BILL ANALYSIS
C.S.H.B. 1090
By: Brimer
2-21-95
Committee Report (Substituted)
BACKGROUND
The Texas Workers' Compensation Insurance Fund (fund) and its nine-member board of directors was created in 1991 by the 72nd
Legislature. The fund is responsible for serving as insurer of
last resort; establishing workers' compensation insurance rates to
be used as a benchmark around the state; administering workers'
compensation insurance claims and paying benefits to injured
workers; educating policyholders, agents and the general public
regarding workers' compensation issues; instituting policies
designed to combat fraud and increase health and safety in the
workplace. The fund carries out its programs and functions through
several divisions including: the Underwriting Division, the Account
Services and Marketing Division, the Benefits/Loss Prevention
Division, the Research and Development Division, the Reporting and
Analysis Division, the Finance and Administration Division, the
Administration Division, the Legal Division, and the Internal Audit
Division. To carry out its duties the fund had a budget of $145
million and 1,264 employees for calendar year 1994 .
The fund 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 fund, the Sunset Advisory Commission
recommended continuation and several statutory modifications that
are contained in the legislation.
PURPOSE
The purpose of this bill is to continue the fund for a twelve-year
period, make statutory modifications recommended by the Sunset
Advisory Commission, and provide for other changes. The
modifications proposed by this bill:
- require the fund to be subject to standard state
oversight provisions including oversight by the State
Auditor, compliance with certain Internal Audit Act
provisions, review by outside legal counsel, and
compliance with guidelines related to hiring women and
minorities;
- authorize the fund to require a business owner seeking
workers' compensation insurance from the fund's insurer
of last resort program to insure all commonly-owned or
controlled businesses if the fund suspects fraud or
identifies conditions that may result in acts of fraud;
- require the fund to file its annual report with the
Texas Department of Insurance no later than March 1st
of each year;
- authorize the commissioner of insurance to overturn a
decision of the fund's board of directors relating to policy
cancellation;
- authorize the commission (Texas Workers' Compensation
Commission) to collect fees for inspections on accident
prevention plans of fund policyholders insured through
the fund's insurer of last resort program;
- authorize the fund to conduct its own fraud
investigations and clarifies that the fund has the authority
to investigate health care providers for fraud;
- protect the confidentiality of fund investigation files;
and
- provide for other changes.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 1(4), Article 5.76-3, Insurance
Code. Technical correction. Updates the citation of the Texas
Workers' Compensation Act.
SECTION 2. Amends Section 2, Article 5.76-3. (b) Updates
standard language developed by the Sunset Commission. Requires the
fund to comply with the Open Meetings Law and the Open Records Law.
(d) Makes conforming change. Specifies that the review of a
decision by the board does not suspend the operation of any act,
ruling, decision or order of the fund unless the commissioner
specifically so orders on a showing of the aggrieved party of
immediate, irreparable injury, loss, or damage and probable success
on the merits. Technical correction. Updates citation of the
administrative procedure law, Chapter 2001, Government Code.
(e) Makes conforming change.
(f) Updates the funds' sunset review date to 2007, which
provides for the usual 12-year review.
(g) Reletters subsection.
(h) Adds standard language developed by the Sunset Commission.
Requires the fund to prepare an annual financial report that meets
the requirements provided in the appropriations act.
SECTION 3. Amends Section 3, Article 5.76-3. (d) Adds
standard language developed by the Sunset Commission. Requires
appointments to the fund's board be made without regard to race,
color, disability, sex, religion, age, or national origin.
(e) Deletes language related to registered lobbyists serving
on the fund's board. Updated language is reinstated in subsection
(q) of this section.
(f) - (h) Adds standard language developed by the Sunset
Commission. Defines grounds for removing a board member and
requires notification of the board's presiding officer, the
governor and the attorney general, if knowledge that a potential
ground for removal exists. Affirms that an action taken by the
board is valid even if taken when a ground for removal exists for
one of the members.
(i) - (k) Reletters subsections.
(l) Adds standard language developed by the Sunset
Commission. Requires the governor to appoint the chairman of the
board.
