A Legislative Preview for the 77th Session of the Texas Congress

Now that the presidential election saga has come to a close and a new governor and lieutenant governor are in place, the new guard at the Texas capitol has begun making decisions and appointments for the upcoming 77th legislative session.

Many observers say the long-hanging presidential election was just one of a multitude of issues that will affect whether key bills to the insurance industry will get a glance from legislators. Simply put, there are a number of items that must take precedent this session. So many, in fact, that they may not all be addressed, including potentially important insurance legislation.

During the 76th session, which adjourned May 31, 1999, the legislature passed approximately 90 bills amending the Texas Insurance Code or directly affecting insurers, including 12 of 16 recommendations made by the Texas Department of Insurance. Bo Gilbert, director of government affairs for the Independent Insurance Agents of Texas, said this session will likely not see quite as much insurance activity.

“We still have some significant transportation issues throughout the state that need to be addressed, clean water, clean air, prison guards, education—all of that has to be addressed—those cannot be ignored,” Gilbert said. “On top of that, there’s redistricting. [The less-pressing bills will] get looked at, but I believe you’ll see a lot of those not leaving committee.”

The bills directly affecting the insurance industry that are non-controversial, like agent licensing, will have the best chance of making it to the floor, he said.

TDI Commissioner Jose Montemayor made 14 recommendations to the Legislature, which he filed Dec. 27. The recommendations affecting the property/casualty industry include:

Agent licensing reform—amend the agent licensing sections of the Insurance Code to reflect the insurance agent licensing policy set out by the Gramm-Leach-Bliley Act. Montemayor suggested legislation similar to SB956, which was vetoed by Gov. Bush because of problems not related to the agent licensing provisions of the bill

Confidentiality of exam information—amend the Insurance Code or other law to provide specific enabling authority for the department and other functional regulators under the Gramm-Leach-Bliley Act to enter into information sharing agreements that permit the entities to share among themselves confidential and privileged information.

Extend approval or denial of acquisitions—amend the Insurance Code to extend from 45 to 60 days the commissioner’s time frame for approving or denying affiliations for insurers.

Amendment of loss control statues to expedite licensing of companies—amend Insurance Code and a section of the Labor Code to require insurance companies to file and obtain approval of accident prevention and loss control information before actually writing these lines of insurance.

Enhanced rulemaking authority for the commissioner—amend the Insurance Code to allow the insurance commissioner to amend or adopt rules as needed to address rapid industry changes, federal law and rules.

Nursing home liability insurance—amend the Insurance Code to include for-profit nursing homes into the joint underwriting association, and subject to the same rules that apply for not-for-profit homes concerning policy forms, rates and rules.

Regulation of commercial auto insurance —amend the Insurance Code to remove commercial auto from the requirements of promulgated forms and endorsements and the benchmark rating system and place the regulation of commercial automobile insurance under the provisions governing the writing of general liability and commercial property insurance.

Change automobile and homeowners benchmark rate hearings to rulemaking proceedings—amend the Insurance Code concerning benchmark rate hearings and TAIPA rates to make the rate proceedings, allowing the commissioner to promulgate the benchmark and TAIPA rates under rulemaking authority.

Collection of statistical information for county mutuals—amend the Insurance Code to make county mutual insurers subject to changes in statistical plan reporting requirements.

Short-term auto coverage for Mexican citizens entering Texas—amend the Insurance Code to authorize the commissioner of insurance to develop and implement a program to provide short-term automobile liability coverage to people entering Texas from Mexico to ensure they have sufficient financial responsibility.

Amend the composition of the board of directors of guaranty associations—amend the Insurance Code to specify the commissioner of insurance shall be a non-voting member of the board of directors.

Unauthorized insurance—amend the Insurance Code to define the business of insurance in broader terms and delete certain provisions that seem to require the insurance activities to occur in Texas to constitute the business of insurance.

Numerous insurance related bills have also been pre-filed (including those listed in the sidebar). For a comprehensive, updated list of all bills that have been filed, visit http://www.house.state.tx.us/. According to Ron Cobb and John Marlow of the American Insurance Association, four bills stand the best chance of being passed.

