BILL ANALYSIS H.B. 1089 By: Brimer 2-21-95 Committee Report (Amended) BACKGROUND The Texas Workers' Compensation Commission (TWCC) and its six-member commission were created in 1989 by the 71st Legislature. TWCC is responsible for ensuring timely, fair, and appropriate benefits for injured and ill workers; providing an effective forum for parties to resolve claim disputes without going to court; helping Texas employers provide safer workplaces; developing programs to contain or reduce medical and legal costs; regulating self-insurance for private employers; helping state agencies establish effective risk management programs; and enforcing compliance with state workers' compensation laws and agency rules. The agency is administered by the executive director and is divided into eleven divisions: administration, compliance and practices, data services, employee/employer services, general counsel, hearings, medical review, records, risk management, self-insurance regulation, and workers' health and safety. To carry out these programs, the agency had a budget of $42,775,000 and 1,266 employees for fiscal year 1994. The Texas Workers' Compensation Commission is subject to the Sunset Act and will be abolished September 1, 1995 unless continued by the Legislature. As a result of its review of the agency, the Sunset Advisory Commission recommended continuation and several statutory modifications that are contained in this legislation. PURPOSE The purpose of this bill is to continue the Texas Workers' Compensation Commission for a 12-year period, make statutory modifications recommended by the Sunset Advisory Commission, and provide for other changes. The major modifications proposed by this bill: - increase the authority of the risk management division to review and approve agency risk management plans and make state agencies directly responsible for managing worker injuries by defining each individual agency as the employer for workers' compensation purposes; - increase the qualifications of ombudsmen and require TWCC to establish training guidelines and continuing education requirements for ombudsmen; - require TWCC to develop and provide plain language information to injured workers about the workers' compensation process both in English and Spanish. - give the executive director the discretion to exclude a business from being identified as an extra-hazardous employer if the business can show that it was placed in the program as a result of a fatal accident not related to the work environment; - authorize TWCC to penalize non-covered employers with five or more employees who fail to file required reports on injuries and illnesses and provide a penalty for disclosure of confidential information submitted by non-covered employers; - authorize TWCC to develop the qualifications for field safety representatives by rule; - require insurance carriers to electronically file employer reports of injury on behalf of their policyholders and require employers to provide information to injured employees at the time a claim is filed; - transfer TWCC's administrative procedure hearings to the State Office of Administrative Hearings; - remove the executive director of TWCC as a voting member of the Texas Certified Self-Insurer Guaranty Association Board of Directors and require continued service on the Board as a non-voting member; - allow TWCC to take administrative action against insurance companies and health care providers in the system for specific violations of the Texas Workers' Compensation Act without having to establish a pattern of practice; - strengthen oversight and regulation of doctors practicing in the workers' compensation system to prevent abuses of the process and to ensure objective diagnoses; - add provisions removed from the Penal Code relating to fraudulently obtaining or denying workers' compensation benefits or fraudulently obtaining workers' compensation insurance coverage to the Texas Workers' Compensation Act; - protect TWCC information related to an ongoing criminal or civil investigation from public disclosure; - specify that the eligibility for 401 weeks of benefits for occupational illnesses begins when the worker first receives income benefits; - provide that executive officers, sole proprietors, and partners are covered and defined as employees under the Act unless affirmatively excluded from coverage on the policy application; - provide the Texas Certified Self-Insurer Guaranty Association Board of Directors and employees the same protection from liability as members of the Texas Workers' Compensation Commission; - provide for other changes. RULEMAKING AUTHORITY It is the opinion of the committee that rulemaking authority is expressly delegated to the Texas Workers' Compensation Commission and the chief administrative law judge of the State Office of Administrative Hearings in Section 1.16 (section 402.073(a) of the Labor Code) and to the Texas Workers' Compensation Commission in the following sections of the bill: Section 1.25, (Section 408.122(b) of the Labor Code); Section 1.27 (Section 409.005(g)(2) of the Labor Code); Section 1.29 (Section 