4) convert procedure and occurrence dates to day of stay values; (5) delete physician and other health professional names and numbers: assign uniform identifiers; (6) convert payer names and identification numbers to uniform payer identifiers: assign codes indicating the primary source of payment; (7) convert employer name and address data to a Standard Industrial Classification Code; (8) convert facility name, address and identification numbers to a facility identifier; (9) convert all procedure codes to ICD-9-CM; (10) add risk and severity adjustment scores utilizing an algorithm approved by the Council; (11) add indicators of whether the hospital is a children's specialty hospital and whether the hospital is a teaching hospital; (12) add indicators of whether the patient was served in an acute care unit or in a specialty unit such as skilled nursing, long-term care, or psychiatric. (d) Release of public use data files The Council shall release in an aggregate form without uniform patient, physician or other health professional identifiers public use data relating to hospitals described by the Health and Safety Code, sec.108.0025(1) that are not rural providers because they do not meet the requirements of sec.108.0025(2). (e) The executive director will make available a public use data file on magnetic media for each quarter not later than seven months after the end of the quarter. (1) The executive director shall release public use data from hospitals that have certified the data as required by sec.1301.17 of this title (relating to Certification of Discharge Reports). A hospital's failure to execute the certification form after six months shall not prevent the executive director from releasing the hospital's data if the director believes the data submitted is reasonably accurate and complete. The executive director shall not include in the public use data file records derived from hospital discharge files which contain material errors. The executive director will include with the public use data file information on the number of discharge files received from each hospital and the number of discharge files from each hospital included on the public use data file. (2) If additional discharge files become available after the initial release of the public use data file for any quarter, the executive director will add these records to the public use data file and make the additional records available to the public. (3) The other sections of these rules not withstanding, the executive director shall not create a public use data file from the discharge reports covering discharges occurring in the first quarter of 1998. It is the intent of the Council to utilize this data only for testing and calibration of its data processing systems and to allow hospitals the opportunity to test and calibrate their own data reporting systems. (4) The other sections of these rules not withstanding, the executive director shall not create or release a public use data file from discharge reports covering discharges for the second quarter of 1998 until a public use data file covering discharges for the third quarter of 1998 is created and released. The Council will initially release six months of data in order to provide a more reliable body of data for analysis and decision-making and to make available public use data files on a quarterly schedule thereafter. (f) The Council shall not charge Texas state agencies a fee for data requested solely for the internal use of the agency to comply with Health and Safety Code, sec.108.012(b). Prior to filling the request of a state agency without fee, the executive director shall secure an interagency agreement imposing restrictions on distribution, republication or reuse of the data in ways that would diminish user fees to the Council. (g) The executive director shall establish procedures for screening all requests to assure that filling the request will not violate the provisions of Health and Safety Code, sec.108.013(c). (h) The data elements specified for discharge reports in sec.1301.19 of this title (relating to Discharge Reports - Records, Data Fields and Codes) do not constitute "Provider Quality Data" as discussed in Health and Safety Code, sec.108.010. (i) A public use data file which is specified by the requestor shall not be considered a "report issued by the Council" as referenced in Health and Safety Code, sec.108.011(f). (j) Requests for data files including data on one or more providers are matters of public record and copies of all requests shall be maintained by the Council for two years from the date of receipt. The executive director will transmit monthly a summary of all requests received to all hospitals submitting discharge data to comply with Health and Safety Code, sec.108.011(e). (k) With any public use data file prepared by the Council, the executive director shall attach all comments submitted by providers which relate to any data included in the file. The Council shall also make these comments available at the Council's offices and on the Council's Internet site. sec.1301.19. Discharge Reports - Records, Data Fields and Codes. (a) Hospitals that have not obtained an exemption letter authorized by sec.1301.15 of this title (relating to Exemptions from Filing) shall submit discharge reports in one of the following formats as listed in paragraphs (1)- (3) of this subsection: (1) electronically in the national standard flat file format for inpatient hospital bills defined by the United States Department of Health and Human Services, Health Care Finance Administration (HCFA), commonly known as the HCFA UB-92 Electronic Format (Versions 004.1 and 004.0). HCFA updates this format from time to time by issuing new versions. The Council will accept discharge reports in the latest version or in the immediately preceding version. At the effective date of these rules, the latest version was version 004.1 and the immediately preceding version was version 004.0. The Council will make detailed specifications for these formats available to submitters and to the public for the cost of reproduction; (2) electronically in the file format for inpatient hospital bills defined by the American National Standards Institute (ANSI), commonly known as the ANSI X.12 form 837. ANSI updates this format from time to time by issuing new versions. The Council will accept discharge reports in the latest version or in the immediately preceding version. As of October 1, 1997, the latest version will be version 30.70 and the immediately preceding version will be version 30.51. The Council will make detailed specifications for these formats available to submitters at no charge and to the public for the cost of reproduction; (3) for paper filing, the UB-92 paper form currently approved by the Health Care Finance Administration, also known as the HCFA 1450 paper version. (b) (No change.) (c) In addition to the data elements contained in the Texas UB-92 Manual, the Council has defined the following data elements shown in this subsection and has defined the location in the HCFA UB-92 Electronic Format (Versions 004.1 and 004.0) where each element is to be reported. (1) Patient race - This data element shall be reported at Record Type 22, Field 7, Beginning Position 86; Form Locator 11 (upper line) as a numeric value. Acceptable codes are 1 = American Indian/Eskimo/Aleut, 2 = Asian or Pacific Islander, 3 = Black, 4 = White and 5 = Other. In order to obtain this data, the hospital staff is to ask the patient, or the person speaking for the patient to classify the patient. If the patient, or person speaking for the patient, declines to answer, the hospital staff is to use its best judgment to make the correct classification based on available data. (2) Patient ethnicity - This data element shall be reported at Record Type 22, Field 8, Beginning Position 98; Form Locator 11 (lower line) as a numeric value. Acceptable codes are 1 = Hispanic Origin and 2 = Not of Hispanic Origin. In order to obtain this data, the hospital staff retrieves the patient's response from a written form or asks the patient, or the person speaking for the patient to classify the patient. If the patient, or person speaking for the patient, declines to answer, the hospital staff is to use its best judgment to make the correct classification based on available data. (3) Patient Social Security Number - This data element shall be reported at Record Type 22, Field 5, Beginning Position 27; Form Locator 2 (upper line) a numeric value. In the event the patient is a newborn or child of United States citizenship for whom a Social Security Number has not been assigned, the hospital shall leave the field blank and shall indicate a response code in the Record Type 22, Field 6, Beginning Position 56; Form Locator 2 (lower line) as to the reason no Social Security Number was submitted. Acceptable codes are: F = Foreign national, does not have a Social Security Number N = Newborn or Infant of United States citizenship for whom a Social Security Number has not been assigned O = Other R = Refused to provide a social security number (4) Source of payment code - This data element shall be reported at Record 30, Field 04, Beginning Position 25 as an alphanumeric value. (A) Acceptable codes are: (i) A = Self pay (ii) B = Workers' Compensation (iii) C = Medicare (iv) D = Medicaid (v) E = Other Federal Programs (includes Veterans Administration) (vi) F = Commercial (vii) G = Blue Cross (viii) H = Champus (ix) I = Other (B) Non-Standard Codes shall be reported at the Alternate Code Site Record 22, Field 9, Position 111 (i) T = State or Local Government Programs (ii) U = Commercial PPO (iii) V = Medicare Managed Care (iv) X = Medicaid Managed Care (v) Y = Commercial HMO (vi) Z = Charity (5) Submission purpose code - This data element shall be reported at Record 01, Field 20.8, Beginning Position 183 as an alphanumeric value. Acceptable codes are C = Claim, D = Discharge Statement, and B = Both. This code is required if a hospital bill clearinghouse is utilized in the data collection effort. Once published these codes and formats may not be changed without 90 days prior notice to hospitals required to submit discharge reports to the Council. (d) (No change.) (e) Hospitals shall submit the required minimum data set for all patients for which a discharge file is required by this title. For patients with any form of insurance, hospitals shall submit to the Council all data elements submitted to any third party payer in addition to data elements in the required minimum data set. The required minimum data set includes the following data elements as listed in paragraphs (1)-(44) of this subsection: (1) Patient race; (2) Patient ethnicity; (3) Patient Social Security Number; (4) Patient control number; (5) Patient last name; (6) Patient first name; (7) Patient middle initial; (8) Patient sex; (9) Patient birth date; (10) Type of admission; (11) Source of admission; (12) Source of Payment Code; (13) Patient address; (14) Patient city; (15) Patient state; (16) Patient zip; (17) Admission/start of care date; (18) Statement covers period from; (19) Statement covers period through; (20) Patient status; (21) Medical record number; (22) Type of bill; (23) Accommodations revenue codes (all applicable); (24) Accommodations rates (all applicable); (25) Accommodation days (all applicable); (26) Accommodation total charges (all applicable); (27) Inpatient ancillary revenue code (all applicable); (28) Units of service (all applicable); (29) Ancillary charges total (all applicable); (30) Principal diagnosis code; (31) Other diagnosis codes (all applicable); (32) Principal surgical procedure code (if applicable); (33) Principal surgical procedure date (if applicable); (34) Other surgical procedure codes (all applicable); (35) Other surgical procedure dates (all applicable); (36) Admitting diagnosis; (37) External cause of injury (if applicable); (38) Procedure coding method used; (39) Attending physician number; (40) Operating or other physician number (if applicable); (41) Other physician number (all applicable); (42) Attending physician name; (43) Operating or other physician name (if applicable); (44) Other physician name (all applicable); (f) A submission will consist of a set of the following types of records from the HCFA UB-92 Electronic Format (Versions 004.1 and 004.0) specification as shown in paragraphs (1)-(13) of this subsection. (1)-(3) (No change.) (4) Third Party Payer Data (Record 30). The third party payer record identifies the insurance information for each payer. If the patient has other insurance, two or more records must be submitted, one for each carrier. If the patient has no third party payer, submit one Record 30 with Field 04 = A. Records must be in the correct payer priority sequence. The '01' Record determines which source payment code will be considered as primary. (5)-(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 legal authority. Issued in Austin, Texas, on December 4, 1997. TRD-9716390 Jim Loyd Executive Director Texas Health Care Information Council Effective date: December 29, 1997 Proposal publication date: September 19, 1997 For further information, please call: (512) 424-6490 TITLE 28. INSURANCE PART I. Texas Department of Insurance CHAPTER 3.Life, Accident, and Health Insurance and Annuities SUBCHAPTER S.Minimum Standards and Benefits and Readability for Individual Accident and Health Insurance Policies 28 TAC sec.sec.3.3001, 3.3002, 3.3018-3.3020, 3.3038, 3.3039, 3.3050, 3.3052, 3.3054, 3.3057, 3.3061, 3.3070-3.3074, 3.3079, 3.3081, 3.3092, 3.3110 The Commissioner of Insurance adopts amendments to Chapter 3, Subchapter S, sec.sec.3.3001, 3.3002, 3.3018-3.3020, 3.3039, 3.3050, 3.3052, 3.3054, 3.3057, 3.3061, 3.3070-3.3074, 3.3079, 3.3081, 3.3092 and 3.3110, and the addition of new sec.3.3038. These amendments relate to standards, benefits and readability for individual accident and health insurance policies. Sections 3.3018, 3.3019, 3.3020, 3.3038, 3.3050, 3.3052 and 3.3092 are adopted with changes to the proposed text as published in the August 29, 1997 issue of the Texas Register (22 TexReg 8584). Sections 3.3001, 3.3002, 3.3039, 3.3054, 3.3057, 3.3061, 3.3070-3.3074, 3.3079, 3.3081 and 3.3110 are adopted without changes and will not be republished. The commissioner also adopts the repeal of sec.3.3078 (relating to Minimum Standards for Medicare Supplement Expense Coverage) elsewhere in this issue of the Texas Register. In House Bill 710, as passed by the 75th Legislature and signed by the governor ("HB710"), Texas adopted certain federal requirements pertaining to individual accident and health insurance policies contained in the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and in federal rules promulgated under HIPAA. The amendments to Subchapter S are necessary to implement the requirement in HB710 and HIPAA that certain individual accident and health insurance policies be guaranteed renewable at the option of the insured, without time or age restrictions. The amendments also implement the requirement in HB710 that, under delineated circumstances based on the length, types and aggregate continuity of coverage, many individuals moving from the group to individual market will be subject either to no preexisting condition provision or to a credit of time against any applicable preexisting condition provision. The sections, as adopted, differ in some respects from the proposed sections, based on further study generated by the comments received. Section 3.3018(b) has been modified to clarify when the 18-month look-back period for crediting coverage begins. Sections 3.3019(b), 3.3020(b)(4) and 3.3050(b)(5) have been revised to limit the time period, to on or before May 31, 1998, in which a company offering excepted benefits can continue to issue policies from stock existing before the effective date of the rules. In conformance with HIPAA and HB710, sec.3.3038(c) now indicates that an insurer governed by Chapter 20 of the Insurance Code may refuse to renew individual hospital, medical or surgical coverage if the insured no longer resides, lives, or works in the service area of the insurer, or the area for which the insurer is authorized to do business, but only if coverage is terminated uniformly without regard to any health status related factor of covered individuals. A corresponding change has been made to promulgated language regarding guaranteed renewability in the outline of coverage provisions in sec.3.3092(b)(5). A new subsection (h) has been added to sec.3.3038 to clarify that the section does not prohibit an insurer from making policy modifications mandated by state law or, consistently with sec.3.3040(b) of this title, from honoring requests from a policyholder for modifications to an individual policy or offering policy modifications uniformly to all insureds under a particular policy form. Section 3.3052 has been revised to clarify that in regards to individual hospital, medical and surgical coverage, an insurer may terminate coverage of the spouse of a primary insured upon dissolution of the marriage, or a dependent of the primary insured upon the dependent's attainment of a limiting age, subject to the any prohibitions or limitations elsewhere in sec.3.3052 or in other applicable law. The amendments to sec.3.3001 indicate that unless otherwise specified, the rules apply to certain individual accident and sickness policies and subscriber contracts of hospital and medical and dental service associations delivered or issued for delivery or renewed in Texas after the effective date of the rules. The amendments to sec.3.3002 add a number of definitions for terms used in the new and amended sections implementing HB710's requirements related to guaranteed renewability and preexisting condition limitations. Two key definitions are "individual, hospital, medical and surgical coverage" and "excepted benefits," because the guaranteed renewability provisions mandated by HB710 and HIPAA, and the preexisting condition provisions mandated by HB710, only apply to individual hospital, medical and surgical coverage and such coverage is defined as all coverage subject to Subchapter S, unless such coverage consists of excepted benefits. The "excepted benefits" are accident only coverage, disability income insurance, coverage for on-site medical clinics and short term limited duration coverage, and, if the benefits are provided under a separate contract of insurance, certain coverage for dental or vision benefits, a specified disease or to supplement CHAMPUS benefits or an ERISA group health plan. The amendments to sec.3.3018 state that preexisting condition provisions normally allowed in Texas cannot be applied to individual hospital, medical and surgical coverage if offered to an individual who was continuously covered for an "aggregate period" of 18 months by "creditable coverage" that was in effect up to a date not more than 63 days before the effective date of the policy, excluding any "waiting period," and whose most recent creditable coverage was under a "group health plan, governmental plan or church plan." All of the terms in quotes are defined in the amendments to sec.3.3002. In regards to individual policies and insureds not falling within the above categories, insurers can continue to impose preexisting conditions. However, in accordance with HB710, the amendments to sec.3.3018 require that even if an insured whose most recent creditable coverage was under a group health plan, governmental plan or church plan does not qualify for exemption from a preexisting condition provision to the policy, an insurer must credit against any preexisting condition period the creditable coverage accrued by the insured at any time during the eighteen months preceding the insured's first day of coverage if there is not a waiting period, or the date of application for coverage if there is a waiting period. The amendments state that when determining to what extent preexisting condition provisions apply to an insured, the insurer must comply with required notices, disclosures and other applicable provisions of Chapter 21, Subtitle K (relating to Certification of Creditable Coverage) of this title. The amendments also provide examples of how to figure creditable coverage through application of this section. The amendments to sec.3.3019 revise the policy definition of "noncancellable." Under the amendment, except in limited circumstances described in subsection (b) of the section, insurers cannot refer to a noncancellable policy--defined as a policy in which the insured has the right to continue by the timely payment of premiums at the same rate until at least age 50, or in the case of a policy issued after age 44, for at least five years--as "noncancellable and guaranteed renewable," unless the policy also meets the definition of "guaranteed renewable," as defined in sec.sec.3.3020(a) and 3.3038. Subsection (b) allows insurers to continue through May 31, 1998 to issue from printed stock existing on the day before the effective date of this subchapter policies offering excepted benefits that are noncancellable, as defined in subsection (a) of this section, and that refer to the policy as "noncancellable and guaranteed renewable," if the policies conform to the definition of the term allowed by rule before the effective date of this subchapter. The amendments to sec.3.3020 state that in regards to individual hospital, medical and surgical coverage, the term "guaranteed renewable" shall not be defined more restrictively than in sec.3.3038. Under rules in effect prior to this adoption order, "guaranteed renewable" was defined similarly to "noncancellable," except that in a policy that was guaranteed renewable, the insurer could raise rates upon renewal of the policy. Under the definition contained in new sec.3.3038 and required by HB710 and HIPAA, there cannot be time or age limits on an insured's right to renew individual hospital, medical and surgical coverage. In regards to excepted benefits, sec.3.3020 will continue to allow insurers to offer a renewability provision that terminates at age 50, or, if the policy is issued after age 44, that terminates at least five years after issuance of the policy. To avoid confusion, such a benefit must be called a "limited guarantee of renewability." However, the section allows insurers to continue through May 31, 1998 to issue from printed stock existing on the day before the effective date of this subchapter policies offering excepted benefits that contain a policy definition of "guaranteed renewable" conforming to the definition of the term allowed by rule before the effective date of this subchapter. Such previous definition of guaranteed renewable is the same as the definition of limited guarantee of renewability contained in this section. Unless the policy also is noncancellable, sec.3.3020 requires that the policy definitions of both "guaranteed renewable" and "limited guarantee of renewability" clearly indicate that the insurer retains the right to raise rates at the time the policy is renewed. Section 3.3038 requires that all individual hospital, medical and surgical coverage be renewed at the option of the insured, unless: the insured fails to pay premiums, or commits fraud or intentional misrepresentation in relation to the policy; the insurer is ceasing to offer individual hospital, medical and surgical coverage either under the particular individual policy form, or under all individual policy forms in Texas, and the insurer follows the procedures required by sec.3.3038 as prerequisites to such termination of coverage; or, in regards to coverage issued by a company governed by the Insurance Code, Chapter 20, the insured no longer resides, lives, or works in the service area of the issuer, or the area for which the issuer is authorized to do business, provided that the coverage is terminated uniformly without regard to any health status related factor of covered individuals. The amendments to sec.3.3050 change the description of a guaranteed renewable policy to comport with the changes in sec.3.3020 and the new definition in sec.3.3038, and add a description for a "limited guarantee of renewability" provision. The amendments further add "limited" at the beginning of the phrase "renewability at the option of the insured." This term describes a provision with time or age limitations that are stricter than a limited guarantee of renewability. Insurers offering excepted benefits may continue through May 31, 1998 to issue policies from printed stock existing on the day before the effective date of this subchapter that refer to this type of provision as renewable at the option of the insured. The amendments to sec.3.3050 also state that the various renewability provisions other than guaranteed renewable that are described in sec.3.3050 can apply to excepted benefits, but not to individual hospital, medical and surgical coverage. The amendments to sec.3.3052 state that individual hospital, medical or surgical coverage can be terminated only for the bases for termination contained in sec.3.3038, or, in the case of coverage of a spouse or dependent of the primary insured, when the spouse or dependent status no longer exists, provided that such termination is consistent with the section and other provisions of Texas law. The amendments to sec.3.3054 require policies containing individual hospital, medical and surgical coverage to clearly disclose and explain the conditions under which Texas law requires modification to a preexisting condition provision for an individual who has previous creditable coverage. The amendments to sec.3.3071 state that Basic Hospital Expense Insurance, as defined in the section, must be guaranteed renewable in accordance with sec.sec.3.3020 and 3.3038, unless such insurance constitutes short-term limited duration coverage, as defined by sec.3.3002(b)(18). The amendments to sec.3.3072 state that Basic Medical-Surgical Expense Insurance, as defined in the section, must be guaranteed renewable in accordance with sec.sec.3.3020 and 3.3038, unless such insurance constitutes short-term limited duration coverage, as defined by sec.3.3002(b)(18). The amendments to sec.3.3073 state that Hospital Confinement Indemnity Coverage, as defined in the section, is not required to be guaranteed renewable, provided it falls within the definition of excepted benefits in sec.3.3002(b)(6). The amendments to sec.3.3074 state that Major Medical Expense Coverage, as defined in the section, must be guaranteed renewable in accordance with sec.sec.3.3020 and 3.3038, unless such insurance constitutes short-term limited duration coverage, as defined by sec.3.3002(b)(18). The amendments to sec.3.3079 state that any Limited Benefit Coverage, as defined in the section, that offers limited hospital expense coverage or limited basic medical-surgical coverage must be guaranteed renewable in accordance with sec.sec.3.3020 and 3.3038 unless such insurance constitutes short-term limited duration coverage, as defined by sec.3.3002(b)(18). The amendments to sec.3.3081 state that unless any nonconventional coverage approved by the commissioner pursuant to this section constitutes an excepted benefit, such coverage must be guaranteed renewable in accordance with sec.sec.3.3020 and 3.3038. The amendments to sec.3.3092 add a disclosure regarding guaranteed renewability provisions that must be included, in substantially similar form, in any outline of coverage for a policy offering individual hospital, medical or surgical coverage. The amendments to sec.3.3110 change the reference to the effective date and remove obsolete language. The amendments to sec.3.3110 also apply the mandatory guaranteed renewability provisions of the subchapter to individual hospital, medical and surgical coverage in policies issued before the effective date of the subchapter, and deemed continuous under the Insurance Code Article 3.70-13, on the first policy anniversary after the effective date of the subchapter. Such polices already must comply with such provisions under HIPAA, because HIPAA applies its guaranteed renewability requirements to all individual, hospital medical and surgical coverage in effect after June 30, 1997. The conforming amendments are necessary to comply with HB710's charge to the commissioner to adopt rules necessary to meet the minimum requirements of federal law and regulations. General. A commenter stated that the rules correctly interpret HB710 and the HIPAA and urged the commissioner to adopt the rules. Another commenter asserted that the department does not have authority to promulgate rules relating to Section 3.01 of HB710, amending the Insurance Code Article 3.70-1, because the section does not contain explicit rulemaking authority. Agency Response. The Texas Department of Insurance ("department") agrees with the commenter, regarding the correct interpretation of HB710 and HIPAA. The department disagrees that it does not have rulemaking authority. Section 3.01 of HB710 adds a subdivision 4 to Article 3.70-1(H). Subsection D of Article 3.70-1 gives the commissioner authority to issue "such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article." Subsection (E) of the Article authorizes the commissioner to issue rules establishing standards for preexisting conditions. The department notes that even if the statute amended did not have explicit rulemaking authority, the department has general authority under the Insurance Code Article 1.03A to promulgate rules, if such rules implement a statute or statutes containing subject matter within the department's jurisdiction. General. A commenter stated that the rules in this subchapter should be completely abandoned because they are out of date. The commenter said that department staff has indicated that comprehensive revisions would be made to these rules. Another commenter generally supported adoption of the rules, but stated that the concerns of the various commenters evidenced that HIPAA and the interim federal rules contained ambiguities which hopefully would be clarified by Congress or the Department of Health and Human Services in the near future. The commenter stated that the department and the commissioner should react promptly to any forthcoming revisions in federal law. Agency Response. The department plans to propose additional revisions to this subchapter in the future. However, the department determined that it should propose rules implementing HIPAA and HB710 as quickly as possible, rather than include such implementation in any comprehensive revision that would require a much longer rulemaking process. The department agrees that these rules should be adopted. The department will evaluate any changes to federal law when they occur, and, if appropriate, propose revisions to these rules. 3.3001. A commenter questioned whether these rules would apply to coverage through an association plan that was not employer-based, because such coverage is deemed by HIPAA to be subject to HIPAA's individual, rather than group, health reforms. The commenter suggested that if these rules do not apply to such association plans, that sec.3.3001 explicitly exclude such plans. Agency Response. These rules do not apply to such association plans, which have been, and remain, group coverage under Texas law. While HIPAA deems association coverage unrelated to employment to be individual coverage for the purposes of federal health reform, HIPAA does not require modification of the way states treat such coverage. The department does not believe that revising the applicability provisions is necessary, because they are clear. The department will be proposing rules in the near future regarding nonemployer-based association coverage to address HIPAA's requirements related to those plans. 3.3002. A commenter suggested that the definition of short-term limited duration coverage be revised to delete the parenthetical phrase stating that the 12-month limitation for such coverage should "(take into account any extensions that may be elected by the policyholder without the insurer's consent)." The commenter stated that this phrase is not in HIPAA's definition of short-term limited duration coverage and might be interpreted to require an insurer to extend up to a full 12 months a contract only intended to cover a much shorter time period. Agency Response. The department disagrees. The definition is taken verbatim from the interim federal rules and is consistent with the definition in HIPAA. The parenthetical phrase does not impose any requirements on an insurer to extend short-term limited duration contracts up to 12 months or to include extension options in a short-term limited duration contract. It merely indicates that a short-term limited durational contract is one that cannot extend the coverage beyond a 12-month term, even if all extension options in the contract are exercised by the insured. 3.3018. A commenter stated that the department's proposed amendments regarding crediting periods of prior coverage against preexisting condition periods do not conform to Article 3.70-1(H)(4), as added by HB710. The commenter asserted that subsection (a) of Article 3.70-1(H)(4), which precludes application of a preexisting condition period under certain circumstances when the insured has 18 months of creditable coverage, requires insurers to credit coverage only if it is continuous, without any gap in coverage. The commenter stated that subsection (a) only allows a 63-day gap in coverage between the end of continuous creditable coverage and the effective date of the individual policy, excluding any waiting period. The commenter also stated that subsection (c) of Article 3.70-1(H)(4), which mandates that an insurer reduce a policy's preexisting condition period by any period of creditable coverage in the 18 months preceding the effective date of coverage, requires insurers to credit only creditable coverage that was continuous up to 63 days before the effective date of coverage, excluding any waiting period for the coverage. Agency Response. The department disagrees. Subsection (a) of Article 3.70- 1(H)(4) requires insurers to count any periods of creditable coverage with no more than 63-day gaps between them for the purposes of determining whether the insured has amassed an "aggregate" of 18 months of coverage. These provisions are not required by HIPAA for companies in the individual market, but are patterned after HIPAA's requirements for carriers in the group market "for the purposes of completing the portability circle for healthy, insurable individuals." Bill Analysis, HB710, House Committee Substitute. Under HIPAA and federal rules implementing HIPAA, aggregated creditable coverage is deemed continuous if not interrupted by "significant breaks in coverage," which are defined using a 63-day time period. See sec.2701(c), Public Health Services Act ("PHSA"), 45 C.F.R. sec.146.113(b)(2). This prevents persons who are without coverage for brief periods of time because of a job change or any other reason from losing health insurance portability. Although subsection (a) is somewhat ambiguous, and how to aggregate creditable coverage is left undefined, the department believes that the rule interprets and implements the subsection correctly, based both on legislative intent and the federal provisions on which the subsection is patterned. Subsection (c) of Article 3.70-1(H)(4) also is patterned after HIPAA provisions governing group health coverage under federal law, but differs in that it explicitly does not require coverage to be continuous, without significant breaks in coverage. The subsection requires an insurer to "credit the time the individual was previously covered under creditable coverage . . . in effect at any time during the 18 months preceding the effective date of the individual coverage." This allows reduction of a preexisting condition period when the insured does not meet the requirements of subsection (a) for avoiding a preexisting condition period entirely. 