1-1 By: Carona, Zaffirini S.B. No. 415
1-2 (In the Senate - Filed January 25, 2001; January 29, 2001,
1-3 read first time and referred to Committee on Health and Human
1-4 Services; February 26, 2001, reported adversely, with favorable
1-5 Committee Substitute by the following vote: Yeas 7, Nays 0;
1-6 February 26, 2001, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 415 By: Carona
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to operation of the Texas Medical Liability Insurance
1-11 Underwriting Association and to participation of nursing homes in
1-12 that association.
1-13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14 SECTION 1. Subdivision (6), Section 2, Article 21.49-3,
1-15 Insurance Code, is amended to read as follows:
1-16 (6) "Health care provider" means:
1-17 (A) any person, partnership, professional
1-18 association, corporation, facility, or institution duly licensed or
1-19 chartered by the State of Texas to provide health care as defined
1-20 in Section 1.03(a)(2) [1.03(2)], Medical Liability and Insurance
1-21 Improvement Act of Texas (Article 4590i, Vernon's Texas Civil
1-22 Statutes), as:
1-23 (i) a registered nurse, hospital, dentist,
1-24 podiatrist, pharmacist, chiropractor, or optometrist;
1-25 (ii) a for-profit[,] or not-for-profit
1-26 nursing home;
1-27 (iii) [, or] a radiation therapy center
1-28 that is independent of any other medical treatment facility and
1-29 which is licensed by the Texas Department of Health in that
1-30 agency's capacity as the Texas [State] Radiation Control Agency
1-31 pursuant to the provisions of Chapter 401, Health and Safety Code,
1-32 and which is in compliance with the regulations promulgated under
1-33 that chapter;
1-34 (iv) [by the Texas State Radiation Control
1-35 Agency,] a blood bank that is a nonprofit corporation chartered to
1-36 operate a blood bank and which is accredited by the American
1-37 Association of Blood Banks;
1-38 (v) [,] a nonprofit corporation which is
1-39 organized for the delivery of health care to the public and which
1-40 is certified under Chapter 162, Occupations Code; [Article 4509a,
1-41 Revised Civil Statutes of Texas, 1925,] or
1-42 (vi) a [migrant] health center as defined
1-43 by 42 U.S.C. Section 254b [P.L. 94-63], as amended; [(42 U.S.C.
1-44 Section 254b), or a community health center as defined by P.L.
1-45 94-63, as amended (42 U.S.C. Section 254c), that is receiving
1-46 federal funds under an application approved under either Title IV,
1-47 P.L. 94-63, as amended (42 U.S.C. Section 254b), or Title V, P.L.
1-48 94-63, as amended (42 U.S.C. Section 254c),] or
1-49 (B) an officer, employee, or agent of an entity
1-50 listed in Paragraph (A) of this subdivision [any of them] acting in
1-51 the course and scope of that person's [his] employment.
1-52 SECTION 2. Subdivision (1), Subsection (b), Section 4,
1-53 Article 21.49-3, Insurance Code, is amended to read as follows:
1-54 (1) The rates, rating plans, rating rules, rating
1-55 classification, territories, and policy forms applicable to the
1-56 insurance written by the association and statistics relating
1-57 thereto shall be subject to Subchapter B of Chapter 5 of the
1-58 Insurance Code, as amended, giving due consideration to the past
1-59 and prospective loss and expense experience for medical
1-60 professional liability insurance within and without this state of
1-61 all of the member companies of the association, trends in the
1-62 frequency and severity of losses, the investment income of the
1-63 association, and such other information as the commissioner [board]
1-64 may require; provided, that if any article of the above subchapter
2-1 is in conflict with any provision of this Act, this Act shall
2-2 prevail. For purposes of this article, rates, rating plans, rating
2-3 rules, rating classifications, territories, and policy forms for
2-4 for-profit nursing homes are subject to the requirements of Article
2-5 5.15-1 of this code to the same extent as not-for-profit nursing
2-6 homes.
2-7 SECTION 3. Section 4A, Article 21.49-3, Insurance Code, is
2-8 amended to read as follows:
2-9 Sec. 4A. POLICYHOLDER'S STABILIZATION RESERVE FUND.
2-10 (a) There is hereby created a policyholder's stabilization reserve
2-11 fund which shall be administered as provided herein and in the plan
2-12 of operation of the association.
2-13 (b) Each policyholder shall pay annually into the
2-14 stabilization reserve fund a charge, the amount of which shall be
2-15 established annually by advisory directors chosen by health care
2-16 providers and physicians eligible for insurance in the association
2-17 in accordance with the plan of operation. The charge shall be in
2-18 proportion to each premium payment due for liability insurance
2-19 through the association. Such charge shall be separately stated in
2-20 the policy, but shall not constitute a part of premiums or be
2-21 subject to premium taxation, servicing fees, acquisition costs, or
2-22 any other such charges.
2-23 (c) The [policyholder's] stabilization reserve fund shall be
2-24 collected and administered by the association and shall be treated
2-25 as a liability of the association along with and in the same manner
2-26 as premium and loss reserves. The fund shall be valued annually by
2-27 the board of directors as of the close of the last preceding year.