409.042(c) of the Labor Code); Section 1.33 (Section 411.0415(b) of the Labor Code); Section 1.36 (Section 411.062(a) of the Labor Code); and Section 1.48. SECTION BY SECTION ANALYSIS ARTICLE 1. TEXAS WORKERS' COMPENSATION COMMISSION SECTION 1.01. Amends Section 401.002, Labor Code. Deletes references to the Texas Workers' Compensation Research Center and the legislative oversight committee and updates the agency's sunset review date to 2007, which provides for the usual 12-year review. SECTION 1.02. Amends Section 402.001(c). Adds standard language developed by the Sunset Commission. Prohibits appointments to the commission if the person provides services subject to regulation by the commission or charges fees subject to regulation by the commission. SECTION 1.03. Amends Subchapter A, Chapter 402, by adding Section 402.0015. Adds standard language developed by the Sunset Commission. Requires the commission members to be provided with adequate information and training to perform their duties prior to assuming their duties. SECTION 1.04. Amends Section 402.003. Updates standard language developed by the Sunset Commission. Prohibits registered lobbyists from serving as a member of the commission or from being employed as the commission's or agency's general counsel. SECTION 1.05. Amends Sections 402.005(a) and (c). Updates standard language developed by the Sunset Commission. Defines grounds for removing a commission member and requires notification of the commission's presiding officer, the governor and the attorney general if knowledge that a potential ground for removal exists. SECTION 1.06. Amends Section 402.008(a). Adds standard language developed by the Sunset Commission. Requires the governor to designate the chairman of the commission and to alternate the chairmanship between the members who are employers and members who are wage earners. SECTION 1.07. Amends Subchapter A, Chapter 402, by adding Section 402.012. Adds standard language developed by the Sunset Commission. Prohibits commission members and employees compensated at or above Group 17 in the appropriations act from being an officer or employee of a related Texas trade association. Allows a person to accept an appointment to the commission if the person resigns from the position with the trade association or terminates the contract with the trade association. Defines Texas trade association and specifically excludes a labor union or an employee's association group from the definition. SECTION 1.08. Amends Section 402.023. (a) Updates standard language developed by the Sunset Commission. Requires the agency to collect and maintain an information file about all written complaints filed with the agency. (b) Updates standard language developed by the Sunset Commission. Requires the agency to maintain files on written complaints that the agency has the authority to resolve and to notify the parties regarding the status of the complaint quarterly until disposition SECTION 1.09. Amends Section 402.024. Updates standard language developed by the Sunset Commission. Requires the agency to comply with state and federal program and facility accessibility laws and to develop a plan that describes how non-English speaking persons can be provided reasonable access to the agency's programs. SECTION 1.10. Amends Section 402.041. (d) Adds standard language developed by the Sunset Commission. Requires the commission to clearly separate its policymaking responsibilities from the management responsibilities of the executive director and staff of the agency. SECTION 1.11. Amends Section 402.044. (a) Updates standard language developed by the Sunset Commission. Requires the executive director to develop an intra-agency career ladder program that addresses mobility and advancement opportunities for employees within the agency and requires intra-agency postings of job openings concurrently with any public posting. (b) Updates standard language developed by the Sunset Commission. Requires the executive director to develop a system of annual performance evaluations based on documented employee performance and upon which merit salary increases must be based. SECTION 1.12. Amends Section 402.045. Updates standard language developed by the Sunset Commission. Requires the executive director to develop an equal employment policy that is annually updated, reviewed by the Texas Commission on Human Rights, and filed with the Governor's Office. SECTION 1.13. Amends Section 402.068. Technical correction. Prohibits the commission from delegating rights or duties unless otherwise authorized by the Texas Workers' Compensation Act. SECTION 1.14. Amends Section 402.069. Updates standard language developed by the Sunset Commission. Requires the executive director to inform commission members and agency employees of the qualifications for office or employment and each person's responsibilities under the law. SECTION 1.15. Amends Section 402.070. Updates standard language developed by the Sunset Commission. Requires the commission to prepare an annual financial report that meets the reporting requirements in the appropriations act. SECTION 1.16. Amends