1-1  By:  Dear (Senate Sponsor - Harris of Dallas)         H.B. No. 1568
    1-2        (In the Senate - Received from the House May 3, 1993;
    1-3  May 4, 1993, read first time and referred to Committee on Economic
    1-4  Development; May 24, 1993, reported favorably, as amended, by the
    1-5  following vote:  Yeas 9, Nays 0; May 24, 1993, sent to printer.)
    1-6                            COMMITTEE VOTE
    1-7                          Yea     Nay      PNV      Absent 
    1-8        Parker             x                               
    1-9        Lucio              x                               
   1-10        Ellis              x                               
   1-11        Haley                                          x   
   1-12        Harris of Dallas   x                               
   1-13        Harris of Tarrant  x                               
   1-14        Leedom             x                               
   1-15        Madla              x                               
   1-16        Rosson             x                               
   1-17        Shapiro            x                               
   1-18        Wentworth                                      x   
   1-19  COMMITTEE AMENDMENT NO. 1                     By:  Harris of Dallas
   1-20  Amend House Bill 1568 by striking all below the Enacting Clause,
   1-21  and inserting in lieu thereof the following:
   1-22        Section 1.  Amend Article 5.13-1(a), Texas Insurance Code, to
   1-23  read as follows:
   1-24        (a)  "Every insurer governed by Subchapter B of Chapter 5 of
   1-25  the Insurance Code, as amended, and every life, health, and
   1-26  accident insurer governed by Chapter 3 of the Insurance Code, as
   1-27  amended, is authorized to issue prepaid legal services contracts.
   1-28  Every such insurer or rating organization authorized under Article
   1-29  5.16 of the Insurance Code shall file with the State Board of
   1-30  Insurance all rules and forms applicable to prepaid legal service
   1-31  contracts in a manner to be established by the State Board of
   1-32  Insurance.  <All rates, rating plans, and charges shall be
   1-33  established in accordance with actuarial principles for various
   1-34  categories of insureds.  Rates, rating plans, and charges shall not
   1-35  be excessive, inadequate, unfairly discriminatory, and the benefits
   1-36  shall be reasonable with respect to the rates charged.>
   1-37  Certification, by a qualified actuary, to the appropriateness of
   1-38  the charges, rates, or rating plans, based upon reasonable
   1-39  assumptions, shall accompany the filing along with adequate
   1-40  supporting information.  To provide for the actuarial soundness of
   1-41  the prepaid legal service contracts issued under this Code, the
   1-42  State Board of Insurance may require that prepaid legal service
   1-43  contracts, other than prepaid legal service contracts that provide
   1-44  only consultation and advice on simple legal matters, either alone
   1-45  or in combination with a referral service and have the promise of
   1-46  fee discounts for other matters, have rates that are not inadequate
   1-47  to reasonably provide the benefits under the prepaid legal service
   1-48  contracts.  The State Board of Insurance shall have no authority or
   1-49  power to determine, fix, prescribe, set or promulgate maximum rates
   1-50  or maximum amounts of premium to be charged for any prepaid legal
   1-51  service contracts, agreements, plans or policies issued under this
   1-52  Chapter or Chapter 23 of this Code."
   1-53        Section 2.  Amend Article 5.13-1(b) Texas Insurance Code, to
   1-54  read as follows:
   1-55        (b)  "The State Board of Insurance shall, within a reasonable
   1-56  period, approve any form if the requirements of this section are
   1-57  met.  It shall be unlawful to issue such forms until approved or to
   1-58  use such schedules of charges, rates, or rating plans until filed.
   1-59  <and approved.>  If the State Board of Insurance has good cause to
   1-60  believe such rates and rating plans do not comply with the
   1-61  standards of this article, it shall give notice in writing to every
   1-62  insurer or rating organization which filed such rates or rating
   1-63  plans, stating therein in what manner and to what extent such
   1-64  noncompliance is alleged to exist and specifying therein a
   1-65  reasonable time, not less than 30 days thereafter, in which such
   1-66  noncompliance may be corrected.  If the board has not acted on any
   1-67  form, rate, rating plan, or charges within 30 days after the filing
   1-68  of same, they shall be deemed approved.  The board may require the
    2-1  submission of whatever relevant information is deemed necessary in
    2-2  determining whether to approve or disapprove a filing made pursuant
    2-3  to this section."
    2-4        Section 3.  Amend Article 5.13-1(f), Texas Insurance Code, to
    2-5  read as follows:
    2-6        "Except for the limitations expressed herein in paragraph (a)
    2-7  above, nothing in this Act shall be construed as compelling the
    2-8  State Board of Insurance to establish standard or absolute rates
    2-9  and the board is specifically authorized, in its discretion, to
   2-10  approve different rates for different insurers for the same risk or
   2-11  risks on the types of insurance covered by this article; nor shall
   2-12  this article be construed as to require the State Board of
   2-13  Insurance to establish a single or uniform rate for each risk or
   2-14  risks or to compel all insurers to adhere to such rates previously
   2-15  filed by other insurers; and the board is empowered to approve such
   2-16  different rates for different insurers, and is required to approve
   2-17  such rates as filed by any insurer unless it finds that such filing
   2-18  does not meet the requirements of this article."
