By: Carona S.B. No. 421
A BILL TO BE ENTITLED
AN ACT
relating to coverage of assisted living facilities under
professional liability insurance and the Texas Medical Liability
Insurance Underwriting Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subdivision (2), Section 2, Article 5.15-1,
Insurance Code, is amended to read as follows:
(2) "Health care provider" means any person,
partnership, professional association, corporation, facility, or
institution licensed or chartered by the State of Texas to provide
health care as a registered nurse, hospital, dentist, podiatrist,
chiropractor, optometrist, pharmacist, veterinarian,
not-for-profit kidney dialysis center, blood bank that is a
nonprofit corporation chartered to operate a blood bank and which
is accredited by the American Association of Blood Banks,
for-profit nursing home or not-for-profit nursing home, for-profit
assisted living facility or not-for-profit assisted living
facility, or an officer, employee, or agent of any of them acting in
the course and scope of his employment, or a health care
practitioner or facility that the commissioner, in accordance with
Section 3B(b), Article 21.49-3, of this code, determines is
eligible for coverage under this article.
SECTION 2. Section 8, Article 5.15-1, Insurance Code, is
amended to read as follows:
Sec. 8. EXEMPLARY DAMAGES UNDER MEDICAL PROFESSIONAL
LIABILITY INSURANCE. No policy of medical professional liability
insurance issued to or renewed for a health care provider or
physician in this state may include coverage for exemplary damages
that may be assessed against the health care provider or physician;
provided, however, that the commissioner may approve an endorsement
form that provides for coverage for exemplary damages to be used on
a policy of medical professional liability insurance issued to a
hospital, as the term "hospital" is defined in this article, or to a
for-profit or not-for-profit nursing home or assisted living
facility.
SECTION 3. Subdivision (6), Section 2, Article 21.49-3,
Insurance Code, is amended to read as follows:
(6) "Health care provider" means:
(A) any person, partnership, professional
association, corporation, facility, or institution duly licensed
or chartered by the State of Texas to provide health care as defined
in Section 1.03(a)(2), Medical Liability and Insurance Improvement
Act of Texas (Article 4590i, Vernon's Texas Civil Statutes), as:
(i) a registered nurse, hospital, dentist,
podiatrist, pharmacist, chiropractor, or optometrist;
(ii) a for-profit or not-for-profit nursing
home;
(iii) a radiation therapy center that is
independent of any other medical treatment facility and which is
licensed by the Texas Department of Health in that agency's
capacity as the Texas Radiation Control Agency pursuant to the
provisions of Chapter 401, Health and Safety Code, and which is in
compliance with the regulations promulgated under that chapter;
(iv) a blood bank that is a nonprofit
corporation chartered to operate a blood bank and which is
accredited by the American Association of Blood Banks;
(v) a nonprofit corporation which is
organized for the delivery of health care to the public and which is
certified under Chapter 162, Occupations Code; [or]
(vi) a health center as defined by 42 U.S.C.
Section 254b, as amended; or
(vii) a for-profit or not-for-profit
assisted living facility; or
(B) an officer, employee, or agent of an entity
listed in Paragraph (A) of this subdivision acting in the course and
scope of that person's employment.
SECTION 4. Section 3A, Article 21.49-3, Insurance Code, as
amended by Chapter 1284, Acts of the 77th Legislature, Regular
Session, 2001, is amended to read as follows:
Sec. 3A. ELIGIBILITY FOR COVERAGE. (a) The commissioner
[board] shall establish by order the categories of physicians and
health care providers who are eligible to obtain coverage from the
association and may, from time to time, revise its order to include
or exclude from eligibility particular categories of such
physicians and health care providers.
(b) If a category of physicians or health care providers has
been excluded from eligibility to obtain coverage from the
association, the commissioner [board] may determine, after notice
of at least 10 days and a hearing, that medical liability insurance
is not available. On that determination, the category of
physicians or health care providers is eligible to obtain insurance
coverage from the association.
(c) A for-profit or not-for-profit nursing home or assisted
living facility not otherwise eligible under this section for
coverage from the association is eligible for coverage if the
nursing home or assisted living facility demonstrates, in
accordance with the requirements of the association, that the
nursing home or assisted living facility made a verifiable effort
to obtain coverage from authorized insurers and eligible surplus
lines insurers and was unable to obtain substantially equivalent
coverage and rates.
