BILL ANALYSIS Insurance Committee 03-29-95 Committee Report (Substituted) BACKGROUND Insurers use historical loss experience data as a basis to predict future losses. The state uses the aggregate loss data to test the fairness of rates that insurers use in Texas. The data can be collected by the Texas Department of Insurance or the Commissioner can designate an outside organization to collect the data. Both of these methods have been used in the past. PURPOSE As substituted, H.B. 1985 would allow, but not require, the Texas Department of Insurance to use an outside organization to collect historical financial and loss data for workers compensation insurance. It would also eliminate a sunset provision in the law which governs advisory organizations and repeals a statute that contains a similar authorization for data collection. 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 Article 5.58, Insurance Code as follows: Re-reference the "Board" and the "State Board of Insurance" to the "Commissioner." Deletes a prohibition of the use of advisory organizations and allows, but does not require, the Commissioner to use such organizations. Deletes the term "financial". Provides for an exception to the content of Unit Statistical Data Report as provide by Subsection (d) of this article. Narrows the scope of data that must be reported by insurers including workers' compensation statistical reports and ensures that the two major workers' compensation agencies will have input into workers' compensation data-reporting decisions. Specifies that an insurer can report its information to an advisory organization in addition to providing that information to the Texas Department of Insurance. Provides that while current law permits specific types of information be reported by insurance companies, the Commissioner can authorize exclusion of any of those specific reports. SECTION 2. Amends Article 5.73, Insurance Code as follows: Re-reference the "Board" and the "State Board of Insurance" to the "Commissioner." Changes the requirement for annual audits to periodic audits. Deletes the expiration (September 1, 1997) provision in Article 1.50, Insurance Code, allowing insurance companies to report data to advisory organizations. Provides for the chief actuary at TDI to calculate prospective loss costs and subjects those calculations to open records laws. Establishes the statutory authority for advisory organizations, which are subject to the Sunset review process, and requires advisory organizations to be reviewed in conjunction with the Texas Department of Insurance. SECTION 3. Amends Article 5.74, Insurance Code to re-reference the "Board" and the "State Board of Insurance" to the "Commissioner." SECTION 4. Amends Article 21.69, Insurance Code by granting the Commissioner the flexibility to contract with more than one statistical agency for each line of insurance. Provides a cost-sharing system among insurers for the payment of data collection expenses. Requires designated statistical agents to collect data pursuant to a statistical plan promulgated by the commissioner. SECTION 5. Effective date SECTION 6. Emergency Clause COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute to H.B. 1985 includes all of the provisions contained in filed bill. However, the substitute omits the word "financial" from SECTION 1 to eliminate any restrictions the Texas Department of Insurance might place on data collected from insurers. In the filed bill the Commissioner was authorized to narrow the scope of data that must be reported by insurers including workers' compensation statistical reports. The substitute to H.B. 1985 provides that the executive directors of the Texas Workers' Compensation Commission and Texas Workers' Compensation Research Center must also sign off on any exclusions. The substitute also provides for public access through the open records process to information collected by any advisory organizations designated as a statistical agent by the Texas Department of Insurance. Subjects any loss cost calculations by the Texas Department of Insurance to open records requests. The substitute also creates statutory authority for advisory organizations, which are subject to the Sunset review process, and requires advisory organizations to be reviewed in conjunction with the Texas Department of Insurance. Instead of repealing Article 21.69, the substitute to H.B. 1985 amends Article 21.69 by granting the Commissioner the authority to contract with more than one statistical agency for each line of insurance; provides for a cost-sharing system among insurers for the payment of data collection expenses; and requires designated statistical agents to collect data pursuant to a statistical plan promulgated by the commissioner. SUMMARY OF COMMITTEE ACTION In accordance with House Rules, H.B. 1985 was heard in a public hearing on March 22, 1995. There being a quorum present, the Chair laid out H.B. 1985 and recognized Representative Duncan to explain the bill. The Chair recognized the following persons to testify in support of H.B. 1985: Richard S. Geiger, Association of Fire & Casualty Companies in Texas; Jay Thompson, Texas Insurance Advisory Association, AFACT; Pam Beachley, Business Insurance Consumers Association. The Chair recognized the following person to testify in opposition to H.B. 1985: Rob Schneider, Consumers Union. The Chair recognized the following person to testify neutrally on H.B. 1985: C.H. Mah, Texas Department of Insurance. The Chair left H.B. 1985 pending before the Committee. There being a quorum present on March 29, 1995, the Chair laid out H.B. 1985 as pending business and recognized Representative Duncan who offered a substitute to H.B. 1985. Representative Counts moved the Committee adopt the substitute to H.B. 1985. The Chair heard no objections and the substitute to H.B. 1985 was adopted. The Chair recognized Representative Counts who moved the Committee report H.B. 1985 as substituted to the full House with the recommendation that it do pass and be printed. Representative Driver seconded the motion and the motion prevailed by the following vote: AYES (7); NAYES (0); ABSENT (2); PNV (0).