Subchapter D, Chapter 402, by adding Section 402.073. Transfers administrative procedure hearings to the State Office of Administrative Hearings and specifically indicates those cases in which the administrative law judge makes the final decision and those cases in which the commission makes the final decision. SECTION 1.17. Amends Section 402.091(d). Requires cases related to the disclosure of confidential information to be prosecuted in the county where the violation occurred. Deletes the option to prosecute the case in Travis County. SECTION 1.18. Amends Subchapter E, Chapter 402, by adding Section 402.092. Protects the agency's investigative files from public disclosure in order to improve the agency's ability to investigate fraud and develop cases. Defines "investigation file" for purposes of this section. SECTION 1.19. Amends Subchapter E, Chapter 406, by adding Section 406.097. Provides that executive officers, sole proprietors, and partners are covered and defined as employees under the Texas Workers' Compensation Act unless affirmatively excluded from coverage by endorsement or by rejection of coverage on the policy application. SECTION 1.20. Amends Section 407.046(b) and (c). Transfers administrative procedure hearings related to the revocation of a certificate of authority to self-insure to the State Office of Administrative Hearings. Makes a conforming change. SECTION 1.21. Amends Section 407.122(b) and (c) and adds Subsection (d). (b) Adds a self-insurer as a voting member of the Texas Certified Self-Insurer Guaranty Association Board of Directors to replace the Texas Workers' Compensation Commission executive director. (c) The Texas Workers' Compensation Commission executive director is designated as a non-voting member of the Board of Directors. (d) Provides the Texas Certified Self-Insurer Guaranty Association board of directors and the members of its staff liability protection for acts performed in good faith in the execution of their powers or duties. SECTION 1.22. Amends Section 407.126. (a) Extends the period of time from five years to ten years for the self-insurers to build the trust fund to at least $1 million. (b) Requires the Texas Certified Self-Insurer Guaranty Association board of directors to adopt a year-by-year schedule to meet the 10-year funding goal. Reletters subsections. SECTION 1.23. Amends Section 408.023(b). Requires the agency to sanction doctors who do not meet norms set by the commission for medical policies, fee guidelines, and impairment ratings. SECTION 1.24. Amends Section 408.083. Specifies that the 401 weeks of benefits for occupational illnesses start when benefits begin to accrue. SECTION 1.25. Amends Section 408.122. Requires designated doctors to meet specific qualifications set by the executive director, including training in determining impairment ratings. Reletters subsection. SECTION 1.26. Amends Section 408.125. (f) Adds language prohibiting any party except the injured worker or agency staff from communicating with the designated doctor before, during, or after the impairment rating. Allows insurance carriers and representatives to contact the designated doctor on business and technical matters. SECTION 1.27. Amends Section 409.005. Requires employers to file a report of injury with the insurance carrier within 8 days of the injury and insurance carriers to electronically file a report with the agency within 7 days after receipt of the employer's injury report to reduce unnecessary bureaucracy in filing injury reports. Requires employers to give a copy of the injury report to the worker at the time of injury. Requires the worker's copy of the injury report to contain a plain language summary of the worker's rights and responsibilities under the statute. Gives the executive director authority to waive electronic filing requirements if a carrier is not equipped and sets up an alternative procedure within the same time frame. Grants rulemaking authority to the commission to adopt rules regarding the information in the report and the development and implementation of the electronic filing system. SECTION 1.28. Amends Subchapter A, Chapter 409, by adding Section 409.013. Requires the agency to develop plain language information in English and in Spanish for injured workers about the workers' compensation process. Requires the agency to contact injured workers having missed eight or more days of work and provide the injured workers with information about the process. SECTION 1.29. Amends Subchapter C, Chapter 409. Amends Sections 409.041-409.044. Strengthens ombudsmen qualifications and training by requiring ombudsmen to have three years of experience in workers' compensation; demonstrate knowledge of the Texas Workers' Compensation Act, related laws and rules; have experience in conflict resolution for the general public; and possess strong interpersonal skills. Requires the commission to establish training guidelines and continuing education requirements for ombudsmen. Makes conforming changes. SECTION 1.30. Amends Section 411.032. Authorizes the commission to impose an administrative fine of up to $500 on