84R6990 SCL-F

By: Workman H.B. No. 2243

A BILL TO BE ENTITLED

AN ACT

relating to the authorization, regulation, and function of dedicated personal insurers; requiring a certificate of authority; imposing fees.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle E, Title 6, Insurance Code, is amended by adding Chapter 889 to read as follows:

CHAPTER 889. DEDICATED PERSONAL INSURERS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 889.001. DEFINITIONS. In this chapter:

(1) "Adjusted gross income" has the meaning assigned by 26 U.S.C. Section 62.

(2) "Dedicated personal insurer" means an entity authorized to issue an insurance policy to a designated insurable individual under Section 889.152.

(3) "Designated insurable individual" means an individual with whom a dedicated personal insurer has the relationship required by Section 889.051.

(4) "Medical care" has the meaning assigned by 26 U.S.C. Section 213.

(5) "Medically related unemployment" means unemployment while an individual has a medical condition that substantially interferes with the individual's ability to work.

(6) "Qualified dependent" means a dependent that is a qualified child as defined by 26 U.S.C. Section 152(c).

Sec. 889.002. LIMITED EXEMPTION FROM INSURANCE LAWS. (a) Except as expressly provided by this code, a provision of this code, other than this chapter, does not apply to a dedicated personal insurer.

(b) A law enacted after January 1, 2015, does not apply to a dedicated personal insurer unless dedicated personal insurers are expressly designated in the law.

SUBCHAPTER B. ORGANIZATION OF DEDICATED PERSONAL INSURERS

Sec. 889.051. FORM AND RELATIONSHIP OF INSURER; USE OF INSURANCE-RELATED TERMS PROHIBITED. (a) To be granted or maintain a limited certificate of authority as a dedicated personal insurer, an entity must be related to a designated insurable individual in the following manner:

(1) the entity and designated insurable individual are the same natural person; or

(2) the entity is a for-profit corporation or limited liability company and the designated insurable individual is the sole owner of that entity.

(b) Notwithstanding Section 2.003, Business Organizations Code, an entity may operate as a dedicated personal insurer under this chapter.

(c) An entity formed for the purpose of operating as a dedicated personal insurer may not use in its name, contracts, or literature the word "insurance" or any other words that are descriptive of the insurance, casualty, or surety business.

Sec. 889.052. APPLICATION FOR LIMITED CERTIFICATE OF AUTHORITY. (a) An entity satisfying the requirements of this chapter may apply to the department for a limited certificate of authority as a dedicated personal insurer. The application must include:

(1) the name and address of the applicant;

(2) the name, address, and date of birth of the designated insurable individual; and

(3) the application fee required by Section 889.205.

(b) If the commissioner determines that the application does not satisfy the requirements of this subchapter, the commissioner shall deny the application in writing. The denial must include the reason for the denial.

(c) If the commissioner does not deny the application under Subsection (b), the commissioner shall approve the application. On approval, the department shall issue under the department's seal a limited certificate of authority authorizing the entity as a dedicated personal insurer.

Sec. 889.053. TRANSFER OF CERTIFICATES PROHIBITED. A limited certificate of authority issued under this chapter may not be transferred or sold.

SUBCHAPTER C. MANAGEMENT OF FUNDS

Sec. 889.101. DEPOSIT REQUIREMENTS. (a) For each calendar quarter in which a dedicated personal insurer holds a limited certificate of authority issued under this chapter, the dedicated personal insurer shall deposit funds to the credit of the insurer in accordance with this section.

(b) A quarterly deposit under this section must be one-fourth of the aggregate amount of:

(1) at least eight percent of the designated insurable individual's adjusted gross income for the preceding calendar year; and

(2) if applicable, at least eight percent of each designated insurable individual's spouse's adjusted gross income for the preceding calendar year.

(c) Notwithstanding Subsection (a), a dedicated personal insurer is not required to make a deposit under this section if the total balance of funds deposited in all accounts to the credit of the insurer is at least $60,000.

(d) Funds required by this section must be held in:

(1) cash;

(2) a bond or other evidence of indebtedness of the United States, this state, or a political subdivision of this state;

(3) a security that is readily marketable over a national exchange;

(4) another form of security approved by the commissioner; or

(5) a combination of the forms described by Subdivisions (1), (2), (3), and (4).

(e) The dedicated personal insurer's deposit account or accounts must be with a bank or broker that is insured by the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation, or a similar institution approved by the commissioner.

(f) A dedicated personal insurer shall deposit funds according to Subsection (a) not later than:

(1) for the initial deposit, the 30th day after the date the limited certificate of authority is issued under this chapter; or

(2) the 30th day after the last day of the calendar quarter for which the deposit is required by this section.

Sec. 889.102. AUTHORIZED EXPENDITURES. (a) Funds required to be in a dedicated personal insurer's deposit account under Section 889.101 may only be disbursed for:

(1) medical care expenses of an individual covered by a policy issued by the insurer;

(2) reinsurance or stop-loss insurance premiums;

(3) maintenance fees required by Section 889.205; or

(4) expenses incurred by the designated insurable individual during a period of medically related unemployment.

(b) Nothing in this section may be construed to restrict payments or transfers made by a dedicated personal insurer using funds in excess of the funds required to be in the insurer's deposit account under Section 889.101(b).

