PART 1. TEXAS DEPARTMENT OF INSURANCE
CHAPTER 3. LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES
SUBCHAPTER RR. VALUATION MANUAL
The Texas Department of Insurance (TDI) proposes to amend 28 TAC §3.9901, concerning the adoption of a valuation manual for reserving and related requirements. The amendment to §3.9901 implements Insurance Code §425.073.
EXPLANATION. The amendment to §3.9901 is necessary to comply with Insurance Code §425.073, which requires the commissioner to adopt a valuation manual that is substantially similar to the National Association of Insurance Commissioners (NAIC) Valuation Manual.
Under Insurance Code §425.073, the commissioner must adopt the valuation manual, and any changes to it, by rule.
Under Insurance Code §425.073(c), when the NAIC adopts changes to its valuation manual, the commissioner must adopt substantially similar changes. This subsection also requires the commissioner to determine that NAIC's changes were approved by an affirmative vote representing at least three-fourths of the voting NAIC members, but not less than a majority of the total membership. In addition, the NAIC members voting in favor of amending the valuation manual must represent jurisdictions totaling greater than 75% of the direct written premiums as reported in the most recently available life, accident, and health/fraternal annual statements and health annual statements.
TDI originally adopted the valuation manual in §3.9901 on December 29, 2016, in compliance with Insurance Code §425.073. On August 16, 2023, the NAIC voted to adopt changes to the valuation manual. Fifty jurisdictions, representing jurisdictions totaling 89.48% of the relevant direct written premiums, voted in favor of adopting the amendments to the valuation manual. The vote adopting changes to the NAIC Valuation Manual meets the requirements of Insurance Code §425.073(c).
This proposal includes provisions related to NAIC rules, regulations, directives, or standards. Under Insurance Code §36.004, TDI must consider whether authority exists to enforce or adopt the NAIC's changes. In addition, under Insurance Code §36.007, the commissioner cannot adopt or enforce a rule implementing an interstate, national, or international agreement that infringes on the authority of this state to regulate the business of insurance in this state, unless the agreement is approved by the Texas Legislature. TDI has determined that neither §36.004 nor §36.007 prohibit this proposal because Insurance Code §425.073 requires the Texas insurance commissioner to adopt a valuation manual that is substantially similar to the valuation manual approved by the NAIC, and §425.073(c) expressly requires the commissioner to adopt changes to the valuation manual that are substantially similar to changes adopted by the NAIC.
In addition to clarifying existing provisions, the 2024 NAIC Valuation Manual includes changes that:
- require reporting on actuarial items, including company inflation assumptions;
- revise required hedge modeling for index credit hedging, a fundamentally different type of hedging from the type of hedging that existing requirements were designed to reflect; and
- update the required timing for companies to submit mortality experience data to allow for more timely creation of industry mortality tables.
The NAIC's adopted changes to the valuation manual can be viewed at https://content.naic.org/sites/default/files/pbr_data_valuation_manual_future_edition_redline.pdf.
Section 3.9901. The amendment to §3.9901 strikes the date on which the NAIC adopted its previous valuation manual and inserts the date on which the NAIC adopted its current valuation manual, adopting by reference the new valuation manual dated August 16, 2023.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Jamie Walker, deputy commissioner of the Financial Regulation Division, has determined that during each year of the first five years the proposed amendment is in effect, there will be no measurable fiscal impact on state and local governments as a result of enforcing or administering the amendment, other than that imposed by the statute. Ms. Walker made this determination because the proposed amendment does not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed amendment.
Ms. Walker does not anticipate any measurable effect on local employment or the local economy as a result of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amendment is in effect, Ms. Walker expects that administering the proposed amendment will have the public benefit of ensuring that TDI's rules conform to Insurance Code §425.073.
Ms. Walker expects that the proposed amendment will not increase the cost of compliance with Insurance Code §425.073 because it does not impose requirements beyond those in the statute. Insurance Code §425.073 requires that changes to the valuation manual be adopted by rule and be substantially similar to changes adopted by the NAIC. As a result, any cost associated with adopting the changes to the valuation manual is a direct result of Insurance Code §425.073 and not the proposed amendment.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TDI has determined that the proposed amendment will not have an adverse economic effect on small or micro businesses, or on rural communities. This is because the amendment does not impose any requirements beyond those required by statute. As a result, and in accordance with Government Code §2006.002(c), TDI is not required to prepare a regulatory flexibility analysis.
EXAMINATION OF COSTS UNDER GOVERNMENT CODE §2001.0045. TDI has determined that this proposal does not impose a possible cost on regulated persons. In addition, no other rule amendments are required under Government Code §2001.0045 because the proposed amendment is necessary to implement legislation. The proposed rule implements Insurance Code §425.073, as added by Senate Bill 1654, 84th Legislature, 2015.
GOVERNMENT GROWTH IMPACT STATEMENT. TDI has determined that for each year of the first five years that the proposed amendment is in effect, the amendment:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will not create a new regulation;
- will not expand, limit, or repeal an existing regulation;
- will not increase or decrease the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TDI has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TDI will consider any written comments on the proposal that are received by TDI no later than 5:00 p.m., central time, on November 6, 2023. Send your comments to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030.
To request a public hearing on the proposal, submit a request before the end of the comment period to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030. The request for public hearing must be separate from any comments and received by the TDI no later than 5:00 p.m., central time, on November 6, 2023. If TDI holds a public hearing, TDI will consider written and oral comments presented at the hearing.
STATUTORY AUTHORITY. TDI proposes the amendment to §3.9901 under Insurance Code §425.073 and §36.001.
Insurance Code §425.073 requires the commissioner to, by rule, adopt changes to the valuation manual previously adopted by the commissioner that are substantially similar to any changes adopted by NAIC to its valuation manual.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
CROSS-REFERENCE TO STATUTE. Section 3.9901 implements Insurance Code §425.073.
§3.9901.Valuation Manual.
(a) The Commissioner adopts by reference the National
Association of Insurance Commissioners (NAIC) Valuation Manual, including
subsequent changes that were adopted by the NAIC through August
16, 2023, [August 13, 2022,] as required by Insurance
Code §425.073.
(b) The operative date of the NAIC Valuation Manual in Texas is January 1, 2017.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 22, 2023.
TRD-202303517
Jessica Barta
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: November 5, 2023
For further information, please call: (512) 676-6555
SUBCHAPTER F. INLAND MARINE INSURANCE, [AND] MULTI-PERIL INSURANCE, AND COMMERCIAL LINES
DIVISION 3. EXEMPT COMMERCIAL LINES
The Texas Department of Insurance (TDI) proposes to amend the title of Subchapter F of 28 TAC Chapter 5 and to add new Division 3, containing new 28 TAC §5.5201, concerning exempt commercial lines. The new section implements Senate Bill 1367, 87th Legislature, 2021.
