By: Carona, Zaffirini S.B. No. 415
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to operation of the Texas Medical Liability Insurance
1-3 Underwriting Association and to participation of nursing homes in
1-4 that association.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subdivision (6), Section 2, Article 21.49-3,
1-7 Insurance Code, is amended to read as follows:
1-8 (6) "Health care provider" means:
1-9 (A) any person, partnership, professional
1-10 association, corporation, facility, or institution duly licensed or
1-11 chartered by the State of Texas to provide health care as defined
1-12 in Section 1.03(a)(2) [1.03(2)], Medical Liability and Insurance
1-13 Improvement Act of Texas (Article 4590i, Vernon's Texas Civil
1-14 Statutes), as:
1-15 (i) a registered nurse, hospital, dentist,
1-16 podiatrist, pharmacist, chiropractor, or optometrist;
1-17 (ii) a for-profit[,] or not-for-profit
1-18 nursing home;
1-19 (iii) [, or] a radiation therapy center
1-20 that is independent of any other medical treatment facility and
1-21 which is licensed by the Texas Department of Health in that
1-22 agency's capacity as the Texas [State] Radiation Control Agency
1-23 pursuant to the provisions of Chapter 401, Health and Safety Code,
1-24 and which is in compliance with the regulations promulgated under
1-25 that chapter;
2-1 (iv) [by the Texas State Radiation Control
2-2 Agency,] a blood bank that is a nonprofit corporation chartered to
2-3 operate a blood bank and which is accredited by the American
2-4 Association of Blood Banks;
2-5 (v) [,] a nonprofit corporation which is
2-6 organized for the delivery of health care to the public and which
2-7 is certified under Chapter 162, Occupations Code; [Article 4509a,
2-8 Revised Civil Statutes of Texas, 1925,] or
2-9 (vi) a [migrant] health center as defined
2-10 by 42 U.S.C. Section 254b [P.L. 94-63], as amended; [(42 U.S.C.
2-11 Section 254b), or a community health center as defined by P.L.
2-12 94-63, as amended (42 U.S.C. Section 254c), that is receiving
2-13 federal funds under an application approved under either Title IV,
2-14 P.L. 94-63, as amended (42 U.S.C. Section 254b), or Title V, P.L.
2-15 94-63, as amended (42 U.S.C. Section 254c),] or
2-16 (B) an officer, employee, or agent of an entity
2-17 listed in Paragraph (A) of this subdivision [any of them] acting in
2-18 the course and scope of that person's [his] employment.
2-19 SECTION 2. Subdivision (1), Subsection (b), Section 4,
2-20 Article 21.49-3, Insurance Code, is amended to read as follows:
2-21 (1) The rates, rating plans, rating rules, rating
2-22 classification, territories, and policy forms applicable to the
2-23 insurance written by the association and statistics relating
2-24 thereto shall be subject to Subchapter B of Chapter 5 of the
2-25 Insurance Code, as amended, giving due consideration to the past
2-26 and prospective loss and expense experience for medical
3-1 professional liability insurance within and without this state of
3-2 all of the member companies of the association, trends in the
3-3 frequency and severity of losses, the investment income of the
3-4 association, and such other information as the commissioner [board]
3-5 may require; provided, that if any article of the above subchapter
3-6 is in conflict with any provision of this Act, this Act shall
3-7 prevail. For purposes of this article, rates, rating plans, rating
3-8 rules, rating classifications, territories, and policy forms for
3-9 for-profit nursing homes are subject to the requirements of Article
3-10 5.15-1 of this code to the same extent as not-for-profit nursing
3-11 homes.
3-12 SECTION 3. Section 4A, Article 21.49-3, Insurance Code, is
3-13 amended to read as follows:
3-14 Sec. 4A. POLICYHOLDER'S STABILIZATION RESERVE FUND.
3-15 (a) There is hereby created a policyholder's stabilization reserve
3-16 fund which shall be administered as provided herein and in the plan
3-17 of operation of the association.
3-18 (b) Each policyholder shall pay annually into the
3-19 stabilization reserve fund a charge, the amount of which shall be
3-20 established annually by advisory directors chosen by health care
3-21 providers and physicians eligible for insurance in the association
3-22 in accordance with the plan of operation. The charge shall be in
3-23 proportion to each premium payment due for liability insurance
3-24 through the association. Such charge shall be separately stated in
3-25 the policy, but shall not constitute a part of premiums or be
3-26 subject to premium taxation, servicing fees, acquisition costs, or
4-1 any other such charges.
4-2 (c) The [policyholder's] stabilization reserve fund shall be
4-3 collected and administered by the association and shall be treated
4-4 as a liability of the association along with and in the same manner
4-5 as premium and loss reserves. The fund shall be valued annually by
4-6 the board of directors as of the close of the last preceding year.