“I think privacy is the big overriding issue,” said Cobb, vice president of AIA’s Southwest region. “We obviously have a keen interest that the Gramm-Leach-Bliley Act stays intact and is not violated in any way.”

Cobb said the bill that will be introduced this year will have done away with the bail bond provision it included during the last legislative session. Aside from that, Cobb believes the bill will receive minimal changes. “We would oppose any major tinkering with the bill as, I think, would most of the industry. All the insurance interests had agreed on the bill, and there was a general agreement that this time it would be on a fast track.”

Along with privacy, agent licensing and workers’ comp bills will be at the forefront of the insurance agenda at the capitol this session. According to Marlow, who is the director of public affairs for AIA’s Southwest region, they could likely be the only bills on that agenda this session. The lingering presidential election has bookended the session with time constraints.

“It actually accentuates the time crunch…that redistricting places on the system,” he said. Cobb agreed, saying some of the housekeeping-type bills could pass, “but anything that doesn’t have a lot of support by March and is moving along at a good pace” will be “dead in the water.”

That seems to be the general consensus throughout the industry. Rosemarie Marshall, president of the Texas Surplus Lines Association and a vice president with Heath Insurance Brokers in Dallas, said little will take place this session that will affect the surplus lines industry.

“The thinking seems to be that a lot of focus for the legislature is going to be on redistricting, so there’s probably not going to be much happening that will affect us,” she said.

Even though privacy is a top priority, one bill addressing that issue could get some hard-hitting opposition from the insurance industry. Senate Bill 11, filed by Sen. Jane Nelson, R-Flower Mound, addresses protecting the privacy of medical records and provides penalties for not doing so. Marlow said it is similar to a proposition passed in Maine last year that was later revoked in special session.

“There are significant problems with SB 11, and the property casualty industry, as well as the business community as a whole, will probably be rising up against it,” Marlow said.

“SB 11 is intended to provide protection against the unlawful disclosure of medical information by health insurers. However, the bill fails to distinguish property and casualty insurers and particularly workers’ compensation carriers, which may not be able to perform legitimate insurance functions without access to some medical information,” Marlow explained. The bill, he said, would permit claimants to revoke their consent for sharing personal information at any time during the claims process, making potential fraud investigations that much more difficult.

“Any medical records privacy legislation must guarantee an insurer’s ability to perform legitimate business functions such as administering and evaluating claims, fraud detection and meeting related obligations under their contracts and the law,” said Ron Cobb. “We are hopeful a more reasonable approach which recognizes these very important distinctions will be found.”

Sen. Nelson was unavailable to answer direct questions about the bill, but her office prepared a statement, saying Nelson “actively sought input from all sides of the health care community on this issue, including representatives from [the] insurance industry who had an opportunity to participate in our work group meetings throughout the past year. That input helped [Sen. Nelson] craft a bill that delivers what an overwhelming majority of Texans want—confidentiality with respect to their medical records—while still being sensitive to the practical concerns of business.”

Another bill that could see heavy opposition is Rep. Lon Burnam’s HB 304. The bill relates to the application of the flex-rating system for county mutuals, Lloyd’s associations and reciprocal or interinsurance exchanges. The bill calls for changes in the insurance code that would do away with many regulatory exemptions presently enjoyed by such companies.

Willy Graves, president of Progressive County Mutual Insurance Co. said the idea of flex-rating is “archaic” and “arduous.”

“We don’t think that extending those requirements to even more companies would help the situation,” he said. “We think a better solution long-term is open competition.”

Graves anticipates several bills affecting the way county mutuals conduct business to be filed this session. He also expects them to be similar to those filed during the last session, including a file-and-use bill, open competition for all companies, and, of course, Burnam’s flex-rating bill.

“We will certainly be paying attention to the various bills that get filed,” he said. “And we may very well testify at some point on rate regulation.”

John Marlow concurred with Graves, saying it is time Texas “put the benchmark system in the mothballs and move into the 21st Century along with numerous other states that have moved toward a more competitive rating system.

“Our view is this is the exact opposite direction regulatory reform should go in Texas,” Marlow said. “What we need is a more competitive rating system.”

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