EXPLANATION. This proposal implements SB 1367, which exempts certain commercial lines of insurance from rate and form filing requirements. SB 1367 also authorizes the commissioner to exempt additional commercial lines of insurance to promote enhanced competition or more effectively use TDI resources that might otherwise be used to review commercial lines filings.
As part of the implementation of 1367, a proposed amendment revises the title of Subchapter F to reflect that a section in it addresses commercial lines and adds new Division 3 to address exempt commercial lines.
Proposed new §5.5201 identifies 12 additional commercial lines of property and casualty insurance and exempts them from the rate and form filing requirements in Insurance Code Chapter 2251, Subchapter C, and Insurance Code Chapter 2301, Subchapter A. The rule does not exempt these insurance lines from any other applicable statute or rule.
These lines are appropriate to exempt because TDI receives comparatively few rate and form filings or policyholder complaints involving them. These factors indicate that there is less need for TDI to review forms and rates for these lines. Further, exempting these lines of insurance will promote enhanced competition and allow TDI to more effectively use its resources to review other commercial lines filings, as contemplated by SB 1367.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Mark Worman, deputy commissioner of the Property and Casualty Division, has determined that during each year of the first five years the proposed new section is in effect, there will be no measurable fiscal impact on state and local governments as a result of enforcing or administering the new section, other than that imposed by the statute. Mr. Worman made this determination because the proposed new section does not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed new section.
Mr. Worman does not anticipate any measurable effect on local employment or the local economy as a result of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed new section is in effect, Mr. Worman expects that administering it will have the public benefits of ensuring that TDI's rules conform to Insurance Code §2251.0031 and §2301.0031 and promoting more effective use of TDI resources.
Mr. Worman expects that the proposed new section will not increase the cost of compliance with Insurance Code §2251.0031 and §2301.0031 because it does not impose requirements beyond those in the statute. Insurance Code §2251.0031 and §2301.0031 exempt certain lines of insurance from rate and form filing requirements and authorize the commissioner to exempt additional commercial lines of insurance to promote enhanced competition or more effectively use TDI resources that might otherwise be used to review commercial lines filings. Because it will reduce the lines of insurance subject to filing requirements, the proposed new section will likely reduce the cost of compliance.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TDI has determined that the proposed new section will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TDI is not required to prepare a regulatory flexibility analysis.
EXAMINATION OF COSTS UNDER GOVERNMENT CODE §2001.0045. TDI has determined that this proposal does not impose a cost on regulated persons. Even if it did, no additional rule amendments are required under Government Code §2001.0045 because proposed new §5.5201 is necessary to implement legislation. The proposed rule implements Insurance Code §2251.0031 and §2301.0031, as added by SB 1367.
GOVERNMENT GROWTH IMPACT STATEMENT. TDI has determined that for each year of the first five years that the proposed new section is in effect, the proposed rule:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will not create new regulations;
- will limit existing regulations;
- will not increase the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
This rule will limit existing regulations by exempting additional lines of insurance from rate and form filing requirements.
TAKINGS IMPACT ASSESSMENT. TDI has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TDI will consider any written comments on the proposal that are received by TDI no later than 5:00 p.m., central time, on November 6, 2023. Send your comments to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030.
To request a public hearing on the proposal, submit a request before the end of the comment period to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030. The request for public hearing must be separate from any comments and received by TDI no later than 5:00 p.m., central time, on November 6, 2023. If TDI holds a public hearing, TDI will consider written and oral comments presented at the hearing.
STATUTORY AUTHORITY. TDI proposes new §5.5201 under Insurance Code §§2251.0031, 2301.0031, 36.001, and 36.002.
Insurance Code §2251.0031 exempts certain lines of insurance from rate filing requirements and provides that the commissioner may by rule exempt additional commercial lines of insurance to promote enhanced competition or more effectively use TDI resources. Section 2251.0031 also provides that the commissioner may adopt reasonable and necessary rules to implement §2251.0031.
Insurance Code §2301.0031 exempts certain lines of insurance from form filing requirements and provides that the commissioner may by rule exempt additional commercial lines of insurance to promote enhanced competition or more effectively use TDI resources. Section 2301.0031 also provides that the commissioner may adopt reasonable and necessary rules to implement §2301.0031.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
Insurance Code §36.002 provides that the commissioner may adopt reasonable rules that are necessary to effect the purposes of Insurance Code Chapter 2251 and Chapter 2301, Subchapter A.
CROSS-REFERENCE TO STATUTE. Section 5.5201 implements Insurance Code §2251.0031 and §2301.0031.
§5.5201.Exempt Commercial Lines.
(a) The purpose of this section is to identify commercial lines of insurance that the commissioner of insurance has determined should be exempt from the rate filing requirements in Insurance Code Chapter 2251, Subchapter C, concerning Rate Filings, and the form filing requirements in Insurance Code Chapter 2301, Subchapter A, concerning Policy Forms Generally. These exemptions are in addition to the exceptions for certain lines of insurance listed in Insurance Code §2251.0031(a), concerning Exceptions for Certain Lines, and Insurance Code §2301.0031(a), concerning Exceptions for Certain Lines.
(b) The rate filing requirements in Insurance Code Chapter 2251, Subchapter C, and the form filing requirements in Insurance Code Chapter 2301, Subchapter A, do not apply to any line of the following kinds of insurance written under a commercial insurance policy or contract:
(1) commercial credit insurance products that cover outstanding commercial debt, including trade credit insurance and commercial guaranteed auto protection (GAP) insurance;
(2) crime insurance;
(3) fidelity and surety products, whether referred to as a bond or insurance, including products that cover crime, forgery, and employee dishonesty;
(4) financial guaranty;
(5) glass insurance;
(6) hail insurance on farm crops;
(7) rain insurance;
(8) employee benefits liability;
(9) liquor liability;
(10) owners and contractors protective liability;
(11) railroad protective liability; or
(12) commercial tuition withdrawal insurance.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 19, 2023.