SECTION 5. Article 21.49-3, Insurance Code, is amended by
adding Section 3B to read as follows:
Sec. 3B. ELIGIBILITY OF OTHER HEALTH CARE PRACTITIONERS AND
FACILITIES. (a) In this section:
(1) "Health care" includes any medical or health care
service, including an examination, treatment, medical diagnosis,
or evaluation, and care provided in an inpatient, outpatient, or
residential setting.
(2) "Health care facility" means a facility providing
health care, other than a facility described by Section 2(6) of this
article.
(3) "Health care practitioner" means an individual,
other than an individual described by Section 2(6) of this article,
who:
(A) is licensed to provide health care; or
(B) is not licensed to provide health care but
provides health care under the direction or supervision of a
licensed individual.
(b) After notice and opportunity for hearing, the
commissioner may:
(1) determine that appropriate liability insurance
coverage written by insurers authorized to engage in business in
this state is not reasonably available to a type of health care
practitioner or health care facility; and
(2) by order designate that type of health care
practitioner or health care facility to be included as a health care
provider eligible to receive coverage under this article.
(c) A health care practitioner or facility designated under
Subsection (b) of this section is entitled to receive coverage
provided under this article in accordance with Article 5.15-1 of
this code in the same manner as other health care providers
described by Section 2 of this article and Section 2, Article
5.15-1, of this code.
(d) The commissioner's order may indicate whether a health
care practitioner or facility designated under Subsection (b) of
this section is included under the policyholder's stabilization
reserve fund established under Section 4A or 4B of this article or
whether a separate policyholder's stabilization reserve fund is
created. A separate policyholder's stabilization reserve fund
established under this subsection operates in the same manner as a
stabilization reserve fund created under Section 4B of this
article.
SECTION 6. Subdivisions (1), (3), and (6), Subsection (b),
Section 4, Article 21.49-3, Insurance Code, are amended to read as
follows:
(1) Subject to Subdivision (6) of this subsection, the
rates, rating plans, rating rules, rating classification,
territories, and policy forms applicable to the insurance written
by the association and statistics relating thereto shall be subject
to Subchapter B of Chapter 5 of the Insurance Code, as amended,
giving due consideration to the past and prospective loss and
expense experience for medical professional liability insurance
within and without this state of all of the member companies of the
association, trends in the frequency and severity of losses, the
investment income of the association, and such other information as
the commissioner may require; provided, that if any article of the
above subchapter is in conflict with any provision of this Act, this
Act shall prevail. For purposes of this article, rates, rating
plans, rating rules, rating classifications, territories, and
policy forms for for-profit nursing homes and for-profit assisted
living facilities are subject to the requirements of Article 5.15-1
of this code to the same extent as not-for-profit nursing homes and
not-for-profit assisted living facilities.
(3) Any deficit sustained by the association with
respect to physicians and health care providers, other than
for-profit and not-for-profit nursing homes and assisted living
facilities, or by for-profit and not-for-profit nursing homes and
assisted living facilities in any one year shall be recouped,
pursuant to the plan of operation and the rating plan then in
effect, by one or more of the following procedures in this sequence:
First, a contribution from the policyholder's
stabilization reserve fund for physicians and health care
providers, other than for-profit and not-for-profit nursing homes
and assisted living facilities, established under Section 4A of
this article or from the stabilization reserve fund for for-profit
and not-for-profit nursing homes and assisted living facilities,
established under Section 4B of this article, as appropriate, until
the respective fund is exhausted;
Second, an assessment upon the policyholders
pursuant to Section 5(a) of this article;
Third, an assessment upon the members pursuant to
Section 5(b) of this article. To the extent a member has paid one or
more assessments and has not received reimbursement from the
association in accordance with Subdivision (5) of this subsection,
a credit against premium taxes under Article 4.10 of this code, as
amended, shall be allowed. The tax credit shall be allowed at a
rate of 20 percent per year for five successive years following the
year in which said deficit was sustained and at the option of the
insurer may be taken over an additional number of years.
(6) The rates applicable to professional liability
insurance provided by the association that cover nursing homes and
assisted living facilities that are not for profit must reflect a
discount of 30 percent from the rates for the same coverage provided
to others in the same category of insureds. The commissioner shall
ensure compliance with this subdivision.