3.3018(b)(2), (4)(C), (D). A commenter stated that the examples of crediting coverage erred by calculating the amount of creditable coverage to credit against any preexisting condition provision by looking back 18 months from the date of the application, rather than from the effective date of coverage. Agency Response. The department disagrees that the examples are incorrect. The department acknowledges that subsection (c) of the Insurance Code Article 3.70- 1(H)(4), as added by HB710, states that the look-back period for crediting coverage is 18 months from the effective date of coverage. However, this subsection is patterned after HIPAA's requirements for carriers in the group market "for the purposes of completing the portability circle for healthy, insurable individuals." Bill Analysis, HB710, House Committee Substitute. The department believes that the reference to "effective date" is synonymous with the term "enrollment date," as used in HIPAA. Enrollment date is defined in HIPAA as "the date of enrollment of the individual in the plan for coverage or, if earlier, the first day of the waiting period for such enrollment." sec.2701(b)(2) of PHSA. Coverage is credited under HIPAA by looking back from the "enrollment date," which would be the date the application is filed unless there is no waiting period. sec.2701(c)(2) of PHSA. The requirement in sec.3.3018(b)(2) and related examples that an insurer must look back 18 months from the date of application if there is a waiting period for coverage is consistent with HIPAA and the intent of HB710. Conforming the rules to the federal law upon which the state statute was patterned ensures that the 18-month look-back period will be applied consistently, and will not include waiting periods that could vary widely between insurers. Subsection (b)(2) of sec.3.3018 has been revised to clarify when the 18-month look-back period begins. sec.sec.3.3019, 3.3020, 3.3050. A commenter agreed with the department's use of terminology such as "limited guarantee of renewability" to differentiate time and age limitations allowed in renewability provisions in excepted benefits policies from the renewability provisions for individual hospital, medical and surgical coverage, which cannot allow such limitations. However, the commenter expressed concern about provisions in sec.sec.3.3019, 3.3020, and 3.3050 that would allow companies offering excepted benefits to issue policies from printed stock existing on the day before the effective date of the subchapter, but prohibit companies from printing any new policies not conforming to new terminology. The commenter stated that a company conceivably could issue policies indefinitely from a large stock of printed policies and suggested that the department put a time limitation on how long such policies could be issued. Agency Response. The department agrees that a time limitation is appropriate. Allowing companies offering excepted benefits to continue to issue policies from stock existing before the effective date of the rules is intended to effectuate a low-cost transition to new forms, not to allow companies to avoid using new forms indefinitely. The adopted sections will allow the issuance of policies from stock existing before the effective date of the rules only through May 31, 1998. sec.3.3038. A commenter stated that HIPAA allows individual hospital, medical and surgical coverage to be guaranteed renewable until the contract's stated expiry date, and the rules should expressly allow this. The commenter also stated that the rules should not mandate guaranteed renewability provisions in policy forms, if those provisions may be no longer valid upon publication of final rules by the Health Care Financing Administration implementing HIPAA or upon amendments to HIPAA. Agency Response. The department disagrees. As mandated by HIPAA and HB710, individual hospital, medical and surgical coverage shall be renewable or continue in force at the option of the insured, except in very limited circumstances that do not include reaching a contract's termination date. The existence of a termination date cannot be reconciled with the general requirement to continue the policy in force at the option of the insured. The department notes that in the course of its policy approval process, it presently reviews very few individual health policies containing expiry dates other than a Medicare eligibility date. The department also notes that consistent with state and federal law, coverage falling within the definition of "excepted benefits" in sec.3.3002, including any short-term policy with a termination date of 12 months or less after its effective date, does not have to comply with the mandatory guaranteed renewability provisions applicable to individual hospital, medical and surgical coverage. All guaranteed renewability provisions added by these amended rules conform to federal law now in effect. Through such conformance, the state avoids abdicating enforcement power to the federal government. If changes to federal law occur, the department will evaluate at that time the need to propose rules. sec.3.3038. A commenter stated that HIPAA makes guaranteed renewable policies subject to an insurer's unilateral amendments upon renewal of the policies, provided that the amendments are made uniformly for all policyholders under the same policy form. The commenter stated that federal law allowing uniform modifications prohibits honoring individual policyholder requests for changes to a policy, or offering a policy change to all insureds with the same form and allowing each insured to accept the change at his or her option. The commenter asserted that Texas must allow insurers to modify policies unilaterally at renewal, because this is the only way under HIPAA that insurers can respond to policyholder requests for changes, or can adapt policies to future changes in medical services or state law. Agency Response. The department disagrees that allowing insurers to unilaterally modify a policy form as insureds renew their policies is required by HIPAA, or that it is necessary. HIPAA states that such uniform policy modifications may be made if consistent with state law. Neither HB710 nor other provisions of Texas law allow insurers to make such unilateral modifications. See 28 TAC sec.3.3040(b) (requiring that any riders or endorsements added after the effective date of the policy either be requested or accepted in writing by the insured). On the other hand, HIPAA's uniform modification provision does allow insurers to modify policy provisions at renewal if the modifications are based on state legislative mandates, because, obviously, such mandates would be consistent with state law. HIPAA does not prohibit changes to a policy made at the request of the insured or offers made to all persons with the same policy form, and such actions are explicitly allowed by sec.3.3040(b). HIPAA requires a policy to be renewed with the same terms (excepting rates) only if the insured exercises the option to renew. It does not limit an insured's ability to seek or accept policy modifications. To clarify these issues, a subsection (h) has been added to sec.3.3038. sec.3.3038(b). Continued coverage of Medicare recipients. A commenter acknowledged that HIPAA requires continued coverage of Medicare recipients, but stated that Congress likely may change this within the next year. The commenter stated that since HB710 and these rules were intended to comply with federal requirements, the department should echo any federal changes through future rule amendments. Agency Response. The department will evaluate any future modifications in federal law when they occur. As evidenced by sec.3.3038(b), these rules (in conformance with applicable federal law) do not require insurers to duplicate Medicare coverage. sec.3.3038(c). A commenter stated that subsection (c) omits a federal and state statutory basis for nonrenewal--when a person no longer resides in a service area. Agency Response. The department agrees that this exception is appropriate for companies governed by Chapter 20 of the Insurance Code, because they are precluded from offering coverage outside of designated service areas, and has changed sec.3.3038(c) for this purpose. This exception applies only to Chapter 20 insurers. The exception does not apply to coverage with preferred provider organization ("PPO") provisions, because applicable statutes and rules do not prohibit payment of benefits under such coverage for services received by insureds outside the PPO service area. See, e.g., 28 TAC sec.3.3704(6). The department also has made a corresponding change to the promulgated language in the outline of coverage provisions in sec.3.3092(b)(5). sec.3.3052(a). A commenter expressed concern that provisions of this section could prevent insurers from terminating spouse coverage because of dissolution of the marriage, or from terminating dependent coverage because the dependent has reached a limiting age. The concern is based on language in subsection (a) stating that individual hospital, medical or surgical coverage can only be terminated for the reasons for nonrenewal allowed by sec.3.3038 of this section. Agency Response. The department did not intend to prohibit such termination of spouse or dependent coverage, except to the extent such termination is prohibited or limited by existing Texas law, and does not believe HIPAA prohibits such termination. To clarify these issues, provisions relating to individual hospital, medical and surgical coverage have been revised by placing them in a separate subsection (b) and adding clarifying language. sec.3.3110(b). A commenter disagreed with sec.3.3110(b), which makes policies deemed continuous and not annually renewed under Insurance Code Article 3.70-13 subject to the mandatory guaranteed renewability provisions on the first policy anniversary date after the effective date of the subchapter as amended. The commenter stated that both HB 710 and HIPAA apply only to policies issued for delivery, delivered or renewed after July 1, 1997, and that applying any of these rules to policies deemed continuous under Article 3.70-13 is inconsistent with those statutes. Agency Response. The department disagrees. The guaranteed renewability amendments are necessary to implement HIPAA. The relevant HIPAA provisions apply to all policies "offered, sold, issued, renewed, in effect or operated in the individual market after June 30, 1997 . . ." See sec.2747(b) of PHSA. In Section 3.02 of HB710, the Legislature directed the commissioner to "adopt rules necessary to . . . meet the minimum requirements of federal law and regulations." Applying the mandatory guaranteed renewability requirements to policies deemed continuous under Texas law as set forth in sec.3.3110(b) is necessary to accomplish conformance with federal law. The subsection explicitly excludes such policies from any other requirements in these adopted amendments for the prescribed statutory period of continuity. For, with changes: Blue Cross Blue Shield of Texas, Insurance Alliance of America, Office of Public Insurance Counsel, Texas Association of Life and Health Insurers Against: Provident American Insurance. The amendments to Subchapter S are adopted under the Insurance Code Articles 3.70-1 and 3.70-1A (as each article was amended by the 75th Legislature in HB710, Sections 3.01 and 3.02, respectively, effective July 1, 1997), and Article 1.03A. Article 3.70-1(H)(4) requires health insurers in the individual market to not apply, or in some cases to limit application, of preexisting condition provisions to certain insureds moving from the group to the individual market. These provisions of Article 3.70-1, which are patterned after, though not required by, provisions of HIPAA, complete the portability circle for healthy, insurable individuals, providing such individuals an alternative to coverage by the Texas Health Insurance Risk Pool created by the Insurance Code Article 3.77 (as also amended by HB710). The Texas Health Insurance Risk Pool implements an alternative guaranteed availability mechanism allowed by HIPAA and federal rules promulgated under HIPAA. Subsection D of Article 3.70-1 gives the commissioner authority to issue "such reasonable rules and regulations as may be necessary to carry out the various purposes and provisions of this article." Subsection (E) of the article authorizes the commissioner to issue rules establishing standards for preexisting conditions. Article 3.70-1A requires that certain individual health insurance policies be guaranteed renewable, at the option of the insured, without time or age restrictions. The guaranteed renewability provisions are mandated by HIPAA and federal rules promulgated under HIPAA. Subsection (c) of Article 3.70-1A requires the commissioner to adopt rules necessary to implement Article 3.70-1A and to meet the minimum requirements of the article and of federal law and regulations. 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 a statute. The federal mandate for guaranteed renewability in the individual health insurance market is contained in sec.2742 of the Public Health Service Act, as amended by section 111 of HIPAA. The Department of Health and Human Services promulgated interim rules implementing the guaranteed renewability provisions of HIPAA at 45 C.F.R. sec.148.122. To the extent that the federal guaranteed renewability rules contain required provisions not specifically addressed by HB710, the department has addressed such provisions in these amendments, pursuant to Article 3.70- 1A(c). sec.3.3018. Policy Definition of Preexisting Condition. (a) Subject to the conditions set forth in subsection (b) of this section, a policy subject to this subchapter may contain provisions limiting or denying coverage based on the existence of a preexisting condition or conditions. "Preexisting condition" may not be defined to be more restrictive than the following: Preexisting condition means the existence of symptoms which would cause an ordinarily prudent person to seek diagnosis, care or treatment within a five year period preceding the effective date of the coverage of the insured person or a condition for which medical advice or treatment was recommended by a physician or received from a physician within a five year period preceding the effective date of the coverage of the insured person. This does not prohibit an insurer, using an application form designed to ask questions concerning the health or medical history of a prospective insured and on the basis of the answers on that application, from fully underwriting in accordance with that insurer's established standards. It does, however, prohibit an insurer that elects to use a simplified application from reducing or denying a claim on the basis of the existence of a preexisting condition that is defined more restrictively than above. (b) In regards to individual hospital, medical or surgical coverage: (1) no preexisting condition provision shall apply to an individual who was continuously covered for an aggregate period of 18 months by creditable coverage (as defined in sec.3.3002 of this subchapter (relating to Definitions)) that was in effect up to a date not more than 63 days before the effective date of the coverage, excluding any waiting period, and whose most recent creditable coverage was under a group health plan, governmental plan or church plan, as such plans are defined in sec.3.3002 of this subchapter. (2) In determining whether a preexisting condition provision applies to an individual whose most recent creditable coverage was under a group health plan, governmental plan or church plan, but who does not have aggregate creditable coverage totaling 18 months, the insurer shall credit the time the individual was previously covered under creditable coverage if the previous coverage was in effect at any time during the 18 months preceding: (A) the first day coverage is effective, if there is not a waiting period; or (B) the day that the individual files a substantially complete application for coverage, if there is a waiting period. (3) When determining the applicability of preexisting condition provisions in accordance with paragraphs (1) and (2) of this subsection, an insurer of individual hospital, medical or surgical coverage shall comply with required notices, disclosures and other applicable provisions of Chapter 21, Subtitle K (relating to Certification of Creditable Coverage) of this title. (4) The application of paragraphs (1) and (2) of this subsection are demonstrated by the following examples: (A) Individual A: Not subject to any preexisting condition limitation: (i) Relevant insurance history: Individual A was covered under an individual policy for 12 months beginning on January 1, 1996 through December 31, 1996, followed by a gap in coverage of 58 days until February 28, 1997. Individual A then was covered under a group health plan beginning on March 1, 1997 for six months through August 30, 1997, followed by a gap in coverage of 61 days until October 31, 1997. (ii) Present coverage: Individual A applies for individual hospital, medical and surgical coverage on November 1, 1997, and the insurer issues the coverage on December 1, 1997. (iii) Applicability of preexisting condition prohibited: Pursuant to paragraph (1) of this subsection, the insurer offering the individual hospital, medical and surgical coverage cannot apply any preexisting condition provision to Individual A because: A's most recent past creditable coverage was under a group health plan; A has 18 months of creditable coverage--six months under the group plan and 12 months under the previous individual plan--up to a date not more than 63 days from the effective date of the coverage (excluding the one-month waiting period); and there were no significant breaks--i.e., more than 63 days-- in the 18 months of creditable coverage. (B) Individual B: Subject to preexisting condition provision: (i) Relevant insurance history: Individual B had coverage under a group health plan for 12 months beginning on January 1, 1996 through December 31, 1996, followed by a gap in coverage of 58 days until February 28, 1997. Individual B then was covered under an individual health insurance policy beginning on March 1, 1997 for 6 months through August 30, 1997, followed by a gap in coverage of 61 days until October 31, 1997. (ii) Present coverage: Individual B applies for a policy offering individual hospital, medical and surgical coverage on November 1, 1997 and is issued coverage on December 1, 1997. (iii) No exemption from preexisting condition provisions: Under paragraph (1) of this subsection, the insurer offering the individual hospital, medical and surgical coverage can fully apply any preexisting condition provision to Individual B, because B's most recent coverage was under an individual health plan, rather than a group health plan, governmental plan or church plan. Unless an insured's most recent creditable coverage was under a group health plan, governmental plan or church plan, the insurer is not required to take into account any of the insured's past creditable coverage under either paragraphs (1) or (2) of this subsection. (C) Individual C: Twelve-month credit against preexisting condition period: (i) Relevant insurance history: Individual C was covered under an individual health insurance policy for 18 months beginning January 1, 1996 through June 30, 1997, followed by a four-month gap in coverage from July 1, 1997 to October 31, 1997. On November 1, 1997, Individual C was covered under a group health plan for three months, through January 31, 1998, followed by a two-month gap in coverage. (ii) Present coverage: Individual C applies for a policy offering individual hospital, medical and surgical coverage on March 1, 1998 and is issued coverage on June 1, 1998. (iii) Twelve-month credit applied: Individual C's most recent creditable coverage was under a group health plan, so the insurer must perform a creditable coverage analysis. However, C is not eligible to be exempt from a preexisting condition provision under paragraph (1) of this subsection, because of the significant break (four months) in C's creditable coverage. Under paragraph (2) of this subsection, an insurer must then total up the creditable coverage in the 18 months preceding the effective date of the policy, excluding the waiting period. Because the waiting period in this scenario is three months, the insurer essentially must look back to the start of the waiting period--i.e., the application date of March 1, 1998--and count back 18 months from there. In the eighteen months between September 1, 1996 and March 1, 1998, Individual C had total of twelve months creditable coverage--nine months from September 1, 1996 to June 1, 1997, and three months from October 1, 1997 to January 31, 1998. Accordingly, the insurer must credit twelve months against any preexisting condition period. (D) Individual D: Six months credit against preexisting condition period: (i) Relevant insurance history: After being uninsured for a number of years, Individual D was covered under a governmental plan from March 1, 1997 to September 30, 1997, followed by a 31-day gap in coverage. (ii) Present coverage: Individual D applies for a policy offering individual hospital, medical and surgical coverage on November 1, 1997 and is issued coverage on December 1, 1997. (iii) Six-month credit applied: Individual D's most recent creditable coverage was under a governmental plan, so the insurer must perform a creditable coverage analysis. However, D is not eligible to be exempt from a preexisting condition provision under paragraph (1) of this subsection, because D has no other past coverage that could count towards an 18-month aggregate total of creditable coverage. Under paragraph (2) of this subsection, an insurer must give Individual D a six-month credit against any preexisting condition period. sec.3.3019. Policy Definition of Noncancellable. (a) The term "noncancellable" may be used only in a policy which the insured has the right to continue by the timely payment of premiums set forth in the policy until at least age 50, or in the case of a policy issued after age 44, for at least five years. The insurer may not unilaterally make any change in any provision of the policy while the policy is in force. Except in the limited circumstances delineated in subsection (b) of this section, an insurer shall not use the phrase "noncancellable and guaranteed renewable" in relation to coverage that meets the above definition, unless it also meets the definition of "guaranteed renewable" set forth in sec.sec.3.3020(a) (relating to Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability) and 3.3038 (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions) of this subchapter. (b) In regards to policies offering excepted benefits, an insurer may continue to issue through May 31, 1998 policies from printed stock existing on the day before the effective date of this subchapter that are noncancellable, as defined in subsection (a) of this section, and that refer to the policy as "noncancellable and guaranteed renewable," as was allowed by rule before the effective date of this subchapter. An insurer may not print any new noncancellable policies on or after the effective date of this subchapter which use policy language describing the policy as "noncancellable and guaranteed renewable," unless such policy also meets the definition of guaranteed renewable set forth in sec.sec.3.3020(a) (relating to Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability) and 3.3038 (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions) of this subchapter. sec.3.3020. Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability. (a) In regards to individual hospital, medical or surgical coverage, the term "guaranteed renewable" shall not be defined more restrictively than set forth in sec.3.3038 of this subchapter (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions). Unless the policy or coverage also is noncancellable (as defined in sec.3.3019 of this subchapter (relating to Policy Definition of Noncancellable), the policy definition of guaranteed renewable shall state clearly that the insurer retains the right, at the time of renewal of a policy, to make changes in premium rates by classes. (b) In regards to excepted benefits: (1) Except in the limited circumstances delineated in paragraph (4) of this subsection the term guaranteed renewable shall not be used unless the term is defined consistently with subsection (a) of this section and mirrors all mandatory provisions of sec.3.3038 of this subchapter (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions). (2) An insurer may use the term "limited guarantee of renewability," which shall not be defined more restrictively than the right of the insured to continue the coverage in force by the timely payment of premiums until at least age 50, or in the case of a policy issued after age 44, for at least five years from its date of issue, during which period the insurer has no right to unilaterally make any change in any provision of the policy while the policy is in force, except that the insurer may make changes in premium rates by classes. (3) Unless the policy or coverage also is noncancellable (as defined in sec.3.3019 of this subchapter (relating to Policy Definition of Noncancellable), the policy definition of guaranteed renewable or of limited guarantee of renewability shall state clearly that the insurer retains the right, at the time of renewal of a policy, to make changes in premium rates by classes. (4) An insurer may continue to issue through May 31, 1998 policies from printed stock existing on the day before the effective date of this subchapter that contain a policy definition of "guaranteed renewable" conforming to the definition of the term allowed by rule before the effective date of this subchapter. The previous definition, setting the minimum standard for a guaranteed renewable policy, was the same as the definition of limited guarantee of renewability, as set forth in paragraph (2) of this subsection. An insurer may not print any new policies offering excepted benefits on or after the effective date of this subchapter which use policy language describing the policy as "guaranteed renewable," unless such policy also conforms to the definition of "guaranteed renewable" set forth in subsection (a) of this section and in sec.3.3038 of this subchapter (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions) of this subchapter. sec.3.3038.Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions. (a) Except as provided by subsection (c) of this section, all individual hospital, medical or surgical coverage (as defined in sec.3.3002(b)(12) of this subchapter (relating to Definitions)) shall be renewed or continued in force at the option of the insured. (b) Medicare eligibility or entitlement is not a basis for nonrenewal or termination of individual hospital, medical or surgical coverage; however, such coverage sold to an insured before the insured attains Medicare eligibility may contain a clause that excludes payments for benefits under the policy to the extent that Medicare pays for such benefits. (c) Individual hospital, medical or surgical coverage may only be discontinued or nonrenewed based on one or more of the following circumstances: (1) the policyholder has failed to pay premiums or contributions in accordance with the terms of the policy, including any timeliness requirements; (2) the policyholder has performed an act or practice that constitutes fraud, or has made an intentional misrepresentation of material fact, relating in any way to the policy, including claims for benefits under the policy; (3) the insurer is ceasing to offer individual hospital, medical or surgical coverage under the particular type of policy, or is ceasing to offer any form of individual hospital, medical or surgical coverage in this state, in accordance with subsections (d) and (e) of this section; (4) in regards only to coverage offered by an issuer under the Insurance Code, Chapter 20, the insured no longer resides, lives, or works in the service area of the issuer, or area for which the issuer is authorized to do business, but only if coverage is terminated uniformly without regard to any health status related factor of covered individuals. (d) An insurer may elect to discontinue offering a particular type of individual hospital, medical or surgical coverage plan in the individual market only if the insurer: (1) provides written notice to each covered individual of the discontinuation before the 90th day preceding the date of the discontinuation of the coverage; (2) offers to each covered individual on a guaranteed issue basis the option to purchase any other individual hospital, medical or surgical insurance coverage offered by the insurer at the time of the discontinuation; and (3) acts uniformly without regard to any health-status related factors of a covered individual or dependents of a covered individual who may become eligible for the coverage. (e) An insurer may elect to refuse to renew all individual hospital, medical or surgical coverage plans delivered or issued for delivery by the insurer in this state only if the insurer: (1) notifies the commissioner of the election not later than the 180th day before the date coverage under the first individual hospital, medical or surgical health benefit plan terminates; (2) notifies each affected covered individual not later than the 180th day before the date on which coverage terminates for that individual; and (3) acts uniformly without regard to any health-status related factor of covered individuals or dependents of covered individuals who may become eligible for coverage. (f) An insurer that elects not to renew all individual hospital, medical or surgical coverage in Texas in accordance with subsection (e) of this section may not issue any such coverage in Texas during the five-year period beginning on the date of discontinuation of the last such coverage not renewed. (g) Nothing in this section prohibits or restricts an insurer's ability to make changes in premium rates by classes in accordance with applicable laws and regulations. (h) Nothing in this section shall be interpreted as prohibiting an insurer from making policy modifications mandated by state law, or, acting consistently with sec.3.3040(b) of this title (relating to Prohibited Policy Provisions), from honoring requests from a policyholder for modifications to an individual policy or offering policy modifications uniformly to all insureds under a particular policy form. sec.3.3050. Standards for Renewability Provisions. (a) Each policy subject to this subchapter: (1) Shall include a renewal, continuation, or nonrenewal provision, consistent with the requirements of this subchapter. The language or specifications of such provision must be consistent with the type of contract to be issued (e.g., guaranteed renewable, noncancellable, limited guarantee of renewability, limited renewability at the option of the insurer, single term nonrenewable, etc.). Such provision must be appropriately captioned and commence or be referenced on the first page of the policy. All limitations on renewability must be clearly stated. (2) Which contains a provision reserving the right of the insurer to increase the premium charged for such policy at the time such policy is renewed shall have printed at the top of the first page of such policy, and may not be preceded by any language except the company name, logo, or masthead (and address if shown) in not less than 10 point type, a statement that the premium may be increased upon the renewal date. (3) Which contains a provision reserving the right of the insurer to nonrenew the policy upon the insured's attaining a certain age or a provision whereby the policy terminates upon attainment of a certain age shall have printed at the top of the first page of such policy, and may not be preceded by any language except the company name, logo, or masthead (and address, if shown) in not less than 10 point type, a statement that such policy may be subject to nonrenewal upon attainment of a certain age or that the policy will be terminated upon attainment of a specified age. This requirement may be combined into one statement with the requirement in paragraph (2) of this subsection, if the policy is subject to change in premium upon renewal and to nonrenewal or termination upon the insured's attainment of a specified age. (b) Standards for specific types of renewability provisions. (1) Noncancellable Policy--A renewal provision of a policy characterized as "noncancellable" must be consistent with the minimum requirements set forth in sec.3.3019 of this subchapter (relating to Policy Definition of Noncancellable Policies). In a family policy covering both husband and wife the age of the younger spouse must be used as the basis for fulfilling the age (at least to age 50) or durational (for at least five years if issued after age 44) requirements for the definition of a noncancellable policy for the purpose of defining the period of noncancellability of the policy. This requirement shall not prevent termination of coverage of the older spouse upon attainment of the stated age limit (e.g. age 65), so long as the termination is not otherwise prohibited by law and the policy may be continued in force as to the younger spouse to the age or for the durational period as specified in said definition. Except as otherwise provided in sec.3.3019(b), a policy shall not refer to a noncancellable policy as "noncancellable and guaranteed renewable, unless the policy also meets the definition of guaranteed renewable set forth in sec.sec.3.3020(a) (relating to Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability) and 3.3038 (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions) of this subchapter. (2) Guaranteed renewable policy--Except as provided in sec.3.3020(b)(4) of this subchapter (relating to Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability), the renewal provision used in a policy which is characterized as a "guaranteed renewable policy" must be consistent with the minimum requirements relating to use of the term guaranteed renewable set forth in sec.sec.3.3020 and the provisions of sec.3.3038 (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions) of this subchapter. Every policy offering individual hospital, medical or surgical coverage shall contain a guaranteed renewability provision applicable to such coverage. (3) Limited guarantee of renewability policy--The renewal provision used in a policy which is characterized as having a "limited guarantee of renewability" must be consistent with the minimum requirements relating to use of the term "limited guarantee of renewability" set forth in sec.3.3020 of this subchapter (relating to Policy Definition of Guaranteed Renewable and Limited Guarantee of Renewability). The renewal provision will be the same as that contained in a "noncancellable policy" except for the reservation of the right to the insurer to change premium on a class basis. Such right shall be clearly expressed within the renewal provision and referenced in the caption of such provision. A limited guarantee of renewability may apply to excepted benefits, but shall not apply to individual hospital, medical or surgical coverage. (4) Renewable subject to consent of company and variants thereof. The renewability options set forth below may apply to excepted benefits, but shall not apply to individual hospital, medical or surgical coverage. (A) The renewal provision of a policy which is renewable at the option of the company shall be appropriately captioned. The provision shall clearly declare that renewal of the policy is subject to the consent of the insurer and that the premium rate applicable to such policy shall be that currently in use on each renewal date of the policy. If the insurer reserves the right of cancellation, notice of the existence of the provision shall be cross-referenced in the renewal provision. (B) Conditional or limited continuance--A policy which provides a qualified right of continuance (after expiration of the period during which such policy is noncancellable or subject to a limited guarantee of renewability) must clearly specify the conditions which must be fulfilled to permit continuance of the policy. If premiums are to be based on an attained age or on a step-rate basis, such must be declared in the renewal provision. The age limit, if any, to which any policy is renewed shall be declared in the renewal provision. (C) Qualified right of renewal--A renewal provision, other than enumerated above, may grant to the insured the right of renewal by timely payment of premium up to a stated age, if any, subject to the reserved right of the insurer to nonrenew all such policies on a specified basis upon the giving of a specified period of notice, which shall be set forth in the appropriate provision of the policy. The right of the insured to renew the policy may be conditioned upon the continuation of a reasonable specified status (e.g., an employee of a named employer, member of a named organization, while engaged in a specific occupation associated with such employment or such organization, residence in a given state or geographic area, insured under a given form of insurance having like form number identification). The rights of the insured and of the insurer shall be clearly set forth in the renewal provision. Such provision shall include, where applicable, the specified age limit, requirements as to the professional or occupational status, and requirements as to the continuing relationship of the employee or member. Continuance of insurance after the insured ceases to be eligible for coverage under the plan may be at the option of the insurer. If a different table of premium rates is to be applicable with respect to renewals occurring thereafter, such fact shall be declared in the renewal provision. (D) Single term nonrenewable policy--A policy characterized as a "single term nonrenewable policy" shall include a provision appropriately captioned (e.g., "This policy is not renewable" or words of similar import). Such provision must identify or reference the proper part of the contract within which the duration of the coverage is specified. (5) Limited renewability at the option of the insured--A policy which may not be characterized as noncancellable or as having a limited guarantee of renewability solely because such policy may not be continuable to age 50 or for a minimum period of five years, may use a renewal provision caption, subject to the approval of the commissioner, which states that the right of the renewal is vested in the insured for a stated period of years, to a stated age, to the occurrence of a stated event or during the continuance of a given status. Such a provision may apply to excepted benefits, but shall not apply to individual hospital, medical or surgical coverage. A policy printed on or after the effective date of this subchapter shall not refer to such a renewability provision as "renewable at the option of the insured." However, in regards to excepted benefits, an insurer may continue to issue through May 31, 1998 policies from printed stock existing on the day before the effective date of this subchapter that refer to such a renewability provision as "renewable at the option of the insured," as was previously allowed by rule. sec. 3.3052.Standards for Termination of Insurance Provision. (a) A policy subject to this subchapter shall include termination provisions which shall specify as to each eligible family member, as set out in sec.3.3051 of this subchapter (relating to Initial and Subsequent Conditions of Eligibility Provision), the age, or event, if any, upon which coverage under the policy will terminate. (b) In regards to individual hospital, medical or surgical coverage, a policy shall only contain the following bases for termination of coverage: (1) the bases for nonrenewal contained in sec.3.3038 of this subchapter (relating to Mandatory Guaranteed Renewability Provisions for Individual Hospital, Medical or Surgical Coverage; Exceptions); (2) in regards to policies covering a spouse of the primary insured or dependents: (A) Coverage of the spouse may terminate upon the dissolution of the marriage through divorce or other lawful means, subject to this section, sec.21.407 of this title (relating to Continuance of Coverage) and other applicable law; and (B) Coverage of a dependent may terminate upon the dependent's attainment of a limiting age, subject to this section, article 3.70-2(C), Insurance Code (relating to Form of Policy), and other applicable law. (c) A policy containing noncancellable, guaranteed renewable or limited guarantee of renewability provisions may not provide for termination of coverage of the spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than nonpayment of premium. The provision shall stipulate that in the event of the insured's death the spouse of the insured, if covered under the policy, shall become the insured. (d) The provision shall stipulate that if the insurer accepts premium for coverage extending beyond the date, age or event specified for termination as to an insured family member, then coverage as to such person shall continue during the period for which an identifiable premium was accepted, except where such acceptance was predicated on a misstatement of age outlined in the Insurance Code, Article 3.70-7. (e) In the event of cancellation by the insurer or refusal to renew by the insurer of a policy providing pregnancy benefits, the provision shall provide for an extension of benefits as to pregnancy commencing while the policy is in force and for which benefits would have been payable had the policy continued in force. (f) The provision shall stipulate that termination of the policy by the insurer shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period the policy was in force may be predicated upon the continuous total disability of the insured person limited to the duration of the policy benefit period, payment of the maximum benefits or to a time period of not less than three months. (g) The provision may provide for the termination or suspension of family members who become eligible for coverage provided by the federal government. (h) A policy may not provide for termination of coverage of a dependent child on attainment of the limiting age for dependent children specified in the policy while the child is: (1) incapable of self-sustaining employment due to mental retardation or physical handicap; and (2) chiefly dependent upon the insured for support and maintenance. Proof of the incapacity and dependency shall be furnished to the insurer by the insured within 31 days of the child's attainment of the limiting age and subsequently as may be required but not more frequently than annually after the two-year period following the child's attainment of the limiting age. Upon the attainment of the limiting age, the applicable adult premium may be charged. sec.3.3092. Format, Content, and Readability for Outline of Coverage. (a) (No Change.) (b) Content. (1)-(4) (No Change.) (5) Drafting instructions for paragraph (5). This paragraph shall include a description of the provisions regarding renewability including any limitation by age, time, or event, status requirements, any reservation by the insurer of a right to change premiums or right of cancellation, and any other matter appropriate to the terms and conditions of renewability. If the policy, or any part of the policy, consists of individual hospital, medical, or surgical coverage, paragraph (5) shall include language regarding guaranteed renewability substantially similar to the following: "This (policy/coverage) is guaranteed renewable. That means that you have the right to keep the policy in force with the same benefits, except that we may discontinue or terminate the policy if: "1. You fail to pay premiums as required under the policy; "2. You have performed an act or practice that constitutes fraud, or have made an intentional misrepresentation of material fact, relating in any way to the policy, including claims for benefits under the policy; or "3. We stop issuing the (policy/coverage) in Texas, but only if we notify you in advance." (Include, if coverage offered by an issuer under the Insurance Code, Chapter 20: "4. You no longer reside, live, or work in our service area, as described in the policy." (Include, if applicable: "This policy will not terminate when a covered person becomes eligible for Medicare. However, the policy excludes any benefits that are paid to a covered person by Medicare.") "Unless the policy is 'noncancellable,' as defined in the policy, we have the right to raise rates on your policy at each time of renewal, in a manner consistent with the policy and Texas law. If the policy is noncancellable, our right to raise rates is limited by the definition of 'noncancellable' contained in the policy, and by Texas law." (6) (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 legal authority. Issued in Austin, Texas, on December 1, 1997. TRD-9716087 Caroline Scott General Counsel and Chief Clerk Texas Department of Insurance Effective date: December 22, 1997 Proposal publication date: August 29, 1997 For further information, please call: (512) 463-6327 28 TAC sec.3.3078 The Commissioner of Insurance adopts repeal of 28 Texas Administrative Code ("TAC") sec.3.3078 without changes to the proposed text published in the August 29, 1997 issue of the Texas Register (22 TexReg 8596). The repeal of sec.3.3078, which relates to Minimum Standards for Medicare Supplement Expense Coverage, is necessary because the section is obsolete. Rules governing such minimum standards for Medicare supplement policies now are contained in 28 TAC, Chapter 3, Subchapter T. This repeal is adopted in conjunction with amendments to Subchapter S published elsewhere in this issue of the Texas Register. The repeal of sec.3.3078 removes from the TAC obsolete provisions relating to Medicare supplement expense coverage. The removal of sec.3.3078 from Subchapter S will not any affect other sections in Subchapter S. The Department received no comments on the proposal. The repeal is proposed pursuant to the Insurance Code, Articles 3.74, 1.02 and 1.03A. Article 3.74 governs minimum standards for Medicare supplement policies. Section 10 of Article 3.74 authorizes the Commissioner of Insurance to adopt rules that are necessary and proper to carry out Article 3.74. Article 1.02 provides that a reference in the Insurance Code to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the commissioner and the department. Article 1.03A provides that the commissioner may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by a statute. 