TRD-202303489
Jessica Barta
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: November 5, 2023
For further information, please call: (512) 676-6555
The Texas Department of Insurance (TDI) proposes to amend 28 TAC Chapter 5, Subchapter H, §§5.7005, 5.7007, 5.7011, 5.7012, and 5.7013, and new §§5.7101 - 5.7110. As part of this proposal, TDI will divide Subchapter H into two new divisions. New Division 1 will contain §§5.7001 - 5.7018. New Division 2 will contain new §§5.7101 - 5.7110. The amendments and new sections implement:
- Senate Bill 1602, 87th Legislature, 2021, which requires insurers to nonrenew private passenger automobile policies if an insured fails or refuses to cooperate;
- House Bill 1900, 88th Legislature, 2023, which updates notice requirements for nonrenewal and cancellation of private passenger automobile policies; and
- House Bill 2065, 88th Legislature, 2023, which specifies that mandatory nonrenewal applies to third-party liability claims and removes a reference to named insured.
EXPLANATION. Proposed amendments to §§5.7005, 5.7007, 5.7011, 5.7012, and 5.7013 implement Insurance Code §551.104(f) and §551.105, as amended by HB 1900. Insurance Code §551.104(f) requires insurers to send notice of cancellation of a personal automobile insurance policy not later than 60 days before the effective date of cancellation, rather than the 30th day, as required by the previous version of the statute. Likewise, amended Insurance Code §551.105 requires insurers to send notice of nonrenewal of a personal automobile insurance policy not later than the 60th before a policy expires, rather than the 30th day.
Amended §5.7005 also includes a change to implement HB 2065, which amended Insurance Code §551.1053 to address mandatory nonrenewal of a private automobile insurance policy when an insured fails to cooperate in--or cannot be contacted regarding--the investigation, settlement, or defense of a third-party liability claim or action.
SB 1602 amended Insurance Code §551.1053 effective September 1, 2021. However, most personal automobile insurance policy forms filed for review and approval since that effective date have not initially complied with §551.1053. Therefore, new §§5.7101 - 5.7110 are proposed to specify requirements to make it easier for insurers and TDI staff to ensure that forms and claim handling practices comply with Insurance Code §551.1053. In addition, to assist consumers, the new sections offer sample plain language notices and require that insurers give insureds at least 10 days from the date the notice is sent to cooperate in a claim.
Insurance Code §551.1053 gives rise to some complex situations for insurers when noncooperation occurs near the end of the policy period. Insurers may have already developed methods to deal with these issues, but the new sections will promote consistency in handling these complex situations.
To provide clarity and structure to the requirements in Subchapter H, TDI proposes to divide the subchapter into two new divisions. Division 1, titled "Miscellaneous," will include the current sections in Subchapter H, consisting of §§5.7001 - 5.7018. Division 2, titled "Mandatory Nonrenewal of Private Passenger Automobile Insurance Policies," will include new §§5.7101 - 5.7110.
The proposed amendments to §§5.7005, 5.7007, 5.7011, 5.7012, and 5.7013 and new §§5.7101 - 5.7110 are described in the following paragraphs, organized by division.
Division 1. Miscellaneous.
Sections 5.7005 and 5.7007. Amendments to §5.7005 and §5.7007 conform the sections to Insurance Code §551.104(f) and §551.105 by extending the deadline by which an insurer must give written notice of cancellation from 30 days to 60 days. The amendments also revise text to simplify language, address nonrenewal, and note that exceptions to the sections are provided in new §§5.7101 - 5.7110.
Section 5.7011. Amendments to §5.7011 simplify language and change the word "subchapter" to "division" to account for new Division 2, clarifying that the scope of the section is unchanged.
Section 5.7012. Amendments to §5.7012 remove redundant and outdated statutory references. The current versions of statutes listed in §5.7012 are included in 28 TAC §5.7001(c), which provides the general applicability for Subchapter H. An amendment also changes "Board of Insurance" to "Texas Department of Insurance."
Section 5.7013. To conform to Insurance Code Chapter 35, for general liability and certain commercial automobile insurance policies, amendments to §5.7013(a) and (b) remove the requirement that notices must be mailed. Section 5.7013(a) is also amended to remove the specific number of days for notice of cancellation and add a reference to Insurance Code §551.053. Similarly, amendments to §5.7013(b) remove the specific number of days for notice of nonrenewal and add references to Insurance Code §551.054 and §551.1053. New §5.7013(c) is added to replace text removed from §5.7013(a) and (b). New §5.7013(c) provides that an insurer may comply with the section by requiring or permitting its agent to notify the policyholder, but that it is the insurer's responsibility to give notice to the policyholder if the agent fails to notify the policyholder.
Amendments to the sections also reorganize some text and include nonsubstantive plain language revisions to conform the text to current agency drafting style.
Division 2. Mandatory Nonrenewal of Private Passenger Automobile Insurance Policies.
Section 5.7101. New §5.7101 states the purpose and applicability of new Division 2. Division 2 does not apply to policies written through the Texas Automobile Insurance Plan Association (TAIPA) because Insurance Code §551.102 specifically excludes TAIPA from the applicability of Insurance Code Chapter 551, Subchapter C.
Section 5.7102. New §5.7102 defines "notice" to mean the notice of nonrenewal and opportunity to cooperate required by Insurance Code §551.1053(a). This will streamline the rule text, making it easier to read.
Section 5.7103. New §5.7103 reiterates the Insurance Code §551.1053(a) requirement that insurers use reasonable efforts to contact and encourage cooperation from an insured who fails or refuses to cooperate in the investigation, settlement, or defense of a claim or action. The section does not define "reasonable efforts" because what is "reasonable" depends on the facts of each claim.
Section 5.7104. New §5.7104 requires an insurer to send a notice to the named insured within five days after determining an insured is uncooperative. Specifying this timing requirement promotes prompt and transparent communication between the parties and consistency in claims handling across insurers. It also keeps the claims process moving.
Section 5.7105. New §5.7105 requires an insurer to give an insured at least 10 days for the insured to cooperate after the insurer sends the notice. Insurance Code §551.1053(b) sets forth a required condition for nonrenewal--that the insured continues to fail or refuse to cooperate. This means the insurer must give the insured an opportunity to cooperate before it may nonrenew.
Because §551.1053 contemplates an opportunity to cooperate, the insurer must give the insured that opportunity, even if it means extending the policy period. A 10-day period beyond the current term is reasonable and consistent with the existing 10-day cancellation notice requirement under Insurance Code §551.104(e).
Specifying a minimum time period that the insurer must give an insured to cooperate recognizes that an insured could cooperate and avoid nonrenewal on that basis. This helps encourage cooperation.
This section also clarifies that the insured has an opportunity to cooperate at any time during the policy term in which the insurer sends the notice. For example, if an insured had an accident on the last day of the policy term, the insurer would not send the notice until the next policy term, and thus the insurer would not be able to determine whether the insured cooperates until sometime within the next policy term.