(m) - (p) Reletters subsections.
(q) Adds standard language developed by the Sunset
Commission. Prohibits registered lobbyists from serving as a
member of the board or from being employed as the board's or the
fund's general counsel.
(r) Adds standard language developed by the Sunset
Commission. Requires the board to clearly separate its
policymaking responsibilities from the management responsibilities
of president and staff of the fund.
SECTION 4. Amends Article 5.76-3, by adding Section 3A. Adds
standard language developed by the Sunset Commission. Requires the
board members be provided with adequate information and training
prior to assuming their duties.
SECTION 5. Amends Section 4, Article 5.76-3, by adding
Subsections (c), (d), and (e).
(c) Requires the board to appoint an internal auditor in
compliance with Chapter 2102, Government Code (Internal Audit Act).
Specifies that the internal auditor serves at the pleasure of the
board.
(d) Requires the fund to have its use of outside counsel
reviewed by the attorney general to ensure that the use of outside
counsel does not result in a conflict of interest and that persons
used as outside counsel comply with state and federal policies
regarding minority groups.
(e) Requires the fund to provide requested information to
appropriate legislative committees in the manner requested by those
committees.
SECTION 6. Amends Section 6, Article 5.76-3, by adding
Subsections (f) - (l).
(f) Adds standard language developed by the Sunset Commission.
Requires the president to develop a career ladder program that
addresses mobility and advancement opportunities for employees
within the fund and requires internal posting of job openings
concurrently with any public posting.
(g) Adds standard language developed by the Sunset
Commission. Requires the president to develop a system of annual
performance evaluations based on documented employee performance
and upon which merit salary increases must be based.
(h) - (j) Adds standard language developed by the Sunset
Commission. Requires the president 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.
(k) Adds standard language developed by the Sunset
Commission. Requires the president to provide to board members and
fund employees the qualifications for office or employment and each
person's responsibilities under the law.
(l) Requires the president to ensure that the fund complies
with the minority hiring guidelines found in the General
Appropriations Act.
SECTION 7. Amends Section 7, Article 5.76-3, by adding
Subsections (f) and (g).
(f) Clarifies that the fund is not required to appoint a
local recording agent to act as an agent for the fund. Specifies
that an agent transacting business with the fund does so as the
agent for the applicant.
(g) Specifies that information submitted to the fund by a
licensed agent on behalf of an employer, including a policy
expiration date, is the work product of that agent, and the fund
may not use that information in any marketing or direct sales
activity. Specifies that the fund may not provide information
obtained from a licensed agent to any other licensed agent, except
as required or permitted by the open records law, Chapter 552,
Government Code. Clarifies that these restrictions on information
submitted to the fund does not prevent an employer from designating
another licensed agent or the fund as the agent of record and does
not prevent the fund from using the information submitted to the
fund for the purpose of underwriting or fraud investigation.
Requires the fund to adopt reasonable guidelines in the plan of
operation to implement this subsection.
SECTION 8. Amends Sections 10(k) and (l), Article 5.76-3.
(k) Requires the commission (Texas Worker's Compensation
Commission) to charge and collect fees for follow-up inspections of
the accident prevention plans of fund policyholders insured through
the fund's insurer of last resort program.
(l) Technical correction. Updates the citation of the Texas
Workers' Compensation Act.
SECTION 9. Amends Sections 11(a) and (b), Article 5.76-3.
(a) Requires the fund to include health care providers or other
persons in the program which identifies and investigates fraud and
violations relating to workers' compensation insurance. Also
includes a technical correction which updates the citation of the
Texas Workers' Compensation Act.
(b) Authorizes the fund to conduct fraud investigations and
requires the fund to coordinate its investigations with the
commission to avoid duplication of efforts and refer cases not
resolved by the fund to the commission to conduct investigations.
SECTION 10. Amends Article 5.76-3, by adding Section 11A.
(a) Requires the fund to hold information in investigation files
confidential except in criminal proceedings; hearings conducted by
the fund or the commission; on a judicial determination of good
cause; or to a governmental agency, political subdivision or
regulatory body if the disclosure is necessary or proper for
enforcement.