non-covered employers with five or more employees who fail to file required reports on injuries and illnesses. SECTION 1.31. Amends Section 411.034. Makes non-covered employers' injury reports confidential. Provides that disclosure of this confidential information is a class A misdemeanor. Requires cases related to the disclosure of confidential information to be prosecuted in the county where the violation occurred. Also provides that a district court in Travis County has jurisdiction to enjoin the use or disclosure of this information. SECTION 1.32. Amends Section 411.041(b). Provides for the exclusion, described in Section 411.045, of an employer from the extra-hazardous employer program. SECTION 1.33. Amends Subchapter D, Chapter 411, by adding Section 411.0415. Authorizes the executive director to exclude a business from being identified as extra hazardous if it can show it qualified as a result of a fatal accident that occurred because of factors beyond the employers' control or occurred outside the course and scope of employment. Grants rulemaking authority to the commission to adopt rules to analyze and list these fatalities. Authorizes the agency to request a hearing to dispute the employer's exclusion from the program and requires the agency to prove that the employer or the work environment was the proximate cause of the fatality in order to place the business in the extra hazardous employers program. SECTION 1.34. Amends Section 411.045(a). Establishes an accident prevention plan implementation inspection window of six to nine months. SECTION 1.35. Amends Section 411.049 (b). Transfers administrative procedure law hearings that an employer may request to contest findings made by the commission related to the extra hazardous employers program to the State Office of Administrative Hearings. Makes conforming changes. SECTION 1.36. Amends Section 411.062. Authorizes the agency to develop the qualifications for field safety representatives by rule and requires field safety representatives to meet qualifications established by the commission. Deletes existing qualifications set in statute. SECTION 1.37. Adds Section 412.0025. Requires state agencies that are subject to the risk management program to actively manage risks by developing, implementing, and maintaining health and safety programs and return-to-work programs. SECTION 1.38. Amends Section 412.003(a). Requires the risk management division to review, verify, monitor, and approve risk management programs adopted by state agencies. SECTION 1.39. Amends Section 412.007(b). Requires the risk management division to identify state agencies that do not comply with the risk management guidelines. SECTION 1.40. Amends Section 413.002. Adds language requiring the medical review division to monitor and evaluate the performance of doctors in the system with rules adopted by the commission relating to medical policies, fee guidelines, and impairment ratings. SECTION 1.41. Amends Section 413.031(d). Transfers administrative procedure law hearings related to medical disputes to the State Office of Administrative Hearings. Makes a conforming change. SECTION 1.42. Amends Subchapter D, Chapter 413, by adding Section 413.044. Requires the agency to sanction designated doctors after an evaluation determines the designated doctors in the system do not comply with the statute or rules of the commission related to medical policies, fee guidelines, and impairment ratings. SECTION 1.43. Amends Subchapter A, Chapter 415, by amending Sections 415.002 and 415.003, and adding Section 415.0035. 415.002. Deletes language referring to specific administrative violations by an insurance carrier, including an insurance carrier's failure to submit to the commission a settlement or agreement of the parties and failure to timely notify the commission of the termination or reduction of benefits. Renumbers subdivisions. 415.003. Deletes language referring to specific administrative violations by a health care provider, including the health care provider's failure or refusal to timely file required reports or records and failure to disclose an interest as required by Section 413.041, the statutory disclosure requirement for health care providers. Renumbers subdivisions. 415.0035. Adds language for additional violations by insurance carriers or health care providers. (a) Adds language specifying that an insurance carrier or its representative commits an administrative violation if that person fails to submit to the commission a settlement or agreement of the parties; fails to timely notify the commission of the termination or reduction of benefits and the reason for that action; or denies preauthorization in a manner that is not in accordance with rules adopted by the commission under Section 413.014, the statutory rulemaking authority for the commission to specify which health care treatments and services require preauthorization. (b) Adds language specifying that a health care provider commits an administrative violation if the person fails or refuses to timely file required reports or records; or fails to file with the commission the