Section 5.7106. New §5.7106 requires that if an insurer sends a notice less than 10 days before the end of the policy term, it must extend the policy to give the insured at least 10 days to cooperate. The insurer may charge for the coverage extension. This is not a new concept. Some insurers already extend policy periods if they intend to nonrenew or cancel but do not send notice in time.
If insurers extend a policy period to provide the 10-day minimum period to cooperate, the section allows them to charge for the extension on a pro rata basis.
Section 5.7107. New §5.7107 lists the required contents of a notice sent by an insurer under Insurance Code §551.1053. Prescribing specific, required elements for the notice will help prevent inconsistencies and consumer confusion. These required elements are designed to ensure that the named insured gets clear, complete, and correct information about the claim; what they need to do to cooperate; and the consequences if they do not cooperate.
The section requires insurers to provide either (1) the required notice in both English and Spanish, or (2) an English version with information in Spanish about how to get a Spanish version. According to the 2020 U.S. Census, over 7 million Texas households speak Spanish as their primary language. Providing Spanish instructions will help Spanish-speaking consumers understand their obligation to cooperate. Spanish notice requirements are consistent with other rules intended to alert consumers of important rights or changes in their policies.
Section 5.7108. New §5.7108 provides examples of notices. Providing sample notices encourages clear and consistent communication, saves insurers the time and expense of having to draft language, and helps insurers comply with the law. In addition to English and Spanish notices, TDI is providing a dual-language notice. The notice is in English and contains instructions on how to contact the insurer in Spanish. Plain language examples are consistent with TDI policy and Insurance Code plain language requirements, including §2301.053 regarding plain language form requirements, and §551.056 and §551.1055 regarding cancellation and nonrenewal. Insurers are not required to use a sample notice. If they do use one, they may alter the format, except that §5.7106(a)(2) requires insurers to use at least 10-point font. TDI's website provides plain language resources with guidance on formatting.
Section 5.7109. New §5.7109 reiterates that if the insured does not cooperate after the insurer gives notice, the insurer must nonrenew the policy. However, if an insured does cooperate at any time before policy expiration or the end of the extended term, §5.7109 prohibits the insurer from nonrenewing the policy under Insurance Code §551.1053.
Section 5.7110. New §5.7110 affirms that insurers may nonrenew under other applicable statutes, even if the insured cooperates under Insurance Code §551.1053. When the insurer plans to nonrenew the policy under other applicable law, the insurer must still send a notice of nonrenewal and opportunity to cooperate. Because the notice encourages the insured to cooperate, the insurer must send the notice even when nonrenewal is certain for other reasons.
Date of compliance. Insurance Code §551.1053 became effective on September 1, 2021, and insurers must already comply with it. But to give insurers time to prepare for the requirements in new §§5.7101 - 5.7110, TDI will begin requiring compliance with those sections starting six months after the effective date of their adoption.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Marianne Baker, director, Property and Casualty Lines, has determined that during each year of the first five years the proposed amended and new sections are in effect, there will be no measurable fiscal impact on state and local governments as a result of enforcing or administering the amended and new sections other than that imposed by statute. Ms. Baker made this determination because the proposed amended and new sections do not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed amended and new sections.
Ms. Baker does not anticipate any measurable effect on local employment or the local economy as a result of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amended and new sections are in effect, Ms. Baker expects that administering them will have the public benefit of ensuring that TDI's rules conform to Insurance Code §§551.053, 551.054, 551.104, 551.105 and 551.1053. It will also have the benefit of providing consistency among insurers in implementing §551.1053. The public will benefit from consistent implementation because insureds will receive clear notices encouraging them to cooperate in a claim or be nonrenewed, thus increasing the likelihood that injured third parties will be paid. The public will also benefit from having 60 days rather than 30 days to shop for insurance when their insurer provides notice that their coverage will be nonrenewed.
Ms. Baker expects that the proposed amended and new sections may increase the cost of compliance with Insurance Code §§551.053, 551.054, 551.104, 551.105 and 551.1053. The cost to comply will vary depending on insurers' current operations. Insurers may incur programming, legal, and administrative costs to address new rule requirements, including those related to giving longer notice of nonrenewal and cancellation, developing the notice language, extending the policy period, and providing a Spanish translation of the notice.
Cost of personnel associated with programming information systems. The United States Department of Labor indicates that in Texas, the mean hourly wage for computer programmers is $44.98 (www.bls.gov/oes/current/oes_tx.htm#15-0000). TDI recognizes that costs will vary depending on each insurer's data systems and staffing strategies. Ms. Baker estimates that insurers may need 20 to 40 hours to complete the programming.
Cost of personnel associated with updating notice language in forms. The United States Department of Labor indicates that in Texas, the hourly mean wage for attorneys is $80.10 and legal support workers is $35.71 (www.bls.gov/oes/current/oes_tx.htm#15-0000). According to the 2019 survey of the State Bar of Texas on income and hourly rates, the median hourly rate for attorneys is $291 (https://tinyurl.com/mr7n3vpc). TDI recognizes that costs will vary depending on each insurer's staffing strategies. Ms. Baker estimates insurers will need 15 to 30 hours to complete the drafting necessary to update the notice language.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TDI has determined that the proposed amended and new sections may have an adverse economic effect on small or micro businesses. The cost analysis in the Public Benefit and Cost Note section of this proposal also applies to these small and micro businesses. TDI estimates that the proposed amended and new sections could affect fewer than 150 small or micro businesses.
TDI has determined that the proposed amended and new sections will not have an adverse economic effect or a disproportionate effect on rural communities because the sections do not apply to rural communities.
TDI considered the following alternatives to minimize any adverse effect on small and micro businesses while accomplishing the proposal's objectives:
(1) not proposing new §§5.7101 - 5.7110;
(2) proposing different requirements for small and micro businesses; and
(3) postponing the applicability of new §§5.7101 - 5.7110.
Not proposing §§5.7101 - 5.7110. Policy forms filed with TDI have not complied with Insurance Code §551.1053. To address this problem, the proposal establishes uniform requirements for insurers that implement important consumer protections. Not proposing §§5.7101 - 5.7110 would result in continued insurer misunderstanding of and failure to comply with statutory requirements, which could harm consumers because they may not get the information required under Insurance Code §551.1053. For these reasons, TDI rejected this option.