SECTION 7. Section 4A, Article 21.49-3, Insurance Code, as
amended by Chapters 921 and 1284, Acts of the 77th Legislature,
Regular Session, 2001, is reenacted and amended to read as follows:
Sec. 4A. POLICYHOLDER'S STABILIZATION RESERVE FUND FOR
PHYSICIANS AND CERTAIN HEALTH CARE PROVIDERS [OTHER THAN FOR-PROFIT
AND NOT-FOR-PROFIT NURSING HOMES]. (a) There is hereby created a
policyholder's stabilization reserve fund for physicians and
health care providers, other than for-profit and not-for-profit
nursing homes and assisted living facilities, which shall be
administered as provided herein and in the plan of operation of the
association. The stabilization reserve fund created by this
section is separate and distinct from the stabilization reserve
fund for for-profit and not-for-profit nursing homes and assisted
living facilities created by Section 4B of this article.
(b) Each policyholder shall pay annually into the
stabilization reserve fund a charge, the amount of which shall be
established annually by advisory directors chosen by health care
providers, other than for-profit and not-for-profit nursing homes
and assisted living facilities, and physicians eligible for
insurance in the association in accordance with the plan of
operation. The charge shall be in proportion to each premium
payment due for liability insurance through the association. Such
charge shall be separately stated in the policy, but shall not
constitute a part of premiums or be subject to premium taxation,
servicing fees, acquisition costs, or any other such charges.
(c) The stabilization reserve fund shall be collected and
administered by the association and shall be treated as a liability
of the association along with and in the same manner as premium and
loss reserves. The fund shall be valued annually by the board of
directors as of the close of the last preceding year.
(d) [Except as provided by Subsection (e) of this section,
collections] Collections of the stabilization reserve fund charge
shall continue until such time as the net balance of the
stabilization reserve fund is not less than the projected sum of
premiums for physicians and health care providers, other than
for-profit and not-for-profit nursing homes and assisted living
facilities, to be written in the year following valuation date.
[(e) If in any fiscal year the incurred losses and defense
and cost-containment expenses from physicians or any single
category of health care provider result in a net underwriting loss
and exceed 25 percent of the stabilization reserve fund, as valued
for that year, the commissioner may by order direct the initiation
or continuation of the stabilization reserve fund charge for
physicians or that category of health care provider until the fund
recovers the amount by which those losses and cost-containment
expenses exceed 25 percent of the fund.]
(e) The stabilization reserve fund shall be credited with
all stabilization reserve fund charges collected from physicians
and health care providers, other than for-profit and not-for-profit
nursing homes and assisted living facilities, and shall be charged
with any deficit sustained by physicians and health care providers,
other than for-profit and not-for-profit nursing homes and assisted
living facilities, from the prior year's operation of the
association.
[(f) The stabilization reserve fund shall be credited with
all stabilization reserve fund charges collected from
policyholders and shall be charged with any deficit from the prior
year's operation of the association.]
SECTION 8. The heading of Section 4B, Article 21.49-3,
Insurance Code, is amended to read as follows:
Sec. 4B. STABILIZATION RESERVE FUND FOR FOR-PROFIT AND
NOT-FOR-PROFIT NURSING HOMES AND ASSISTED LIVING FACILITIES.
SECTION 9. Subsections (a), (b), (d), (e), and (h), Section
4B, Article 21.49-3, Insurance Code, are amended to read as
follows:
(a) There is hereby created a stabilization reserve fund for
for-profit and not-for-profit nursing homes and assisted living
facilities that shall be administered as provided in this section
and in the plan of operation of the association. The stabilization
reserve fund created by this section is separate and distinct from
the policyholder's stabilization reserve fund for physicians and
health care providers, other than for-profit and not-for-profit
nursing homes and assisted living facilities, created by Section 4A
of this article.
(b) Each policyholder shall pay annually into the
stabilization reserve fund a charge, the amount of which shall be
established annually by advisory directors chosen by for-profit and
not-for-profit nursing homes and assisted living facilities
eligible for insurance in the association in accordance with the
plan of operation. The charge shall be in proportion to each
premium payment due for liability insurance through the
association. The charge shall be separately stated in the policy,
but shall not constitute a part of premiums or be subject to premium
taxation, servicing fees, acquisition costs, or any other similar
charges.
(d) Collections of the stabilization reserve fund charge
shall continue only until such time as the net balance of the
stabilization reserve fund is not less than the projected sum of
premiums for for-profit and not-for-profit nursing homes and
assisted living facilities to be written in the year following the
valuation date.