annual disclosure statement required by Section 413.041, the statutory disclosure requirement for health care providers. (c) Adds language specifying that a violation under Subsection (a) is a Class C administrative violation. (d) Adds language specifying that a violation under Subsection (b) is a Class D administrative violation. SECTION 1.44. Amends Section 415.034(a). Transfers administrative procedure hearings from the Texas Workers' Compensation Commission to the State Office of Administrative Hearings. Makes a conforming change. SECTION 1.45. Amends Subtitle A, Title 5, by adding Chapter 418. Creates specific criminal penalties for fraudulently obtaining or denying benefits or fraudulently obtaining workers' compensation coverage and authorizes restitution. SECTION 1.46. (a) Specifies that the qualifications and grounds for removal of commission members apply on or after September 1, 1995. (b) Specifies that the training program for commissioners be established no later than January 1, 1996 and that persons appointed to the commission after January 1, 1996 must comply with training requirements. SECTION 1.47. Specifies that the method of selecting the chairman of the commission applies only to a member designated as the chairman after September 1, 1995. Does not affect the entitlement of a member elected to serve as the chairman before September 1, 1995 to continue to serve for the term appointed. SECTION 1.48. Requires the commission to adopt rules necessary to implement changes in this Act not later than March 1, 1996. SECTION 1.49. Specifies that the inclusion of sole proprietors, partners, or corporate executives as employees of businesses with workers' compensation coverage unless the sole proprietors, partners, or corporate executives are specifically excluded from coverage applies to an insurance policy or certificate of authority to self-insure that is delivered, issued for delivery, or renewed on or after January 1, 1996. SECTION 1.50. Specifies that the change in law related to occupational disease applies only to an occupational disease with a date of injury on or after September 1, 1995. SECTION 1.51. Specifies that changes in the law related to electronic filing and reports of injury apply to an injury report regarding a compensable injury that occurs on or after September 1, 1995. SECTION 1.52. Specifies that qualifications of ombudsmen only apply to people designated as ombudsmen on or after September 1, 1995. Requires all ombudsmen to meet continuing education requirements adopted by the commission. SECTION 1.53. Specifies that information maintained in the agency's investigative files is protected from public disclosure without regard to when the information was collected. SECTION 1.54. Specifies that changes made to the qualifications of field safety representatives in this Act apply only to a person employed on or after September 1, 1995. The change does not affect the entitlement of a person employed before September 1, 1995 to continue to serve if the person continues to meet qualifications in place when employed and meet the requirements adopted by the commission. SECTION 1.55. Specifies that state agencies that are subject to the risk management program develop required programs not later than January 1, 1996. SECTION 1.56. Specifies that the transfer of hearings to the State Office of Administrative Hearings takes effect January 1, 1996. Hearings held before or pending on December 31, 1995 are governed by the law in effect before September 1, 1995. SECTION 1.57. Specifies the effective dates for penalties and sanctions. ARTICLE 2. WORKERS' COMPENSATION INSURANCE COVERAGE FOR CERTAIN GOVERNMENTAL EMPLOYEES SECTION 2.01. Amends Sections 501.002(b) and (c). Defines individual agencies as employers for purposes of workers' compensation insurance. SECTION 2.02. Amends Section 501.022. Adds language defining the board of regents of Texas Tech University as the employer for purposes of workers' compensation insurance. SECTION 2.03. Amends Section 501.042. Deletes language defining the director of the division of workers' compensation insurance at the attorney general's office as the employer for purposes of workers' compensation insurance. SECTION 2.04. Amends Section 501.043(a). Technical correction. Deletes the requirement that the workers' compensation division of the attorney general's office be the agency to develop rules to address accident and injury prevention. This clarifies that the risk management division will be responsible for developing rules to help state agencies prevent accidents and injuries. SECTION 2.05. Specifies that defining individual state agencies as employers, defining the division director as the insurer, and deleting the requirement that the workers' compensation division of the attorney general's office be the division to develop rules to address accident and injury prevention be effective on or after September 1, 1995. ARTICLE 3. CONFORMING AMENDMENTS SECTION 3.01. Amends Section 2003.001(3), Government Code. Adds the Texas Workers' Compensation Commission to the definition of state agency since the Texas