(b) Specifies that fund investigation files are not open
records for purposes of the Open Records Law.
(c) Specifies that information in an investigation file that
is information in or derived from a claim file, or an employer
injury report or occupation disease report, is governed by the
confidentiality provision relating to that information.
(d) Specifies that "investigation file" means any information
compiled or maintained by the fund with respect to a fund
investigation authorized by law.
SECTION 11. Amends Section 16, Article 5.76-3. Technical
correction. Updates the citation of the Texas Workers'
Compensation Act.
SECTION 12. Amends Section 17(a), Article 5.76-3. Requires
the fund to file a report not later than March 1 of each subsequent
year, analyzing the fund's activities and fiscal condition during
the preceding fiscal year with the Texas Department of Insurance.
SECTION 13. Amends Article 5.76-3 by adding Section 17A. (a)
Requires the state auditor to periodically identify issues related
to the operational efficiency, effectiveness, and statutory
compliance of the fund. Requires the fund to include all issues
identified by the state auditor in the fund's annual independent
and internal audit plans.
(b) Requires a copy of all independent or internal audits to
be submitted to the state auditor. Requires the state auditor to
summarize the required audit reports in an annual memorandum to the
Legislative Audit Committee.
(c) Requires the internal auditor to submit the internal
audit report directly to the board and provide a summary of the
report to the governor, lieutenant governor, and speaker of the
house of representatives. Requires the internal auditor's report
to include an analysis of the use by the fund of historically
underutilized businesses using the definition set forth in Section
1.02, State Purchasing and General Services Commission Act (Article
601b, Vernon's Texas Civil Statutes.)
SECTION 14. Amends Article 5.76-3, by adding Sections 19A and
19B. Section 19A(a) and (b). Adds standard language developed by
the Sunset Commission. Requires the fund to prepare and distribute
information to the public concerning the fund's function and
complaint procedures. Authorizes the board to provide information
as a supplement to a written policy, on signs in regional offices
of the fund, or in a bill for services by the fund.
(c) Adds standard language developed by the Sunset
Commission. Requires the fund 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 fund's programs.
(d) Adds standard language developed by the Sunset
Commission. Requires the board to give the public reasonable
opportunity to appear before it regarding issues under the
jurisdiction of the fund.
Section 19B. (a) Adds standard language developed by the
Sunset Commission. Requires the fund to collect and maintain
information about all written complaints filed with the fund.
(b) Adds standard language developed by the Sunset
Commission. Requires the fund to maintain files on written
complaints that the fund has the authority to resolve and to notify
the parties regarding the status of the complaint quarterly until
disposition.
SECTION 15. Amends Section 21(a), Article 5.76-3. Technical
correction. Updates the citation of the Texas Workers'
Compensation Act.
SECTION 16. Amends Article 5.76-4, by adding Subsections (g)
and (h).
(g) Authorizes the fund to require a business owner seeking
workers' compensation insurance from the fund's insurer of last
resort program to insure all commonly-owned or controlled
businesses, if the fund suspects fraud or identifies conditions
that may result in acts of fraud.
(h) Requires the fund to report, on request, statistical and
other information, including information about writings in the
voluntary market and writings as the insurer of last resort, to the
Texas Workers' Compensation Research Center and the legislative
oversight committee on workers' compensation, or to any successor
entity for research and oversight of the workers' compensation
system.
SECTION 17. (a) Specifies that the training program for board
members applies only to a person appointed on or after September 1,
1995.
(b) Requires that the president of the fund adopt personnel
policies under Section 6, Article 5.76-3, no later than January 1,
1996.
(c) Requires that fees collected for follow-up inspections of
accident prevention plans applies only to those inspections
conducted on or after the effective date of this bill.
(d) Specifies that confidentiality of investigation files
applies to information maintained in investigation files of the
Texas workers' compensation insurance fund without regard to the
date the information is collected, compiled, or developed or
otherwise becomes part of the investigation file.