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 December 1, 1997. TRD-9716086 Carloine Scott General Counsel and Chief Clerk Texas Department of Insurance Effective date: December 22, 1997 Proposal publication date: August 29, 1997 For further information, please call: (512) 463-6327 CHAPTER 21.Trade Practices SUBCHAPTER K.Certification of Creditable Coverage 28 TAC sec.sec.21.1101-21.1110 The Commissioner of Insurance adopts new Subchapter K, sec.sec.21.1101 - 21.1110, concerning certification of creditable coverage. Sections 21.1104, 21.1106, 21.1107, 21.1108 and 21.1110 are adopted with changes to the proposed text as published in the August 29, 1997 issue of the Texas Register (22 TexReg 8597). Sections 21.1101 - 21.1103, 21.1105 and 21.1109 are adopted without changes and will not be republished. This new subchapter is necessary to implement House Bill 1212 enacted by Acts, 75th Legislature, 1997, and codified at Texas Insurance Code Article 21.52G, effective July 1997. House Bill 1212 requires issuers of health benefit plans to provide certification of creditable coverage upon termination of coverage for the insured or dependents of the insured indicating the period of applicable coverage credited towards the application of any preexisting condition exclusion provision. It also authorizes the Commissioner of Insurance to establish rules setting out the certification of creditable coverage standards including meeting the minimum standards required by federal law in the Health Insurance Portability and Availability Act of 1996 (sometimes referred to as "HIPAA") and federal regulations. This subchapter establishes procedures and minimum standards for issuance of certificates of creditable coverage. This subchapter is also necessary to provide guidance to issuers of health benefit plans in determining the applicable timeframes for individual and group coverage credited towards the application of any preexisting condition provision. This subchapter also provides a model certificate that can be utilized by plans and issuers for crediting prior coverage for those individuals seeking health coverage from one insurer to another. After receiving public comments on the proposal, the department has made the following changes to the subchapter. Based on comments, changes were made to sec.21.1104(b)(7) and (8) to clarify that the issuer may either indicate the date that any waiting period (and affiliation period if applicable) began and the date creditable coverage began or may indicate the individual has the full amount of creditable coverage on the certification. Based on comments, the department added language to sec.21.1104(c) to clarify that a substantially similar form to Form CCC provided at Figure 1, sec.21.1110, or the federal model found in HIPAA regulations with modifications to reflect applicable time limits for Texas residents may be used to certify creditable coverage. Based on comments, subsection (g) was added to sec.21.1104 to provide that a certification of creditable coverage issued prior to the adoption of this subchapter that is in compliance with the federal regulations and properly reflects the creditable time period applicable to Texas residents, will be acceptable. Based on comments, sec.21.1106(b) was changed to allow a certificate for dependent coverage to state the name of the individual covered by the health benefit plan and specify the type of coverage where the issuer is unable to provide the dependent's last known address. In response to comments, subsection (i) was added to sec.21.1107 to clarify that an issuer of a health benefit plan may provide coverage and receive premium during the period of determination of creditable coverage. In response to comments, clarifying language was added to sec.21.1108(a) to provide that a notice to the individual by the issuer of the health benefit plan is only required if an preexisting condition exclusion period is to be applied. Based on comments, No. 9 on Form CCC, Figure 1, sec.21.1110, was changed to be consistent with the definitions in this subchapter by using the date the application was filed instead of the date the application was received. Section 21.1101 defines key words and terms used in this subchapter. Section 21.1102 contains information regarding the issuance of a certification of creditable coverage by each issuer of a health benefit plan and allows an issuer of a health benefit plan to contract with a third party administrator or plan sponsor to provide a certification of creditable coverage. Section 21.1103 addresses the timing of issuance of a written certificate of creditable coverage to an individual by the issuer under certain conditions and provides that issuance of the certificates are without charge to the individual for up to 24 months after coverage ceases. The requirements of the form and content for a written certificate of creditable coverage are set forth in sec.21.1104 along with provisions allowing the use of a substantially similar form to the one provided in this subchapter or the use of the federal model contained in the federal regulations with modifications. Section 21.1105 sets out requirements of delivery of a certificate of creditable coverage, including, allowing the use of fax or e-mail and establishes when separate mailings of certificates are required for dependents. Section 21.1106 contains information relating to determination of information concerning dependent coverage. Section 21.1107 sets forth other means of establishing creditable coverage in the absence of a creditable coverage certificate. Section 21.1108 sets forth the requirements of determination of creditable coverage and notification of a preexisting condition exclusion to an individual by an issuer of a health benefit plan. Section 21.1109 provides for severability of terms or sections of this subchapter under certain circumstances. Section 21.1110 contains a creditable coverage form developed by the department. Delay Adoption of Regulations. Two commenters requested that the adoption of regulations for the certification of creditable coverage be delayed until the U.S. Health and Human Services Department adopts final regulations. The commenters stated that the final regulations are not due until the fall of 1998 and that during the interim the insurers of Texas should be allowed to apply creditable coverage rules as best fits their existing policy forms. One commenter stated that the federal regulations are not clear and are subject to major changes during the final adoption process. Another commenter requested that if substantial changes are made to the federal regulations during the final adoption stage that the department issue new regulations to reflect those changes. Agency Response. The department disagrees. Although the federal government may not yet have adopted final rules regarding creditable coverage, there are existing state and federal laws on this subject. The department feels that it is appropriate and timely to implement rules adopting state legislation rather than waiting for the federal government to adopt final rules because it is not expected that substantial change will occur to the final adopted federal rules. The department believes the adoption of Subchapter K is necessary so that issuers of health benefit plans will have rules which accurately reflect Texas law, which differs in part, from federal law. The department will evaluate the need to amend Subchapter K when the federal rules are finally adopted. Applications. A commenter asked how they should handle an application in which the applicant requests that the coverage not be effective until some future date. Another commenter expressed concern regarding applications that are not dated and sought clarification. Agency Response. The carrier/agent has the responsibility to advise the applicant that requesting coverage at a future date may result in a significant break in coverage (i.e. the federal rules allow the break in coverage to stop upon application for application processing delays....not for requests for coverage at a future date). The applicant would then have to make a decision to either accept the coverage with an earlier effective date or be subject to some or all of the preexisting condition limitations. Neither the summary to the federal rules nor the federal rules address the issue of "what if the application is not dated." The department believes the date the agent takes the application would be the date the application is filed. If there is no agent, the date of application would be the date the application is hand delivered to the agent's or company's place of business or if mailed, the date of postmark. In the situations where there is a discrepancy between the postmark date and the date the individual signed the application, the postmark date will be considered the filed date. 21.1101 Creditable Coverage. A commenter is concerned about the consistency between state and federal requirements and notes that neither HIPAA nor HB 1212 (Articles 26.035 and 21.52G) contain the provision of "short term limited duration" as provided in the proposed definition section of creditable coverage. Another commenter asked if a certificate of creditable coverage must be issued for short term limited duration coverage in light of the wording in federal legislation which suggests that no certificate of creditable coverage is required: "whether the coverage is short-term, limited duration coverage or other coverage for benefits for medical care for which no certificate of creditable coverage is required." Agency Response. The department agrees that the term "short term limited duration" is not in the definition of creditable coverage in either HIPAA or HB 1212; however, the term is defined in the definitions of the federal regulations and is also referred to in the "rules relating to creditable coverage" of the federal regulations and is therefore, an appropriate term to be included in the definition of creditable coverage and defined in Subchapter K. Article 21.52G of the Insurance Code requires a certificate to be issued for all creditable coverage in the manner established by rule. Consequently, in Texas, a certificate of creditable coverage is also required for short term limited duration coverage. 21.1101 Waiting Period. One commenter asked what constitutes a "substantially completed application." Another commenter asked why the department is using the term "first day of coverage" instead of the term "effective date" since "effective date" is used in other regulations. Agency Response. The summary to federal rules implementing HIPAA states that processing delay of an application or omission of details will not cause a significant break in coverage for a person who files a substantially completed application. Based on this language, the department believes a substantially completed application would be one that contains sufficient information to allow the company to contact the applicant to obtain the omitted information. The department recognizes that Article 3.70-1(H)(4) utilizes the phrase "effective date" and the rule utilizes the phrase "first day of coverage." The department believes there is no difference in the meaning of these terms and it appears that the federal government also recognizes the terms mean the same as they utilized the term "effective date" in the summary to the federal rules. 21.1103(a). Because some employers may issue termination notices after the actual termination, a commenter suggested requiring the issuance of a certificate of coverage within 30 days of termination or receipt of notification of termination, whichever comes later. Agency Response. The department disagrees and believes that the rule follows federal law. The provision is clear that the certificate is to be issued within 30 days from the date the person would lose coverage. 21.1103(d). A commenter understands that the "automatic" certificate should be provided to the covered person without charge. However, the commenter expressed concern that second and subsequent requests, up to two years later, are too expensive and are not required to be provided without charge. Agency Response. The department recognizes the commenter's concern but the federal regulations provide that requests for certificates are permitted to be made by or on behalf of an individual within 24 months after coverage ceases and are to be provided without charge. Federal law allows the issuer to charge for certifications requested after 24 months from termination of coverage. 21.1104(b)(7)-(8). Two commenters suggested that because federal regulations allow a statement that the person has "full" credit (18 months or more), that the issuer should not have to indicate the number of months coverage is credited if coverage exceeds 18 months. The commenters also requested clarification that the issuer may either indicate on the certificate the number of months covered or the date any waiting/affiliation period began and the date creditable coverage began but both are not required. The commenters contend that to require both would add significant expense in software/program modifications. Agency Response. The department agrees that the language should be revised and has changed the language to allow an issuer to state on the certificate either the date any waiting period (or affiliation period, if applicable) began and the date creditable coverage began or a statement indicating the individual has 18 months of creditable coverage for individual coverage, or 12 months of creditable coverage for group coverage. 21.1104(b)(8). One commenter stated that his company currently reports date of hire, date coverage begins, and the waiting period, however, the first day of the waiting period is actually inferred. The commenter contends that because of switch enrollments in dual coverage options calculating the first day of a waiting period is difficult and requested that issuers be allowed to "infer" the first day of a waiting period in situations as described. Agency Response. The department disagrees. In these instances, federal rules permit issuers to simply transfer the start and stop date of coverage to the new plan in lieu of issuing a certificate. 21.1104(c). A commenter suggested clarifying language be added to indicate that the issuer is not limited to using Form CCC, and the issuer may use a form substantially similar to Form CCC or may use the federal model. One commenter requested a "grandfather" provision be added to protect issuers of creditable coverage certificates prior to adoption of state regulations. Agency Response. The department agrees with the suggestion regarding a substantially similar form and has changed the subsection to reflect that a substantially similar form or the federal model with modifications may be used. The department agrees with the recommendation and has added subsection (g) to reflect that delivery of a certificate of creditable coverage prior to the adoption of this subchapter shall be deemed to comply with Form CCC provided the certificate complied with the federal regulations and properly reflects the creditable time period applicable to Texas residents. 21.1105(c) and 21.1106(b). A commenter stated that although steps have now been taken to maintain dependent addresses, prior to July 1997, many carriers did not maintain dependent addresses. The commenter recommended new language be added to provide that if the address of a dependent cannot be ascertained, that the certificate may be provided to the person to whom coverage was issued indicating that the certificate is for dependent coverage. Agency Response. The department agrees with the commenter's concerns and has changed sec.21.1106 (b) to address the comment. 21.1107. A commenter stated that coverage of a person should not be delayed while any creditable coverage is being debated and recommended language allowing the issuer to provide coverage and receive premium while the coverage information is being determined be added. Agency Response. The department agrees and has added the necessary language to new subsection (i). 21.1108. A commenter stated that the federal regulations require notification only when a preexisting condition exclusion period is to be applied and that if full credit is indicated, then no notice seems necessary. The commenter further stated that it is too expensive to send a notice to each participant and that a notice should only be sent to those who have an exclusionary period. Agency Response. The department believes that sec.21.1108(b) articulates that an issuer is only required to notify an individual to whom a preexisting condition is to be applied; however, the department has added clarifying language to subsection (a). 21.1110. A commenter asked what the difference was between "filing" an application or "receiving" an application. Agency Response. The department recognizes there is an inconsistency in the use of these terms in the rules in that the definition of waiting period in sec.21.1104 utilizes the phrase "files a substantially complete application" and No. 9 of Form CCC utilizes the phrase "application was received." Since the definition of waiting period complies with federal rules, the department has changed No. 9 of Form CCC to be consistent with the language contained in the definition of waiting period. For, with changes: Blue Cross and Blue Cross of Texas, Sierra Health Services, Inc., Insurance Alliance of America and Texas Association of Life and Health Insurers. Against: Provident American Insurance. Subchapter K, sec.sec.21.1101-21.1110 are adopted under the Insurance Code Article 21.52G; the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"); the interim federal regulations implementing HIPAA promulgated by the Department of Treasury, Department of Labor, and the Department of Health and Human Services; and the Insurance Code Article 1.03A. The Insurance Code Article 21.52G, as added by the 75th Legislature, implements provisions regarding creditable coverage which were necessary to comply with the federal requirements contained in HIPAA. Under the Insurance Code Article 21.52G, the commissioner shall set standards for the certification of creditable coverage required to be provided by each issuer of a health benefit plan. Under the Insurance Code Article 21.52G, sec.5, the commissioner shall adopt rules as necessary to implement the Insurance Code Article 21.52G and related provisions of the Insurance Code and to meet the minimum requirements of federal law and regulations. The minimum requirements of federal law for creditable coverage are contained in HIPAA. Interim federal regulations implementing HIPAA have been promulgated by the Department of Treasury, Department of Labor, and the Department of Health and Human Services, 62 Fed. Reg. 16893. Portions of the federal regulations are included in these rules as necessary to meet the minimum requirements of federal law and regulations. 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 a 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.21.1104.Form and Content of Written Certificate of Creditable Coverage. (a) Except as otherwise provided in sec.21.1107 of this title (relating to Creditable Coverage Established Through Means Other than Written Certificate), a certificate of creditable coverage must be provided in writing. (b) The written certificate of creditable coverage shall include the following: (1) The date the certificate is issued; (2) The name of the issuer of the health benefit plan that provided the coverage described in the certificate; (3) The individual's or dependent's name for which the certificate of creditable coverage is issued; (4) Any other information necessary for the health benefit plan providing the coverage specified in the certificate to identify the individual, including but not limited to, the individual's identification number under the health benefit plan; (5) The name, address and telephone number of the third party administrator, plan sponsor, or issuer of the health benefit plan providing the certificate; (6) A telephone number to call for further information regarding the certificate of creditable coverage, if different than paragraph (5) of this section; (7) Either one of the following: (A) the date any waiting period (or affiliation period, if applicable) began and the date creditable coverage began; or (B) a statement indicating the individual has: (i) 18 months of creditable coverage for individual coverage, or (ii) 12 months of creditable coverage for group coverage; and (8) The date creditable coverage ended, or a statement that creditable coverage is continuing. (c) A carrier may use either: (1) Form CCC provided at Figure 1 of sec.21.1110(b) of this title (relating to Form CCC) to comply with subsection (a) of this section, or (2) a form that is substantially similar to Form CCC and complies with subsection (a) of this section, or (3) the model contained in federal rules with modifications to reflect the applicable 12 or 18 month time period. (d) If a certificate is provided under subsection (a) of sec.21.1103 of this title (relating to Timing and Issuance of a Written Certificate of Creditable Coverage to an Individual), the period that must be included on the certificate is the last period of continuous coverage, ending on the date coverage ceased. (e) If an individual requests a certificate under subsection (b) of sec.21.1103 of this title (relating to Timing and Issuance of a Written Certificate of Creditable Coverage to an Individual), a certificate shall be provided for each period of continuous creditable coverage ending within the 24-month period, ending on the date of the request (or continuing on the date of the request). A separate certificate shall be provided for each such period of continuous creditable coverage. (f) A certificate of creditable coverage may provide information on both an individual and the individual's dependents if the information is identical for each individual. If the information is not identical, the certificates of creditable coverage may be provided on one form if the form provides all the required information for each individual and separately states the information that is not identical. (g) Delivery of a certificate of creditable coverage prior to the adoption of this subchapter shall be deemed to comply with this subchapter, provided the certificate complied with the federal regulations and properly reflected the creditable time period applicable to Texas residents. sec.21.1106. Dependent Coverage. (a) An issuer of a health benefit plan is required to use reasonable efforts to determine the information needed for a certificate of creditable coverage relating to dependent coverage. (b) An issuer of a health benefit plan that cannot provide the names or addresses of dependents for providing a dependent's certificate of creditable coverage may satisfy the requirements of subsection (b)(3) of sec.21.1104 of this title (relating to Form and Content of Certificate of Creditable Coverage) until June 30, 1998, by providing the name of the individual covered by the issuer of the health benefit plan and specifying that the type of coverage described in the certificate is for dependent coverage (for example: family coverage or employee/spouse coverage). (c) An issuer of a health benefit plan that issues a written certificate of creditable coverage that does not contain the name of a dependent must furnish a certificate within 21 days after the individual ceases to be covered under the policy. (d) An issuer of a health benefit plan shall treat an individual as having furnished a certificate of creditable coverage showing the dependent status if the individual attests to the dependent status and the period of such dependency and the individual cooperates with the issuer's efforts to verify the dependent status. sec.21.1107. Creditable Coverage Established Through Means other than Written Certificate. (a) An individual may establish creditable coverage through means other than a written certificate of creditable coverage as provided in sec.21.1103 of this title (relating to Timing of Issuance of a Written Certificate of Creditable Coverage) if the accuracy of a written certificate is contested or if a written certificate is unavailable when needed by the individual. For example, the individual may make such a demonstration, including but not limited to, the following circumstances: (1) an entity has failed to provide a certificate within the required time period; (2) the coverage is for a period before July 1, 1996; (3) the individual has an urgent medical condition that necessitates a determination of whether prior creditable coverage existed before the individual can deliver a certificate to the health benefit plan; or (4) the individual lost a certificate he or she had previously received and is unable to obtain another certificate. (b) No written certificate is required to be provided if the following conditions are met: (1) an individual is entitled to receive a certificate; (2) the individual requests that the certificate be sent to another issuer of a health benefit plan instead of to the individual; (3) the issuer of the health benefit plan that would otherwise receive the certificate agrees to accept the information regarding creditable coverage through means other than a written certificate (for example, by telephone); and (4) the issuer of the health benefit plan receives the information from the sending issuer of the health benefit plan within the time periods required under sec.21.1103 of this title (relating to Timing of Issuance of a Written Certificate of Creditable Coverage to an Individual). (c) Documents that may establish creditable coverage (and waiting or affiliation periods) in the absence of a written certificate of coverage, include but are not limited to, the following: (1) explanations of benefit claims or other correspondence from a health benefit plan or issuer indicating coverage; (2) pay stubs showing a payroll deduction for health benefit coverage; (3) health benefit plan identification card; (4) a certificate of coverage under a health benefit plan; (5) records from medical care providers indicating health benefit plan coverage; (6) third party statements verifying periods of coverage; and (7) other relevant documents that evidence periods of health benefit plan coverage. (d) An issuer of a health benefit plan shall take into account all information that it obtains or that is present on behalf of an individual to make a determination, based on the relevant facts and circumstances, whether an individual has creditable coverage and is entitled to offset all or a portion of any preexisting condition exclusion period. (e) An issuer of a health benefit plan shall treat the individual as having furnished a written certificate of creditable coverage if the individual attests to the period of creditable coverage, the individual presents relevant corroborating evidence of some creditable coverage during the period, and the individual cooperates with the issuer of the health benefit plan's efforts to verify the individual's coverage. (f) For purposes of subsection (e) of this section, cooperation includes providing, upon request, a written authorization for the issuer of the health benefit plan to request a certificate on behalf of the individual, and cooperating in efforts to determine the validity of the corroborating evidence and the dates of creditable coverage. (g) An issuer of a health benefit plan may refuse to credit coverage if the individual fails to cooperate with the issuer's efforts to verify coverage. However, an issuer of a health benefit plan shall not consider an individual's inability to obtain a certificate to be evidence of the absence of creditable coverage. (h) Creditable coverage may also be established through means other than documentation, such as by a telephone call from the health benefit plan or provider to a third party verifying creditable coverage. (i) Nothing contained in this subchapter shall be construed to prohibit an issuer of a health plan from providing coverage on the contractual effective date and receiving premium for such coverage while creditable coverage information is being determined. sec.21.1108.Notification of Creditable Coverage and Preexisting Condition Exclusion. (a) After receipt of a written certification of creditable coverage as provided under sec.21.1103 of this title (relating to Timing of Issuance of a Written Certificate of Creditable Coverage to an Individual) or other means as provided under sec.21.1107 of this title (relating to Creditable Coverage Established Through Means other than Written Certificate), an issuer of a health benefit plan shall as soon as reasonably possible, not to exceed 30 days after receipt of the information regarding creditable coverage, make a determination regarding the individual's period of creditable coverage and notify the individual to whom a preexisting condition exclusion period is to apply of its determination in accordance with subsection (b) of this section. (b) An issuer of a health benefit plan seeking to impose a preexisting condition exclusion shall disclose to the individual, in writing, its determination of any preexisting condition exclusion period that applies to the individual as soon as reasonably possible, not to exceed 30 days after receipt of the information regarding creditable coverage. The issuer of a health benefit plan shall disclose the basis for such determination, including the source and substance of any information on which the issuer relied. The issuer of a health benefit plan shall establish a grievance procedure in accordance with applicable law and shall notify the individual in writing of such grievance procedure. The issuer of a health benefit plan shall provide an individual with a reasonable opportunity to submit additional evidence of creditable coverage. (c) An issuer of a health benefit plan may modify an initial determination of creditable coverage if the issuer determines the individual did not have the claimed creditable coverage, provided that: (1) a notice of the reconsideration is provided to the individual; and (2) until the final determination is made, the issuer of the health benefit plan, for purposes of approving access to medical services, acts in a manner consistent with the initial determination. sec.21.1110.Form CCC. (a) Form CCC relating to Insurance Code, Article 21.52G for certification and disclosure of coverage under a health benefit plan is included in subsection (b) of this section in its entirety and has been filed with the Office of the Secretary of State. The figure can be obtained from the Texas Department of Insurance, Life/Health Group, MC 106-1A, P.O. Box 149104, Austin, Texas 78714- 9104. (b) Form CCC referenced in this subchapter is as follows: FIGURE 1: 28 TAC sec.21.1110(b) 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 December 1, 1997. TRD-9716401 Lynda H. Nesenholtz Assistant General Counsel Texas Department of Insurance Effective date: December 22, 1997 Proposal publication date: August 29, 1997 For further information, please call: (512) 463-6327 TITLE 30. ENVIRONMENTAL QUALITY PART I. Texas Natural Resources and Conservation Commission CHAPTER 101.General Rules The commission adopts the repeal of existing sec.101.29, concerning Emissions Banking, new sec.101.29, concerning Emissions Banking and Trading, and revisions to the State Implementation Plan regarding these adoptions. New sec.101.29 is adopted with changes to the proposed text as published in the June 10, 1997 issue of the Texas Register (22 TexReg 5641). EXPLANATION OF ADOPTED RULES This rulemaking action expands the scope of the current banking program by allowing for the use of emission reduction credits (ERCs) to meet reasonably available control technology (RACT) requirements for the control of volatile organic compounds (VOCs) and nitrogen oxides (NO10) would need to be factored into the trading program structure. The Texas Center for Policy Studies expressed concern that DERCs have the potential to actually increase emissions from year to year, since they are temporary rather than permanent reductions. Every DERC deposited in the bank represents emissions removed from the air. It is only when the DERC is used that these emissions are re-introduced to the air, with the stipulation that 10% over the amount used must be retired. Since deposited DERCs tend to accumulate over time, with only a percentage actually being used at any given time, the result would be a net decrease in emissions, not an increase. Additionally, while the decreases authorized under this program are temporary rather than permanent, authorized increases are temporary as well. Language has been added to sec.101.29(d)(4)(B)(v)(II) (formerly sec.101.29(d)(4)(B)(vi)), to assure that emissions increases are limited to one exceedance up to 12 months within any 24-month period. This language is consistent with that of sec.101.29(d)(4)(B)(v)(I), which pertains to VOC and NOx. EPA commented that the state should delete any statement in sec.sec.101.29, 117.540 and 117.570 which would allow the generation of MERCs using the Texas Accelerated Vehicle Retirement (AVR) and Texas Clean Fleet (TCF) programs, since