Property

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Property Casualty 2008Compliance Conference
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TPA Licensing including Workers Compensation
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Discussion Topics

• Introduction
• House Bill 472 (80th Legislature)
• New Rules
• TPA Applications
• Q A

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Introduction

• The TPA Section moved effective April 1st Second
  level
  
• NEW ADDRESS Financial Program, TPA/Premium
  Finance Section, MC 305-TPA/PF
  
• Street Address 333 Guadalupe, Austin, Texas,
  78701
  
• Mailing Address P O Box 149104, Austin, Texas,
  78714-9104
  
• Phone [phone]
• Fax [phone]
• Manager David Moskowitz [phone]
• Staff Elaine Cabrera [phone]
• Robert Kuempel [phone]

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Introduction continued

• LICENSED TPAs IN TEXAS
• 270 Domestic Administrators
• 482 Foreign Administrators
• 114 Insurers/HMOs Registered as Administrators
• 866 TOTAL Licensed as of APRIL, 2008
• In comparison 840 were licensed FY07

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Introduction continued

• TPAS Licensed in Texas administer
• 73,380 fully insured plans, which affect
  31,890,520 Texas lives

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House Bill 472

• AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
• TPAs are entities to which insurance companies
  delegate authority for claim adjusting,
  processing, and bill payment. Most of these
  administrators are currently regulated by the
  Texas Department of Insurance (TDI) under the
  Texas Third Party Administrator Act. However,
  workers compensation administrators are exempted
  from such regulation.
• HB 472 provides that workers compensation TPAs
  are subject to regulation by the Texas Third
  Party Administrator Act. The bill also increases
  the auditing and reporting requirements of all
  TPAs to TDI.

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House Bill 472 continued

• Highlights of Changes to HB 472
• Additional exceptions were added for
• Affiliates of self-insurers meeting certain
  conditions
  
• Processing agents meeting certain conditions
• Certain insurance agents
• Note The law now provides over twenty (20)
  different exceptions

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House Bill 472 continued

• The Commissioners rulemaking authority was
  amended to authorize the Commissioner to adopt
  rules that are fair, reasonable, and appropriate
  to augment and implement Chapter 4151, including
  rules establishing financial standards, reporting
  requirements, and required contract provisions.
• Other authority for Commissioner rule-making is
  included throughout HB 472

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House Bill 472 continued

• Issues of Interest
• Notification requirements regarding change of
  control in a TPAs ownership
  
• Notification requirements relating to changes in
  facts or circumstances affecting a TPAs
  qualifications for a certificate of authority
  
• Requirements related to written agreements
• Retention and Transfer of Records

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House Bill 472 continued

• Requirements related to notice of TPA services
• Requirements related to referral of claim or loss
  to TPA
  
• Semiannual audit requirements
• On-site Audit requirements
• Compensation of TPA
• Annual Report Requirements
• Maintenance of Qualifications Requirements

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House Bill 472 continued

• Specific Requirements Related to Workers
  Compensation Large Deductible Policies
  
• Added Subchapter G, relating to disciplinary
  actions and penalties

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House Bill 472 continued

• Want a copy of HB472?.....
• http//www.capitol.state.tx.us/tlodocs/80R/billte
  xt/pdf/HB00472F.pdf
  

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New Rules

• 3 Sets of TDI Proposed Rules Implement HB 472
• 28 TAC 5.6401 5.6405, 5.6408, 5.6409, and
  5.6411 - 5.6413 (relating to Group Self Insurance
  Coverage)
  
• 28 TAC 1.501 and1.503 (relating to Effect of
  Criminal Conduct)
  
• 28 TAC Chapter 7, Subchapter P (relating to
  Administrators)

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New Rules continued

• GROUP SELF-INSURANCE COVERAGE28 TAC 5.6401
  5.6405, 5.6408, 5.6409, and 5.6411 - 5.6413
  
• Proposed Amended and New Sections
• Clarify scope of division and add new definitions
  
  
• Define roles and responsibilities of delegated
  entities
  
• Clarify information required to be submitted with
  application for certificate of approval,
  including fingerprints
  
• Clarify format and amount of fidelity and
  performance bonds
  
• Clarify information to be included in a groups
  business plan

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New Rules continued

• GROUP SELF-INSURANCE COVERAGE28 TAC 5.6401
  5.6405, 5.6408, 5.6409, and 5.6411 - 5.6413
  
• Proposed Amended and New Sections
• Clarify notification requirements and
  responsibility for ongoing compliance
  
• Increase excess insurance requirements
• Permit books and records to be located outside
  the State of Texas
  
• Clarify contracting requirements
• Require Operational Review Plan
• Clarify Membership Cancellation or Termination
  Filing Requirements

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New Rules continued

• EFFECT OF CRIMINAL CONDUCT28 TAC 1.501
  and1.503
  
• Proposed Amended Sections
• Require administrators under the Insurance Code
  Chapter 4151 to submit a complete set of
  fingerprints at or near the time they submit an
  application for a certificate of authority.