Proposing different requirements for small and micro businesses. Proposing different standards for small and micro businesses would not accomplish the goal of creating a uniform procedure to implement Insurance Code §551.1053. All consumers should receive clear, consistent, timely notices regarding mandatory nonrenewal of private passenger automobile coverage. In addition, harmonizing rules with statutes is important to ensure fair competition and foster a competitive market for all insurers, to protect and ensure fair treatment of consumers, and to ensure insurance laws are executed. For these reasons, TDI rejected this option.
Postponing the applicability of new §§5.7101 - 5.7110. Providing a six-month delay before the uncooperative insured requirements of new §§5.7101 - 5.7110 apply will help alleviate some of the possible economic impacts on all insurers, including small and micro businesses, by giving insurers the ability to incorporate the requirements with other updates and process changes they are implementing. For these reasons, TDI has decided to incorporate this option into the proposal.
EXAMINATION OF COSTS UNDER GOVERNMENT CODE §2001.0045. TDI has determined that this proposal does impose a possible cost on regulated persons. However, Government Code §2001.0045 does not require any rule amendments or repeals because the proposed amendments and new sections are necessary to implement legislation. The proposed rule implements Insurance Code §§551.104, 551.105, and 551.1053.
GOVERNMENT GROWTH IMPACT STATEMENT. TDI has determined that for each year of the first five years that the proposed amended and new sections are in effect, the proposed rule:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will create a new regulation;
- will not expand, limit, or repeal an existing regulation;
- will not increase the number of individuals subject to the rule's applicability; and
- will positively affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TDI has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TDI will consider any written comments on the proposal that are received no later than 5:00 p.m., central time, on November 6, 2023. Send your comments to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030.
To request a public hearing on the proposal, submit a request before the end of the comment period to ChiefClerk@tdi.texas.gov or to the Office of the Chief Clerk, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030. The request for public hearing must be separate from any comments and received by TDI no later than 5:00 p.m., central time, on November 6, 2023. If TDI holds a public hearing, the department will consider written and oral comments presented at the hearing.
SUBCHAPTER H. CANCELLATION, DENIAL, AND NONRENEWAL OF CERTAIN PROPERTY AND CASUALTY INSURANCE
DIVISION 1. MISCELLANEOUS
28 TAC §§5.7005, 5.7007, 5.7011 - 5.7013
STATUTORY AUTHORITY. TDI proposes amendments to §§5.7005, 5.7007, 5.7011, 5.7012, and 5.7013 under Insurance Code §§551.1053, 551.112, 1951.002, and 36.001.
Insurance Code §551.1053 requires insurers to nonrenew private passenger automobile insurance policies when an insured fails or refuses to cooperate with the insurer in the investigation, settlement, or defense of a claim or action.
Insurance Code §551.112 authorizes the commissioner to adopt rules relating to the cancellation and nonrenewal of insurance policies.
Insurance Code §1951.002 authorizes the commissioner to adopt and enforce rules necessary to carry out the provisions of Insurance Code Title 10, Subtitle C.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
CROSS-REFERENCE TO STATUTE. Sections 5.7005, 5.7007, 5.7011, 5.7012, and 5.7013 implement Insurance Code §551.104 and §551.105.
§5.7005.Special One-Year Rule Applicable Only to Personal Automobile Policies.
(a) Purpose of rule. The [It is the]
purpose of this [special] section is to:
(1) require [provide]
continuity of coverage for [a period of] at least one year
when the policy is written for a lesser term; and [.
Its purpose is also to permit]
(2) allow cancellation at the
expiration of a one-year term when coverage is written for [to cover a period of] more than one year.
(b) Cancellation or nonrenewal. An
insurer [A company] may cancel or nonrenew personal
automobile policies for any legal reason [irrespective
of the reasons which prompt it to do so], if the purpose is
to terminate coverage concurrently with the expiration of any annual
period, beginning with the original effective date of the policy.
The prohibition [contained] in §5.7002 of this title
(relating to Cancellations) does not apply [is inapplicable
] to such cancellations. An insurer that [It
is especially provided, however, that a company which] cancels
on the anniversary, and in accordance with [the provisions of]
this subsection, must give the policyholder at least 60 [30] days prior written notice of cancellation.
(c) Except as provided in Division 2 of this
subchapter (relating to Mandatory Nonrenewal of Private Passenger
Automobile Insurance Policies), personal [Personal]
automobile policies that [which] are written
for [a period of] less than one year must be renewed, at
the option of the insured, for additional periods so as to accumulate
a minimum of 12 months' continuous coverage.
§5.7007.Renewal of Policies.
(a) Except as provided in Division 2 of this
subchapter (relating to Mandatory Nonrenewal of Private Passenger
Automobile Insurance Policies), a [A] policy must
be renewed at expiration, at the option of the policyholder, unless
the insurer [company] has mailed written notice of nonrenewal to the policyholder [of its intention to
decline renewal] at least 60 [30] days before
the policy's [in advance of the policy] expiration
date. The insurer [company] may comply with
this provision by requiring or permitting its agent to notify the
policyholder. However, it is the insurer's responsibility to give [of giving] notice to the policyholder [insured remains with the company] if the agent fails [to
carry out its instructions] to notify the insured.
(b) An insurer [A company] may
not decline to renew personal automobile policies because of the ages
of the insureds.
§5.7011.Violations.
In addition to all other remedies provided by law, any policy
cancellation or restriction of coverage made in violation of this
subchapter is [shall be] deemed to be null and
void and of no effect. Policies on which notice of nonrenewal is not
given as required by this division must [subchapter
shall] be renewed at the request of the insured.
§5.7012.Reason for Declination, Cancellation, or Nonrenewal.
Insurers must provide to policyholders or applicants a written
statement of the reason or reasons for the declination, cancellation,
or nonrenewal of any policy regulated by the Texas Department [State Board] of Insurance [pursuant to the Insurance Code,
Chapter 5,] upon request by the policyholder or applicant. [This
section is applicable to policies prescribed or approved by the board
under authority of the Insurance Code, Articles 5.06, 5.13-1, 5.15,
5.15-1, 5.35, 5.36, 5.53, 5.53-A, 5.56, 5.57, 5.81, and 5.91.]
§5.7013.Notice Requirements for Cancellation and Nonrenewal for General Liability and Certain Automobile Insurance Policies.
(a) An insurer may cancel general [General
] liability insurance policies and commercial automobile
insurance policies to which this section applies [may be cancelled
by the company] by providing the notice required by Insurance
Code §551.053, concerning Written Notice of Cancellation Required [mailing written notice to the insured of its intent to cancel at least
45 days prior to the effective date of cancellation], except
as provided by [in] §5.7014 of this title
(relating to Exceptions to Cancellations and Nonrenewal Notice Requirements
for General Liability and Certain Automobile Insurance Policies).
