78R2263 AKH-D

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. Section 2(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. 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. Section 2(6), 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(c), Article 21.49-3, Insurance Code, as added by Chapter 921, Acts of the 77th Legislature, Regular Session, 2001, is amended to read as follows: (c) In consultation with the Texas Department of Human Services, the commissioner shall, by rule, adopt minimum rating standards for for-profit nursing homes and for-profit assisted living facilities that must be met before a for-profit nursing home or for-profit assisted living facility may obtain coverage through the association. The standards must promote the highest practical level of care for residents of those nursing homes and assisted living facilities. SECTION 5. Section 3A(c), Article 21.49–3, Insurance Code, as added by Chapter 1284, Acts of the 77th Legislature, Regular Session, 2001, is relettered as Subsection (d) and amended to read as follows: (d) [(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 6. Sections 4(b)(1), (3), and (6), Article 21.49-3, Insurance Code, are amended to read as follows: (b)(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. Sections 4B(a), (b), (d), (e), and (h), 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 (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. Section 5(a), 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. Section 3(a), 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. This Act takes effect September 1, 2003.