HBA-MPM H.B. 1203 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1203 By: Brimer Business & Industry 7/20/2001 Enrolled BACKGROUND AND PURPOSE Prior to the 77th Legislature, existing law authorized a state agency or an institution of higher education (agency) to purchase its own insurance policies. As a result, a state agency may have purchased an unnecessary or questionable policy, which posed an additional cost to the state. House Bill 1203 requires the State Office of Risk Management (SORM) to administer insurance services obtained by state agencies and operate as a full-service insurance and risk manager, and in administering insurance services, purchase insurance coverage for state agencies. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the risk management board in SECTION 1.02 (412.011, Labor Code), SECTION 1.04 (Section 412.0121, Labor Code), and SECTION 3.01, and to the State Office of Risk Management in SECTION 1.10 (Section 2, Article 21.49-15A, Insurance Code) of this bill. ANALYSIS House Bill 1203 amends the Labor Code to require the State Office of Risk Management (SORM) to administer insurance services obtained by state agencies. The bill requires SORM to operate as a fullservice insurance and risk manager for state agencies, to maintain and review records of property, casualty, or liability insurance coverages purchased by or for a state agency, and to administer the program for the purchase of surety bonds for state officers and employees. The bill requires SORM to perform risk management for each state agency, and to purchase insurance coverage for state agency employees, except for those employees under the direction or control of the board of regents of Texas Tech University, under any line of insurance other than health or life insurance, including liability insurance. The bill requires the risk management board (board) by rule to develop an implementation schedule for the purchase of insurance and requires the board to phase in, by line of insurance, the requirement that a state agency purchase coverage only through SORM. The bill prohibits a state agency, except for the board of regents of Texas Tech University, from purchasing property, casualty, or liability insurance coverage without board approval (Sec. 412.011). The bill authorizes the board by rule to establish the formula for allocating the cost of purchasing insurance for state agencies and for performing risk management services in an interagency contract in a manner that gives proper consideration to relevant factors such as the site of an agency and the cost of insurance (Sec. 412.0121). H.B. 1203 provides that members of the board that govern SORM must have demonstrated experience in the field of insurance and insurance regulation. The bill entitles a person serving as a member of the board on the effective date of this Act to serve until the person's term expires. The governor is required to appoint a member who meets the qualifications established by these provisions upon the expiration of the person's term (Sec. 412.021 and SECTION 1.15). The bill requires the director to furnish copies of all rules adopted by the board to the commissioner of the Texas Department of Insurance (commissioner) (Sec. 412.041). In addition to a report from the executive director of SORM (executive director) to the legislature regarding the services provided by SORM to state agencies and Texas Tech University, the bill requires the executive director to report no later than February 1 of each odd-numbered year regarding insurance coverage purchased for state agencies, premium dollars spent to obtain the coverage, as well as losses incurred under the coverage. Agencies that had medical malpractice insurance coverage, workers' compensation insurance coverage, or other self-insurance coverage with associated risk management programs before January 1, 1989 are required to provide on an annual basis no later than September 30 of each year a written report to the Legislative Budget Board identifying policies purchased under any line of insurance other than life or health insurance. (Sec. 412.042). H.B. 1203 amends the Insurance Code and further amends the Labor Code to require each state agency to actively manage the risks of that agency by cooperating with SORM and the Texas Department of Insurance in the purchase of property, casualty, and liability lines of insurance coverage (Sec. 412.051, Labor Code). The bill requires each state agency that intends to purchase property, casualty, or liability insurance coverage in a manner other than through the services provided by SORM and the insurer providing the coverage to report the intended purchase to SORM within 30 days of the date on which the intended purchase is to occur. In addition to the information contained in the report, SORM may require the state agency to submit copies of insurance forms, policies, and other relevant information (Sec. 412.051, Labor Code and Art. 21.49-15A, Insurance Code). The bill requires SORM to adopt rules to implement these provisions and to consult with the commissioner in adopting the rules. The bill provides that failure by an insurer to comply with the reporting requirements constitutes grounds for the imposition of sanctions against the insurer (Art. 21.49-15A, Insurance Code). H.B. 1203 amends the Government Code to authorize a state agency to purchase a surety bond for a state officer or employee only if required by the Texas Constitution or by federal law or regulation or by court order, or if approved by SORM. The bill authorizes SORM to approve the purchase of a surety bond if SORM finds that the bond is warranted by a substantial or unusual risk of loss or SORM otherwise determines that the purchase is necessary to protect the interest of the state. The bill removes existing provisions authorizing the head of a state agency to contract for a position schedule honesty bond or a blanket position bond, specific excess indemnity coverage, or a faithful performance blanket position bond for certain employees (Sec. 653.004). The bill authorizes SORM to determine the necessary scope and amount of bond coverage for a state agency, unless the bond coverage is established by the Texas Constitution, by federal law or regulation, or by court order. The bill removes existing provisions specifying the maximum amount of bond coverage on certain state officers or employees (Sec. 653.005). The bill specifies that a state officer or employee otherwise qualified to hold office, employment, or to serve as a notary public shall not be disqualified because a surety bond has not been obtained for the officer or employee (Sec. 653.012). The bill amends the Labor Code to authorize an employee of the Texas Department of Transportation to use accrued sick leave or annual leave before receiving workers' compensation income benefits. If the employee opts to use sick or annual leave, the employee is not entitled to the income benefits until the sick or annual leave has been exhausted (Sec. 505.060). The board is required to adopt rules to implement the changes in this bill no later than December 1, 2002. An insurer is not required to comply with the reporting requirements until January 1, 2002 (SECTION 3.01). EFFECTIVE DATE September 1, 2002.