SUBCHAPTER D. AUTHORITY TO ISSUE INSURANCE

Sec. 889.151. LIMITED CERTIFICATE OF AUTHORITY. A limited certificate of authority issued by the department to a dedicated personal insurer shall state in a format determined by the commissioner by rule:

(1) the name of the designated insurable individual;

(2) the following language: "Only the designated insurable individual, the individual's spouse, and the individual's qualified dependents may be covered or insured by an insurance policy authorized by this certificate"; and

(3) any other information required by the commissioner by rule.

Sec. 889.152. AUTHORITY TO ISSUE AN INSURANCE POLICY; REINSURANCE AUTHORIZED. (a) A dedicated personal insurer holding a limited certificate of authority issued under this chapter may issue a health insurance policy only to the designated insurable individual, consistent with the limitations of that certificate and this chapter.

(b) Only the designated insurable individual named on a limited certificate of authority issued under this chapter, the individual's spouse, and the individual's qualified dependents may be covered or insured by a dedicated personal insurer under a policy authorized by that certificate.

(c) A dedicated personal insurer may obtain reinsurance for a risk that the insurer is authorized to insure.

Sec. 889.153. PROHIBITED ACTS. (a) A dedicated personal insurer may not take, receive, facilitate, or process an insurance application.

(b) A dedicated personal insurer may not charge a premium. Nothing in this subsection may be construed to prohibit a designated insurable individual from providing capital to the insurer.

Sec. 889.154. EXCLUSION FROM GUARANTY FUND. A dedicated personal insurer is not a member insurer required to participate in the Texas Life and Health Insurance Guaranty Association and a policy issued by a dedicated personal insurer is not a covered policy for purposes of Chapter 463.

SUBCHAPTER E. ENFORCEMENT AND FUNDING

Sec. 889.201. ANNUAL REPORT OF FUNDS. (a) A dedicated personal insurer shall file an annual report with the department that includes:

(1) a statement or return showing the designated insurable individual's adjusted gross income and the adjusted gross income of each spouse covered during any part of the year by a policy issued by the insurer;

(2) an account statement issued by a bank or broker demonstrating compliance with Section 889.101; and

(3) a statement of disbursements made under Section 889.102.

(b) A dedicated personal insurer shall file the maintenance fee required by Section 889.205 with the report required by this section.

(c) A dedicated personal insurer shall file the report required by this section not later than March 31 following a year in which the insurer holds a limited certificate of authority issued under this chapter during any part of that year.

Sec. 889.202. AUDIT OF OPERATIONS; REVOCATION OF LIMITED CERTIFICATE OF AUTHORITY. (a) The department shall audit the operations of a dedicated personal insurer according to this section.

(b) The department shall conduct a random audit of dedicated personal insurers, and the department shall ensure that the probability that a particular insurer is audited under this subsection during a year is not more than 1 in 100.

(c) If the department determines there is a reasonable suspicion that a dedicated personal insurer is not in compliance with this chapter, the department may conduct an audit of the insurer.

(d) A dedicated personal insurer shall comply with the audit and provide the department information and records necessary to conduct the audit.

(e) If an audit results in a finding that a dedicated personal insurer is not substantially in compliance with this chapter, the department shall revoke the insurer's limited certificate of authority issued under this chapter.

Sec. 889.203. SURRENDER OF LIMITED CERTIFICATE OF AUTHORITY. (a) A dedicated personal insurer that does not have a relationship required by Section 889.051 with the designated insurable individual specified in the insurer's limited certificate of authority issued under this chapter shall surrender the certificate to the department.

(b) A dedicated personal insurer that does not satisfy the requirements of Subchapter C shall surrender the insurer's limited certificate of authority issued under this chapter to the department.

(c) A dedicated personal insurer may voluntarily surrender the insurer's limited certificate of authority issued under this chapter to the department.

Sec. 889.204. CONSEQUENCES OF CERTIFICATE REVOCATION OR SURRENDER. (a) On surrender or revocation of a dedicated personal insurer's limited certificate of authority issued under this chapter, the insurer shall terminate each outstanding insurance policy issued by the insurer.

(b) The department may not issue a limited certificate of authority under this chapter for a period of:

(1) one year after the surrender of a certificate listing the same designated insurable individual; and

(2) five years after the revocation of a certificate listing the same designated insurable individual.

Sec. 889.205. FUNDING FOR ADMINISTRATION OF CHAPTER. (a) The department shall collect:

(1) a nonrefundable application fee from an entity applying for a limited certificate of authority under this chapter; and

(2) a maintenance fee from a designated personal insurer submitting a report under Section 889.201.

(b) The department shall deposit the fees collected under this section to the credit of the Texas Department of Insurance operating account.

(c) The department shall set each fee collected under this section in an amount reasonable and necessary to implement this chapter, not to exceed $90. The department may use any portion of the fee to enforce this chapter.

SUBCHAPTER F. PRIVACY

Sec. 889.251. PRIVACY. (a) Except as provided by Subsection (b), the department may not disclose:

(1) personal identifying information of a designated insurable individual, the individual's spouse, and the individual's qualified dependents; or

(2) identifying and financial information of an applicant for a limited certificate of authority issued under this chapter.

(b) The department may disclose information described by Subsection (a) if the individual or entity requesting the information demonstrates in the manner prescribed by the commissioner that:

(1) the designated insurable individual or dedicated personal insurer that is the subject of the information request has provided written consent for the disclosure to the requestor; or

(2) the use of the information will be strictly limited to the performance of a governmental agency's or court's functions by that agency or court or a private individual or entity acting on behalf of the agency or court.

SECTION 2. This Act takes effect September 1, 2015.