credits cannot be generated using the methods referenced in these programs. EPA cannot approve the state AVR program because it uses a vehicle emission testing method that has changed. The AVR program planned to implement an inspection and maintenance (I/M) program utilizing the IM240 emission test which is no longer available. The Texas Clean Fuel Fleet program is not currently operational as a result of changes to the underlying legislation of the program which changed the criteria for vehicle accumulation. Because the IM240 emission test is no longer available, it is correct that credits will not be available from the AVR program until the program is revised. Staff is in the process of revising the AVR and the TCF programs. When these revisions are complete, it will be possible for the state to generate and use credits under these programs. It is appropriate to allow those credits to be used once the programs are operational. In addition, although recent legislation requires revisions to the TCF program, current provisions will remain in place until the new provisions take effect. The state intends to rectify the problems EPA has identified with this program through revisions to Chapter 114 and the SIP. An individual commented that it is inappropriate to allow MDERCs to be used at a stationary source, given the uncertainty and complexity associated with mobile emission calculations. The agency is able to estimate the emissions from vehicles in a manner that is applicable for trades to stationary sources. Staff uses methodology provided by the EPA to calculate these reductions. The emission factors for use in the calculations are derived from EPA's Mobile Emission Factor Model (MOBILE5). Staff believes that since mobile sources also contribute to the nonattainment problems of an area, reductions from those sources should be encouraged as well. Exxon recommended that the compliance margin requirement be removed from the rule, because the penalties associated with credit shortfalls provide adequate incentives for the users of DERCs or MERCs to acquire sufficient credits, thus ensuring that no shortfall occurs. Exxon commented that some activities for which excess credits would be used are so well understood or controllable that the excess is unnecessary. In those cases, this extra 5% margin would discourage some parties from participation in the program. Staff does not believe that the additional 5% margin will result in a disincentive to participate in the program, since these credits may be resold after it is determined that they are not needed. In order to be consistent with the EPA's Draft OMTG, a compliance margin has been retained in the rule. EPA suggested that the state may want to clarify whether allowable emissions or actual emission are used to calculate baseline emissions. Staff has added the word "actual" to the definition of baseline emissions. EDF and the Texas Center for Policy Studies expressed concerns about the implementation of the DERC system overlaid onto the existing ERC system. The EDF expressed concerns that the DERC program will result in an overall emission increase. While some overlap between DERCs and ERCs exists, the creation of the DERC program should not result in an increase in overall emissions. Under existing permitting procedures, and under the sec.117.540 Phased RACT rule prior to this rule proposal, certain emissions increases could be allowed without the requirement for a comparable decrease. For example, under the current permitting program, a source may request an amendment to increase the emission rate from a facility. Presuming that the impacts and control technology are acceptable, the amendment would typically be granted. Under the DERC rule, the source will still be allowed to increase its emissions, but must retire an equivalent amount of reductions plus a 10% environmental contribution. It is anticipated that as DERCs are used, companies will contemplate further methods of creating DERCs, resulting in an overall decrease in emissions. The benefit to the source in participating in the banking/trading program is the short time frame required for authorization, compared to traditional permitting programs. EDF expressed concerns that the certification process in the proposed rule does not enable the agency to determine if DERCs are in fact surplus. The determination that credits are surplus will be made based on an assessment of the actual emissions, the applicable regulations, and the proposed reduction strategy. Because DERCs will be certified only when the reduction goes beyond the requirements of the rules, the reduction is surplus. EPA stated that the agency must include specific references to modeling provisions for carbon monoxide, sulfur dioxide, and PM10 if reductions of emissions from those pollutants are to be considered in the generation of DERCs or MDERCs. The rule limits the levels at which these trades may take place to below the threshold at which EPA would normally require additional modeling and impact analysis. The rule allows increases of these pollutants to occur only to the extent that those increases are below the PSD significance levels. If the rule was revised as requested, this rule would make the use of DERCs more cumbersome than obtaining a permit amendment under the existing permitting structure. As currently written, sec.101.29(d)(4)(B)(v)(II) states that the user must demonstrate that there will be no adverse impacts from the use of DERCs at the levels requested. Staff believes that this requirement, in combination with the limitation of emission increases to below the PSD significance level, assures that these increases will not cause an adverse impact. EPA commented that the state may want to consider adding a sentence to sec.101.29(d)(1)(G) specifying that, although ERCs may be converted to DERCs, the newly created credit must continue to meet all of the requirements imposed on DERCs. Staff believes this is implicit in the rule. Allowing conversions from ERCs to DERCs does not allow circumvention of other rule requirements pertaining to the creditability of DERCs. EPA suggested adding the following language to sec.101.29(d)(4)(B)(v): .. "a synthetic minor may not exceed its permit allowable on a temporary basis if doing so would make it a major source," in order to avoid any situation in which a synthetic minor would become a major source. Language was added to sec.101.29(d)(4)(B)(vi), stating that DERCs may not be used to allow a source whose emissions are enforceably limited to below applicable major source threshold levels, as defined in sec.122.10 (relating to General Definitions), to operate with actual emissions above those levels without triggering applicable requirements that would otherwise be triggered by such major source status. EPA commented that the state should consider eliminating the executive director's authority to allow a user to exceed an allowable emission level, because this allows the executive director too much discretion. The intent of this provision at sec.101.29(d)(4)(B)(v) is to provide a mechanism for denial of the DERC in the event that an unforeseen use is proposed. Staff has revised the rule language to clarify that this discretion enables the executive director to deny inappropriate uses, rather than providing an opportunity for the executive director to authorize unspecified actions. EPA requested that the state include the requirement that credits must be purchased and held by a prospective user source prior to the time when the credits will be used for compliance, in order to prevent the user from deferring purchase of the credit until after the source has violated its emission limits. Current rule language at sec.101.29(d)(4)(A)(i) requires that the user have ownership of the DERCs prior to use. Staff believes that the rule language addresses EPA's comment. An individual commented that the agency needs to define terms such as "good engineering practices," and objected to the vagueness of phrases like "based on actual monitoring results, when available." The term "good engineering practices" is commonly used in the fields of engineering and air pollution control. Staff expects that when actual monitoring has been performed, these results are available and additional monitoring would not be required for the sole purpose of demonstrating the validity of a credit. If the monitoring has been conducted, it is required to be submitted. Where monitoring has not been performed, standard methods of documentation and calculation will be used. At the executive director's discretion, sampling may be required as well. Sierra Club and an individual expressed reservations about the ability to accomplish trading across areas. [sub]x increases in attainment areas to be countered by decreases in other areas. For nonattainment areas, the use of DERCs is restricted by requiring that emissions decreases must occur in the same nonattainment area as the increases. This restriction serves to protect nonattainment areas from being overwhelmed by increases without accompanying decreases within the same areas. The likely consequence of this restriction is that a greater amount of DERCs created in nonattainment areas will be used and removed from the system. The increases allowed by DERCs in attainment areas are restricted to values protective against adverse impacts. Those areas with the highest pollution levels will have the greatest amount of emissions available for reductions. Consequently, the greatest amount of reductions should be achieved where the reductions are most beneficial. The use of DERCs is restricted to meeting the sec.106.261(3) or (4) or sec.106.262(3) emission and distance limitations, which limit increases allowed under sec.101.29(d)(4)(B)(iv). In fact, the banking and trading rule is actually more restrictive than the agency's existing standard exemption process, which allows such emission increases without requiring corresponding reductions. An additional safeguard has been added to the rule at sec.101.29(d)(1)(H)(v), by providing that, with commission approval, the executive director may suspend trading in whole or in part where a localized area of concern has developed. If trading into an area begins to cause a problem, the executive director may suspend trading in that area. Additionally, the executive director may prohibit a use which would cause or contribute to a condition of air pollution. Sierra Club commented that grandfathered sources should not be allowed to make use of the DERC rule, and questioned whether grandfathered sources could circumvent the permitting process through this rule. This rule allows permitted facilities to exceed their allowable emission rates by strictly defined amounts, which must be offset by acquiring credits. Section 101.29(d)(4)(B)(v)(II) has been reworded to clarify that only permitted sources may exceed their allowables. Grandfathered sources could participate in creating DERCs by reducing emissions, but could not use DERCs to increase emissions. This rule encourages grandfathered and uncontrolled facilities to implement additional control technology early in order to create credits, and therefore does not promote circumvention of the permitting process. South East Texas Regional Planning Commission requested that language be added to the rule to allow for trades of ERCs and MERCs from one ozone nonattainment area to another if it can be demonstrated that the emissions from the area of generation contribute to nonattainment of the ozone standard in the area of use and if the area of generation has an equal or higher nonattainment classification than the area of use. Such trades should be allowed pursuant to the Federal Clean Air Act Section 173(c)(1), 42 U.S.C. sec.7503(c)(1), subject to the approval of the executive director. Section 101.29(c)(1)(E) has been revised to allow for the type of trade described in 42 U.S.C. sec.7503(c)(1). Staff has revised the language submitted by the commenter to spell out the conditions under which a trade between nonattainment areas would be allowed. 30 TAC sec.101.29 STATUTORY AUTHORITY The repeal is adopted under the Texas Health and Safety Code (Vernon 1992), the Texas Clean Air Act (TCAA), sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA; and TCAA sec.382.012, which requires the commission to develop plans for protection of the state's air. 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 December 3, 1997. TRD-9716207 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 23, 1997 Proposal publication date: June 10, 1997 For further information, please call: (512) 239-1970 The new section is adopted under the Texas Health and Safety Code (Vernon 1992), the Texas Clean Air Act (TCAA), sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA; and TCAA sec.382.012, which requires the commission to develop plans for protection of the state's air. sec.101.29.Emission Credit Banking and Trading. (a) Definitions. Unless specifically defined in the Texas Clean Air Act (TCAA) or in the rules of the Texas Natural Resource Conservation Commission (commission), the terms used by the commission have the meanings commonly ascribed to them in the field of air pollution control. In addition to the terms which are defined by the TCAA, the following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Activity - The amount of activity at a source measured in terms of production, use, raw materials input, vehicle miles traveled (VMT), or other similar units that have a direct correlation with the economic output and emission rate of the source (i.e., mass emitted per unit of activity). (2) Actual emissions - Actual emissions as of a particular date shall equal the total emissions during the selected time period, using the unit's actual daily operating hours, production rates, types of materials processed, stored, or combusted during the selected time period. (3) Applicable emission point - The emission point that is either generating an emission reduction or using an emission reduction credit (ERC) or discrete emission reduction credit (DERC). (4) Area source - Any source reported in the agency emissions inventory under the area source category. (5) Baseline - Emissions that occur prior to an emission reduction strategy, considering all limitations required by applicable state and federal regulations. The baseline may not exceed the level of emissions reported in the 1990 emission inventory or a subsequent emissions inventory. For reduction strategies that exceed 12 months, the baseline is established after the first year of generation and is fixed for the life of the strategy. A new baseline is established for each emission reduction strategy. (6) Baseline activity - The stationary source's actual level of activity averaged over any 24 consecutive month period during the 120 consecutive months which precede the emission reduction strategy or credit use period, using the source's actual daily activity level. (7) Baseline emission rate - The stationary source's average rate of emissions per unit of activity using the unit's actual daily operating hours, production rates, or types of materials processed, stored, or combusted for any 24 consecutive month period during the 120 consecutive months which precede the emission reduction strategy or credit use period. (8) Baseline emissions - The stationary source's total actual emissions, averaged for a 12-month period for ERCs or averaged for the discrete time period for DERCs, using the unit's actual daily operating hours, production rates, or types of materials processed, stored, or combusted for any 24 consecutive month period during the 120 consecutive months which precede the emission reduction strategy or credit use period. The baseline emissions may not exceed the level of emissions reported in the 1990 emissions inventory or a subsequent emissions inventory. For sources in existence less than 24 months, a shorter time period not less than 12 months may be considered by the executive director. (9) Certified - Any emission reduction that is determined to be creditable upon review and approval by the executive director. (10) Curtailment - A temporary or partial reduction in activity level at any facility or mobile source. (11) Discrete emission reduction credit (DERC) - A creditable emission reduction that is created during a discrete time period, quantified after the period in which emissions reductions are made, and expressed in tons. (12) Discrete time period - The finite period of time in which a DERC is generated. (13) Emission reduction credit (ERC) - A certified emission reduction that is created by eliminating future emissions, quantified during or before the period in which emission reductions are made, and expressed in tons per year. (14) Emission reduction strategy - The method implemented to reduce the source's emissions beyond that required by state or federal law, regulation, or agreed order. (15) Generation period - The discrete period of time over which a DERC is created. (16) Generator - The owner or operator of a source that creates an emission reduction. (17) Mobile discrete emission reduction credit (MDERC) - a credit that is surplus, generated by a mobile source as set forth in sec.114.200 of this title (relating to Accelerated Vehicle Retirement Program) or sec.114.201 of this title (relating to Mobile Emission Reduction Credit Program), and quantified after the period in which the reductions were made. (18) Most stringent allowable emissions level - The emissions rate of a stationary source, calculated using the maximum rated capacity of the source (unless the source is subject to federally enforceable limits which restrict the operating rate, or hours of operation, or both), considering all limitations required by applicable state and federal regulations. (19) Ozone season - The portion of the year when ozone monitoring is required to occur in a specific geographic area. The Houston/Galveston, Beaumont/Port Arthur, and El Paso nonattainment areas have a 12-month ozone season, whereas Dallas/Fort Worth's ozone season runs from March 1 to October 31. (20) Permanent - An emission reduction that is long lasting and unchanging for the remaining life of the source. (21) Protocol - A replicable and workable method of estimating emission rates or activity levels used to calculate the amount of emission reduction generated or credits required. (22) Quantifiable - An emission reduction that can be measured or estimated with confidence using replicable techniques. (23) Real reduction - A reduction in which actual emissions are reduced. (24) Shutdown - The permanent cessation of an activity producing emissions at a facility. (25) Surplus - An emission reduction that is not otherwise required of a source by a state or federal law, regulation, or agreed order. (26) Use period - The period of time over which the user source applies DERCs to an applicable emission reduction requirement. (27) User - The owner or operator of a source that acquires and uses credits to meet a regulatory requirement, demonstrate compliance, or offset an emission increase. (28) Use strategy - The compliance requirement for which DERCs are being used. (b) Purpose. The purpose of this section is to allow the operator of a source to generate ERCs or DERCs by reducing emissions beyond the level required by local, state, and federal regulation and to allow the operator of a source to use these credits as offsets or as an alternative means of compliance with state regulations. (c) Emissions credit banking of ERCs and mobile emission reduction credits (MERCs). (1) General provisions. (A) Applicable criteria pollutants. Reductions of volatile organic compounds (VOCs) and nitrogen oxides (NOx ) may qualify as ERCs or MERCs. In addition, reductions of carbon monoxide (CO) may qualify as MERCs. Reductions of other criteria pollutants are not creditable. Reductions of one criteria pollutant may not be used to meet the requirements of another pollutant, except at such time as urban airshed modeling demonstrates that one ozone precursor may be substituted for another. (B) Emission reduction requirements. To be creditable as an ERC, an emission reduction must be enforceable, permanent, quantifiable through a replicable methodology, real, and surplus. The reduction must be surplus at the time it is created, as well as when it is used. The creditable reduction must have occurred after January 1, 1990 for VOC and NOx, and the emission point's annual emissions prior to the ERC application must have been reported or represented in the 1990 emissions inventory or a subsequent emissions inventory. MERCs generated from reductions beyond those required by the Texas Clean Fleet Program must have occurred after January 1, 1992. MERCs generated from the accelerated retirement of high-emitting vehicles must have occurred after January 1, 1996. An emission reduction may be creditable as an ERC or DERC, but not both. A mobile source emission reduction may be creditable as a MERC or MDERC, but not both. (C) Eligible sources. Participation in emissions credit banking is strictly voluntary. The following sources are eligible to generate ERCs: (i) any stationary source; (ii) any area source; (iii) any mobile source registered in a designated ozone nonattainment area; and (iv) any non-road mobile source or area source associated with actions by federal agencies under sec.101.30 of this title (relating to Conformity of General Federal Actions to State Implementation Plans). (D) Life of an ERC or MERC. If an ERC is used prior to its expiration date, the ERC is effective for the life of the applicable user source except for an ERC which has been used for purposes of compliance with the provisions of sec.117.570 of this title (relating to Trading). An ERC is available for use for 120 months from the date of the emission reduction except to the extent that regulatory changes after the date of the reduction reduce the creditable amount or invalidate the entire reduction for affected emission points. Only a NOx ERC that is used for compliance with Chapter 117 of this title (relating to Control of Air Pollution From Nitrogen Compounds) is subject to the applicable provisions of sec.117.570 of this title. The length of time a certified MERC is available for use is a function of the remaining vehicle miles of the mobile source, as determined in sec.114.200 of this title and sec.114.201 of this title. The Emissions Bank expiration date and useful life of the credit are calculated from the date the MERCs are certified. (E) Geographic scope. Only emission reductions generated in ozone nonattainment areas are creditable. An ERC or MERC must be used in the nonattainment area in which it is generated unless: (i) the ERC or MERC is used as an offset for a new or modified facility pursuant to sec.116.150 of this title (relating to New Major Source or Major Modification in Ozone Nonattainment Area); (ii) the ERC or MERC was generated in an ozone nonattainment area which has an equal or higher nonattainment classification than the ozone nonattainment area of use; (iii) a demonstration has been made to show that the emissions from the ozone nonattainment area where the ERC or MERC is generated contribute to a violation of the national ambient air quality standard in the ozone nonattainment area of use; and (iv) the user has obtained prior written approval of the executive director. (F) Public information. Information regarding the banking or sale of ERCs or MERCs may be obtained from the Texas Natural Resource Conservation Commission (commission) Emissions Bank, which is the registry of all ERCs and MERCs generated and used. (G) Authorization to emit. An ERC created under this section is a limited authorization to emit VOC and/or NOx in accordance with the provisions of this section, the Federal Clean Air Act (FCAA), and the Texas Clean Air Act (TCAA), as well as regulations promulgated thereunder. An ERC does not constitute a property right. Nothing in this section may be construed to limit the authority of the commission or the United States Environmental Protection Agency (EPA) to terminate or limit such authorization. [sub] x which is used to comply with the provisions of Chapter 117 of this title must meet all applicable provisions of sec.117.570 of this title and shall then be subject to all applicable provisions of sec.117.570 of this title in addition to the requirements of this section. The value of any NOx ERC or MERC which is used to comply with Chapter 117 of this title may be reduced in accordance with sec.117.570(d) of this title. (2) ERC and MERC generation. (A) Methods of generation. ERC and MERCs may be generated using one of the following methods or any other method that meets the requirements of subsection (c)(1) of this section and is approved by the executive director: (i) the permanent shutdown of a facility which causes a loss of capability to produce emissions; (ii) the installation and operation of pollution control equipment which reduces emissions below the level required of the emission source; (iii) a change in a manufacturing process which reduces emissions below the level required of the emission source; (iv) the permanent curtailment in production, which reduces the source's capability to produce emissions; (v) pollution prevention projects that produce surplus emission reductions; (vi) an actual emission reduction resulting from the utilization of vehicles below the established emissions standard and/or the fleet percentages as required by the Texas Clean Fleet Program. (vii) an actual emissions reduction resulting from the accelerated retirement of high-emitting vehicles. (B) Calculation. The quantity of ERCs is determined by subtracting the source's new allowable emission limit (tons per year) from the emission source's baseline emissions. The source's new allowable emission limit equals the enforceable emission limit for the applicable emission point after the emission reduction strategy has been implemented. The quantity of MERCs must be calculated in accordance with sec.114.200 and sec.114.201 of this title. (C) Certification and registration. Stationary sources with potential ERCs may submit an ERC application to the Emissions Bank. Applications for total emission reductions, VOC and NOx combined, of less than 10 tons per year (TPY) will be registered in the Emissions Bank and subjected to a review upon use. Applications for 10 TPY or greater will be subjected to a review in accordance with paragraph (3)(D) of this subsection to determine the creditability of the reductions. Reductions determined to be creditable will be certified by the executive director and an ERC certificate will be issued to the owner. MERCs will be certified by the Emissions Bank for any emission reduction which has been registered in accordance with the specific requirements of sec.114.200 and sec.114.201 of this title. A MERC certificate will be issued by the executive director which indicates the total amount of certified emission reduction credits, the quantity available on an annual basis, and the date upon which the last annualized emission reduction expires. The applicant will be notified in writing if the executive director denies the ERC application. The applicant may submit a revised application at any time. (D) Protocols. The amount of ERCs in TPY will be determined and certified based on actual monitoring results, when available, or otherwise calculated using good engineering practices including calculation methodologies in general use in new source review (NSR) permitting. The executive director shall have the authority to inspect and request information to assure that the emissions reductions have actually been achieved. MERCs will be determined and certified using the methodologies provided in sec.114.200 and sec.114.201 of this title. (E) ERC bank deposits. All ERCs are deposited in the Emissions Bank and reported as available credits by the Emissions Bank until they are withdrawn or expire. (F) Enforcement. ERCs generated by a stationary emission source will be made enforceable by: (i) amending an NSR permit to reflect the emission reduction and set a new maximum allowable emission limit; (ii) voiding an NSR permit when an emission source has been shut down; (iii) registering on a PI-8 form the emission reduction and the new maximum allowable emission limit for any standard exemption facility; or (iv) an agreed order which sets a new maximum allowable emission limit for a facility which is not required to have a permit or qualify for a standard exemption. (3) ERC and MERC use. (A) Use of ERCs. ERCs may be used as: (i) offsets for a new source or major modification to an existing source; (ii) mitigation offsets for action by federal agencies under sec.101.30 of this title; (iii) netting by the original applicant, if not used as an offset to meet a regulatory requirement or relied upon in the issuance of an NSR permit; or (iv) an alternative means of compliance with VOC and NOx reduction requirements as provided in Chapter 115 of this title (relating to the Control of Air Pollution from VOCs) and Chapter 117 of this title. (B) Use of MERCs. MERCs can only be used for the following purposes: (i) extending a compliance deadline for up to the life of the credit to the extent allowed in any provision of Chapter 115 of this title and sec.117.540 of this title (relating to Phased Reasonably Available Control Technology (RACT)); (ii) complying with fleet requirements to the extent allowed by the Texas Clean Fleet Program Requirements for Motor Vehicle Fleets; (iii) providing offsets for a new major source or major modifications. When MERCs are used for purposes of this clause, offsets will be required, upon the expiration of the MERCs, through internal emission reductions (netting) or the purchase of additional credits as allowed under this section, or the facility will be required to shut down the emission source. (C) Calculation. The calculation of the number of ERCs needed by the user for offsets or for compliance with Chapter 115 or Chapter 117 of this title are as follows: (i) for ERC usage as offsets, the method for determining the number of ERCs needed by the user for offsets is provided in sec.116.150 of this title (relating to New Major Source or Major Modification in Ozone Nonattainment Area); or (ii) for ERC usage for compliance with Chapter 115 or Chapter 117 of this title, the number of ERCs needed equals the emission reduction that would have been generated if the affected emission point had implemented the respective requirements of Chapter 115 or Chapter 117 of this title, plus an additional 10% to be retired as an environmental contribution. (D) Review schedule. The following applies to ERCs which are to be used for compliance with the requirements of Chapter 115 or Chapter 117 of this title. The user must submit a notice of intent to use, at least 90 days prior to the planned utilization of the ERC. ERCs may be utilized only after the executive director grants approval of the notice of intent to use. The executive director shall have 30 days from date of receipt to determine if the registration application is complete. The executive director shall have 90 days from date of receipt to approve, modify, or deny the registration or 60 days after determination of completeness, whichever is later. (E) Transfer. ERCs and MERCs are freely transferable in whole or in part, and may be traded or sold to a new owner anytime before the expiration date of the ERC. The Emissions Bank must be notified no later than 30 days after the transfer of any credits to another party. The old certificate must be submitted to the Emissions Bank. The executive director will issue a new certificate to the ERC purchaser reflecting the ERCs purchased by the new owner, and a revised certificate to the ERC seller showing any remaining ERCs available to the original owner. (F) Withdrawal. ERCs may be withdrawn from the Emissions Bank by the owner at any time prior to the expiration date of the credit and may be held by the owner. ERCs may still be used by the original owner for netting purposes after the ERCs have expired, as provided in sec.116.150 of this title. (G) Recording of ERC use. (i) ERCs and MERCs used as offsets must be included in the user's new source review permit application. The original ERC or MERC certificate must be submitted by the permit applicant to the executive director before the permit is issued. (ii) Use of ERCs or MERCs for purposes other than those specified in clause (i) of this subparagraph may not commence until the user has received approval from the executive director. The user must also keep a copy of the ERC certificate, the notice, and all backup data on site for a minimum of five years. (iii) If the executive director denies the stationary source's use of ERCs or MERCs, any person affected by the executive director's decision may file a motion for reconsideration. Notwithstanding the applicability provisions of sec.50.31(c)(7) of this title (relating to Purpose and Applicability), the requirements of sec.50.39 of this title (relating to Motion for Reconsideration) may apply. However, only a person affected may file a motion for reconsideration. (d) Emission credit trading of DERCs and MDERCs. (1) General provisions. [sub] x[sub]2), and particulates with an aerodynamic diameter of less than or equal to a nominal 10 microns (PM10) may qualify as DERCs or MDERCs as appropriate. Reductions of other criteria pollutants are not creditable. Reductions of one pollutant may not be used to meet the reduction requirements for another pollutant, except at such time as urban airshed modeling demonstrates that one ozone precursor may be substituted for another. (B) Discrete emission reduction requirements. To be creditable as a DERC or MDERC, an emission reduction must be real, properly quantified, and surplus at the time the emission reduction is generated. For a DERC to be creditable, the emission point's annual emissions prior to the emission reduction strategy must have been reported or represented in the 1990 emissions inventory or a subsequent emissions inventory. An emission reduction may be credited as either an ERC or DERC, or as a MERC or MDERC. (C) Credit measurement. A DERC or MDERC is equivalent to one ton of emissions of one pollutant. DERCs and MDERCs may not be broken down into units smaller than one ton. (D) Start date for discrete emission reductions. An emission reduction must be generated after the effective date of this section. However, reductions made after November 15, 1992 (January 1, 1992 if credits are generated from reductions beyond those required by the Texas Clean Fleet Program or January 1, 1996 if credits are generated from the accelerated retirement of high-emitting vehicles and before the effective date of this section) may be creditable if the reduction is surplus on the effective date of this section. Sources that generated emission reductions prior to the effective date of this section must submit a notice of generation within six months of the effective date of this section or the reductions will not be creditable. (E) Eligible sources. Participation in emission credit trading is strictly voluntary. Stationary sources and any non-road mobile source or area source associated with actions by federal agencies under sec.101.30 of this title are eligible to generate and use DERCs, if there are no permits under the same commission account number that contain a condition or conditions precluding the use of DERCs. Mobile sources are eligible to generate MDERCs. Stationary and area sources may use MDERCs if there are no permits under the same commission account number that contain a condition or conditions precluding the use of DERCs or MDERCs. (F) Life of a DERC or MDERC. A DERC or MDERC is available for use after the notice of generation has been received by the commission Registry in accordance with subparagraph (J) of this paragraph, and may be used anytime thereafter. (G) Converting ERCs to DERCs. Certified ERCs and MERCs banked in the Emissions Bank prior to the effective date of this section may be converted to DERCs or MDERCs, respectively, if the emission reduction is surplus on the date the ERCs or MERCs are to be converted, the ERCs or MERCs have not expired, and the reduction meets the requirements of subsection (c)(3)(A) of this section. The conversion of ERCs to DERCs or MERCs to MDERCs, must occur within six months of the effective date of this section. A whole ERC, not a portion, must be converted to a DERC and may not be converted back to an ERC. (H) Geographic scope. Emission reductions generated in the state of Texas may be creditable and used in the state with the following limitations: [sub]x reductions generated in an ozone attainment area may be used in any county or portion of a county designated as attainment or unclassified, but may not be used in an ozone nonattainment area. [sub]x reductions generated in an ozone nonattainment area may be used either in the same ozone nonattainment area in which they were generated, or in any county or portion of a county designated as attainment or unclassified. [sub]x reductions generated in an ozone nonattainment area may not be used in any other ozone nonattainment area. [sub] 10 must be used in the same metropolitan statistical area in which the reduction was generated. (v) The trading of DERCs or MDERCs may be discontinued by the executive director in whole or in part and in any manner, with commission approval, as a remedy for problems resulting from trading in a localized area of concern. (I) Ozone season. In areas having an ozone season of less than 12 months, VOC and NOx credits generated outside the ozone season may not be used during the ozone season. (J) The commission Registry. All required notices of DERC and MDERC generators and users must be submitted to the Registry. A notice submitted by a generator or user will automatically be posted to the Registry. The Registry will assign a unique number to each ton of emission reductions generated. The Registry will maintain current listings of all credits available or used for each ozone nonattainment area. One combined listing for all the counties or portions of counties designated as attainment or unclassified will be provided by the Registry. (K) Recordkeeping. The generator must maintain a copy of all notices and backup information submitted to the Registry for a minimum of five years following the completion of the generation period. The user must maintain a copy of all notices and backup information submitted to the Registry for a minimum of five years following the completion of the use period. Other relevant reference material or raw data must