88R12308 CJD-F

By: Cole H.B. No. 4389

A BILL TO BE ENTITLED

AN ACT

relating to the funding mechanism for the regulation of workers' compensation and workers' compensation insurance; authorizing surcharges.

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

SECTION 1. The heading to Title 3, Insurance Code, is amended to read as follows:

TITLE 3. DEPARTMENT FUNDS, FEES, SURCHARGES, AND TAXES

SECTION 2. The heading to Subtitle C, Title 3, Insurance Code, is amended to read as follows:

SUBTITLE C. INSURANCE MAINTENANCE TAXES AND SURCHARGES

SECTION 3. Section 251.001(a), Insurance Code, is amended to read as follows:

(a) The commissioner shall annually determine the rate of assessment of each maintenance tax or aggregate workers' compensation surcharge imposed under this subtitle.

SECTION 4. The heading to Section 251.004, Insurance Code, is amended to read as follows:

Sec. 251.004. DEPOSIT OF MAINTENANCE TAXES AND SURCHARGES.

SECTION 5. Section 251.004(a), Insurance Code, is amended to read as follows:

(a) Except as provided by Subsection (b), maintenance taxes collected under this subtitle and aggregate surcharges collected under Chapter 255 shall be deposited in the general revenue fund and reallocated to the Texas Department of Insurance operating account.

SECTION 6. Chapter 255, Insurance Code, is amended to read as follows:

CHAPTER 255. WORKERS' COMPENSATION INSURANCE

Sec. 255.001. SURCHARGE [MAINTENANCE TAX] IMPOSED. (a) A surcharge [maintenance tax] is imposed on each authorized insurer with gross premiums subject to the surcharge [taxation] under Section 255.003, including a:

(1) stock insurance company;

(2) mutual insurance company;

(3) reciprocal or interinsurance exchange; and

(4) Lloyd's plan.

(b) The surcharge [tax] required by this chapter is in addition to [other] taxes imposed that are not in conflict with this chapter.

(c) The aggregate surcharge required by this chapter includes an amount necessary for funding the regulation of workers' compensation as described by this chapter and Chapter 403, Labor Code.

Sec. 255.002. MAXIMUM RATE; ANNUAL ADJUSTMENT. (a) The aggregate rate of assessment for surcharges set by the commissioner may not exceed 2.7 [0.6] percent of the gross premiums subject to the aggregate surcharge [taxation] under Section 255.003 and Chapters 403 and 405, Labor Code.

(b) The commissioner shall annually adjust the rate of assessment of the surcharge [maintenance tax] so that the surcharge [tax] imposed that year, together with any unexpended funds produced by the surcharge [tax], produces the amount the commissioner determines is necessary to pay the expenses during the succeeding year of regulating workers' compensation insurance.

Sec. 255.003. PREMIUMS SUBJECT TO SURCHARGE [TAXATION]. (a) An insurer shall pay the surcharge [maintenance taxes] under this chapter on the correctly reported gross workers' compensation insurance premiums from writing workers' compensation insurance in this state, including the modified annual premium of a policyholder that purchases an optional deductible plan under Subchapter E, Chapter 2053.

(b) The rate of assessment for a surcharge shall be applied to the modified annual premium before application of a deductible premium credit.

Sec. 255.004. SURCHARGE [MAINTENANCE TAX] DUE DATES. (a) The insurer shall pay the surcharge [maintenance tax] annually or semiannually.

(b) The comptroller may require semiannual payment only from an insurer whose surcharge [maintenance tax] liability under this chapter for the previous tax year was at least $2,000.

Sec. 255.005. RECOVERY OF SURCHARGE. An insurer may recover a surcharge under this chapter by:

(1) reflecting the surcharge as an expense in a rate filing required under this code; or

(2) charging the insurer's policyholders.

SECTION 7. Section 403.001(a), Labor Code, is amended to read as follows:

(a) Except as provided by Sections 403.006, 403.007, and 403.008, or as otherwise provided by law, money collected under this subtitle, including aggregate surcharges and advance deposits for purchase of services, shall be deposited in the general revenue fund of the state treasury to the credit of the Texas Department of Insurance operating account.

SECTION 8. Section 403.002, Labor Code, is amended to read as follows:

Sec. 403.002. SURCHARGES [MAINTENANCE TAXES]. (a) Each insurance carrier, other than a governmental entity, shall pay an annual surcharge [maintenance tax] to pay the costs of administering this subtitle and to support the prosecution of workers' compensation insurance fraud in this state.

(b) The assessment may not exceed the aggregate [an] amount provided by Section 255.002, Insurance Code, [equal to two percent] of the correctly reported gross workers' compensation insurance premiums, including the modified annual premium of a policyholder that purchases an optional deductible plan under Subchapter E, Chapter 2053 [Article 5.55C], Insurance Code. The rate of assessment shall be applied to the modified annual premium before application of a deductible premium credit.