[However, the responsibility of giving notice to the insured
remains with the company if the agent fails to carry out its instructions
to notify the insured.]
(b) General liability insurance policies and automobile
insurance policies to which this section applies must be renewed at
expiration, at the option of the policyholder, unless the company
has provided the [mailed] written notice required
by Insurance Code §551.054, concerning Written Notice of Nonrenewal
Required, or by Insurance Code §551.1053, concerning Mandatory
Nonrenewal of Private Passenger Automobile Insurance Policies. If [to the policyholder of its intention to decline renewal at least 45
days in advance of the policy expiration date except as provided in §5.7014(d)
of this title (relating to Exceptions to Cancellation and Nonrenewal
Notice Requirements for General Liability and Certain Automobile Insurance
Policies). The company may comply with this provision by requiring
or permitting its agent to notify the policyholder. However, the responsibility
of giving notice to the insured remains with the company if the agent
fails to carry out its instructions to notify the insured. Upon failure
of] the insured does not [to] pay the
renewal premium when due, the insurer's [company's]
obligation to renew terminates on the policy's [policy on its] expiration date [terminates], regardless
of whether the company has given [any] notice of nonrenewal
[intent to decline renewal].
(c) An insurer may comply with this section by requiring or permitting its agent to notify the policyholder. However, it is the insurer's responsibility to give notice to the policyholder if the agent fails to notify the policyholder.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 18, 2023.
TRD-202303480
Jessica Barta
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: November 5, 2023
For further information, please call: (512) 676-6555
STATUTORY AUTHORITY. TDI proposes new §§5.7101 - 5.7110 under Insurance Code §§551.1053, 551.112, 1951.002, and 36.001.
Insurance Code §551.1053 requires insurers to nonrenew private passenger automobile insurance policies when an insured fails or refuses to cooperate with the insurance company in the investigation, settlement, or defense of a claim or action.
Insurance Code §551.112 authorizes the commissioner to adopt rules relating to the cancellation and nonrenewal of insurance policies.
Insurance Code §1951.002 authorizes the commissioner to adopt and enforce rules necessary to carry out the provisions of Insurance Code Title 10, Subtitle C.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
CROSS-REFERENCE TO STATUTE. Sections 5.7101 - 5.7110 implement Insurance Code §551.1053.
§5.7101.Division Purpose and Applicability.
(a) This division implements Insurance Code §551.1053, concerning Mandatory Nonrenewal of Private Passenger Automobile Insurance Policies.
(b) Insurance Code §551.1053 requires insurers to nonrenew a policy if the insured fails or refuses to cooperate with an insurer in an investigation, settlement, or defense of a claim or action.
(c) This division applies to third-party liability claims and actions:
(1) involving insurers identified in Insurance Code §551.101, concerning Definition; and
(2) on private passenger automobile insurance policies that are:
(A) personal automobile insurance policies, or
(B) policies written for any governmental entity or political subdivision identified in Insurance Code §551.102(4), concerning Applicability of Subchapter.
(d) This division does not apply to policies written through the Texas Automobile Insurance Plan Association.
§5.7102.Definition.
In this division, "notice" means the notice of nonrenewal and opportunity to cooperate required by Insurance Code §551.1053(a), concerning Mandatory Nonrenewal of Private Passenger Automobile Insurance Policies.
§5.7103.Reasonable Efforts.
An insurer must use reasonable efforts to contact and encourage cooperation from an insured who fails or refuses to cooperate in an investigation, settlement, or defense of a claim or action.
§5.7104.Notice Timing.
(a) An insurer must send a notice to the named insured within five days after determining that the insured failed or refused to cooperate.
(b) If an insurer determines that an insured is not cooperating, the insurer must send the notice even if the insurer has already sent a notice of nonrenewal for another reason.
§5.7105.Cooperation Timeframe.
(a) An insured may cooperate at any time during the policy term in which a notice is sent or during any extended term required under §5.7106 of this title (relating to Extension of Term and Additional Premium). If the insured cooperates, the insurer may not nonrenew for failure or refusal to cooperate.
(b) An insurer must give the insured at least 10 days to cooperate from the date the insurer sends the notice, regardless of when the policy term ends.
§5.7106.Extension of Term and Additional Premium.
(a) If a notice is sent less than 10 days before the end of the policy term, the insurer must extend the policy term to give the insured 10 days to cooperate.
(b) An insurer may charge additional premium for any extended term on a pro rata basis, based on the premium for the expiring term.
§5.7107.Contents of Notice.
(a) A notice must be written in:
(1) plain language (see TDI's website for plain language guidance); and
(2) at least 10-point type.
(b) The notice must inform the named insured:
(1) of the identity of the insured who failed or refused to cooperate;
(2) how the insured failed or refused to cooperate;
(3) of the insurer's attempts to contact the insured;
(4) of the claim number or action for which the insurer is requesting cooperation;
(5) that the insurer will not renew the policy if the insured continues to fail or refuse to cooperate;
(6) that the insured still has time to cooperate;
(7) that the insured must cooperate before the end of the policy term (or any extended term) to stop nonrenewal of the policy;
(8) that if the insured cooperates, then the insurer will not nonrenew the policy for failure or refusal to cooperate;
(9) that even if the insured cooperates, the insurer may nonrenew for other reasons;
(10) of the date of nonrenewal; and
(11) of any other information the insurer deems appropriate.
(c) Insurers may provide the notice either:
(1) in both English and Spanish; or
(2) in English with a statement in Spanish on the first page that the policy will be nonrenewed if the insured continues to fail or refuse to cooperate. The statement must list a phone number where an insured can speak in Spanish with the insurer's representative to discuss the items listed in subsection (b) of this section.
(d) Insurers are not required to file the notice with TDI unless requested.
(e) The notice may include additional information that does not violate other statutes or rules.
§5.7108.Sample Notice of Nonrenewal and Opportunity to Cooperate.
The figures in this section provide examples of written notices that comply with §5.7107 of this title (relating to Contents of Notice). Insurers are not limited to using the examples in this section; they may use other content and formatting as long as the notice they provide complies with this division.
Figure 1: 28 TAC §5.7108 (.pdf)
Figure 2: 28 TAC §5.7108 (.pdf)
Figure 3: 28 TAC §5.7108 (.pdf)
§5.7109.Nonrenewal Under Insurance Code §551.1053.