also be maintained on site by the participating sources. The user must also maintain a copy of the generator's notice and backup information for a minimum of five years after the use is completed. Failure to keep sufficient records is a violation of this rule. (L) Public information. All information submitted with a notice or report regarding the nature and quantity of emissions associated with the use or generation of DERCs or MDERCs is public information and will not be considered confidential. Any claim of confidentiality not meeting this requirement, or failure to submit all information, may result in the rejection of the emission reduction. All non-confidential notices and information regarding the generation, use, and availability of DERCs or MDERCs may be obtained from the Registry. (M) Program audits. (i) No later than three years after the effective date of this section, and every three years thereafter, the executive director will audit this program. (ii) The audit will evaluate the timing of credit generation and use, the impact of the program on the state's attainment demonstration and the emissions of hazardous air pollutants (HAPs), the availability and cost of credits, compliance by the participants, and any other elements the executive director may choose to include. (iii) The executive director will recommend measures to remedy any problems identified in the audit. The trading of DERCs or MDERCs may be discontinued by the executive director in part or in whole and in any manner, with commission approval, as a remedy for problems identified in the program audit. (iv) The audit data and results will be completed and submitted to EPA and made available for public inspection within six months after the audit begins. (N) Authorization to emit. A DERC or MDERC created under this section is a limited authorization to emit the specified pollutants in accordance with the provisions of this section, the FCAA and the TCAA as well as regulations promulgated thereunder. A DERC or MDERC does not constitute a property right. Nothing in this section should be construed to limit the authority of the commission or the EPA to terminate or limit such authorization. (O) Program participation. The executive director has the authority to prohibit a company from participating in the emission credit trading of DERCs or MDERCs either as a generator or user, if the executive director determines that the company has violated the requirements of the program or abused the privileges provided by the program. (P) Chapter 117 compliance. Any DERC or MDERC for NOx which is used to comply with the provisions of Chapter 117 of this title must meet all applicable provisions of sec.117.570 of this title and shall then be subject to all applicable provisions of sec.117.570 of this title in addition to the requirements of this section. The value of any NOx ERC which is used to comply with Chapter 117 of this title may be reduced in accordance with sec.117.570(d) of this title. (2) Protocols. (A) All source categories must use an EPA approved protocol if one exists for the applicable source. If the source wants to deviate from an EPA approved protocol, EPA approval is required before the protocol can be used. (B) If an approved protocol does not exist the following applies: (i) The amount of DERCs in tons will be determined and certified based on actual monitoring results, when available, or otherwise calculated using good engineering practices including calculation methodologies in general use in NSR permitting. The source must collect relevant data sufficient to characterize the process emissions of the affected pollutant and the process activity level for all representative phases of source operation during the period under which DERCs are created or used. (ii) The amount of MDERCs will be quantified in accordance with sec.114.200 or sec.114.201 of this title as appropriate. For the purposes of quantifying MDERCs, the term "VMT" represents the actual vehicle miles traveled over the time period for which credit is desired, and the term "n" represents the time period over which the credit is generated. (3) DERC generation. (A) Generation limitations. A DERC or MDERC may be generated by any strategy that reduces a source's emission rate below its baseline, except for the following: (i) curtailing an activity at a source; (ii) modification or discontinuation of any activity that is otherwise in violation of a federal, state, or local law; (iii) emissions reductions required to comply with any provision under Title I of the FCAA regarding tropospheric ozone, or Title IV of the FCAA regarding acid rain; (iv) emission reductions of hazardous air pollutants, as defined in the FCAA sec.112, from application of a standard promulgated under the FCAA sec.112; (v) emission reductions credited or used under any other emissions trading program; (vi) emission reductions occurring at a source which received an alternative emission limitation to meet a state RACT requirement, except to the extent that the emissions are reduced below the level that would have been required had the alternative emission limitation not been issued; and (vii) emission reductions at a facility with a flexible permit, unless the reductions are made permanent and enforceable or the generator can demonstrate that the emission reductions were not used to satisfy the conditions for the facilities under the flexible permit. (B) Calculation of emission reduction generated. (i) An emission reduction is generated when the operator of an emission source undertakes a strategy to reduce the source's emission rate per unit of activity below its baseline. (ii) For all emission reduction strategies, except shutdowns and mobile source emission reduction strategies, the emission reduction is calculated as follows: Figure 1: 30 TAC sec.101.29(d)(3)(B)(ii) (iii) The amount of DERCs or MDERCs generated must be rounded down to the nearest ton. (iv) For shutdown emission reduction strategies, the quantity of emission reduction generated is equivalent to the baseline emissions. (v) The generation period for a shutdown is ten years. Shutdown DERCs must be generated and noticed to the Registry on an annual basis. (vi) If the generator exceeds the allowable emission limit for the applicable facility, no DERC will be generated. (vii) If the generator uses the emission reduction to net out of nonattainment new source review or increases emissions at another emission point within the property by an amount equal to or greater than the emission reduction generated, no DERC will be generated. (C) Notice of generation. A notice of generation and generator certification must be submitted to the Registry in accordance with the following requirements if the reduction is to be creditable and marketable: (i) the notice must be submitted no later than 90 days after the generation activity has been completed, or no later than 90 days after the completion of the first 12 months of generation, if the generation period exceeds 12 months, and every 12 months thereafter for each subsequent year of generation, whichever is sooner. (ii) The notice for a stationary or area source generator must include the following information for each pollutant reduced at each applicable emission point: (I) the name, address, county, telephone number, contact person, permit or standard exemption numbers, account number of the generator, and the unique facility identification number (FIN) and emission point number (EPN) of the applicable emission points, (II) the name of the owner and/or operator of the generator source, (III) the generation period, (IV) a complete description of the generation activity, (V) for shutdown emission reduction strategies, an explanation as to whether production shifted from the shut down facility to another facility in the same nonattainment area, (VI) the amount of DERCs generated, (VII) for VOC reductions, a list of the specific compounds reduced, (VIII) the baseline emission rate and baseline total emissions for each applicable pollutant and emission point, (IX) the most stringent emission rate and the most stringent emission level for the applicable emission point, considering all the applicable regulatory requirements, (X) a complete description of the protocol used to calculate the emission reduction generated, (XI) the actual calculations performed by the generator to determine the amount of DERCs generated, and (XII) a statement that the emission reductions on which the DERCs are based are real, surplus, and not based on an emission reduction strategy prohibited in subsection (c)(3)(A) of this section. (iii) The notice for a mobile source generator must include information as required to verify the credit calculation. A mobile source generator shall also indicate in his notification whether credits have been banked under sec.114.201 of this title. (iv) The notice must include a certification of generation, which shall contain certification under penalty of law by a responsible official of the generator source of truth, accuracy, and completeness. This certification shall state that based on information and belief formed after reasonable inquiry, the statements and information in the document are true, accurate and complete. (v) If a generator submits a notice late, the creditable portion of the reduction will be reduced at the discretion of the executive director. (vi) The generator must provide a complete copy of the Notice of Generation, Certification, and backup information to the user. (vii) The generator is responsible for maintaining current information in the notice of generation after it is submitted to the Registry, such as address changes, or a change of ownership when the credits are sold or transferred. (D) Compliance burden and enforcement. (i) The generator is responsible for assuring that the DERCs or MDERCs generated are real, surplus, and quantified accurately. (ii) The notice of generation will be reviewed and the credits certified by the executive director at the time the credits are used. Certification by the executive director does not relieve the generator of any responsibilities. (4) DERC and MDERC use. (A) Use requirements. (i) The user must have ownership of a sufficient amount of DERCs or MDERCs before the use period for which the specific DERCs or MDERCs are to be used. (ii) The user must hold sufficient DERCs or MDERCs to cover the user's compliance obligation at all times. (iii) The user shall acquire additional DERCs or MDERCs during the use period if the user determines that he does not possess enough DERCs or MDERCs to cover the entire use period. The user must acquire additional credits as allowed under this section prior to the shortfall, or the user will be in violation of this section. (iv) Source operators may acquire and use only DERCs or MDERCs listed on the Registry. (B) Use limitations. A DERC or MDERC may be used to meet a regulatory requirement or demonstrate compliance, except as prohibited by this paragraph. A DERC or MDERC may not be used: (i) before it has been acquired by the user; (ii) for netting to avoid the applicability of federal and state NSR requirements; (iii) to meet FCAA requirements for: (I) new source performance standards under sec.111; (II) lowest achievable emission rate standards under sec.173(a)(2); (III) best available control technology standards under sec.165(a)(4); (IV) HAP standards under sec.112, including the requirements for maximum achievable control technology; (V) standards for solid waste combustion under sec.129; (VI) requirements for a vehicle inspection and maintenance program under sec.182(b)(4) or (c)(3); (VII) ozone control standards set under sec.183(e) and (f); (VIII) clean fueled vehicle requirements under sec.246; (IX) motor vehicle emissions standards under sec.202; (X) standards for nonroad vehicles under sec.213; (XI) requirements for reformulated gasoline under sec.211(k); (XII) requirements for Reid vapor pressure standards under sec.211(h) and (i); (iv) to allow an emissions increase of an air contaminant that exceeds the limitations of sec.106.261(3) or (4) or sec.106.262(3) of this title (relating to Facilities (Emission Limitations), and Facilities (Emission and Distance Limitations)) except as approved by the executive director; (v) to exceed any allowable emission level, except as follows: (I) In ozone nonattainment areas, permitted facilities may use DERCs and MDERCs to exceed permit allowables by no more than 25 tons for NOx or 5 tons for VOC in a 12-month period as approved by the executive director. This use is limited to one exceedance up to 12 months, within any 24-month period per use strategy. The use must extend beyond a 24-hour period; (II) At permitted facilities in counties or portions of counties designated as attainment or unclassified, DERCs and MDERCs may be used to exceed permit allowables by values not to exceed the prevention of significant deterioration significance levels as provided in 40 Code of Federal Regulations sec.52.21(b)(23), as approved by the executive director prior to use. This use is limited to one exceedance up to 12 months, within any 24-month period per use strategy. The user must demonstrate that there will be no adverse impacts from the use of DERCs or MDERCs at the levels requested. (vi) to authorize a source whose emissions are enforceably limited to below applicable major source threshold levels, as defined in sec.122.10 of this title (relating to General Definitions), to operate with actual emissions above those levels without triggering applicable requirements that would otherwise be triggered by such major source status; or (vii) to exceed an allowable emission level where the exceedance would cause or contribute to a condition of air pollution as determined by the executive director. (C) Use of DERCs or MDERCs for NSR offsets. (i) The user must obtain the executive director's approval prior to the use of specific DERCs or MDERCs to cover, at a minimum, one year of operation of the new or modified source in the NSR permit. (ii) The NSR permit must contain an enforceable requirement that the source obtain at least one additional year of offsets before continuing operation in each subsequent year. (D) Chapter 117 compliance. Any DERC or MDERC for NOx which is used to comply with the provisions of Chapter 117 of this title must meet all applicable provisions of sec.117.570 of this title and shall then be subject to all applicable provisions of sec.117.570 of this title in addition to the requirements of this section. (E) Calculation of DERCs or MDERCs needed. (i) The amount of DERCs or MDERCs needed to demonstrate compliance or meet a regulatory requirement is calculated as follows: Figure 2: 30 TAC sec.101.29(d)(4)(E)(i) (ii) The amount of DERCs or MDERCs needed must be rounded up to the nearest ton. (iii) The user must possess 10% more DERCs or MDERCs than are needed, as calculated in clause (i) of this subparagraph, to ensure that the source's environmental contribution retirement obligation will be met in accordance with subparagraph (G)(i) of this paragraph. (iv) If the amount of DERCs or MDERCs needed to meet a regulatory requirement or to demonstrate compliance is greater than 10 tons, an additional 5% of the DERCs or MDERCs needed, as calculated in clause (i) of this subparagraph, must be acquired to ensure that sufficient DERCs are available to the user with an adequate compliance margin. (v) The amount of DERCs or MDERCs needed for NSR offsets equals the quantity of tons needed to achieve the maximum allowable emission level set in the user's NSR permit. The user must also purchase and retire enough DERCs or MDERCs to meet the offset ratio requirement in the user's ozone nonattainment area. The user must purchase and retire either the environmental contribution of 10% or the offset ratio, whichever is higher. (vi) DERCs or MDERCs that are not used during the use period are surplus and remain available for transfer or use by the holder. In addition, any portion of the calculated environmental contribution not attributed to actual use is also available. (F) Notice of intent to use. A notice of intent to use must be submitted to the Registry in accordance with the following requirements: (i) DERCs or MDERCs may be used only after the user has submitted the notice to the Registry; (ii) the notice must be submitted at least 45 days prior to the first day of the use period if the generator is a stationary source, and 90 days if the generator is a mobile source, and every 12 months thereafter for each subsequent year if the use period exceeds 12 months; (iii) a copy of the notice must also be sent to the Federal Land Manager 30 days prior to use if the user is located within 100 kilometers of a Class I area. (iv) the notice for a stationary or area source user must include the following information for each use: (I) the name, address, county, telephone number, contact person, permit or standard exemption numbers, and account number of the user, the unique FIN and EPN identification numbers for each emission point, (II) the name of the owner and/or operator of the user source, (III) the applicable state and federal requirements that the DERCs will be used to comply with and the intended use period, (IV) the amount of DERCs needed, (V) the baseline emission rate, activity level, and total emissions for the applicable emission points, (VI) the expected emission rate, activity level, and total emissions for the applicable emission points, (VII) the most stringent emission rate and the most stringent emission level for the applicable emission points, considering all applicable regulatory requirements, (VIII) a complete description of the protocol used to calculate the amount of DERCs needed, (IX) the actual calculations performed by the user to determine the amount of DERCs needed, (X) the date on which the DERCs were acquired or will be acquired, (XI) the DERC generator and the serial numbers of the DERCs acquired or to be acquired, (XII) the price of the DERCs acquired or the expected price of the DERCs to be acquired, and (XIII) a statement that due diligence was taken to verify that the DERCs were not previously used, that the DERCs were not generated as a result of actions prohibited under this regulation, and that the DERCs will not be used in a manner prohibited under this regulation. (v) the notice for a mobile source user must include information as required in sec.114.200 and sec.114.201 of this title. (vi) the notice must include a certification of use, which must contain certification under penalty of law by a responsible official of the user source of truth, accuracy, and completeness. This certification must state that based on information and belief formed after reasonable inquiry, the statements and information in the document are true, accurate and complete. (vii) a user may submit a notice late in the case of an emergency, but the notice must be submitted before the DERCs can be used. The user must include a complete description of the emergency situation in the notice of intent to use. All other notices submitted less than 45 days prior, or 90 days prior for a mobile source, to use will be considered late and in violation. (viii) the user is responsible for determining the credits it will purchase and notifying the executive director of the selected generating source in the notice of intent to use. The executive director will certify or reject the generating source's emission reduction within 14 days of receiving the notice of intent to use from the user if the generator is a stationary source and 30 days if the generator is a mobile source. If the generator's credits are rejected or the notice of generation is incomplete, the use of DERCs by the user may be delayed by the executive director. The user cannot use any DERCs that have not been certified by the executive director. The executive director may reject the use of DERCs by a source if the credit and use cannot be demonstrated to meet the requirements of this section. (G) Actual DERC or MDERC use. (i) The user shall calculate: (I) the amount of DERCs or MDERCs used, including the amount of DERCs or MDERCs retired to cover the environmental contribution associated with actual use; and (II) the amount of DERCs or MDERCs not used, including the amount of excess DERCs or MDERCs that were purchased to cover the environmental contribution but not associated with the actual use, and available for future use. (ii) A report of use must be submitted to the Registry in accordance with the following requirements: (I) a report of use must be submitted within 90 days after the end of the use period; (II) the report must be submitted within 90 days of the conclusion of each 12- month use period, if applicable; (III) the report is to be used as the mechanism to update or amend the notice of intent to use and must include any information different from that reported in the notice of intent to use, including but not limited to the following items: (-a-) purchase price of the DERCs or MDERCs obtained prior to the current use period, (-b-) the actual amount of DERCs or MDERCs possessed during the use period, (-c-) the actual emissions during the use period for VOC and NOx; (-d-) the actual amount of DERC or MDERCs used; (-e-) the actual environmental contribution; and (-f-) the amount of DERC's or MDERCs available for future use. (iii) The user is in violation of this section if the user submits the report of use later than the allowed 90 days following the conclusion of the use period. (iv) The Registry shall not contain proprietary information. (H) Compliance burden and enforcement. (i) The user is responsible for assuring that a sufficient quantity of DERCs or MDERCs is acquired to cover the applicable source's emissions for the entire use period. The user should ensure that the credits are real, surplus, and properly quantified DERCs or MDERCs for purchase. (ii) The user is in violation of this section if the user does not possess enough DERCs or MDERCs to cover the credit need for the use period. If the user possesses an insufficient quantity of DERCs or MDERCs to cover its compliance need, the user will be out of compliance for the entire use period, unless the user can demonstrate otherwise. Each day the user is out of compliance may be considered a violation. (iii) Users may not transfer their compliance burden and legal responsibilities to a third party participant. Third party participants may only act in an advisory capacity to the user. 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 December 3, 1997. TRD-9716206 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 23, 1997 Proposal publication date: June 10, 1997 For further information, please call: (512) 239-1970 CHAPTER 115.Control of Air Pollution from Volatile Organic Compounds SUBCHAPTER J.Administrative Provisions Emissions Trading 30 TAC sec.115.950 The commission adopts new sec.115.950, concerning Emissions Trading, in Subchapter J (Administrative Provisions), and revisions to the State Implementation Plan without changes to the proposed text as published in the June 10, 1997, issue of the Texas Register (22 TexReg 5651). EXPLANATION OF ADOPTED RULE Emissions banking and trading is an innovative approach to regulatory compliance, allowing a source to meet emission control requirements by purchasing and using credits generated by another source in the same ozone nonattainment area which has reduced its emissions below the level required by rule or permit. Prior to this adoption, banking and trading were not an option to meet the Chapter 115 volatile organic compound (VOC) control requirements, with the exception of limited intrasource trading available under sec.sec.115.910-115.916, regarding Alternate Means of Control. This new sec.115.950 enables sources to meet the VOC emission control requirements of Chapter 115, in whole or in part, by obtaining reduction credits in accordance with sec.101.29 of this title, regarding Emissions Banking and Trading. Concurrent with the sec.115.950 adoption, existing sec.101.29 is repealed and new sec.101.29 is adopted. The new section retains provisions that allow emission reduction credits (ERCs) and mobile emission reduction credits (MERCs) to be used for purposes of nonattainment offsetting. The new section expands uses of ERCs to include compliance with reasonably available control technology requirements and to allow for the creation and use of discrete emission reduction credits (DERCs) and mobile discrete emission reduction credits (MDERCs). Also, revisions to Chapter 117 of this title, concerning Control of Air Pollution from Nitrogen Compounds, are adopted concurrent with this adoption which provide more flexible trading options for sources of nitrogen oxides. New sec.115.950 allows sources to meet Chapter 115 VOC control requirements by applying ERCs, MERCs, DERCs, or MDERCs. Please refer to the sec.101.29 adoption for a more complete description of these types of credits, and the requirements for their generation and use. TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact Assessment for this rule pursuant to Texas Government Code Annotated, sec.2007.043. The following is a summary of that assessment. The specific purpose of the new rule is to provide an alternative, cost-effective method of complying with the VOC control requirements of Chapter 115. Promulgation and enforcement of this rule will not affect private real property. COASTAL MANAGEMENT PLAN The commission has determined that this rulemaking action is subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, sec.sec.33.201 et. seq.), the rules of the Coastal Coordination Council (31 TAC Chapters 501-506), and the commission's rules in 30 TAC Chapter 281, Subchapter B, concerning Consistency with the Texas Coastal Management Program. As required by 31 TAC sec.505.11(b)(2) and sec.505.22(a), and 30 TAC sec.281.45(a)(3), relating to actions and rules subject to the CMP, agency rules governing air pollutant emissions must be consistent with applicable CMP goals and policies. The commission has reviewed this rulemaking action for consistency, and has determined that it is consistent with the applicable CMP goals and policies because the action provides a flexible, cost-effective alternative approach to rule compliance by allowing emissions banking and trading. This rulemaking action will not authorize any new sources of air emissions. PUBLIC HEARING AND COMMENTERS A public hearing was held in Austin on July 8, 1997. Nine organizations and one individual submitted comments during the public comment period, which closed on July 10, 1997. Baker & Botts, Exxon Chemical Company, Houston Lighting & Power, and Texas Chemical Council supported the proposal. The United States Environmental Protection Agency generally supported the proposal, but submitted comments recommending various changes. Environmental Defense Fund, Sierra Club Lone Star Chapter, Texas Center for Policy Studies, and an individual generally opposed the proposal. No comments were received that specifically addressed provisions of Chapter 115. Evaluation of testimony regarding general banking and trading issues can be found in the Chapter 101 adoption, published concurrently with this adoption. STATUTORY AUTHORITY The new section is adopted under the Texas Health and Safety Code (Vernon 1992); the Texas Clean Air Act (TCAA), sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA; and TCAA sec.382.012, which requires the commission to develop plans for protection of the state's air. 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 December 3, 1997. TRD-9716209 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 23, 1997 Proposal publication date: June 10, 1997 For further information, please call: (512) 239-1970 CHAPTER 117.Control of Air Pollution from Nitrogen Compounds SUBCHAPTER D.Administrative Provisions 30 TAC sec.117.540, sec.117.570 The commission adopts amendments to sec.117.540, concerning Phased Reasonably Available Control Technology (RACT), and sec.117.570, concerning Trading, in Subchapter D (Administrative Provisions), and revisions to the State Implementation Plan. The amendments are adopted without changes to the proposed text as published in the June 10, 1997, issue of the Texas Register (22 TexReg 5653) and will not be republished. EXPLANATION OF ADOPTED RULES Section 117.540 and sec.117.570 are amended to make the rule requirements consistent with new sec.101.29 of this title, regarding Emissions Banking and Trading. Existing sec.101.29 is being repealed, and new sec.101.29 is being added, concurrent with these amendments to Chapter 117. The amendments retain provisions that allow emission reduction credits (ERCs) and mobile emission reduction credits (MERCs) to be used for purposes of nonattainment offsetting. The amendments expand uses of ERCs to include compliance with RACT requirements and to allow for the creation and use of discrete emission reduction credits (DERCs) and mobile discrete emission reduction credits (MDERCs). Under the amendments, sources may meet Chapter 117 nitrogen oxides (NOx) control requirements by applying ERCs or DERCs. Please refer to the sec.101.29 adoption for a more complete description of these types of credits, and the requirements for their generation and use. Also, revisions to Chapter 115 of this title, concerning Control of Air Pollution from Volatile Organic Compounds (VOC), are adopted concurrent with this rulemaking to provide more flexible trading options for sources of VOCs. Section 117.540 allows affected sources to petition the agency for additional time to comply with Chapter 117 requirements. The rule was developed in response to companies' concerns that in spite of good faith efforts to achieve compliance by the required date, delays in delivery, construction, and installation of control equipment could be encountered in some cases. As originally adopted and previously amended, sec.117.540 requires documentation of the specific reasons for any requested compliance extension. This amendment requires that reduction credits, if reasonably available, must be obtained by sources seeking extensions past the Chapter 117 compliance date. Revised sec.117.540 requires that phased RACT petitions contain detailed documentation that credits are not reasonably available. In addition, sec.117.540 (b) and (c) are deleted, since the uses of MERCs for Chapter 117 compliance as outlined in these subsections are now addressed in new sec.101.29(d). Existing sec.117.570 allows trading as an alternative method for sources of NOx to comply with the control requirements of Chapter 117. Revisions to sec.117.570 in this adoption update rule references to include MERCs, DERCs, and MDERCs, clarify rule requirements, and eliminate redundant rule provisions now contained in new sec.101.29. New sec.117.570(c)(4) specifies requirements for credit generation by units participating in a source cap in accordance with sec.117.223 (Source Cap). Under sec.117.223, heat input is calculated by taking the actual historical average of the daily heat input for each participating unit during a specified 24 consecutive month period, plus one standard deviation of the average daily heat input for that period. This provision for adding one standard deviation affords companies a compliance margin that accounts for normal fluctuations in the actual daily heat input. A source cap allowable emission rate based on historical heat input, without including this margin, could result in exceedances of the source cap under normal operating conditions unless either a compliance margin was provided, or the source lowered its actual emission rate to compensate for these fluctuations. In order to assure that credits generated under a source cap represent actual emission reductions, new sec.117.570(c)(4) requires that one standard deviation may not be included in the calculation of reduction credits generated. In addition, the source cap allowable must be reduced by the amount of the creditable reductions claimed for the unit in question. TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code Annotated, sec.2007.043. The following is a summary of that assessment. The specific purpose of the adoption is to provide an alternative flexible, cost-effective method of complying with the NOx control requirements of Chapter 117. Promulgation and enforcement of these rule amendments will not affect private real property. COASTAL MANAGEMENT PLAN The commission has determined that this rulemaking action is subject to the Texas Coastal Management Program (CMP) in accordance with the Coastal Coordination Act of 1991, as amended (Texas Natural Resources Code, sec.sec.33.201 et. seq.), the rules of the Coastal Coordination Council (31 TAC Chapters 501-506), and the commission's rules in 30 TAC Chapter 281, Subchapter B, concerning Consistency with the Texas Coastal Management Program. As required by 31 TAC sec.505.11(b)(2) and sec.505.22(a), and 30 TAC sec.281.45(a)(3), relating to actions and rules subject to the CMP, agency rules governing air pollutant emissions must be consistent with applicable CMP goals and policies. The commission has reviewed this rulemaking action for consistency, and has determined that it is consistent with the applicable CMP goals and policies because the action provides a flexible, cost-effective alternative approach to rule compliance by allowing emissions banking and trading. This rulemaking action will not authorize any new sources of air emissions. PUBLIC HEARING AND COMMENTERS A public hearing was held in Austin on July 8, 1997. Nine organizations and one individual submitted comments during the public comment period, which closed on July 10, 1997. Baker & Botts, Exxon Chemical Company, Houston Lighting & Power, and the Texas Chemical Council supported the proposal. The United States Environmental Protection Agency generally supported the proposal, but submitted comments recommending various changes. Environmental Defense Fund, Sierra Club Lone Star Chapter, Texas Center for Policy Studies, and an individual generally opposed the proposal. One comment was received that specifically addressed provisions of Chapter 117. Evaluation of testimony regarding general banking and trading issues can be found in the Chapter 101 adoption, published concurrently with this adoption. An individual questioned the agency's allowance of additional time to comply with Chapter 117, and requested a definition of "not reasonably available" and "impracticable." Section 117.540, relating to Phased RACT, requires that sources requesting a time extension to comply with Chapter 117 must demonstrate that credits are not reasonably available. Although the term "reasonably available" is not defined, the burden of proof rests with the company requesting the phased RACT extension. The company must supply full documentation of the sale price requested by the buyer and offered by the seller, as well as the reason why credits, if available, were not purchased. "Impracticable" considerations will be evaluated for technical merit using engineering judgment. Again, the burden of proof rests with the company requesting the RACT extension. The rule provides the opportunity for environmental benefit in conjunction with time extensions, which the staff believes is an improvement over the current rule requirements. STATUTORY AUTHORITY The amendments are adopted under the Texas Health and Safety Code (Vernon 1992); the Texas Clean Air Act (TCAA), sec.382.017, which provides the commission with the authority to adopt rules consistent with the policy and purposes of the TCAA; and TCAA sec.382.012, which requires the commission to develop plans for protection of the state's air. 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 December 3, 1997. TRD-9716208 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 23, 1997 Proposal publication date: June 10, 1997 For further information, please call: (512) 239-1970 CHAPTER 330.Municipal Solid Waste SUBCHAPTER Z.Waste Minimization and Recycable Materials 30 TAC sec.sec.330.1181, 330.1183 The Texas Natural Resource Conservation Commission (commission) adopts amendments to sec.330.1181 and sec.330.1183, concerning used oil filters. The amendments are adopted without changes to the proposed text as published in the October 3, 1997 issue of the Texas Register (22 TexReg 9854) and will not be republished. EXPLANATION OF ADOPTED RULE. The purpose of the adopted rulemaking was limited to amending sec.330.1181 and sec.330.1183(a) to establish an increase in the allowable used oil filter (UOF) storage quantity prior to transport. The commission increased the allowable storage quantity to make it possible for persons handling UOFs to accumulate a larger quantity of UOFs in a single container or containers without having to register as a storage facility and meet storage facility rule requirements. TAKINGS IMPACT ASSESSMENT. The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code Annotated sec.2007.043. The following is a summary of that assessment. The specific purpose of the rule is to allow collection centers, generators, and other handlers to store a larger quantity of UOFs prior to transport without registration as a storage facility. The rules will substantially advance this specific purpose by increasing the allowable UOF storage quantity from three 55- gallon containers or the volumetric equivalent to six 55-gallon containers or the volumetric equivalent. Promulgation and enforcement of these rules will not burden private real property which is the subject of the rules because the proposed changes allow increased UOF storage without registration as a storage facility, and they do not limit or restrict a person's rights in private real property. COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW. The executive director has reviewed this rulemaking and found that the rule is neither identified in Coastal Coordination Act Implementation Rules, 31 TAC sec.505.11, nor will it affect any action or authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC sec.505.11. Therefore, the proposed rule is not subject to the Coastal Management Program. HEARINGS AND COMMENTERS. A public hearing was not held. GENERAL COMMENTS. Six comment letters were received on the proposal. They were from Central and South West Services, the Filter Manufacturers Council, Pennzoil Company, the Texas Automobile Dealers Association, Texas Motor Transportation Association, and Valvoline Company. All the commenters were supportive of the rule amendments as proposed. STATUTORY AUTHORITY. These amendments are adopted under Texas Health and Safety Code, Solid Waste Disposal Act, sec.sec.361.011, 361.024, and 361.432, which authorize the commission to regulate municipal solid waste and to adopt rules consistent with the general intent and purposes of the Act and require the commission to prohibit a used oil filter from being intentionally or knowingly placed in or accepted for disposal in a landfill permitted by the commission. These amendments are also proposed under Texas Water Code sec.5.103 and sec.5.105, which provide the commission with the authority to adopt any rules necessary to carry out its powers and duties under the provisions of the Texas Water Code or other laws of this state. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 5, 1997. TRD-9716395 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 29, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 239-6087 TITLE 31. NATURAL RESOURCES AND CONSERVATION PART II. Texas Parks and Wildlife Department CHAPTER 55.Law Enforcement SUBCHAPTER D. Operation Game Thief Fund 31 TAC sec.55.113 The Operation Game Thief Committee adopts an amendment to sec.55.113, concerning Reporting Violations; Eligibility of Applicant, without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10106). The amendment will function by allowing persons who provide information to game wardens, as well as those who furnish information directly to Operation Game Thief, to be eligible for Operation Game Thief rewards. The amendment is necessary to modify the current eligibility mechanism for paying rewards to persons who provide information leading to the arrest and conviction of flagrant game-law violators. The Operation Game Thief Committee received no comments concerning adoption of the proposed amendment. The amendment is adopted under Parks and Wildlife Code, sec.12.201, which provides the Operation Game Thief Committee with the authority to adopt rules for the implementation of the Operation Game Thief program. 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 December 8, 1997. TRD-9716430 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 389-4642 SUBCHAPTER F.Restricted Wild Animals 31 TAC sec.sec.55.201-55.211 The Texas Parks and Wildlife Commission adopts the repeal of sec.sec.55.201- 55.211, concerning the regulation of restricted wild animals, without changes to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9856). The repeals will function to remove existing regulations that the department has no statutory authority to administer or enforce after September 1, 1997. The repeals are necessary to implement the intent of Senate Bill 97, Acts of the 74th Texas Legislature, 1995, which relieved the department of regulatory authority with respect to certain wildlife classified as "dangerous wild animals" by former Parks and Wildlife Code, Chapter 12, Subchapter G. The department received one comment opposing the adoption of the proposed repeals. The department responds that the adoption of the repeals is a moot point, since the statutory authority to enforce the former regulations has been removed from the Parks and Wildlife Code. The repeals are adopted under the authority of Senate Bill 97, Acts of the 74th Texas Legislature, Regular Session, 1995, which removes the department's authority to administer or enforce the provisions of Parks and Wildlife Code, Chapter 12, Subchapter G. 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 December 8, 1997. TRD-9716431 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 389-4642 CHAPTER 57.Fisheries Harmful or Potentially Harmful Exotic Fish, Shellfish and Aquatic Plants 31 TAC sec.sec.57.111, 57.113, 57.114, 57.134-57.136 The Texas Parks and Wildlife Commission in a regularly scheduled public hearing on November 6, 1997, adopts repeal of sec.sec.57.134 and 57.136, amendments to sec.sec.57.111, 57.113, 57.114 and new sec.sec.57.134-57.136 concerning harmful or potentially harmful exotic shellfish. Sections 57.111 and 57.114 are adopted with changes to the proposed text as published in the October 3, 1997, issue of the Texas Register (22 TexReg 9856). Repealed sections and amended sec.sec.57.113, 57.134, 57.135 and 57.136 were adopted without changes and will not be republished. The purpose of new sec.57.111 and sec.57.114 is to protect wild native aquatic species from depletion due to the detrimental effects of competition from exotic species and the introduction of exotic diseases. To further this purpose, sec.57.111 is amended to add the families Synbranchidae (rice eels/swamp eels/one-gilled eels) and Angullidae (except for Anguilla rostrata, the native American eel) to the list of harmful or potentially harmful exotic shellfish and to add definitions for the terms "disease", "disease-free", "waste", and "water in the state" in order to clarify the requirements of new sec.57.114. New sec.57.114 furthers the department's goal of protecting wild native aquatic species from depletion by clarifying and extending the disease certification requirements for importation of exotic shellfish into the state as well as for exotic shellfish produced within the state. The new section also advances the department's purpose by adding requirements for the quarantine of facilities experiencing mortalities which may be attributable to disease and by requiring laboratory testing of exotic shellfish for disease prior to discharge of wastewater into or adjacent to water in the state. More specifically, the intent of sec.57.114(e) is to require private facilities to submit samples of exotic shellfish for laboratory analysis by a department approved shellfish disease specialist prior to any discharge of waste which has ever been in contact at any time with such exotic shellfish. Thus, even if water is first discharged into ditches, retention ponds, treatment ponds or other structures, a sample of the shellfish which had been held in such water must be submitted for laboratory analysis and certified as disease-free prior to any discharge of the water into or adjacent to water in the state. The testing must be performed no more than ten days before the commencement of the discharge. The following is an example of how the requirements of new sec.57.114(e) would be implemented. A private facility wishes to discharge from Pond No. 1. The facility submits samples of the exotic shellfish held in Pond No. 1 for analysis on August 25th. The shellfish are certified as disease-free on September 1st. The facility begins discharging wastewater from Pond No. 1 on September 1st and ceases discharge on September 5th. On October 1st, the facility decides to harvest Pond No. 1 which will entail an additional discharge. The previous testing of shellfish from Pond No. 1 was performed more than ten days ago. Therefore, new samples of the shellfish held in Pond No. 1 must be submitted for analysis. The samples are submitted for analysis on October 2nd and certified disease-free on October 7th. On October 8th, the facility begins to discharge from Pond No. 1 and continues discharging until Pond No. 1 is drained and all the shellfish are harvested. An alternative scenario using retention ponds would work as follows. On September 1st, the private facility decides an exchange of water is necessary in Pond No. 1. The facility cannot wait for the disease-free certification so it begins discharging into a retention pond on September 1st. On September 5th, an exchange of water is required in Ponds No. 2 and 3 so the facility discharges from those ponds into the retention pond. On September 30th it becomes obvious that a discharge from the retention pond will be necessary soon in order to avoid an inadvertent overflow discharge. The facility submits samples of shellfish from Ponds No. 1, 2, and 3 for laboratory analysis on September 30th. The shellfish are certified as disease-free on October 5th and the facility begins discharging from the retention pond. The purpose of new sec.57.113 is to allow aquaculturists expanded business opportunities while still protecting wild native aquatic species from depletion. The rule furthers this purpose by allowing the possession, propagation, transportation and sale of Penaeus stylisrostris (Pacific blue shrimp) only when this species is held in quarantined aquaculture facilities located outside the harmful or potentially harmful exotic species exclusion zone. The purpose of new sec.57.134 is to protect wild native aquatic species from depletion by ensuring that the Texas Natural Resource Conservation Commission (TNRCC), the agency with the primary responsibility for the regulation of waste discharges, will be aware of and able to regulate the discharges from aquaculture facilities proposing to raise exotic shellfish. The rule accomplishes this purpose by preventing applicants for renewals and amendments of exotic species permits from being authorized to receive and stock exotic shellfish thus creating the perceived need to begin waste discharges prior to obtaining the required authorization or exemption from TNRCC. The purpose of new sec.57.135 is to protect wild native aquatic species from depletion by improving efficiency and coordination between the department and TNRCC regarding the regulation of aquaculture facilities. The rule accomplishes this purpose by implementing the requirement in the department's Memorandum of Understanding (MOU) with the TNRCC to adopt the MOU by rule. The purpose of new sec.57.136 is to protect wild native aquatic species from depletion by establishing penalties for violations of these rules. TPWD has not prepared a Takings Impact Assessment for these rules because Government Code sec.2007.003 provides an exception for rules or proclamations adopted for the purpose of regulating or controlling nonindigenous or exotic aquatic resources. Public hearings were held on the rule in Austin, Texas on August 28, 1997, and on November 6, 1997. Oral comments were provided at the November 6, 1997 hearing. The written comment period closed on November 3, 1997. Twelve commenters provided both specific and general comments. The following six commenters expressed strong support for the rules: The Coastal Conservation Association, The Hynes Bay Coalition, Neighbors Interested in Copano Environment, Regal Farms, the Pecos River Compact Commission and the Texas Shrimp Association. The following four commenters expressed support for the rules but suggested changes: the Coalition for the Protection of Copano Bay (CPCB), the Environmental Defense Fund (EDF), the Sportsmen Conservationists of Texas (SCOT) and the Texas Redfish Company (TRC). The following two commenters expressed neither support nor opposition for the rules but suggested changes: Harlingen Shrimp Farms (HSF) and the South Carolina Department of Natural Resources (SCDNR). The EDF commented that the term "private facility" which appears several places in the rules is not defined and suggested that the term be clarified to include any facility that holds or cultures exotic shellfish. HSF asked for clarification as to whether the term "private facility" covers research and governmental facilities. The term "private facility" is already defined in sec.57.111 to include any pond, tank, lake or other structure capable of holding cultured species in confinement whether located on public or private land or water. HSF asked if the definition of the term "disease" is intended to cover natural or exotic pathogens. The definition of disease is intended to include all contagious pathogens or injurious parasites exactly as stated. It cannot be restricted to "exotic" pathogens since no one is able to say with certainty which pathogens are "exotic" and which are "natural". For example, there is still no consensus among experts as to whether or not the Taura syndrome virus is "exotic". Therefore, the department should not be required to show that a pathogen is "exotic" before taking action. SCDNR suggested changing the definition of "disease-free" to "free of known contagious pathogens or injurious parasites". HSF suggests that the definition of the term "disease-free" should be re-written to say "free of disease" or to include the remaining part of the definition of the term "disease". The commission agrees that the definition of the term"disease-free" should be clarified. The rule has been modified to include the last part of the definition of "disease" as suggested by HSF. However, the commission does not want to limit its quarantine authority to "known" pathogens since the possibility exists for the occurrence of previously unidentified but extremely deleterious or lethal pathogens. Concerning health certification of exotic shellfish, TRC commented that requiring a facility to quarantine, report and test if it experiences mortalities is too restrictive since there is a certain amount of naturally occurring mortality associated with the raising of even a healthy crop of shellfish. SCDNR also commented that the wording could be construed to include normal mortality in an otherwise healthy crop. HSF objected to the use of mortalities as a triggering event since there are environmental factors unrelated to disease which can cause significant mortalities such as low dissolved oxygen and cold temperatures. HSF suggested that the term "mortalities" be qualified either in the text of the rule or in the specific mechanisms set up to enforce it. The Commission agrees that there is a certain amount of normal mortality associated with culturing shellfish and that environmental factors not related to disease could cause an aquaculture facility to experience mortalities. Therefore, due to the pressing need to have protective regulations in place prior to the next growing season, the commission has decided to address these issues through enforcement or implementation mechanisms as suggested by HSF. Consequently, department staff will meet with representatives of the industry and other interested parties to draft procedures and protocols for identifying and classifying mortalities. The intent is that the resulting procedures and protocols will be incorporated as permit conditions in each exotic species permit and modified as experience may require. SCDNR commented that the department should consider requiring that the samples submitted for testing be pulled from the obviously affected parts of the facility's shellfish population, that is, lethargic or moribund animals should be submitted. The Commission expects that this issue will be addressed in the process of drafting the procedures and protocols to identify and classify mortalities referred to above. SCOT commented that aquaculture facilities raising shrimp should not be allowed to wait until mortalities occur to trigger the quarantine, reporting and testing requirements. Instead, SCOT believes that such facilities should have to quarantine, report and test upon noticing "indications of diseased shrimp". The Commission agrees that the possibility exists that disease could be present at a facility prior to the occurrence of observable mortalities. The commission has attempted to address such a situation in sec.57.114(e) by requiring routine disease testing of exotic shellfish prior to discharging any waste which at any time has been in contact with such shellfish from any structure at a private facility. Additionally, in the process of working with industry representatives and other interested parties to draft procedures and protocols as stated above, the commission hopes that department staff may be able to identify methods which will allow for earlier detection than that provided by traditional laboratory testing. CPCB, EDF, HSF and SCDNR all suggested clarification or definition of the term "clinical testing". CPCB also suggested clarification of who would be responsible for the disease-free certification. The Commission has modified the rule to make it clear that a permittee must submit samples of shellfish to a department approved shellfish disease specialist for analysis and certification. EDF suggested clarifying in the rule that testing is still required even if waste is first routed to a holding structure before being discharged into or adjacent to water in the state. The Commission has modified the rule to clarify that testing of exotic shellfish must occur before any waste which has been in contact at any time with such exotic shellfish may be discharged from any structure at the facility into or adjacent to water in the state. Additionally, detailed examples are given in the preamble of the intended implementation of the rule including a scenario wherein a holding or retention pond is used. HSF commented that the preventive laboratory testing required by the rule would be "unmanageable and very expensive." SCDNR commented on the limited availability of diagnostic laboratories and their ability to handle large numbers of samples. SCOT expressed the view that the cost of testing required by the rules would not be a hardship on aquaculture facilities and commented that since almost all of the department's costs of regulating and managing exotic species are paid by sportsmen's user fees, sportsmen expect the department to do its utmost to conserve and protect native wildlife. EDF commented that the cost to aquaculture facilities of performing preventive testing must be weighed against the potentially huge cost to the public of the possibly disastrous impacts that exotic viruses could have on native fisheries. The Commission has modified the rule so that the amount of testing required is completely within the control of the facility operator. The fewer the discharges, the less testing is necessary. Information available to the commission indicates that under normal environmental conditions a properly designed and managed facility can operate profitably with very few or no discharges. Currently, the only testing methodology available which is objective, relatively reliable and easy to implement and enforce from a regulatory standpoint is the traditional laboratory analysis. However, as stated above, the commission hopes that in the process of working with industry representatives and other interested parties, department staff may be able to identify methods of detection which would b e improvements upon the traditional laboratory methodology. The commission believes the rules allow the aquaculture industry to continue to operate reasonably profitably within a regulatory framework which is protective of native aquatic resources. The amendments and new sections are adopted under the Texas Parks and Wildlife Code sec.66.007 which prohibits possession of exotic harmful or potentially harmful shellfish except as authorized by rule or permit, requires permittees to provide proof to the department of the disease free status of the animals possessed under their permit and authorizes the department to make rules to carry out these provisions. sec.57.111.Definitions. The following words and terms, when used in these rules, shall have the following meanings, unless the context clearly indicates otherwise. Disease- Contagious pathogens or injurious parasites which may be a threat to the health of natural populations of aquatic organisms. Disease-Free - A status, based on the results of an examination conducted by a department approved shellfish disease specialist that certifies a group of aquatic organisms as being free of contagious pathogens or injurious parasites which may be a threat to the health of natural populations of aquatic organisms. Harmful or potentially harmful exotic fish - (A)-(AA) (No change.) (BB) Swamp Eels, Rice eels or One-Gilled Eel Family: Synbranchidae--all species; (CC) Anguilliidae--all species except Anguilla rostrata; Waste - waste shall have the same meaning as in Chapter 26, sec.26.001(5) of the Texas Water Code. Water in the state - water in the state shall have the same meaning as in Chapter 26, sec.26.001(6) of the Texas Water Code. sec.57.114. Health Certification of Exotic Shellfish. (a) (No change.) (b) Any person importing live exotic shellfish from facilities outside the state must prior to importation: (1) provide documentation to the department that the shellfish to be imported have been inspected and certified as disease-free by a department-approved shellfish disease specialist; and (2) receive acknowledgment from the department that the requirements of paragraph (b)(1) of this section have been met. (c) Any person in possession of exotic shellfish for the purpose of production of post larvae must provide to the department monthly certification that nauplii and postlarvae have been examined and are certified to be disease-free. If certification cannot be provided, the exotic shellfish must be maintained in quarantine condition until the department acknowledges in writing that the stock is disease-free or specifies in writing condition(s) under which the quarantine can be removed. (d) Any person in possession of exotic shellfish stocks that experience mortalities shall immediately place the private facility under quarantine condition, immediately notify the department of such mortalities and immediately send samples of the shellfish from the affected portions of the private facility to a department approved shellfish disease specialist for analysis. Results of the required analyses shall be forwarded to the department immediately upon receipt. The private facility, including all infected shellfish stock, shall be required to remain under quarantine condition until the department removes the quarantine in writing or authorizes in writing an appropriate disposal method based on the results of the required analyses. (e) Before discharging any waste which at any time has been in contact with exotic shellfish into or adjacent to water in the state, the permittee shall submit samples of the shellfish from the particular structure(s) within the private facility from which a discharge is planned to a department approved shellfish disease specialist for analysis no more than ten days prior to discharge. If the analysis indicates that the shellfish are disease-free, the permittee may discharge from the particular structure(s) within the private facility from which the test samples were obtained. If the results indicate the presence of disease, the quarantine provisions of sec.57.114(d) of this chapter shall apply. 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 December 5, 1997. TRD-9716362 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 29, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 389-4642 31 TAC sec.57.134, sec.57.136 These repeals are adopted under the Texas Parks and Wildlife Code sec.66.007 which prohibits possession of exotic harmful or potentially harmful shellfish except as authorized by rule or permit, requires permittees to provide proof to the department of the disease free status of the animals possessed under their permit and authorizes the department to make rules to carry out these provisions. sec.57.134. Penalties 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 December 8, 1997. TRD-9716363 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 29, 1997 Proposal publication date: October 3, 1997 For further information, please call: (512) 389-4642 TITLE 34. PUBLIC FINANCE PART V. Texas County and District Retirement System CHAPTER 103.Calculation or Types of Benefits 34 TAC sec.103.5 The Texas County and District Retirement System adopts new sec.103.5, concerning the time and manner for the mandatory distribution of benefits without changes to the proposed text as published in the October 31, 1997, issue of the Texas Register (22 TexReg 10629). The new section is being adopted to implement the distribution requirements of the Government Code, Chapter 841, sec.841.010. Specifically, the language of that statute requires that benefit distributions be determined and made in accordance with sec.401(a)(9) of the Internal Revenue Code which had established distribution requirements for qualified plans. The Texas County and District Retirement System is a qualified plan. The new section lists the requirements and sets forth rules for the timely distribution of benefits to members of the system. No comments were received regarding adoption of this new section. This new section is adopted under the Government Code, Chapter 845, Subchapter B, sec.845.102 which provides the board of trustees with the authority to adopt rules necessary or desirable for the effective administration of the System. The Government Code, Chapter 841, Subchapter A, sec.841.010 is affected by this new rule. 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 December 5, 1997. TRD-9716334 Terry Horton Director Texas County and District Retirement System Effective date: December 31, 1997 Proposal publication date: October 31, 1997 For further information, please call: (512) 328-8889 CHAPTER 105.Creditable Service 34 TAC sec.105.4 The Texas County and District Retirement System adopts new sec.105.4, concerning the granting of current service credit for qualified service performed in the uniformed services by eligible members of the System without changes to the proposed text as published in the October 31, 1997, issue of the Texas Register (22 TexReg 10630). The new section is adopted to implement the requirements of the Texas Government Code, Chapter 843, sec.843.603. Specifically, with respect to service qualifying under the Uniformed Services Employment and Reemployment Rights Act of 1994 (38 U.S.C. sec.4301 et seq.) (the USERRA), sec.843.603 requires that contributions, benefits and service credit be provided to eligible members in accordance with Section 414(u) of the Internal Revenue Code. The new section lists the requirements and establishes procedures for granting current service credit to eligible employees for their uniformed service in accordance with the USERRA. No comments were received regarding the adoption of this new section. This new section is adopted under the Government Code, Chapter 845, Subchapter B, sec.845.102 which provides the board of trustees with the authority to adopt rules necessary or desirable for the effective administration of the System. The Government Code, Chapter 843, Subchapter G, sec.843.603 is affected by this proposed new rule. 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 December 5, 1997. TRD-9716335 Terry Horton Director Texas County and District Retirement System Effective date: December 31, 1997 Proposal publication date: October 31, 1997 For further information, please call: (512) 328-8889 CHAPTER 107.Miscellaneous Rules 34 TAC sec.107.4 The Texas County and District Retirement System adopts the repeal of sec.107.4, concerning conformity with the benefit limitations under Section 415 of the Internal Revenue Code as amended by the enactment of Public Law 104-188. The proposal to repeal sec.107.4 was published in the October 31, 1997, issue of the Texas Register (22 TexReg 10632). Public Law 104-188 amended Section 415 of the Internal Revenue Code to exempt qualified governmental plans from certain benefit limitations found in that section. In 1997, the 75th Texas Legislature amended the Government Code, Chapter 844, sec.844.008 to provide for conformity with Section 415 of the Internal Revenue Code. Prior to amendment, sec.844.008 established a limitation of benefits but authorized the board of trustees to adopt rules to cause the plan to operate in conformity with the benefit limitations under Section 415 of the Internal Revenue Code as amended by federal law. With the amendment of sec.844.008, this administrative rule is obsolete and no longer necessary to cause the System to operate in conformity with Section 415 of the Internal Revenue Code. No comments were received regarding the repeal of this section. The repeal of this section is adopted under the Government Code, Chapter 845, Subchapter B, sec.845.102 which provides the board of trustees with the authority to adopt rules necessary or desirable for the effective administration of the System. 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 December 5, 1997. TRD-9716336 Terry Horton Director Texas County and District Retirement System Effective date: December 31, 1997 Proposal publication date: October 31, 1997 For further information, please call: (512) 328-8889 TITLE 37. PUBLIC SAFETY AND CORRECTIONS PART I. Texas Department of Public Safety CHAPTER 21.Equipment and Vehicle Standards Equipment and Vehicle Standards 37 TAC sec.21.2 The Texas Department of Public Safety adopts the repeal of sec.21.2, concerning Motorcycle Operator and Passengers Protective Headgear Minimum Safety Standards and Exemption for Motorcycle Protective Headgear, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10254). The justification for the repeal will be to allow a person 21 years of age or older to be exempt from wearing a motorcycle helmet if they so choose. The section is repealed with simultaneous proposal of new sec.21.2 which provides for a helmet law exemption for persons 21 years of age and older. No comments were received regarding adoption of the repeal. The repeal is adopted pursuant to Texas Government Code, sec.411.006(4), which provides the director with the authority to adopt rules, subject to commission approval, considered necessary for the control of the department. 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 November 19, 1997. TRD-9716133 Dudley M. Thomas Director Texas Department of Public Safety Effective date: December 22, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 424-2890 The Texas Department of Public Safety adopts new sec.21.2, concerning Motorcycle Operator and Passengers Protective Headgear Minimum Safety Standards and Exemption for Motorcycle Protective Headgear, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10254). The justification for the new section will be to allow a person 21 years of age or older to be exempt from wearing a motorcycle helmet if they so choose. The new section is necessary in order for the department to implement the provisions of Senate Bill 99, 75th Legislature, 1997, which amends the helmet law to allow for persons 21 years of age and older to be exempt from wearing a helmet as long as certain requirements are met. No comments were received regarding adoption of the new section. The new section is adopted pursuant to Texas Government Code, sec.411.006(4), which provides the director with the authority to adopt rules, subject to commission approval, considered necessary for the control of the department. 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 November 19, 1997. TRD-9716134 Dudley M. Thomas Director Texas Department of Public Safety Effective date: December 22, 1997 Proposal publication date: October 17, 1997 For further information, please call: (512) 424-2890 PART V. Texas Board of Pardons and Paroles CHAPTER 141.General Provisions Definition of Terms 37 TAC sec.141.111 The Texas Board of Pardons and Paroles adopts an amendment to sec.141.111, concerning definition of terms, without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10107). The Board proposes an amendment to sec.141.111 for the purpose of defining new terms cited in hearings rules proposed in Chapter 146. The new sections are proposed in order to implement House Bill 1112, Chapter 429, Acts of the 75th Legislature, Regular Session, 1997 (effective January 1, 1998). No comments were received regarding adoption of the amendment. The amendment is adopted under the Code of Criminal Procedure, Article 42.18, sec.14, and sec.508.281, Government Code, which vest the Board with authority to promulgate rules under which releasees are to be heard on revocations of parole and mandatory supervision. 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 December 8, 1997. TRD-9716407 Laura McElroy General Counsel Texas Board of Pardons and Paroles Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-1883 CHAPTER 145.Parole Revocation of Administrative Release (Parole, Mandatory Supervision, and Executive Clemency) 37 TAC sec.sec.145.41-145.47, 145.49-145.53, 145.57 The Texas Board of Pardons and Paroles adopts the repeals to sec.sec.145.41- 145.47, 145.49-145.53, and 145.57, concerning hearing procedures in the revocation of parole or mandatory supervision, without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10107). The sections are proposed for repeal to incorporate new and old language under Chapter 146, Revocation of Parole or Mandatory Supervision, in order to implement House Bill 1112, Chapter 429, Acts of the 75th Legislature, Regular Session, 1997 (effective January 1, 1998). No comments were received regarding adoption of the repeals. The repeals are adopted under the Code of Criminal Procedure, Article 42.18, sec.14 and sec.508.281, Government Code, which vest the Board with authority to promulgate rules under which releasees are to be heard on parole revocations. 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 December 8, 1997. TRD-9716402 Laura McElroy General Counsel Texas Board of Pardons and Paroles Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-1883 CHAPTER 146.Revocation of Parole or Mandatory Supervision 37 TAC sec.sec.146.3-146.10 The Texas Board of Pardons and Paroles adopts new sections sec.sec.146.3, 146.4, 146.5, 146.7, 146.9, and 146.10, concerning hearing procedures on revocation of parole or mandatory supervision, without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10107). The Board also adopts new sec.146.6 and new sec.146.8, concerning hearing procedures on revocation of parole or mandatory supervision, with one change to the proposed text of each rule as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10107). The new sections are proposed as part of a new Chapter 146, Revocation of Parole or Mandatory Supervision, in order to implement House Bill 1112, Chapter 429, Acts of the 75th Legislature, Regular Session, 1997 (effective January 1, 1998). The purpose of the new sections is to streamline the hearing procedures so as to facilitate the hearing process by working in tandem with the counties, law enforcement, and TDCJ Parole Division. Three sets of comments were received. Two were from TDCJ divisions (Interstate Compact office and Parole Division). The third comment was from co-chair of the Texas Criminal Defense Lawyers Association Committee on Parole and Sentencing. Comments were received on proposed sec.sec.146.3 (Right to Counsel), 146.4 (Procedure after Waiver of Preliminary Hearing), 146.6 (Scheduling of Preliminary Hearing), 146.7 (Preliminary Hearing), and 146.8 (Scheduling of Revocation Hearing). Three comments were received from the Interstate Compact office. It was suggested that proposed sec.146.7(d)(3), which requires a tape recording to be made a part of the record in preliminary hearings, be changed to allow for the lack of a tape recording in some states. No change is recommended, as this language remains unchanged from prior rules and refers to preliminary hearings held in Texas as the receiving state. The second suggested change was to add new subsection (g) to sec.146.7 to provide that, for those parolees sent to Texas from another state following a preliminary hearing under Article 42.11, Code of Criminal Procedure, the parole panel need not make any decision on whether to proceed to revocation. The suggested change will not be made because the language in sec.146.7(d) gives specific direction to the parole panel or designee of the board to transfer the record of the hearing to the director of paroles, hearings, and clemency, rather than to the parole panel for a decision on whether to proceed to a revocation, so that the record may be forwarded to the sending state. The third suggested change was to add a new subsection to sec.146.8 to provide that a revocation hearing not be scheduled following a preliminary hearing where Texas is the receiving state. No change will be made in the proposed amendment, because the rule specifies that the hearings section shall schedule a hearing upon request. In cases where Texas is the receiving state and is conducting only a preliminary hearing according to the Compact, there should be no request made for a revocation hearing and no hearing held, because the record will have been transferred to the sending state under sec.146.7(d). Comments from TDCJ Parole Division related to proposed sec.146.4 (Procedure after Waiver of Preliminary Hearing) and sec.146.6 (Scheduling of Preliminary Hearing). The first comment was a suggestion that proposed sec.146.4 be amended to require the Parole Division to give a warning to the releasee during the initial interview following arrest to the effect that the releasee has not been "influenced, coerced, or persuaded in any manner in making said waiver," and that releasee is not making the waiver with the hope that "the Board will not consider all options available to them" regarding releasee's supervision. The suggested change will not be made because Morrissey v. Brewer provides the sole guide for the notice requirements in the proposed rule. In addition, this policy change would more properly be addressed by the Parole Division, eliminating any language regarding Board options, which are covered adequately in Board Rules. The second comment by Parole Division is that the definition of warrant execution in proposed sec.146.6(b) is erroneous under House Bill 1112 because it incorporates the portion of House Bill 1112 relating to when a hearing must be held rather than some other definition of when a warrant is executed. No change will be made to the proposed language dictated by House Bill 1112. The critical 60-day time period within which the Board must dispose of the revocation case begins upon warrant execution, not warrant issuance. If the releasee is charged only with an administrative violation, the arrest on the parole violator warrant is warrant execution for the purposes of House Bill 1112. For other purposes, the warrant is considered as "executed" and begins the 60-day time period upon occurrence of certain events, such as notification by the sheriff of the completion of a jail sentence or of formal dismissal of the charges by the local district attorney (see Texas Code of Criminal Procedure, Article 42.18, sec.14(c)(1)(a) and (b)). The third comment by the Parole Division was to request that the Board amend proposed sec.146.6 (Scheduling of Preliminary Hearing) and sec.146.8 (Scheduling of Revocation Hearing) to provide that the revocation hearing must be held within a reasonable time following return to custody from an out-of-state facility or federal institution under Texas Code of Criminal Procedure, Article 42.18, sec.14(c)(2) and (d)(1), or if the releasee is transferred to a TDCJ or contract facility under Article 42.18, sec.13A, following the expiration of the 60-day time period for a hearing under House Bill 1112. The Board has made the suggested