(e) Requires the board of directors of the Texas Workers'
Compensation Insurance Fund to adopt a public information system
and a complaint resolution system not later than January 1, 1996.
SECTION 18. Establishes the effective date of this bill as
September 1, 1995.
SECTION 19. Emergency clause.
COMPARISON OF ORIGINAL BILL TO SUBSTITUTE
Major points of difference between HB 1090, as introduced, and the
committee substitute are as follows:
1. The substitute specifies that the review of a decision by
the board does not suspend the operation of any act, ruling,
decision or order of the fund unless the commissioner of insurance
specifically so orders on a showing of the aggrieved party of
immediate, irreparable injury, loss, or damage and probable success
on the merits. The original bill does not have this provision.
2. The substitute clarifies that the fund is not required to
appoint a local recording agent to act as an agent for the fund and
specifies that an agent transacting business with the fund does so
as the agent for the applicant. The original bill does not have
this provision.
3. The substitute specifies that information submitted to the
fund by a licensed agent on behalf of an employer, including a
policy expiration date, is the work product of that agent, and the
fund may not use that information in any marketing or direct sales
activity and that the fund may not provide information obtained
from a licensed agent to any other licensed agent, except as
required or permitted by the open records law, Chapter 552,
Government Code. The substitute clarifies that these restrictions
on information submitted to the fund does not prevent an employer
from designating another licensed agent or the fund as the agent of
record and does not prevent the fund from using the information
submitted to the fund for the purpose of underwriting or fraud
investigation. The substitute requires the fund to adopt
reasonable guidelines in the plan of operation to implement this
subsection. The original bill does not have this provision.
4. The substitute requires the commission (Texas Workers'
Compensation Commission) to charge and collect fees for follow-up
inspections of the accident prevention plans of fund policyholders
insured through the fund's insurer of last resort program. The
original bill does have this provision.
5. The substitute requires the fund to include health care
providers or other persons in the program which identifies and
investigates fraud and violations relating to workers' compensation
insurance. The original bill does not have this provision.
6. The substitute authorizes the fund to conduct fraud
investigations and requires the fund to coordinate its
investigations with the commission to avoid duplication of efforts
and refer cases not resolved by the fund to the commission to
conduct investigations. The original bill does not have this
provision.
7. The substitute requires the fund to hold information in
investigation files confidential except under certain conditions
and specifies that fund investigation files are not open records
for purposes of the Open Records Law. Also, the substitute
specifies that information in an investigation file that is
information in or derived from a claim file, or an employer injury
report or occupation disease report is governed by the
confidentiality provision relating to that information. The
substitute also defines "investigation file."
The original bill does not have these provisions.
8. The substitute authorizes the fund to require a business
owner seeking workers' compensation insurance from the fund's
insurer of last resort program to insure all commonly-owned or
controlled businesses, only if the fund suspects fraud or
identifies conditions that may result in acts of fraud. The
original bill does not require the fund to identify or suspect
fraud before requiring all the commonly-owned or controlled
business of an applicant to be insured.
SUMMARY OF COMMITTEE ACTION
House Bill 1090 was considered in a public hearing on February 21,
1995. Testifying on the bill were David Holland, representing
Sunset Advisory Commission and Ken Levine, representing Sunset
Advisory Commission. Testifying for the bill were Pam Beachley,
representing Business Insurance Consumers Association, George B.
Allen, representing Texas Apartment Association, Larry K. Durrett,
representing himself, Joe Hanson, representing Texas Association of
Business and Chambers of Commerce, Ted Roberts, representing Texas
Association of Business and Chambers of Commerce and Don Summers,
representing National Federation of Independent Business. The
committee considered a complete substitute for H.B. 1090. One (1)
amendment was offered to the substitute. The one (1) amendment was
adopted without objection. The substitute, as amended, was adopted
without objection. The chair directed the staff to incorporate
the amendment into the substitute. A motion to report H.B. 1090,
as substituted, 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.
1090, as substituted, was reported favorably was reconsidered
without objection. A motion to report H.B. 1090, as substituted,
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.