(a) If an insured does not cooperate after the insurer provides a notice, the insurer must nonrenew the policy at the end of the policy term or at the end of the extended term under §5.7106 of this title (relating to Extension of Term and Additional Premium).
(b) Insurance Code §551.105, concerning Nonrenewal of Policies; Notice Required, and Insurance Code §551.106, concerning Renewal and Reinstatement of Personal Automobile Insurance Policies, do not apply where they conflict with the requirement to nonrenew the policy under Insurance Code §551.1053.
(c) If the insured cooperates before the end of the policy term or the end of the extended term under §5.7106 of this title, then the insurer may not nonrenew under this division.
§5.7110.Nonrenewal Under Other Statutes.
(a) An insurer may nonrenew a policy for a reason other than an insured's failure or refusal to cooperate under §5.7109 of this title (relating to Nonrenewal Under Insurance Code §551.1053) if the insurer complies with other rules and statutes governing renewal and nonrenewal, including Insurance Code §551.105, concerning Nonrenewal of Policies; Notice Required, and Insurance Code §551.106, concerning Renewal and Reinstatement of Personal Automobile Insurance Policies.
(b) To encourage cooperation, even if an insurer has already sent a notice of nonrenewal for another reason, the insurer must still send the notice required by Insurance Code §551.1053(a).
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 18, 2023.
TRD-202303483
Jessica Barta
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: November 5, 2023
For further information, please call: (512) 676-6555
SUBCHAPTER T. SUBMISSION OF CLEAN CLAIMS
The Texas Department of Insurance (TDI) proposes to amend 28 TAC §21.2819, concerning extensions of time frame requirements on providers and health plans for claim submissions and payments in Insurance Code §§843.337, 843.342, 1301.102, and 1301.137--prompt pay deadlines--due to a catastrophic event. The proposed amendments to §21.2819 implement Senate Bill 1286, 88th Legislature, 2023.
EXPLANATION. This proposal implements SB 1286, which provides two ways that an entity--an HMO, a preferred provider carrier, an exclusive provider carrier, a physician, or a provider--can qualify for an extension of a prompt pay deadline after a catastrophic event. An entity can extend its prompt pay deadlines after a catastrophic event either under an extension granted by commissioner notice or by TDI approving a request for an extension submitted by the entity.
SB 1286 is a TDI biennial recommendation. During the COVID-19 pandemic, TDI issued bulletins about extensions of various deadlines. There were questions about processes for these extensions; TDI agreed clarifications were necessary and made a recommendation to the legislature in its Biennial Report. Based on this, the biennial recommendation's goal was to clarify (1) the standards for entities requesting extensions to prompt pay deadlines; (2) the duration of the extensions; and (3) TDI's authority to approve, limit, or disapprove requests. This proposal provides needed clarity in the process for requesting and receiving prompt pay deadline extensions.
Section 21.2819 provides the process for an entity to notify TDI about its need for an extension of prompt pay deadlines due to the effects of a catastrophic event on its normal business operations.
An amendment to subsection (a) clarifies the date range in which an entity must notify TDI that a catastrophic event has interfered with normal business operations.
One amendment to subsection (b) clarifies how entities will electronically communicate with TDI regarding an extension, and what information they need to provide. Rather than notifying TDI a second time at the end of the business interruption, entities will be required to provide all necessary information in their initial request. Another amendment eliminates the need for the notification to be a sworn affidavit, as that is an unnecessary additional expense to entities that are experiencing administrative challenges.
Amendments are also proposed to the required notification elements in subsection (b) to better track extension requests; for example, a physician's or provider's national provider identification number or a managed care carrier's (MCC's) NAIC number will be required. The proposed amendments also require a statement that there is a substantial interference to normal business operations, to ensure that the statutory requirements are met. Some entities contract with third parties or delegees to administer their payment requirements. In that instance, the entity will notify TDI that a catastrophic event interrupted the business operations of the third party and that interruption is also affecting the entity's business operations. TDI will take this business arrangement into consideration in its review of a request.
The proposed amendments also require an entity to provide the initial date of the interference, the expected end date, and information needed to identify entities and locations that are affected by an event.
Proposed amendments to subsection (c) clarify the time frame of an extension. If the extension is related to a notice from the commissioner, the notice will specify the extension's expected end date. For extension requests independent of a commissioner notice, the applicable deadlines in 28 TAC §§21.2804, 21.2806 - 21.2809, and 21.2815 will be tolled until TDI either disapproves the request or sends an approval with a specified end date.
In addition, in new subsection (d) the proposal sets out a process for requesting an extension request, should an entity require more time than a commissioner notice or TDI approval previously allowed. The entity must submit this request at least three business days before the existing extension's expiration explaining why it needs additional time.
The proposed amendments add subsection (e) to address the possibility that TDI may need additional information when determining whether to approve a request for an extension. The new subsection also specifies that TDI may disapprove a request if the nature of the event does not meet the definition of a catastrophic event or may limit a requested extension if the duration of interruption to normal business operations is not proportional to the nature of the catastrophic event.
The amendments clarify that extensions will be based on the date the catastrophic event begins substantially interfering with normal business operations rather than requiring the date of the event itself, as events such as pandemics may affect business operations at different times.
Lastly, the proposed amendments include nonsubstantive editorial and formatting changes to conform the section to the agency's current drafting style and usage guidelines and to improve the rule's clarity. These changes include modifying the references to TDI for consistency.
FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Rachel Bowden, director of the Regulatory Initiatives Office, has determined that during each year of the first five years the proposed amendments are in effect, there will be no measurable fiscal impact on state and local governments as a result of enforcing or administering the amendments, other than that imposed by statute. Ms. Bowden made this determination because the proposed amendments do not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed amendments.
Ms. Bowden does not anticipate a measurable effect on local employment or the local economy as a result of this proposal.
PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amendments are in effect, Ms. Bowden expects that administering the proposed amendments will have the public benefit of ensuring that TDI's rules conform to Insurance Code §§843.337, 843.342, 1301.102, and 1301.137.
Ms. Bowden expects that the proposed amendments will not increase the cost of compliance with Insurance Code §§843.337, 843.342, 1301.102, and 1301.137 because the amendments do not impose requirements beyond those in the statutes and the current rule. The existing rule addresses notifying TDI any time a governed entity is unable to meet a prompt pay deadline. SB 1286 also affords a governed entity the ability to qualify for an extension upon TDI's approval of a request. The proposed amendments specify the process for these distinct options. As a result, the costs associated with submitting notifications to TDI under the proposed amendments result from the enforcement or administration of current regulations and SB 1286.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TDI has determined that the proposed amendments will have no adverse effect on small or micro businesses or rural communities. The cost analysis in the Public Benefit and Cost Note section of this proposal, which explains that associated costs are attributable to SB 1286 and not the proposed rule, also applies to these small and micro businesses and rural communities.