changes to both rules by adding a new subsection (e) to proposed sec.146.6 and by adding a new subsection (f) to proposed sec.146.8. The third comment on the proposed rules was made by co-chair of the Texas Criminal Defense Lawyers Association Committee on Parole and Sentencing. The commenter offered general favorable comments about the proposed rules but offered specific comments regarding proposed sec.146.3 (Right to Counsel) and sec.146.6 (Scheduling of Preliminary Hearing). Regarding Rule 146.3, the commenter comments that the hearing officer be required to make an on-the-record inquiry of the releasee in order to determine if appointed counsel is warranted, in order to support the subsequent decision of the director. The proposed change will not be made, as the director may exercise the right to choose a designee to make the attorney determination decision. The co-chair of the Texas Criminal Defense Lawyers Association Committee on Parole and Sentencing also comments on sec.146.6 that, in the proposed rule, there are no specific requirements for the service of certain information upon the releasee and that this is an unwelcome change from prior Board rules. He suggests that the Board retain and amend the proposed rule to provide for service of information to the releasee at least five days in advance of the preliminary hearing. The proposed change will not be made, as the TDCJ Parole Division, which provides this information to the releasee prior to a hearing, should address the issue by administrative directive. The new rules are adopted under the Code of Criminal Procedure, Article 42.18, sec.14, and sec.508.281, Government Code, which vest the Board with authority to promulgate rules under which releasees are to be heard on revocations of parole and mandatory supervision. sec.146.6. Scheduling of Preliminary Hearing. (a) Upon request, the hearings section shall schedule a preliminary hearing unless: (1) more than seven calendar days have elapsed from the time that the warrant is executed; or (2) information has not been presented to hearings section that the releasee was served with the following: (A) notice of the right to a preliminary hearing and that its purpose is to determine whether there is probable cause to believe the releasee has committed a parole violation; (B) written notice of the allegations of parole violation against the releasee; (C) notice of the right to full disclosure of the evidence; (D) notice that releasee has the opportunity to be heard in person and to present witnesses and documentary evidence; (E) notice that the releasee has the right to confront and cross-examine adverse witnesses unless the hearing officer specifically finds good cause for not allowing confrontation of the witness; (F) notice that the case will be heard by a parole panel or designee of the board; (G) notice that the releasee has the opportunity to waive in writing the right to either or both of the preliminary and revocation hearings, with the additional understanding that, if the releasee waives the revocation hearing, the board will in all probability revoke; and (H) notice that the releasee has the right to retain an attorney and the conditional right to an appointed attorney. (b) For the purposes of subsection (a)(1) of this section, a warrant is executed if: (1) the releasee is arrested only on a charge that the releasee has committed a violation of a condition of parole or mandatory supervision and is not charged before the 61st day with the commission of an offense; or (2) the sheriff having custody of the releasee notifies the division that the releasee has discharged the sentence or that the prosecutor has dismissed the charge under Texas Code of Criminal Procedure, Article 32.02. (c) If the hearings section receives a request for a preliminary hearing later than the seventh calendar day following the provisions described in subsection (a)(1) of this section, the hearings section shall require the requestor to submit the scheduling request directly to the director of paroles, hearings, and clemency, along with a written explanation of the delay. (d) Subsection (a)(1) of this section does not apply when a releasee is: (1) transferred under Article 42.18, sec.13A, to a correctional facility operated by or under contract with the department; or (2) returned to custody from another state, a federal correctional institution, or a medical or psychiatric facility. (e) In cases under subsection (d) of this section, a preliminary hearing shall be held within a reasonable time. sec.146.8. Scheduling of Revocation Hearing. (a) Upon request, the hearings section shall schedule a revocation hearing unless information has not been presented to the hearings section that the releasee was served with the following: (1) notice of the right to a revocation hearing and that its purpose is to make a final evaluation of any contested relevant facts and consideration of whether the facts as determined warrant revocation of parole; (2) written notice of the allegations of parole violation against the releasee; (3) notice of the right to full disclosure of the evidence against the releasee; (4) notice that releasee has the opportunity to be heard in person and to present witnesses and documentary evidence; (5) notice that the releasee has the right to confront and cross-examine adverse witnesses unless the hearing officer specifically finds good cause for not allowing confrontation of the witness; (6) notice that releasee has an opportunity to be heard and to show that he did not violate the conditions, or if the releasee did, that circumstances in mitigation suggest that the violation does not warrant revocation; (7) notice that the case will be heard by a parole panel or designee of the board; (8) notice that the releasee has the opportunity to waive in writing the right to either or both of the preliminary and revocation hearings, with the additional understanding that, if the releasee waives the revocation hearing, the board will in all probability revoke; and (9) notice that the releasee has the right to retain an attorney and the conditional right to an appointed attorney. (b) If the releasee is not entitled to a preliminary hearing and requests a revocation hearing, the hearings section shall schedule a revocation hearing unless: (1) more than seven calendar days have elapsed from the time that the warrant is executed; or (2) information has not been presented to hearings section that the releasee was served with the following: (A) notice of the right to a revocation hearing and that its purpose is to make a final evaluation of any contested relevant facts and consideration of whether the facts as determined warrant revocation of parole; (B) written notice of the claimed allegations of parole violation against the releasee; (C) notice of the right to full disclosure of the evidence; (D) notice that releasee has the opportunity to be heard in person and to present witnesses and documentary evidence; (E) notice that the releasee has the right to confront and cross-examine adverse witnesses unless the hearing officer specifically finds good cause for not allowing confrontation of the witness; (F) notice that releasee has an opportunity to be heard and to show that he did not violate the conditions, or if the releasee did, that circumstances in mitigation suggest that the violation does not warrant revocation; (G) notice that the case will be heard by a parole panel or designee of the board; (H) notice that the releasee has the opportunity to waive in writing the right to either or both of the preliminary and revocation hearings, with the additional understanding that, if the releasee waives the revocation hearing, the board will in all probability revoke; and (I) notice that the releasee has the right to retain an attorney and the conditional right to an appointed attorney. (c) If the hearings section receives a request for a revocation hearing later than the seventh calendar day following the provisions described in subsection (b)(1) of this section, the hearings section shall require the requestor to submit the scheduling request directly to the director of paroles, hearings, and clemency, along with a written explanation of the delay. (d) Subsection (b)(1) of this section does not apply when a releasee is: (1) transferred under Article 42.18, sec.13A, to a correctional facility operated by or under contract with the department; or (2) returned to custody from another state, a federal correctional institution, or a medical or psychiatric facility. (e) For the purposes of subsection (b)(1) of this section, a warrant is executed if: (1) the releasee is arrested only on a charge that the releasee has committed a violation of a condition of parole or mandatory supervision and is not charged before the 61st day with the commission of an offense; or (2) the sheriff having custody of the releasee notifies the division that the releasee has discharged the sentence or that the prosecutor has dismissed the charge under Article 32.02, Texas Code of Criminal Procedure. (f) In cases under subsection (d) of this section, a revocation hearing shall be held within a reasonable time. 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 December 8, 1997. TRD-9716405 Laura McElroy General Counsel Texas Board of Pardons and Paroles Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-1883 CHAPTER 149.Mandatory Supervision Rules and Conditions of Mandatory Supervision 37 TAC sec.149.1 The Texas Board of Pardons and Paroles adopts an amendment to sec.149.1, concerning conditions and rules of mandatory supervision, without changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10107). The Board proposes an amendment to sec.149.1 for the purpose of clarifying that upon release to mandatory supervision, all conditions of parole or release to mandatory supervision required by law are imposed. No comments were received regarding adoption of the amendment. The amendment is proposed under the Code of Criminal Procedure, Article 42.18, sec.8(g), and sec.508.044(b)(2) and (d)(3), Government Code, which direct a parole panel to impose conditions of parole or release to mandatory supervision. 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 December 8, 1997. TRD-9716406 Laura McElroy General Counsel Texas Board of Pardons and Paroles Effective date: December 29, 1997 Proposal publication date: October 10, 1997 For further information, please call: (512) 463-1883 TITLE 40. SOCIAL SERVICES AND ASSISTANCE PART I. Texas Department of Human Services CHAPTER 48.Community Care for Aged and Disabled The Texas Department of Human Services (DHS) adopts the repeal of sec.48.2903 and sec.48.2904; and adopts new sec.sec.48.2903-48.2905 and 48.2908 in its Community Care for Aged and Disabled (CCAD) chapter. New sec.48.2904 and sec.48.2908 are adopted with changes to the proposed text published in the September 19, 1997, issue of the Texas Register (22 TexReg 9445). The repeals of sec.48.2903 and sec.48.2904 and new sec.48.2903 and sec.48.2905 are adopted without changes to the proposed text and will not be republished. The justification for the repeals and new sections is to consolidate the deductions from the income eligibility budget into one area and incorporate additional exemptions and exclusions already allowed under Medicaid policy. The repeals and new sections will function by providing public access to correct information. During the comment period, DHS received a comment from the Tarrant County Department of Human Services. The commenter had concerns that the changes would cause some of the money they provide to be countable income, thus making some clients ineligible for CCAD services. None of the assistance they are providing will be considered countable income. DHS has initiated clarifications to the text of sec.48.2904 and sec.48.2908. In sec.48.2904, the word "counted" is changed to "countable." In sec.48.2908, all references to the word "excluded" are changed to "exempted." Eligibility 40 TAC sec.48.2903, sec.48.2904 The repeals are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Government Code, sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The repeals implement sec.sec.22.001-22.030 and 32.001-32.042 of the Human Resources Code. 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 December 3, 1997. TRD-9716216 Glenn Scott General Counsel Texas Department of Human Services Effective date: January 1, 1998 Proposal publication date: September 19, 1997 For further information, please call: (512) 438-3765 40 TAC sec.sec.48.2903-48.2905, 48.2908 The new sections are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs and under Texas Government Code, sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The new sections implement sec.sec.22.001-22.030 and 32.001-32.042 of the Human Resources Code. sec.48.2904.Income from Excludable Sources. Income may be fully or partially countable, or may be excluded from the current eligibility budget. Excludable income will continue to be monitored by the caseworker at each financial review to determine how eligibility is affected. Excludable sources of income include: (1) deductions from earned income, including social security payments, Medicare premium payments, bonds, pensions, and union dues; (2) the first $65 of a client's (or couple's) net earned income, plus 1/2 of the remainder; (3) loans, grants, scholarships, and fellowship funds obtained and used under conditions that preclude their use for current living costs. Any portion used to pay any other expense (room, board, books, etc.) cannot be excluded; (4) Veterans Administration aid-and-attendance benefits, homebound elderly benefits, and payments to certain eligible veterans for purchase of medications; (5) infrequent or irregular income (income received less frequently than once a month) that averages $20 per month or less; (6) 1/3 of the total amount of child support payments for an eligible child; and (7) allowable exclusions from self-employment income, as indicated on the following chart. Figure 1: 40 TAC sec.48.2904(7) sec.48.2908.Indian-related Exemptions. (a) Type of payment. The following statutes provide that certain types of payments made to members of Indian tribes are exempt from income and resources as specified in paragraphs (1)-(4) of this subsection, or only from income as specified in paragraph (5) of this subsection. (1) Indian Judgment Funds Distribution Act - Public Law 93-134. Effective October 19, 1973, per capita distribution payments to members of Indian tribes who are due judgment funds, according to a plan of the Secretary of the Interior (or legislation, when a plan cannot be prepared or is not approved by the Congress) are exempted from income and resources. This does not include payments of funds distributed or held in trust (i.e., in the possession or care of a trustee) according to public laws enacted before October 19, 1973. (2) Distribution of Indian Judgment Funds - Public Law 97-458. Effective January 12, 1983, Indian judgment funds held in trust (i.e., in the possession or care of a trustee) or distributed per capita, pursuant to an approved plan, or their availability, are exempted from income and resources. Indian judgment funds include interest and investment income accrued while the funds are held in trust. Initial purchases made with distributed judgment funds are exempted from resources. (3) Per Capita Act - Public Law 98-64. (A) Effective August 2, 1983, per capita distributions of all funds held in trust by the Secretary of the Interior to members of an Indian tribe are exempted from income and resources. (B) Any local tribal funds that a tribe distributes to individuals on a per capita basis, but which have not been held in trust by the Secretary of the Interior (e.g., tribally managed gaming revenues) are not exempted from income and resources under this provision. (4) Alaska Native Claims Settlement Act (ANCSA) - Public Law 100-241. (A) Effective February 3, 1988, the following items received from a native corporation are exempted from income and resources: (i) cash received from a native corporation (including cash dividends on stock received from a native corporation) to the extent it does not exceed $2,000, per individual per year; (ii) stock (including stock issued or distributed by a native corporation as a dividend or distribution on stock); (iii) a partnership interest; (iv) land or an interest in land (including land or an interest in land received from a native corporation as a dividend or distribution on stock); and (v) an interest in a settlement trust. (B) The ANCSA also provides that up to $2,000 in retained distributions from a native corporation may be exempted from resources for each year beginning with 1988. (5) Payments from Individual Interests in Trust or Restricted Lands - Public Law 103-66. (A) Effective January 1, 1994, up to $2,000 per year received by Indians that is derived from individual interests in trust or restricted lands is exempted from income. (B) Interests of individual Indians in trust or restricted lands are exempted from resources. (b) Payments to specific Indian tribes and groups. The following statutes provide that certain payments made to members of specified Indian tribes and groups are exempt from income and resources. (1) Distribution of Per Capita Funds - Public Law 85-794. Effective August 28, 1958, per capita payments to members of the Red Lake Band of Chippewa Indians from the proceeds of the sale of timber and lumber on the Red Lake Reservation are exempted from income and resources. (2) Distribution of Judgment Funds - Public Law 92-254. Effective March 18, 1972, per capita distribution payments by the Blackfeet and Gros Ventre tribal governments to members, which resulted from judgment funds to the tribes, are exempted from income and resources. (3) Distribution of Claims Settlement Funds - Public Law 93-531 and Public Law 96-305. Effective December 22, 1974, settlement fund payments to members of the Hopi and Navajo Tribes, and the availability of such funds, are exempted from income and resources. (4) Receipts from Lands Held in Trust for Indian Tribes - Public Law 94-114. (A) Effective October 17, 1975, receipts derived from the following trust lands and distributed to members of designated Indian tribes are exempted from income and resources. (B) The first four Indian groups had lands conveyed with mineral rights prior to Public Law 94-114; that law conveyed the rest of the land to the remaining Indian groups. Figure 1: 40 TAC sec.48.2908(4)(B) (5) Distribution of Judgment Funds - Public Law 94-189. Effective December 31, 1975, judgment funds distributed per capita to, or held in trust for, members of the Sac and Fox Indian Nation, and the availability of such funds, are exempted from income and resources. (6) Distribution of Judgment Funds - Public Law 94-540. Effective October 18, 1976, judgment funds distributed per capita to, or held in trust for, members of the Grand River Band of Ottawa Indians, and the availability of such funds, are exempted from income and resources. (7) Distribution of Judgment Funds - Public Law 95-433. Effective October 10, 1978, any judgment funds distributed per capita to members of the Confederated Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the Mescalero Reservation are exempted from income and resources. (8) Receipts from Lands Held in Trust - Public Law 95-498. Effective October 21, 1978, receipts derived from trust lands awarded to the Pueblo of Santa Ana and distributed to members of that tribe are exempted from income and resources. (9) Receipts from Lands Held in Trust - Public Law 95-499. Effective October 21, 1978, receipts derived from trust lands awarded to the Pueblo of Zia and distributed to members of that tribe are exempted from income and resources. (10) Distribution of Judgment Funds - Public Law 96-318. Effective August 1, 1980, any judgment funds distributed per capita or made available for programs for members of the Delaware Tribe of Indians and the absentee Delaware Tribe of Western Oklahoma are exempted from income and resources. (11) Maine Indian Claims Settlement Act - Public Law 96-420. Effective October 10, 1980, all funds and distributions to members of the Passamaquoddy Tribe, the Penobscot Nation, and the Houlton Band of Maliseet Indians under the Maine Indian Claims Settlement Act, and the availability of such funds, are exempted from income and resources. (12) Distribution of Judgment Funds - Public Law 97-95. Effective December 17, 1981, any distributions of judgment funds to members of the San Carlos Tribe of Arizona are exempted from income and resources. (13) Distribution of Judgment Funds - Public Law 97-371. Effective December 20, 1982, any distributions of judgment funds to members of the Wyandot Tribe of Indians of Oklahoma are exempted from income and resources. (14) Distribution of Judgment Funds - Public Law 97-372. Effective December 20, 1982, distributions of judgment funds to members of the Shawnee Tribe of Indians (Absentee Shawnee Tribe of Oklahoma, the Eastern Shawnee Tribe of Oklahoma, and the Cherokee Band of Shawnee descendants) are exempted from income and resources. (15) Distribution of Judgment Funds - Public Law 97-376. Effective December 21, 1982, judgment funds distributed per capita or made available for programs for members of the Miami Tribe of Oklahoma and the Miami Indians of Indiana are exempted from income and resources. (16) Distribution of Judgment Funds - Public Law 97-402. Effective December 31, 1982, distributions of judgment funds to members of the Clallam Tribe of Indians of the State of Washington (Port Gamble Indian Community, Lower Elwha Tribal Community, and the Jamestown Band of Clallam Indians) are exempted from income and resources. (17) Distribution of Judgment of Funds - Public Law 97-403. Effective December 31, 1982, judgment funds distributed per capita or made available for programs for members of the Pembina Chippewa Indians (Turtle Mountain Band, Chippewa Cree Tribe, Minnesota Chippewa Tribe, and Little Shell Band of Chippewa Indians of Montana) are exempted from income and resources. (18) Distribution of Judgment Funds - Public Law 97-408. Effective January 3, 1983, per capita distributions of judgment funds to members of the Gros Ventre and Assiniboine Tribes of Fort Belknap Indian Community, and the Papago Tribe of Arizona, are exempted from income and resources. (19) Distribution of Judgment Funds - Public Law 97-436. Effective January 8, 1983, up to $2,000 of per capita distributions of judgment funds to members of the Confederated Tribes of the Warm Springs Reservation are exempted from income and resources. (20) Distribution of Judgment Funds - Public Law 98-123. Effective October 13, 1983, judgment funds distributed to the Red Lake Band of Chippewa Indians are exempted from income and resources. (21) Distribution of Judgment Funds - Public Law 98-124. Effective October 13, 1983, funds distributed per capita or family interest payments for members of the Assiniboine Tribe of the Fort Belknap Indian Community of Montana and the Assiniboine Tribe of the Fort Peck Indian Reservation of Montana are exempted from income and resources. (22) Distribution of Claims Settlement Funds - Public Law 98-432. Effective September 28, 1984, judgment funds and income therefrom distributed to members of the Shoalwater Bay Indian Tribe are exempted from income and resources. (23) Distribution of Claims Settlement Funds - Public Law 98-500. Effective October 19, 1984, all distributions to heirs of certain deceased Indians under the Old Age Assistance Claims Settlement Act are exempted from income and resources. (24) Distribution of Judgment Funds - Public Law 98-602. Effective October 30, 1984, judgment funds distributed per capita or made available for any tribal program, for members of the Wyandotte Tribe of Oklahoma and the Absentee Wyandottes, are exempted from income and resources. (25) Distribution of Judgment Funds - Public Law 99-130. Effective October 28, 1985, per capita and dividend payment distributions of judgment funds to members of the Santee Sioux Tribe of Nebraska, the Flandreau Santee Sioux Tribe, and the Prairie Island Sioux, Lower Sioux,and Shakopee Mdewakanton Sioux Communities of Minnesota are exempted from income and resources. (26) Distribution of Judgment funds - Public Law 99-146. Effective November 11, 1985, funds distributed per capita or held in trust for members of the Chippewas of Lake Superior and the Chippewas of the Mississippi are exempted from income and resources. (27) Distribution of Claims Settlement Funds - Public Law 99-264. Effective March 24, 1986, distributions of claims settlement funds to members of the White Earth Band of Chippewa Indians as allottees, or their heirs, are exempted from income and resources. (28) Distribution of Judgment Funds - Public Law 99-346. Effective June 30, 1986, payments or distributions of judgment funds, and the availability of any amount for such payments or distributions, to members of the Saginaw Chippewa Indian Tribe of Michigan are exempted from income and resources. (29) Distribution of Judgment Funds - Public Law 99-377. Effective August 8, 1986, judgment funds distributed per capita or held in trust for members of the Chippewas of Lake Superior and the Chippewas of the Mississippi are exempted from income and resources. (30) Distribution of Judgment Funds - Public Law 100-139. Effective October 26, 1987, judgment funds distributed to members of the Cow Creek Band of Umpqua Tribe of Indians are exempted from income and resources. (31) Aleutian and Pribilof Islands Restitution Act - Public Law 100- 383. Effective August 10, 1988, per capita restitution payments made to eligible Aleuts who were relocated or interned during World War II are exempted from income and resources. (32) Distribution of Claims Settlement Funds - Public Law 100-411. Effective August 22, 1988, per capita payments of claims settlement funds to members of the Coushatta Tribe of Louisiana are exempted from income and resources. (33) Hoopa-Yurok Settlement Act - Public Law 100-580. Effective October 31, 1988, funds distributed per capita for members of the Hoopa Valley Indian Tribe and the Yurok Indian Tribe are exempted from income and resources. (34) Distribution of Judgment Funds - Public Law 100-581. Effective November 1, 1988, judgment funds held in trust by the United States, including interest and investment income accruing on such funds, and judgment funds made available for programs or distributed to members of the Wisconsin Band of Potawatomi (Hannahville Indians Community and Forest County Potawatomi) are exempted from income and resources. (35) Distribution of Money and Land - Public Law 101-41. Effective June 21, 1989, all funds, assets, and income from the trust fund transferred to the members of the Puyallup Tribe under the Puyallup Tribe of Indians Settlement Act of 1989 are exempted from income and resources. (36) Distribution of Judgment Funds - Public Law 101-277. Effective April 30, 1990, judgment funds distributed per capita, or held in trust, or made available for programs, for members of the Seminole Nation of Oklahoma, the Seminole Tribe of Florida, the Miccosukee Tribe of Indians of Florida, and the independent Seminole Indians of Florida, (plus any interest and investment income accruing on the funds held in trust), and the availability of those funds, are exempted from income and resources. (37) Distribution of Settlement Funds - Public Law 101-503. Effective November 3, 1990, payments, funds, distributions, or income derived from them under the Seneca Nation Settlement Act of 1990 are exempted from income and resources. (38) Distribution of Settlement Funds - Public Law 101-618. Effective November 16, 1990, per capita distributions of settlement funds under the Fallon Paiute Shoshone Indian Tribes Water Rights Settlement Act of 1990 are exempted from income and resources. (39) Distribution of Settlement Funds - Public Law 103-116. Settlement funds, assets, income, payments or distributions from trust funds to members of the Catawba Indian Tribe under the Catawba Indian Tribe of South Carolina Land Claims Settlement Act of 1993 are exempted from income and resources. (40) Distribution of Settlement Funds - Public Law 103-436. Effective November 2, 1994, settlement funds held in trust, including interest and investment income accruing on such funds, and payments made to members of the Confederated Tribes of the Colville Reservation under the Confederated Tribes of the Colville Reservation Grand Coulee Dam Settlement Act are exempted from income and resources. 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 December 3, 1997. TRD-9716217 Glenn Scott General Counsel Texas Department of Human Services Effective date: January 1, 1998 Proposal publication date: September 19, 1997 For further information, please call: (512) 438-3765 PART XIX. Texas Department of Protective and Regulatory Services CHAPTER 700. Child Protective Services The Texas Department of Protective and Regulatory Services (TDPRS) adopts the repeal of sec.sec.700.101 and 700.334-700.336; adopts amendments to sec.sec.700.315-700.318, 700.322, 700.330, 700.513, 700.1105, 700.1310, 700.1314, 700.1315, 700.1332, 700.1501, 700.1502, 700.1504, 700.1505, and 700.1718; and adopts new sec.sec.700.334, 700.522, and 700.1506 in its Child Protective Services chapter. The amendments to sec.sec.700.316, 700.317, 700.330, 700.513, 700.1105, 700.1310, 700.1332, 700.1502, and 700.1504, and new sec.700.522 are adopted with changes to the proposed text as published in the October 10, 1997, issue of the Texas Register (22 TexReg 10112). The repeal of sec.sec.700.101 and 700.334-700.336, the amendments to sec.sec.700.315, 700.318, 700.322, 700.1314, 700.1315, 700.1501, 700.1505, and 700.1718; and new sec.sec.700.334, and 700.1506 are adopted without changes to the proposed text and will not be republished. The justification for the proposal is to incorporate legislative changes that were enacted by the 75th Legislature, Regular Session, 1997. The proposal will function by improving permanency decision efforts for families and children and providing public access to correct information. No comments were received regarding adoption of the proposal. TDPRS has, however, initiated several changes to the text for clarification. In sec.700.316, TDPRS has added the words "if eligible" to paragraph (8). In sec.700.317, TDPRS has made several revisions to subsection (a)(1), including changing references from Temporary Assistance for Needy Families (TANF) to Aid to Families with Dependent Children (AFDC). In sec.700.330, TDPRS has deleted subsection (d) because it is not needed. In sec.700.513, TDPRS has revised the language of subsections (a)(2) and (b)(2). Also in sec.700.513, TDPRS has made revisions to subsection (c), subsection (d)(2), (3), and (4), subsection (g), and subsection (h)(2). In sec.700.522(1), TDPRS has revised the language for clarification. In sec.700.1105, TDPRS has made several revisions to clarify what is needed and when to request a paternity search, including the addition of new subsection (b). In sec.700.1310, TDPRS has clarified the language in subsection (f). In sec.700.1332(a), TDPRS has changed the time frame back to 45 days because staff indicated that they might not be able to comply with the change. In sec.700.1502, TDPRS has added the word "cultural" in paragraph (2)(H), and in paragraph (2)(M) has added clarification regarding criminal history checks on persons who have child care responsibilities and the time frames for completing foster and adoptive home criminal checks. Also in sec.700.1502, TDPRS has deleted the words "be obtained" and added the words "have been completed" in paragraph (2)(M)(iv). In sec.700.1504, clarification is added regarding approval of adoption home studies. SUBCHAPTER A. Administration 40 TAC sec.700.101 The repeal is adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The repeal implements the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. 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 December 5, 1997. TRD-9716344 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER C. Eligibility for Child Protective Services 40 TAC sec.sec.700.315-700.318, 700.322, 700.330, 700.334 The amendments and new section are adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendments and new section implement the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. sec.700.316. Eligibility Requirements for Title IV-E, MAO, and State-Paid Foster Care Assistance. The child must meet all of the following criteria to be eligible for Title IV-E, Medical Assistance Only (MAO), or state-paid foster care assistance. (1) Responsibility for Placement and Care. The Texas Department of Protective and Regulatory Services TDPRS must have the responsibility for the child's placement and care. This requirement is met if: (A) the child is placed in TDPRS's managing conservatorship by written court order issued under Title 5, Texas Family Code; (B) the child is placed by TDPRS under the statutory authorization of sec.262.104, Texas Family Code; or (C) the child lives with his minor parent, and the minor parent is in TDPRS's managing conservatorship. The child and the minor parent must reside together in the same foster family home or child-care institution. (2) (No change.) (3) Age if attending school. A youth's eligibility for foster care assistance can be extended until the end of the month of his graduation from high school or the end of the month of his completion of vocational or technical training classes when the conditions specified in subparagraph (A) of this paragraph are satisfied or when the conditions specified in subparagraphs (B) or (C) of this paragraph are satisfied in addition to the conditions in subparagraph (A) of this paragraph. (A) (No change.) (B) Special condition affecting Title IV-E foster-care assistance. If a youth receives a general equivalency diploma (GED) and enrolls in vocational or technical training classes before his 18th birthday, the youth's eligibility for Title IV-E foster-care assistance may be extended until the end of the month in which he completes or withdraws from the vocational or technical training, as long as the youth is scheduled to complete the training before or during the month of his 19th birthday. (C) Special condition affecting state-paid foster-care assistance. A youth who is scheduled to graduate from high school after his 19th birthday is eligible to receive state-paid foster-care assistance from the beginning of the first full month following his 18th birthday until the end of the month of his graduation or withdrawal, as long as the youth is scheduled to graduate from high school before or during the month of his 20th birthday. (4) Placement. The child must be receiving care in Texas in a licensed, certified, or verified foster home or a licensed, private, nonprofit child- caring institution approved for TDPRS foster-care assistance, except in the following circumstances. (A) The child is in permanent foster family care and the foster family must move out of state. The foster family must secure foster care licensing in the new state of residence within 90 days, or the child's eligibility for foster care assistance will be terminated until appropriate licensing is secured. The TDPRS program director may grant one extension of no more than 60 days, but only if it is clear that the foster family will be licensed in the additional time. (B) The child must be removed from an out-of-state adoptive or foster care placement; and TDPRS determines that another out-of-state placement will better meet the child's needs than a return to Texas. (C) Under the service plan, the child is to be reunited with his biological family and must be moved out of state in order to live near the family. (D) The child qualifies for Level of Care (LOC) VI, and no nonprofit, residential child care facility that can meet the child's needs is available in the area in which the child must be placed. When no nonprofit facility is available for a LOC VI child, the child may receive care in a licensed, for- profit facility that provides LOC VI services. The facility must enter into an agreement with TDPRS to provide services to children in the department's conservatorship at the department's normal payment rates. A child placed in a for-profit facility at LOC VI may continue to receive care in the facility if his LOC changes, as long as (i) the child's needs are best served by his remaining in the facility, and (ii) the facility agrees to continue serving the child at the new LOC. (5) Resources. The child must not have equity in real or personal property in excess of $1,000. (6) Income. The child's monthly income must be less than the daily rate paid to the child-care facility for the child's maintenance. Countable income includes supplemental security income (SSI); retirement, survivors, and disability insurance (RSDI); Veterans Administration (VA) benefits; any other dependent or survivor's income; funds resulting from the child's Indian heritage; or other income from private sources. The following types of income are not counted in determining eligibility: (A) Earnings of a child who is: (i) a full-time student; (ii) a part-time student and not a full-time employee. Full-time employment is 30 hours or more per week; (B) money given as a gift on an irregular basis by the parent to the child; (C) educational loans or grants, such as scholarships, to the child if provided for purposes other than regular maintenance; (D) child support payments received by or forwarded to the Office of the Attorney General. (7) Lump-sum Income. Nonrecurring lump-sum payments received after certification for foster care assistance are generally considered as countable income. Exceptions are detailed in sec.sec.3.3208 - 3.3213 of this title (relating to Income) in the AFDC chapter of rules. If the lump-sum payment plus other countable income for a month is equal to or greater than the cost of foster-care maintenance, the child is ineligible for a period of time. The period of ineligibility is determined by dividing the amount of the lump-sum payment and other countable income by the monthly cost of care. The resulting whole number is the number of months the child is ineligible for foster care assistance. Any remaining amount from this division is considered as income the first month after the period of ineligibility. (8) Social Security number. The child must have, or must have applied for, a Social Security number, if eligible. sec.700.317. Additional Eligibility Requirements for Title IV-E Foster Care. (a) Besides the general eligibility requirements specified in sec.700.316 of this title (relating to Eligibility Requirements for Title IV-E, MAO, and State- paid Foster Care Assistance), a child must meet the following additional requirements to qualify for Title IV-E foster care assistance. (1) Aid to Families with Dependent Children (AFDC)-related status. At least one of the following conditions must apply. (A) Using the AFDC eligibility rules in effect on July 16, 1996, the child would have been eligible for AFDC benefits had application been made during the month in which court proceedings were initiated. (B) At some time during the six-month period before the month in which court proceedings were initiated, the child lived with a relative as specified in paragraph (3) of this subsection; and the child would have received AFDC benefits if he had been living with that relative during the month in which court proceedings were initiated, and if the AFDC eligibility rules in effect on July 16, 1996, were used. (C) The child lives with his minor parent, and the minor parent is in the Texas Department of Protective and Regulatory Services' (TDPRS's) managing conservatorship. As long as the child continues to live with the minor parent, a separate court-ordered removal is not required for the child to qualify for Title IV-E foster care assistance. (D) The child was removed from a family that had qualified for the AFDC- Unemployed Parent (AFDC-UP) program during the month in which court proceedings were initiated, if the AFDC eligibility rules in effect on July 16, 1996, were used. (2) Judicial determination. (A) In a nonemergency removal, the court must determine that TDPRS made reasonable efforts to prevent removal and to reunify the family. (B) In an emergency removal, the court must determine either: (i) that TDPRS made reasonable efforts to prevent removal and to reunify the family; or (ii) (No change.) (C) In both emergency and nonemergency removals, the court's original order placing the child in TDPRS's conservatorship must include a statement that removal is in the child's best interest. (3) (No change.) (4) Need. The child's family must have been living at subsistence level or below according to Aid to Families with Dependent Children (AFDC) income standards in effect July 16, 1996. If the child has a stepparent living in the home, the stepparent's income is considered according to the rules governing stepparent income for AFDC eligibility in effect July 16, 1996. (5) Citizenship or alien status. The child must be a citizen of the United States or an alien lawfully admitted for permanent residence. (b) For purposes of determining eligibility for foster care assistance, TDPRS considers court proceedings initiated when: (1)-(2) (No change.) sec.700.330. Billing and Payment for Foster Care Assistance. (a) (No change.) (b) The Texas Department of Protective and Regulatory Services (TDPRS) foster care billing staff use the Child and Adult Protective System to pay TDPRS foster homes and contracted facilities. (c) If a county pays for foster care for the care of a child who is ineligible for state-provided foster care assistance or if a child's funds are used, the rate must be the same rate as TDPRS pays for the same level of care. 