(e) The stabilization reserve fund shall be credited with
all stabilization reserve fund charges collected from for-profit
and not-for-profit nursing homes and assisted living facilities and
the net earnings on liability insurance policies issued to
for-profit and not-for-profit nursing homes and assisted living
facilities and shall be charged with any deficit sustained by
for-profit and not-for-profit nursing homes and assisted living
facilities from the prior year's operation of the association.
(h) Notwithstanding Section 11 of this article, on
termination of the stabilization reserve fund established under
this section, all assets of the fund shall be transferred to the
general revenue fund to be appropriated for purposes related to
ensuring the kinds of liability insurance coverage that may be
provided by the association under this article for for-profit and
not-for-profit nursing homes and assisted living facilities.
SECTION 10. Section 4C, Article 21.49-3, Insurance Code, is
amended by amending Subsections (a) and (c) and adding Subsection
(d-1) to read as follows:
(a) The association is not liable for exemplary damages
under a professional liability insurance policy that covers a
for-profit or [and] not-for-profit nursing home or assisted living
facility and that excludes coverage for exemplary damages awarded
in relation to a covered claim awarded under Chapter 41, Civil
Practice and Remedies Code, or any other law. This subsection
applies without regard to the application of the common law theory
of recovery commonly known in Texas as the "Stowers Doctrine." This
subsection does not affect the application of that doctrine to the
liability of the association for compensatory damages.
(c) This section does not prohibit a for-profit or
not-for-profit nursing home or assisted living facility from
purchasing a policy to cover exemplary damages.
(d-1) This section applies only to the liability of the
association for exemplary damages under an insurance policy
delivered, issued for delivery, or renewed by the association to a
for-profit or not-for-profit assisted living facility on or after
September 1, 2003, and applies only to coverage provided under the
policy for any portion of the term of the policy that occurs before
January 1, 2006. This section applies only to the liability of the
association for exemplary damages with respect to a claim for which
a notice of loss or notice of occurrence was made, or should have
been made, in accordance with the terms of the policy, on or after
September 1, 2003, but before January 1, 2006.
SECTION 11. Subsection (a), Section 5, Article 21.49-3,
Insurance Code, is amended to read as follows:
(a) Each policyholder within the group of physicians and
health care providers, other than for-profit and not-for-profit
nursing homes and assisted living facilities, or within the group
of for-profit and not-for-profit nursing homes and assisted living
facilities shall have contingent liability for a proportionate
share of any assessment of policyholders in the applicable group
made under the authority of this article. Whenever a deficit, as
calculated pursuant to the plan of operation, is sustained with
respect to the group of physicians and health care providers, other
than for-profit and not-for-profit nursing homes and assisted
living facilities, or the group of for-profit and not-for-profit
nursing homes and assisted living facilities in any one year, its
directors shall levy an assessment only upon those policyholders in
the applicable group who held policies in force at any time within
the two most recently completed calendar years in which the
association was issuing policies preceding the date on which the
assessment was levied. The aggregate amount of the assessment
shall be equal to that part of the deficit not recouped from the
applicable stabilization reserve fund. The maximum aggregate
assessment per policyholder in the applicable group shall not
exceed the annual premium for the liability policy most recently in
effect. Subject to such maximum limitation, each policyholder in
the applicable group shall be assessed for that portion of the
deficit reflecting the proportion which the earned premium on the
policies of such policyholder bears to the total earned premium for
all policies of the association in the applicable group in the two
most recently completed calendar years.
SECTION 12. Section 1, Article 21.49-3d, Insurance Code, is
amended to read as follows:
Sec. 1. LEGISLATIVE FINDING; PURPOSE. The legislature
finds that the issuance of bonds to provide a method to raise funds
to provide professional liability insurance through the
association for nursing homes and assisted living facilities in
this state is for the benefit of the public and in furtherance of a
public purpose.
SECTION 13. Subsection (a), Section 3, Article 21.49-3d,
Insurance Code, is amended to read as follows:
(a) On behalf of the association, the Texas Public Finance
Authority shall issue revenue bonds to:
(1) fund the stabilization reserve fund for for-profit
and not-for-profit nursing homes and assisted living facilities
established under Section 4B, Article 21.49-3 of this code;
(2) pay costs related to issuance of the bonds; and
(3) pay other costs related to the bonds as may be
determined by the board.
SECTION 14. Subsection (c), Section 3A, Article 21.49-3,
Insurance Code, as added by Chapter 921, Acts of the 77th
Legislature, Regular Session, 2001, is repealed.
SECTION 15. This Act takes effect September 1, 2003.