EXAMINATION OF COSTS UNDER GOVERNMENT CODE §2001.0045. TDI has determined that this proposal does not impose an increased cost on regulated persons. However, even if it did, no additional rule amendments are required under Government Code §2001.0045 because the proposed amendments to §21.2819 are necessary to implement legislation. The proposed amendments implement Insurance Code §§843.337, 843.342, 1301.102, and 1301.137, as amended by SB 1286. The cost analysis in the Public Benefit and Cost Note section of this proposal explains that any costs for regulated persons are attributable to SB 1286 and not the proposed rule.
GOVERNMENT GROWTH IMPACT STATEMENT. TDI has determined that for each year of the first five years that the proposed amendments are in effect, the proposed rule:
- will not create or eliminate a government program;
- will not require the creation of new employee positions or the elimination of existing employee positions;
- will not require an increase or decrease in future legislative appropriations to the agency;
- will not require an increase or decrease in fees paid to the agency;
- will not create a new regulation;
- will expand, limit, or repeal an existing regulation;
- will not increase or decrease the number of individuals subject to the rule's applicability; and
- will not positively or adversely affect the Texas economy.
TAKINGS IMPACT ASSESSMENT. TDI has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.
REQUEST FOR PUBLIC COMMENT. TDI will consider any written comments on the proposal that are received by TDI no later than 5:00 p.m., central time, on Nov. 6, 2023. Send your comments to ChiefClerk@tdi.texas.gov or to the Chief Clerk's Office, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030.
To request a public hearing on the proposal, submit a request before the end of the comment period to ChiefClerk@tdi.texas.gov or to the Chief Clerk's Office, MC: GC-CCO, Texas Department of Insurance, P.O. Box 12030, Austin, Texas 78711-2030. The request for public hearing must be separate from any comments and received by TDI no later than 5:00 p.m., central time, on Nov. 6, 2023. If TDI holds a public hearing, TDI will consider written and oral comments presented at the hearing.
STATUTORY AUTHORITY. TDI proposes amendments to §21.2819 under Insurance Code §§843.151, 843.337, 1301.007, 1301.102, and 36.001.
Insurance Code §843.151 authorizes the commissioner to adopt rules necessary to implement Chapter 843.
Insurance Code §843.337 authorizes the commissioner to adopt rules necessary to implement TDI's approval of a physician or provider's request for an extension of claim submission deadlines due to a catastrophic event that substantially interferes with normal business operations.
Insurance Code §1301.007 authorizes the commissioner to adopt rules necessary to implement Chapter 1301.
Insurance Code §1301.102 authorizes the commissioner to adopt rules necessary to implement TDI's approval of a physician or provider's request for an extension of claim submission deadlines due to a catastrophic event that substantially interferes with normal business operations.
Insurance Code §36.001 provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of TDI under the Insurance Code and other laws of this state.
CROSS-REFERENCE TO STATUTE. Section 21.281 implements Insurance Code §§843.337, 843.342, 1301.102, and 1301.137.
§21.2819.Catastrophic Event.
(a) An MCC, a physician, or a provider must notify
the Texas Department of Insurance (TDI) [department]
if, due to a catastrophic event, it is unable to meet the deadlines
in §21.2804 of this title (relating to Requests for Additional
Information from Treating Preferred Provider), §21.2806 of this
title (relating to Claims [Claim] Filing Deadline), §21.2807
of this title (relating to Effect of Filing a Clean Claim), §21.2808
of this title (relating to Effect of Filing [a] Deficient
Claim), §21.2809 of this title (relating to Audit Procedures),
and §21.2815 of this title (relating to Failure to Meet the Statutory
Claims Payment Period), as applicable. The entity must send the notification
required under this section [subsection] to TDI
[the department] within five days of the date the
catastrophic event began substantially interfering with the normal
business operations of the entity, or as specified in a notice published
by the commissioner regarding the catastrophic event.
(b) An [Within 10 days after the entity
returns to normal business operations, the] entity must send the
notification required under this section [a certification
of the catastrophic event] to TDI [the Texas
Department of Insurance] by email to PromptPay@tdi.texas.gov,
unless an alternative electronic method is provided by TDI for a specified
event [promptpay@tdi.texas.gov]. The notification [certification] must:
(1) be [in the form of a sworn affidavit] from:
(A) if for a physician or a provider, the
physician, [the] provider, [the] office manager,
[the] administrator, or their designee [designees]; or
(B) if for an MCC, a corporate officer or a corporate officer's designee;
(2) identify the specific nature [and date]
of the catastrophic event; [and]
(3) identify the first date [length
of time] the catastrophic event caused an interruption in the
claims submission or processing activities of the physician, [the]
provider, or [the] MCC; [.]
(4) identify the date the physician, provider, or MCC expects to resume normal business operations;
(5) state that the catastrophic event is substantially interfering with the entity's normal business operations;
(6) include the contact information for the physician, provider, or MCC, including each entity's name, email address, phone number, and:
(A) if for a physician or provider, the national provider identification number; or
(B) if for an MCC, the entity's NAIC number; and
(7) include the physical address of each business or practice location affected by the catastrophic event.
(c) A notification [valid certification
to the occurrence of a catastrophic event] under this section
tolls the applicable deadlines in §§21.2804, 21.2806, 21.2807,
21.2808, 21.2809, and 21.2815 of this title for the number of days between
the date identified in subsection (b)(3) of this section and
any date specified in a notice published by the commissioner or listed
in TDI's approval of a request, or the date TDI disapproves a request. [as of the date of the catastrophic event.]
(d) If a catastrophic event continues to substantially impair an entity's normal business operations past the date in a notice published by the commissioner or in TDI's approval of an extension request, then the entity must send an additional notification meeting the requirements of this section to TDI at least three business days before the expiration of the existing extension. The new notification must explain why an additional extension is needed.
(e) TDI will contact the physician, provider, or MCC if more information is needed. TDI may disapprove a request if the nature of the event does not meet the definition of a catastrophic event that substantially interferes with the entity's normal business operations. TDI may limit a requested extension if the identified duration of interruption to normal business operations is not proportional to the nature of the catastrophic event.
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 20, 2023.
TRD-202303511
Jessica Barta
General Counsel
Texas Department of Insurance
Earliest possible date of adoption: November 5, 2023
For further information, please call: (512) 676-6555