   2-19        Section 4.  Amend Article 23.10, Texas Insurance Code, to
   2-20  read as follows:
   2-21        "The corporations complying with the requirements of this
   2-22  chapter shall be governed and conducted as non-profit nonmembership
   2-23  organizations for the purpose of contracting for and obtaining
   2-24  legal services for their participants through contracting
   2-25  attorneys, in consideration of the payment by the participants of a
   2-26  definite sum to fund the payment of attorneys fees for the legal
   2-27  services to be furnished by the contracting attorneys.  Provided
   2-28  further, that each such corporation shall have two funds, namely:
   2-29  the claim fund and the expense fund.  The claim fund shall be
   2-30  composed of at least <80> 70 percent of the regular payments by
   2-31  participants, and the application fees.  The percentage amounts
   2-32  above stated may be modified by the State Board of Insurance upon
   2-33  showing that such is in the best interest of the then existing
   2-34  persons receiving legal services under contract or that such is
   2-35  necessary for the development of the corporation during its first
   2-36  year of existence.  The application fees shall be paid by
   2-37  applicants prior to issuance of a benefit certificate, and shall
   2-38  not apply as a part of the cost of receiving benefits under the
   2-39  benefit certificate issued.  Claim fund investments may include,
   2-40  besides lawful money and demand deposits, only certificates of
   2-41  deposits, share accounts, and time deposits in public banks and
   2-42  savings and loan institutions whose deposits are insured by a
   2-43  federal governmental agency, and obligations of a state or the
   2-44  federal government; and the expense fund investments may include
   2-45  only such as are legal investments for the capital, surplus, and
   2-46  contingency funds of capital stock life insurance companies.  The
   2-47  net income from the investments shall accrue to the funds,
   2-48  respectively, from which the investments were made.  The claim fund
   2-49  shall be disbursed only for the payment of valid claims, taxes on
   2-50  income of such fund, security transfer costs, and refunds of fees
   2-51  paid into such fund; <and to the extent approved by the State Board
   2-52  of Insurance,> cost of settling contested claims, expenses directly
   2-53  incurred on or for preservation of investments of the claim fund
   2-54  and contracts authorized under Article 23.19 of this code."
   2-55        Section 5.  Amend Article 23.14, Texas Insurance Code, to
   2-56  read as follows:
   2-57        "Every corporation complying with the requirements of this
   2-58  chapter shall, before accepting applications for participation in
   2-59  said non-profit legal service plan, have sufficient money in its
   2-60  expense fund to cover initial operations and shall submit to the
   2-61  State Board of Insurance a plan of operation together with a rate
   2-62  schedule of its charges to participants and a schedule and
   2-63  projections of costs of legal services to be contracted for on
   2-64  behalf of the participants; which plan, <rate schedule,> and the
   2-65  sufficiency of expense fund shall first be approved by the State
   2-66  Board of Insurance as adequate, fair, and reasonable <and not
   2-67  excessive> before such corporation shall engage in business.  The
   2-68  State Board of Insurance shall have continuing control over the
   2-69  plan of operation of such corporation. <and its rate schedule of
   2-70  charges to participants.>  No change in such plan <or rate
    3-1  schedule> shall be effectuated without its first being filed and
    3-2  approved by the State Board of Insurance."
    3-3        Section 6.  This Act takes effect September 1, 1993, and
    3-4  applies only to a prepaid legal services contract issued or renewed
    3-5  entered into on or after that date.
    3-6        Section 7.  The importance of this legislation and the
    3-7  crowded condition of the calendars in both houses create an
    3-8  emergency and an imperative public necessity that the
    3-9  constitutional rule requiring bills to be read on three several
   3-10  days in each house be suspended, and this rule is hereby suspended.
   3-11                         A BILL TO BE ENTITLED
   3-12                                AN ACT
   3-13  relating to an exception from certain requirements regarding
   3-14  prepaid legal services contracts.
   3-15        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   3-16        SECTION 1.  Article 5.13-1, Insurance Code, is amended by
   3-17  adding Subsection (g) to read as follows:
   3-18        (g)  For the purpose of establishing and maintaining rates, a
   3-19  plan that does not provide a benefit other than consultation and
   3-20  advice on a simple legal matter, either alone or in combination
   3-21  with a referral service and the promise of fee discounts for other
   3-22  matters, does not constitute a prepaid legal services contract
   3-23  subject to this article.
   3-24        SECTION 2.  This Act takes effect September 1, 1993, and
   3-25  applies only to a prepaid legal services contract issued or renewed
   3-26  on or after that date.
   3-27        SECTION 3.  The importance of this legislation and the
   3-28  crowded condition of the calendars in both houses create an
   3-29  emergency and an imperative public necessity that the
   3-30  constitutional rule requiring bills to be read on three several
   3-31  days in each house be suspended, and this rule is hereby suspended.
   3-32                               * * * * *
   3-33                                                         Austin,
   3-34  Texas
   3-35                                                         May 24, 1993
   3-36  Hon. Bob Bullock
   3-37  President of the Senate
   3-38  Sir:
   3-39  We, your Committee on Economic Development to which was referred
   3-40  H.B. No. 1568, have had the same under consideration, and I am
   3-41  instructed to report it back to the Senate with the recommendation
   3-42  that it do pass, as amended, and be printed.
   3-43                                                         Parker,
   3-44  Chairman
   3-45                               * * * * *
   3-46                               WITNESSES
   3-47                                                  FOR   AGAINST  ON
   3-48  ___________________________________________________________________
   3-49  Name:  Cordell Hull                              x
   3-50  Representing:  The Signature Group
   3-51  City:  Austin
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   3-53  Name:  Dean Cobb                                 x
   3-54  Representing:  The Signature Group
   3-55  City:  Austin
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   3-57  Name:  Joe Nelson                                        x
   3-58  Representing:  Tx Public Employees Assn.
   3-59  City:  Austin
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