Workers' Compensation Commission is not subject to the Administrative Procedure Act. SECTION 3.02. Amends Section 2003.021. Specifies that the State Office of Administrative Hearings shall conduct administrative procedure hearings for the Texas Workers' Compensation Commission. Technical change for transferring administrative procedure hearings for the Texas Workers' Compensation Commission to the State Office of Administrative Hearings. ARTICLE 4. MISCELLANEOUS PROVISIONS SECTION 4.01. Specifies that changes in the law apply only to a hearing that begins on or after January 1, 1996. A hearing held before or pending on January 1, 1996 is governed by the law in effect immediately before September 1, 1995. SECTION 4.02. Specifies the effective date of the Act as September 1, 1995. SECTION 4.03. Emergency clause. Explanation of Amendments COMMITTEE AMENDMENT # 1 amends new Section 406.097, Labor Code by adding new subsections (b) and (c). This amendment provides that the dual capacity doctrine will not apply to corporate officers with a specific level of ownership in the corporation. Any other executive officers, with less ownership or no ownership, may still take advantage of the executive officer exclusion, but the carrier will have to determine on a case-by-case basis whether the dual capacity doctrine may attach to a particular officer and whether the designation as an officer is merely an attempt to avoid premium. In larger corporations where the executive officer does not have an ownership interest, it is unlikely the dual capacity doctrine would ever attach because the officer's duties will generally be limited to executive duties as opposed to employee duties. The amendment also ensures that sole proprietors, partners, and executive officers with at least 25 percent ownership will be able to exercise the right to exclude themselves from the policy while working on public works contracts. COMMITTEE AMENDMENT # 2 amends Section 501.002 and Section 501.022, Labor Code. This amendment would define Texas Tech University and Texas Tech Health Science Center as state agencies and make them the employer for purposes of workers' compensation insurance, rather than naming the board of regents of Texas Tech as the employer. This amendment also makes the section consistent with new Section 501.002, which defines individual state agencies as the employers for purposes of workers' compensation insurance. COMMITTEE AMENDMENT #3 adds a new SECTION 1.13 to the bill and amends Subchapter D, Chapter 402, Labor Code by adding Section 402.0665. This amendment clarifies legislative authority for oversight of the Texas Workers' Compensation Commission and the workers' compensation system and renumbers the subsequent sections of Article 1 of the bill. COMMITTEE AMENDMENT #4 amends Section 409.005, Labor Code. This amendment is a technical correction and reinstates language from the statute relating to the injury report that was inadvertently deleted during the drafting process. This language specifies that a report made under Section 409.005 may not be considered to be an admission by or evidence against an employer before the commission or a court in which the facts set out in the report are contradicted. This amendment reletters the subsequent subsections of this section. SUMMARY OF COMMITTEE ACTION House Bill 1089 was considered in a public hearing on February 21, 1995. Testifying on the bill were Todd Brown, representing Texas Workers Compensation Commission, David Holland, representing Sunset Commission, Steve Hopson, representing Sunset Advisory Commission, Ken Levine, representing Sunset Advisory Commission. Testifying for the bill were George B. Allen, representing Texas Apartment Association, Pam Beachley, representing Business Insurance Consumers Association, George Christian, representing Jobs for Texas, George S. Christian, representing Texas Association of Defense Counsel, Frank S. Denton, representing Texas Self Insurance Association, Joe Hanson, representing Texas Association of Business and Chambers of Commerce, Ted Roberts, representing Texas Association of Business and Chambers of Commerce, Ms. Dillon Snowden, representing Texas Association Rehabilitation Professionals in the Private Sector, and Don Summers, representing National Federation of Independent Business. Testifying against the bill was Joseph Hamilton, representing himself. The Business and Industry Committee considered six (6) amendments to the bill. Four (4) of those amendments were adopted without objection. One (1) was withdrawn, and one (1) failed with a record vote of 6 ayes, 3 nays, 0 present-not-voting, and 0 absent. A motion to report H.B. 1089, as amended, to the full house with the recommendation that it do pass and be printed carried with a record vote of 8 ayes, 0 nays, 0 present-not-voting, and 1 absent. The vote by which H.B. 1089, as amended, was reportedly favorably was reconsidered without objection. A motion to report H.B. 1089, as amended, to the full House with the recommendation that it do pass and be printed carried with a record vote of 9 ayes, 0 nays, 0 present-not-voting, and 0 absent.