2-28 (d) Except as provided by Subsection (e) of this section,
2-29 collections [Collections] of the stabilization reserve fund charge
2-30 shall continue only until such time as the net balance of the
2-31 stabilization reserve fund is not less than the projected sum of
2-32 premiums to be written in the year following valuation date.
2-33 (e) If in any fiscal year the incurred losses and defense
2-34 and cost-containment expenses from physicians or any single
2-35 category of health care provider result in a net underwriting loss
2-36 and exceed 25 percent of the stabilization reserve fund, as valued
2-37 for that year, the commissioner may by order direct the initiation
2-38 or continuation of the stabilization reserve fund charge for
2-39 physicians or that category of health care provider until the fund
2-40 recovers the amount by which those losses and cost-containment
2-41 expenses exceed 25 percent of the fund.
2-42 (f) The stabilization reserve fund shall be credited with
2-43 all stabilization reserve fund charges collected from policyholders
2-44 and shall be charged with any deficit from the prior year's
2-45 operation of the association.
2-46 SECTION 4. Section 5, Article 21.49-3, Insurance Code, is
2-47 amended to read as follows:
2-48 Sec. 5. PARTICIPATION. (a) Each policyholder shall have
2-49 contingent liability for a proportionate share of any assessment of
2-50 policyholders made under the authority of this article. Whenever a
2-51 deficit, as calculated pursuant to the plan of operation, is
2-52 sustained by the association in any one year, its directors shall
2-53 levy an assessment on the policyholders as provided by this section
2-54 [only upon those policyholders who held policies in force at any
2-55 time within the two most recently completed calendar years in which
2-56 the association was issuing policies preceding the date on which
2-57 the assessment was levied].
2-58 (b) The directors shall determine whether the deficit
2-59 sustained by the association may be attributed solely to the
2-60 activities of physicians or of a specific category of health care
2-61 provider. If the directors do so determine, the directors shall
2-62 levy an assessment only on policyholders who:
2-63 (1) are physicians or belong to that category of
2-64 health care provider; and
2-65 (2) held policies in force at any time within the two
2-66 most recently completed calendar years in which the association was
2-67 issuing policies preceding the date on which the assessment is
2-68 levied.
2-69 (c) If the directors do not determine that the deficit
3-1 sustained by the association may be attributed solely to the
3-2 activities of physicians or of a specific category of health care
3-3 provider, the directors shall levy an assessment on all
3-4 policyholders who held policies in force at any time within the
3-5 two most recently completed calendar years in which the association
3-6 was issuing policies preceding the date on which the assessment is
3-7 levied.
3-8 (d) The aggregate amount of an [the] assessment under this
3-9 section shall be equal to that part of the deficit not recouped
3-10 from the stabilization reserve fund. The maximum aggregate
3-11 assessment per policyholder may [shall] not exceed the annual
3-12 premium for the liability policy most recently in effect. Subject
3-13 to such maximum limitation, each policyholder shall be assessed as
3-14 provided by this section for that portion of the deficit reflecting
3-15 the proportion which the earned premium on the policies of such
3-16 policyholder bears to the total earned premium for all policies of
3-17 the association in the two most recently completed calendar years.
3-18 (e) [(b)] All insurers which are members of the association
3-19 shall participate in its writings, expenses, and losses in the
3-20 proportion that the net direct premiums, as defined herein, of each
3-21 such member, excluding that portion of premiums attributable to the
3-22 operation of the association, written during the preceding calendar
3-23 year bears to the aggregate net direct premiums written in this
3-24 state by all members of the association. Each insurer's
3-25 participation in the association shall be determined annually on
3-26 the basis of such net direct premiums written during the preceding
3-27 calendar year, as reported in the annual statements and other
3-28 reports filed by the insurer that may be required by the board. No
3-29 member shall be obligated in any one year to reimburse the
3-30 association on account of its proportionate share in the deficit
3-31 from operations of the association in that year in excess of one
3-32 percent of its surplus to policyholders and the aggregate amount
3-33 not so reimbursed shall be reallocated among the remaining members
3-34 in accordance with the method of determining participation
3-35 prescribed in this subdivision, after excluding from the
3-36 computation the total net direct premiums of all members not
3-37 sharing in such excess deficit. In the event that the deficit from
3-38 operations allocated to all members of the association in any
3-39 calendar year shall exceed one percent of their respective surplus
3-40 to policyholders, the amount of such deficit shall be allocated to
3-41 each member in accordance with the method of determining
3-42 participation prescribed in this subdivision.
3-43 SECTION 5. Sections 2, 4, and 5, Article 21.49-3, Insurance
3-44 Code, as amended by this Act, apply only to an insurance policy
3-45 delivered, issued for delivery, or renewed on or after January 1,
3-46 2002. A policy delivered, issued for delivery, or renewed before
3-47 January 1, 2002, is governed by the law as it existed immediately
3-48 before the effective date of this Act, and that law is continued in
3-49 effect for that purpose.
3-50 SECTION 6. This Act takes effect September 1, 2001.
3-51 * * * * *