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 December 5, 1997. TRD-9716343 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 40 TAC sec.sec.700.334-700.336 The repeals are adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The repeals implement the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. 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 December 5, 1997. TRD-9716355 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER E. Intake, Investigation, and Assessment 40 TAC sec.700.513, sec.700.522 The amendment and new section are adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendment and new section implement the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. sec.700.513. Notification about Results. (a) Required notification in abbreviated and thorough investigations. (1) Who must be notified. The Texas Department of Protective and Regulatory Services (TDPRS) must notify the following parties about the findings of an abbreviated or thorough investigation unless one of the exceptions specified in subsection (d) of this section apply: (A) each alleged victim who was interviewed during the investigation; (B) each custodial parent of each alleged victim; (C) each non-custodial parent of each alleged victim; (D) each legal guardian, if one has been appointed, of each alleged victim; (E) each person identified as an alleged perpetrator; and (F) the person who reported the alleged abuse or neglect, if his identity is known. (2) Time frame for providing notice. TDPRS must provide notice to the persons specified in paragraph (1) of this subsection within 15 days after the investigation is closed by the supervisor. (b) Required notification in administratively closed investigations. (1) Who must be notified. TDPRS must notify the following parties about the findings of an investigation that was closed administratively, unless one of the exceptions specified in subsection (d) of this section apply: (A) each custodial parent of each alleged victim; (B) each non-custodial parent of each alleged victim; (C) each legal guardian, if one has been reported, of each alleged victim; and (D) the person who reported the alleged abuse or neglect, if his identity is known. (2) Time frame for providing notice. TDPRS must provide notice to the parents and guardian specified in paragraph (1) of this subsection no later than 24 hours after the investigation is closed by the supervisor or to the reporter within 15 days. (c) Optional provision of investigation findings upon request. TDPRS may provide information about the investigation to the custodial and non-custodial parents and legal guardian of any child in the home under investigation, at the parent's or guardian's request, unless one of the exceptions specified in subsection (d) of this section exists. Staff may provide information from the investigation to the extent deemed necessary by TDPRS for the protection and care of the child when such information is necessary to meet the child's needs. Exception: Staff may not release information that is subject to redaction under sec.700.204 of this title (relating to Redaction of Records Prior to Release.) (d) Exceptions to providing notification. (1) Unable to locate. During the investigation, TDPRS was unable to locate the person entitled to notification despite having made reasonable efforts to locate the person. (2) Safety exception. Notwithstanding requirements to notify certain persons of investigation results, TDPRS shall not provide the notice when TDPRS determines that the notice is likely to endanger the safety of any child in the home, the reporter, or any other person who participated in the investigation of the report. This safety exception does not apply to a designated perpetrator or designated victim perpetrator entitled to receive notice under subsection (f) of this section, or to a former alleged perpetrator entitled to receive notice under subsection (g) of this section. (3) Law enforcement exception. TDPRS may delay notification of a person entitled to notification under this section if a law enforcement agency requests the delay because timely notification would interfere with an ongoing criminal investigation. TDPRS may delay notification only in those circumstances in which the law enforcement agency agrees to notify TDPRS at the earliest time that the delay is no longer needed. TDPRS must provide the notification within 15 days after the date on which TDPRS is notified that the law enforcement agency has withdrawn the request to delay the notification. (4) Administrative closure exception. TDPRS must not provide required notifications or optional information about findings to parents and the guardian if a Child Protective Services (CPS) investigation is being closed administratively because the report was referred for investigation to another authorized entry, such as law enforcement or another state agency. (e) Form of notification. TDPRS's notifications about the findings of an investigation may be either written or oral, except the notifications in paragraphs (1)-(2) of this subsection must be provided in writing: (1) written notification of the designated perpetrator, or designated victim perpetrator; and (2) written notification of an alleged perpetrator when all allegations in the case involving the person as an alleged perpetrator have been ruled out. (f) Required written notification of the designated perpetrator or designated victim/perpetrator. TDPRS must give written notice of the findings of the investigation to everyone who has been identified as a designated perpetrator or designated victim/perpetrator as specified in sec.700.512(b)(1) of this title (relating to Conclusions About Roles). For a designated victim/perpetrator, the notice is sent to the child's parents. (g) Required written notification of an alleged perpetrator when all allegations involving the person as an alleged perpetrator have been ruled-out. TDPRS must give written notice of the right to request removal of role information to each person who was identified as an alleged perpetrator when all the allegations in the investigation involving the person as an alleged perpetrator have been ruled out. For a person fitting this category who is a minor, the notice may be sent to the minor's parents. (h) Notifying the reporter. If the person who reported the alleged abuse or neglect is not a professional working with the family, TDPRS's notification to the reporter discloses only: (1) that TDPRS investigated the report, and (2) whether TDPRS provided services to the family during the investigation or plans to provide services to the family after the investigation. sec.700.522. Audiotaping or Videotaping Interviews with Alleged Victims. Texas Department of Protective and Regulatory Services (TDPRS) staff must make a reasonable and good faith effort to audiotape or videotape interviews with child victims of physical or sexual abuse unless good cause exists not to audiotape or videotape the interviews. Good cause exceptions to audiotaping or videotaping interviews include, but may not be limited to, the reasons specified in paragraphs (1)-(8) of this section. (1) The alleged victim cannot communicate verbally at the time of the interview because of his level of functioning or because of any other physical or mental or emotional impairment. (2) The alleged victim is over age 12 and is able to provide a written statement about alleged abuse. (3) The alleged victim refuses to be interviewed on audiotape or videotape, and TDPRS determines that the only reasonable way to obtain an interview with the child is to conduct the interview without audiotaping or videotaping it. (4) The alleged physical abuse to the child does not appear to be likely to endanger the child's life or to result in permanent functional impairment, death, or disfigurement if untreated. (5) Certain corroborating evidence exists as to the identity of the perpetrator, such as an admission by an alleged perpetrator, a statement by a third party witness to the abuse, or physical evidence. (6) The interview is for purposes other than to conduct the initial investigative interview of the child victim. The initial investigative interview is the first thorough interview which is conducted in the investigation for the purpose of obtaining the facts as reported by the child victim about the reported allegations. (7) TDPRS may accept an initial investigative interview of the child victim which was conducted by another entity rather than TDPRS conducting this initial investigative interview. In this instance, good cause exists for the interview not having been audiotaped or videotaped when the substitute initial investigative interview was: (A) audiotaped or videotaped; or (B) not audiotaped or videotaped but a good cause exception as outlined in this section exists for the substitute initial investigative interview not having been audiotaped or videotaped. (8) Audiotaping or videotaping the interview would be contrary to the child victim's best interest, for reasons that include, but are not limited to, the reasons specified in subparagraphs (A)-(E) of this paragraph: (A) Audiotaping or videotaping the interview would unnecessarily delay obtaining the interview. (B) Audiotaping or videotaping the interview would unnecessarily interfere with the child's disclosure of abuse. (C) Audiotaping or videotaping the interview would result in unnecessary multiple initial investigative interviews. (D) The child's therapist or doctor recommends against the interview being audiotaped or videotaped because doing so would be contrary to the child's emotional health or condition. (E) The physical location where it is reasonable to conduct the interview is not conductive to audiotaping or videotaping the interview. 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 December 5, 1997. TRD-9716354 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER K. Court-Related Services 40 TAC sec.700.1105 The amendment is adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendment implements the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. sec.700.1105. Diligent Search for Missing Parents. (a) When the whereabouts of one or more parents of a child in the Texas Department of Protective and Regulatory Services' managing conservatorship is unknown, Child Protective Services must make a diligent search for: (1) each missing parent. (2) (No change.) (b) In cases filed after September 1, 1997, where a child has one or more alleged biological fathers whose identity is unknown or whose identity is known but whose whereabouts is unknown, a request to search the Paternity Registry (a division of the Texas Department of Health's Bureau of Vital Statistics) must be completed, in addition to a diligent search for each alleged biological father. 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 December 5, 1997. TRD-9716353 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER M. Substitute Care Services 40 TAC sec.sec.700.1310, 700.1314, 700.1315, 700.1332 The amendments are adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendments implement the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. sec.700.1310. Permanency Planning. (a) Definition. Permanency planning consists of: (1) the identification of a safe and permanent living situation as the goal towards which Child Protective Services (CPS's) services to a child (and usually to the child's family) are directed; and (2) (No change.) (b) (No change.) (c) Selecting a goal. To establish a permanency plan for a child, CPS tries to select the permanency-planning goal that best serves the child's interest and long-term needs, including the child's needs for belonging, stability, and continuity of care. To this end, the worker must assess the child's needs, then identify the least disruptive available goal that is likely to meet those needs without compromising the child's safety. (d) Documenting the goal. The permanency goal selected for a child is recorded in the: (1) case plan (child and family service plan); and (2) permanency reports submitted to the court for the permanency hearings conducted while a case is in temporary legal status. (e) Revising the plan. If a previously established permanency-planning goal proves to be unrealistic, the goal must be changed. (f) Finalizing the plan. No later than five months after the date that TDPRS was named temporary managing conservator, TDPRS must finalize what permanency goal it wants to pursue for a child so that: (1) a recommendation can be made during the Permanency Planning Team (PPT) staffing held prior to the first permanency court hearing; (2) a recommendation can be made for the first court permanency hearing held six months from the date that TDPRS was named temporary managing conservator (TMC); and (3) appropriate actions can be taken to obtain a dismissal, a final order, or an extension by the Monday after the anniversary date that TDPRS was named temporary managing conservator. sec.700.1332. The Family's Service Plan. (a) Time frame. Within 45 days after a child's placement in substitute care, Child Protective Services (CPS) must develop a written plan for services to the family unless: (1)-(2) (No change.) (b) (No change.) (c) Required content. The family's service plan must: (1)-(3) (No change.) (4) describe the services CPS must provide to help the family complete those tasks; and (5) indicate how CPS will evaluate the family's completion of those tasks. (d) (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 legal authority. Issued in Austin, Texas, on December 5, 1997. TRD-9716352 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER O. Foster and Adoptive Home Development 40 TAC sec.sec.700.1501, 700.1502, 700.1504-700.1506 The amendments and new section are adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendments and new section implement the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. sec.700.1502. Foster and Adoptive Home Inquiry and Screening. The Texas Department of Protective and Regulatory Services' (TDPRS') policies for responding to inquiries and screening and approval of foster and adoptive homes are as follows: (1) Responding to inquiries. TDPRS receives inquiries as a result of recruitment efforts by staff, volunteers, foster and adoptive parents, foster and adoptive parent associations, and other organizations that work with TDPRS. When inquiries are received, staff should provide a written response within 10 working days to provide families information about the process of becoming a foster or adoptive parent with TDPRS. (2) Screening and approval of foster and adoptive homes. (A) Age. All applicants must be at least 21 years of age or older. Age is evaluated in relation to life expectancy and maturity. The applicants' life expectancy must be long enough for the applicants to be able to raise the child to adulthood. Applicants who are nearing retirement age usually are only considered and approved for adolescent children. (B) Marriage. If married, both spouses must apply and their license or declaration of marriage must be recorded. If separated and not divorced, adoptive applicants must finalize the divorce prior to being approved as an adoptive parent. (C) Length of marriage. Couples must be married at least two years before TDPRS accepts an adoption application, unless the following exception is made. Exception: If the couple cohabitated for two years prior to the marriage or obtained a civil registration of common law marriage for the length of time required, the worker should assess the impact of the marriage on the stability of the couple's relationship to determine the appropriateness of making an exception. (D) Single parents. Single parents are evaluated in terms of their ability to nurture and provide for a child without the assistance of a spouse. Placement with a single parent is considered the best plan for some children. (E) Disabilities. Disabilities are evaluated in relation to the applicants' adjustment to the disability and the limits, if any, the disability imposes on the applicants' ability to care for a child. (F) Residence. Adoptive home studies are started only if the applicants will live in the community long enough for PRS to complete a study and make a placement. Exceptions are made in unusual situations which involve a child with special needs if another licensed child placing agency in the new community agrees to complete the adoption services. (G) Adoption by foster families. Foster families are evaluated using the same criteria applied to any other adoptive applicants. The home study must be updated to meet the minimum standards for adoptive homes. The evaluation focuses on the family's demonstrated skill and ability to parent the children TDPRS has placed in the family's care and determines the attachment the family and the child have to each other. (H) Family's ability to help the child. Applicants are evaluated based on their ability to: (i) help the child: (I) develop a sense of identity consistent with the child's racial, cultural, and ethnic background; and (II) learn to cope with difficulties that may arise from racial, cultural, or ethnic differences, both within and outside the adoptive family; and (ii) develop a plan for helping the child manage the issues described above as the child reaches developmental milestones. (I) Finances. Although there are no specific income requirements, the applicants must have enough income, and be able to manage it well enough, to meet the child's basic material needs. Income is also evaluated in terms of past and present management. (J) Health. The applicants' physical and mental health must be sufficient to assume parenting responsibilities. Physical and mental conditions are considered to protect the child against another loss of parenting through death, incapacity, or repetition of abuse or neglect. (K) Religion. There are no specific religious requirements. Applicants are evaluated based on: (i) Their willingness to respect and encourage a child's religious affiliation. (ii) Their willingness to provide a child opportunity for religious, spiritual, and ethical development. (iii) The health protection they plan to give a child if their religious beliefs prohibit certain medical treatment. (L) Discipline. Physical discipline may not be used on a child in any TDPRS foster or adoptive home prior to consummation. TDPRS evaluates applicants based on their willingness and ability to: (i) recognize and respect differences in children, especially children who have been abused or neglected; (ii) employ methods of discipline that suit the particular needs and circumstances of each child; and (iii) employ methods of discipline that conform to the policies specified in sec.700.1340(c) of this title (relating to Special Issues). (M) Criminal history. (i) Criminal history checks are required for all persons 18 years old and older who live in the applicant's home. A criminal history check must be completed for persons who have child care responsibilities for the children in the managing conservatorship of TDPRS. Criminal history is evaluated in terms of the potential danger it presents to placement, rearing, and protection of children. Persons who have been convicted of offenses against the person, offenses against the family, public indecency, or a felony violation of the Texas Controlled Substances Act must submit proof of rehabilitation to TDPRS for their application to be considered further. (ii) TDPRS staff may provide a copy of the criminal records check received from the Texas Department of Public Safety or local law enforcement to the court when the court will accept the material in lieu of ordering adoptive parents to provide their own criminal records check to the court. (iii) Criminal history checks for foster parents are required to be updated every two years to determine if a criminal action has occurred since the subsequent information was obtained from the Texas Department of Public Safety or local law enforcement. (iv) Criminal history checks for adoptive parents must have been completed within one year of the time the court orders a criminal history based on a petition filed for adoption. If the criminal history is not within one year, a new criminal history is required. (N) Adoptive home studies - fertility. Fertility assessments are required only if TDPRS believes the couple needs to know more about their fertility before they adopt a child. The couple's fertility is important only in relation to resolution of their feelings about their infertility and their ability to accept and parent a child not born to them. sec.700.1504. Approval of Foster and/or Adoptive Home Study. The Texas Department of Protective and Regulatory Services (TDPRS) evaluates applicants based on the applicants' ability to care for specific children needing placement. TDPRS approves home studies based on an evaluation of the applicants' total situation; their flexibility in all areas of life; their sensitivity and understanding of children's needs, and their ability to meet the developmental, maintenance, and protection needs of children in TDPRS's managing conservatorship. The written assessment or home study of the family must be completed within four months beginning on the date all information and documentation is returned by the family or on the date of the last pre-service training session. If these two dates are different, staff may use the later date to determine the time frame for completion of the home study. Staff must submit the home study to the supervisor for approval. Supervisors must approve or disapprove the home study within 30 days. Staff must inform the family that they need to return all information and necessary documents within two weeks after pre-service training has ended or their case will be closed. Staff need to inform the family that they may re-open their application to become adoptive parents at a later time, if their case was closed for failure to return all necessary documents. Families who reapply within one year of completing pre- service may need to complete an overview training. This decision must be made by the supervisor. Reasons for this decision must be documented in the family's record. Families who reapply after one year of pre-service will need to attend pre-service training again. 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 December 5, 1997. TRD-9716351 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER Q. Purchased Protective Services 40 TAC sec.700.1718 The amendment is adopted under the Human Resources Code, Title 2, Subtitle D, Chapter 40, which provides the department with the authority to propose and adopt rules to comply with state law and implement departmental programs; and under the Texas Family Code, Chapters 261 and 264, which authorizes the department to provide services to alleviate the effects of child abuse and neglect. The amendment implements the Human Resources Code, Chapter 40, and the Texas Family Code, Chapters 261 and 264. 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 December 5, 1997. TRD-9716350 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 10, 1997 For further information, please call: (512) 438-3765 CHAPTER 720. Twenty-Four Hour Care Licensing SUBCHAPTER I. Standards for Assessment Services 40 TAC sec.sec.720.600-720.608 The Texas Department of Protective and Regulatory Services (TDPRS) adopts new sec.sec.720.600-720.608, in its 24-Hour Care Licensing chapter. New sec.720.604 is adopted with changes to the proposed text published in the October 17, 1997, issue of the Texas Register (22 TexReg 10265). New sec.sec.720.600-720.603 and 720.605-720.608 are adopted without changes to the proposed text and will not be republished. TDPRS is adopting the new sections in new Subchapter I, Standards for Assessment Services. The justification for the new sections is to include minimum standards for assessment services to determine the appropriate type of placement for a child in the care or custody of TDPRS who requires substitute care. The new rules also implement legislation passed in the 75th Legislative Session that requires the assessment services for these children (Texas Family Code) and legislation amending Human Resources Code, Chapter 42 (the licensing statute), that requires TDPRS to regulate these services. The new sections will function by reducing the risk of placement breakdowns for children in the care or custody of TDPRS. It is anticipated that the use of assessment services regulated under these sections will provide the information needed to make more appropriate decisions about the long term substitute care placement needs of the children. Two sets of comments were received regarding adoption of the new sections. One set of comments, from a member of the Advisory Committee on Child Care Administrators and Facilities, supported all proposed rules. The second set of comments from a residential child care provider raised several questions about the implementation of the proposed rules. One question concerned whether a licensed emergency shelter met the definition of a licensed residential child care facility. Licensed emergency shelters do meet this definition and may be authorized to provide assessment services. Other questions concerned service time frames and when a child would be considered as admitted to an assessment services program since a child could be in emergency shelter type care for several days before assessment services were requested. The time frames apply to the time the child is admitted to the assessment services program, not to the date when the child entered the facility. Another question concerned the use of specific forms in determining a child's basic health status. The rules detail the content that must be covered. Providing the assessment is conducted under the supervision of a licensed physician and includes the required information; the "form" on which the information is reported would not impact compliance with the rule. Two questions indicated confusion about the "primary caretaker." The intent of the requirements for primary caretaker involvement relate to input from the person (child care worker or workers, foster parent) who is providing direct care and supervision for the child while the child is in the assessment services program. The comments also included questions about the qualifications of the person responsible for the assessment services program. The concern was that an emergency shelter, for example, might be a very appropriate facility to provide assessment services but the qualifications in the proposed rules were stated in terms of types of staff an emergency shelter would be unlikely to employ. In response to these comments, sec.720.604(b) is revised to broaden and clarify the required qualifications. The new sections are adopted under the Human Resources Code (HRC), Chapters 40 and 42, which describes the department's regulatory and rulemaking authority. The new sections implement the HRC, Chapters 40 and 42. sec.720.604. Staffing for Assessment Services. (a) The facility or child-placing agency must have a person responsible for the assessment services program. (b) The person responsible for the assessment services program must have at least a master's degree in a human services or mental health field from an accredited college or university and must have at least one of the requirements specified in paragraphs (1)-(3) of this subsection: (1) three years of supervised child-placing experience, one year of which must have been placing children in foster care; or (2) three years of supervised experience providing treatment services to emotionally disturbed persons, one year of which must have been in a residential setting providing services to children; or (3) three years of professional level residential child care experience. "Professional level residential child care experience" includes intake and admission studies, treatment and service planning, and other services provided for children. It does not include direct child care or supervision of direct child care workers. (c) The facility or child-placing agency must have sufficient appropriately qualified professional staff available to provide assessment services. This must be documented in a written staffing plan. The plan must document that the number, qualifications, and responsibilities of professional staff are appropriate to the size and scope of the assessment services program. (d) The staffing plan must be implemented. (e) The assessment services program must have available evaluation services from qualified and licensed medical, dental, psychological, psychiatric, social work, and education professionals. (f) All assessment services must be provided in accordance with the provisions of sec.sec.720.606-720.608 of this title (relating to Assessment Plan, Assessment Services, and Assessment Report). The assessment services program must document the qualifications and credentials of all assessment service providers. 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 December 5, 1997. TRD-9716347 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 17, 1997 For further information, please call: (512) 438-3765 CHAPTER 725. General Licensing Procedures The Texas Department of Protective and Regulatory Services (TDPRS) adopts amendments to sec.sec.725.1802, 725.2001, and 725.2026, in its General Licensing Procedures chapter. The amendment to sec.725.1802 is adopted with changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10268). The amendments to sec.725.2001 and sec.725.2026 are adopted without changes to the proposed text and will not be republished. Section 725.4020, which was proposed with these sections in the October 17, 1997, issue of the Texas Register, will be reconsidered by the board. The justification for the amendments is to implement new child-care licensing requirements that were enacted by the 75th Legislature. These include requiring TDPRS to make certain licensing functions which are available for use with licensed facilities applicable to registered and listed homes; requiring a facility or family home to cease operation during the time of judicial appeal if the revocation or denial of the license, listing or registration is based on violations which pose a risk to the health and safety of children; listing the standards violations which pose a risk to the health and safety of children; stating that a court may issue injunction to allow operation pending an appeal if the rule violations do not pose such a risk; and clarifying that TDPRS must publish in the local newspaper action taken to suspend or revoke a license, registration or listing. The amendments will function by increasing protection for children in out-of- home care. Seven comments were received regarding adoption of the amendments. Six comments from members of the Advisory Committee on Child Care Administrators and Facilities approved the proposed rules as written. One comment from a child care provider suggested adding a time frame to the requirement for facilities to notify parents when TDPRS gives notice that a license/registration/listing is being revoked or suspended. TDPRS has incorporated this change in sec.725.1802. The same child care provider suggested that sec.725.1802 be reworded for clarity. TDPRS does not believe additional rewording is needed because of changes already incorporated and required Texas Register formatting requirements. SUBCHAPTER S. Administrative Procedures 40 TAC sec.725.1802 The amendment is adopted under the Human Resources Code, Title 2, Chapter 42, which authorizes the department to administer general child-placing and child care licensing programs. The amendment implements the Human Resources Code sec.sec.42.001- 42.077. sec.725.1802. Notice of Action Against a Facility/Registered or Listed Family Home. If a facility/registered or listed family home receives written notice from the department that its license/registration/listing is being revoked or suspended, the facility/registered or listed family home must send a letter within five days of receiving the notice by certified mail to inform the parents or guardians of each child in care of this action. Parents or guardians seeking to enroll children after the facility/registered or listed family home has received a revocation or suspension notice must also be notified prior to enrollment. The effective date of the revocation or suspension is the date the facility/registered or listed family home receives the notice. The department will publish a notice of the revocation or suspension in the local newspaper. The department will send the notice to the newspaper for publication within 10 days of receipt of the final order following the appeal of the revocation or suspension. If there is no appeal filed, the department will send the notice within 10 days of the exhaustion of the administrative remedies. 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 December 5, 1997. TRD-9716349 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 17, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER U. Day Care Licensing Procedures 40 TAC sec.725.2001, sec.725.2026 The amendments are adopted under the Human Resources Code, Title 2, Chapter 42, which authorizes the department to administer general child-placing and child care licensing programs. The amendments implement the Human Resources Code sec.sec.42.001- 42.077. 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 December 5, 1997. TRD-9716348 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 17, 1997 For further information, please call: (512) 438-3765 SUBCHAPTER EE. Agency and Institutional Licensing Procedures 40 TAC sec.sec.725.3079-725.3083 The Texas Department of Protective and Regulatory Services (TDPRS) adopts new sec.sec.725.3079-725.3083, without changes to the proposed text as published in the October 17, 1997, issue of the Texas Register (22 TexReg 10274). The justification for the new sections is to ensure that, in counties with less than 300,000 population, the community has opportunity for input before a new residential child care facility is opened or an existing facility increases capacity. The new sections implement legislation passed in the 75th Legislative Session requiring the public notice and hearings. The new sections will function by ensuring that there are adequate community resources available to meet the needs of children in substitute care in locations where a new facility plans to open or an existing facility plans to increase capacity. Two comments were received regarding adoption of the new sections. One comment from a member of the Advisory Committee on Child Care Administrators and Facilities noted concerns with some of the provisions of the legislation, which is beyond the authority of TDPRS. A comment was received from an individual representing eight land owners and residents of Lampasas County supporting the proposed rules. The new sections are adopted under the Human Resources Code (HRC), Chapters 40 and 42, which describes the department's regulatory and rulemaking authority. The new sections implement the HRC, Chapters 40 and 42. 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 December 5, 1997. TRD-9716359 C. Ed Davis Deputy Director, Legal Services Texas Department of Protective and Regulatory Services Effective date: January 1, 1998 Proposal publication date: October 17, 1997 For further information, please call: (512) 438-3765