4-7 (d) Except as provided by Subsection (e) of this section,
4-8 collections [Collections] of the stabilization reserve fund charge
4-9 shall continue only until such time as the net balance of the
4-10 stabilization reserve fund is not less than the projected sum of
4-11 premiums to be written in the year following valuation date.
4-12 (e) If in any fiscal year the incurred losses and defense
4-13 and cost-containment expenses from physicians or any single
4-14 category of health care provider result in a net underwriting loss
4-15 and exceed 25 percent of the stabilization reserve fund, as valued
4-16 for that year, the commissioner may by order direct the initiation
4-17 or continuation of the stabilization reserve fund charge for
4-18 physicians or that category of health care provider until the fund
4-19 recovers the amount by which those losses and cost-containment
4-20 expenses exceed 25 percent of the fund.
4-21 (f) The stabilization reserve fund shall be credited with
4-22 all stabilization reserve fund charges collected from policyholders
4-23 and shall be charged with any deficit from the prior year's
4-24 operation of the association.
4-25 SECTION 4. Section 5, Article 21.49-3, Insurance Code, is
4-26 amended to read as follows:
5-1 Sec. 5. PARTICIPATION. (a) Each policyholder shall have
5-2 contingent liability for a proportionate share of any assessment of
5-3 policyholders made under the authority of this article. Whenever a
5-4 deficit, as calculated pursuant to the plan of operation, is
5-5 sustained by the association in any one year, its directors shall
5-6 levy an assessment on the policyholders as provided by this section
5-7 [only upon those policyholders who held policies in force at any
5-8 time within the two most recently completed calendar years in which
5-9 the association was issuing policies preceding the date on which
5-10 the assessment was levied].
5-11 (b) The directors shall determine whether the deficit
5-12 sustained by the association may be attributed solely to the
5-13 activities of physicians or of a specific category of health care
5-14 provider. If the directors do so determine, the directors shall
5-15 levy an assessment only on policyholders who:
5-16 (1) are physicians or belong to that category of
5-17 health care provider; and
5-18 (2) held policies in force at any time within the two
5-19 most recently completed calendar years in which the association was
5-20 issuing policies preceding the date on which the assessment is
5-21 levied.
5-22 (c) If the directors do not determine that the deficit
5-23 sustained by the association may be attributed solely to the
5-24 activities of physicians or of a specific category of health care
5-25 provider, the directors shall levy an assessment on all
5-26 policyholders who held policies in force at any time within the
6-1 two most recently completed calendar years in which the association
6-2 was issuing policies preceding the date on which the assessment is
6-3 levied.
6-4 (d) The aggregate amount of an [the] assessment under this
6-5 section shall be equal to that part of the deficit not recouped
6-6 from the stabilization reserve fund. The maximum aggregate
6-7 assessment per policyholder may [shall] not exceed the annual
6-8 premium for the liability policy most recently in effect. Subject
6-9 to such maximum limitation, each policyholder shall be assessed as
6-10 provided by this section for that portion of the deficit reflecting
6-11 the proportion which the earned premium on the policies of such
6-12 policyholder bears to the total earned premium for all policies of
6-13 the association in the two most recently completed calendar years.
6-14 (e) [(b)] All insurers which are members of the association
6-15 shall participate in its writings, expenses, and losses in the
6-16 proportion that the net direct premiums, as defined herein, of each
6-17 such member, excluding that portion of premiums attributable to the
6-18 operation of the association, written during the preceding calendar
6-19 year bears to the aggregate net direct premiums written in this
6-20 state by all members of the association. Each insurer's
6-21 participation in the association shall be determined annually on
6-22 the basis of such net direct premiums written during the preceding
6-23 calendar year, as reported in the annual statements and other
6-24 reports filed by the insurer that may be required by the board. No
6-25 member shall be obligated in any one year to reimburse the
6-26 association on account of its proportionate share in the deficit
7-1 from operations of the association in that year in excess of one
7-2 percent of its surplus to policyholders and the aggregate amount
7-3 not so reimbursed shall be reallocated among the remaining members
7-4 in accordance with the method of determining participation
7-5 prescribed in this subdivision, after excluding from the
7-6 computation the total net direct premiums of all members not
7-7 sharing in such excess deficit. In the event that the deficit from
7-8 operations allocated to all members of the association in any
7-9 calendar year shall exceed one percent of their respective surplus
7-10 to policyholders, the amount of such deficit shall be allocated to
7-11 each member in accordance with the method of determining
7-12 participation prescribed in this subdivision.
7-13 SECTION 5. Sections 2, 4, and 5, Article 21.49-3, Insurance
7-14 Code, as amended by this Act, apply only to an insurance policy
7-15 delivered, issued for delivery, or renewed on or after January 1,
7-16 2002. A policy delivered, issued for delivery, or renewed before
7-17 January 1, 2002, is governed by the law as it existed immediately
7-18 before the effective date of this Act, and that law is continued in
7-19 effect for that purpose.
7-20 SECTION 6. This Act takes effect September 1, 2001.