(c) A workers' compensation insurance company is assessed [taxed] at the aggregate rate established under Section 403.003 and Section 255.002, Insurance Code. The surcharge [tax] shall be collected in the manner provided for collection of other surcharges [taxes] on gross premiums from a workers' compensation insurance company as provided in Chapter 255, Insurance Code.

(d) Each certified self-insurer shall pay a fee and maintenance taxes as provided by Subchapter F, Chapter 407.

SECTION 9. The heading to Section 403.003, Labor Code, is amended to read as follows:

Sec. 403.003. RATE OF SURCHARGE [ASSESSMENT].

SECTION 10. Section 403.003(a), Labor Code, is amended to read as follows:

(a) The commissioner of insurance shall set and certify to the comptroller the aggregate rate of [maintenance tax] assessment provided by Section 255.002, Insurance Code, taking into account:

(1) any expenditure projected as necessary for the division and the office of injured employee counsel to:

(A) administer this subtitle during the fiscal year for which the rate of assessment is set; and

(B) reimburse the general revenue fund as provided by Section 201.052, Insurance Code;

(2) projected employee benefits paid from general revenues;

(3) a surplus or deficit produced by the surcharge [tax] in the preceding year;

(4) revenue recovered from other sources, including reappropriated receipts, grants, payments, fees, gifts, and penalties recovered under this subtitle; and

(5) expenditures projected as necessary to support the prosecution of workers' compensation insurance fraud.

SECTION 11. Section 403.004, Labor Code, is amended to read as follows:

Sec. 403.004. COLLECTION OF SURCHARGE [TAX] AFTER WITHDRAWAL FROM BUSINESS. The commissioner or the commissioner of insurance immediately shall proceed to collect surcharges [taxes] due under this chapter from an insurance carrier that withdraws from business in this state, using legal process as necessary.

SECTION 12. Section 403.005, Labor Code, is amended to read as follows:

Sec. 403.005. SURCHARGE [TAX] RATE. The commissioner of insurance shall annually adjust the rate of assessment of the surcharge [maintenance tax] imposed under Section 403.003 so that the surcharge [tax] imposed that year, together with any unexpended funds produced by the surcharge [tax], produces the amount the commissioner of insurance determines is necessary to pay the expenses of administering this subtitle.

SECTION 13. Chapter 403, Labor Code, is amended by adding Section 403.0055 to read as follows:

Sec. 403.0055. RECOVERY OF SURCHARGE. An insurer may recover a surcharge under this chapter by:

(1) reflecting the surcharge as an expense in a rate filing required under the Insurance Code; or

(2) charging the insurer's policyholders.

SECTION 14. The heading to Section 405.003, Labor Code, is amended to read as follows:

Sec. 405.003. FUNDING; SURCHARGE AND RECOVERY OF SURCHARGE BY INSURERS [MAINTENANCE TAX].

SECTION 15. Section 405.003, Labor Code, is amended by amending Subsections (a), (b), (c), and (d) and adding Subsection (g) to read as follows:

(a) The group's duties under this chapter are funded through the assessment of a surcharge [maintenance tax] collected annually from all insurance carriers, and self-insurance groups that hold certificates of approval under Chapter 407A, except governmental entities.

(b) The department shall set the rate of the surcharge [maintenance tax] based on the expenditures authorized and the receipts anticipated in legislative appropriations. The surcharge [tax] rate for insurance companies is included in the aggregate rate provided by Section 255.002, Insurance Code, and is based on [may not exceed one-tenth of one percent of] the correctly reported gross workers' compensation insurance premiums. The surcharge [tax] rate for certified self-insurers is included in the aggregate rate provided by Section 255.002, Insurance Code, and is based on [may not exceed one-tenth of one percent of] the total tax base of all certified self-insurers, as computed under Section 407.103(b). The surcharge [tax] rate for self-insurance groups described by Subsection (a) is included in the aggregate rate provided by Section 255.002, Insurance Code, and is based on [may not exceed one-tenth of one percent of] the group's gross premium for the group's retention, excluding premium collected by the group for excess insurance.

(c) The surcharge [tax] imposed under Subsection (a) is in addition to all [other] taxes imposed on those insurance carriers for workers' compensation purposes.

(d) The surcharge [tax] on insurance companies and on self-insurance groups described by Subsection (a) shall be assessed, collected, and paid in the same manner and at the same time as the surcharge [maintenance tax] established for the support of the department under Chapter 255, Insurance Code. The surcharge [tax] on certified self-insurers shall be assessed, collected, and paid in the same manner and at the same time as the self-insurer maintenance tax collected under Section 407.104.

(g) An insurer may recover a surcharge under this section by:

(1) reflecting the surcharge as an expense in a rate filing required under the Insurance Code; or

(2) charging the insurer's policyholders.

SECTION 16. The changes in law made by this Act relating to surcharges on gross workers' compensation premiums apply only to the gross annual premiums reported for an annual period beginning on or after the effective date of this Act. Maintenance taxes imposed on gross annual workers' compensation premiums before the effective date of this Act are governed by the law as it existed before the effective date of this Act, and the former law is continued in effect for that purpose.

SECTION 17. This Act takes effect January 1, 2024.