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New Rules continued

• ADMINISTRATORS28 TAC Chapter 7, Subchapter P
• Anticipated New Section Subject Matter
• Purpose and Scope (clarifying when certificate of
  authority is required and applicability of
  subchapter to certain persons)
  
• Definitions
• Requirements Related to Application for
  Certificate of Authority
  
• Requirements Related to Ownership Interest and
  Change of Control
  
• Facts and Circumstances Affecting Issuance of
  Certificate of Authority

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New Rules continued

• ADMINISTRATORS28 TAC Chapter 7, Subchapter P
• Anticipated New Section Subject Matter
• Fidelity Bond Requirements
• Annual Report Requirements (change of due date)
• Operational Review and On-Site Audit
  Requirements
  
• Fiduciary Bank Account Requirements
• Contracting Requirements
• Prohibited Transactions
• Transfer and Maintenance of Records
• Hazardous or Injurious Operating Conditions

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TPA Application

• LHL079 lists all items to be submitted
• Name Application form (FIN300) this is a
  Company License form that is shared by TPA
  Section
  
• Should match with organizational documents
  EXACTLY
  
• Assumed Name Certificate (LHL078) DBAs or
  Assumed Names should be filed with the Texas
  Secretary of State.
  
• Officers and Directors Page (FIN306) this is
  also a Company License form that TPA Section
  shares
  
• it lists most frequently used types of officers,
  but may be amended
  
• lists Directors, but may be amended for an LLC to
  include a Manager, etc.

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TPA Application continued

• Biographical on each person listed on Officers
  and Directors Page (LHL081)
  
• We accept NAIC form
• Proposed rules require a complete set of
  fingerprints for applicants for and persons who
  have the right to control, direct, or manage the
  affairs of an authorized entity under the
  Insurance Code Chapter 4151
• Ownership information any one with 10 or more
  stock
  
• Narrative describing TPA activities, personnel
  and experience, facilities, list of other states
  that you do business in as a TPA
  
• Financials
• Three years of audited financials
• If unaudited, include income and balance sheets
  and be sure to have Treasurer/CFO certify
  
• If applicant has been in existence less than
  three years, provide financials of owners (income
  tax if individuals)

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TPA Application continued

• Copy of Fidelity Bond
• Not a Surety Bond
• Provides employee dishonesty coverage
• Applicant is a named insured
• Service of Process Form (LHL082) - on Foreign
  applicants only
  
• Organizational Documents
• Articles of Incorporation and all amendments
  CURRENTLY certified by Secretary of State (Home
  State), or similar documents, such as Articles of
  Formation, Articles of Organization, or
  Partnership Agreement
• By-laws, Operating Agreement, Limited Liability
  Agreement
  
• Certified by Corporate Secretary that they are
  true and correct as of (date prepared)

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TPA Application continued

• Certificate of Good Standing from TEXAS
  Comptroller
  
• Payment of 500.00 application fee
• Contact information
• Contact person should be a person located at the
  mailing address. If a representative is
  assisting with the application process only,
  provide that contact information in the cover
  letter.
• Physical address must be in Texas if applicant is
  a Domestic Corporation

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TPA Application continued

• INSTRUCTIONS FOR FILINGADMINISTRATORS ANNUAL
  REPORT
  
• TPAs FILING LHL080 (This submission has a 100.00
  filing fee)
  
• Complete Exhibits A-D LHL088. Download the forms
  from www.tdi.state.tx.us/forms/lhllicensing/lhl088
  tpaexhibt.xls and email them to
  TPA_at_tdi.state.tx.us or print and mail with the
  annual report. Please total the applicable
  columns.
• Transfer the total number of plans and lives
  identified in the Exhibits to Section 7 of
  LHL080
  
• Date and sign form
• Report any changes in contact information on the
  back
  
• Submit any changes to your organizational
  documents
  
• Complete an Officers and Directors Page FIN306
• Provide a copy of your current financial
  statement
  
• Provide a photo COPY of the completed maintenance
  tax form filed with Texas Comptrollers Office
  www.window.state.tx.us/taxinfo/taxforms/25-102.pdf
  

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TPA Application continued

• INSURERS/HMOs FILING LHL084 (This submission has
  a 100.00 filing fee)
  
• Complete Exhibits A-D LHL088. Download these
  forms from www.tdi.state.tx.us/forms/lhllicensing/
  lhl088tpaexhibt.xls and email them to
  TPA_at_tdi.state.tx.us or print and mail with the
  annual report. Please total the applicable
  columns
• Transfer the total number of plans and lives
  identified in the Exhibits to Section 3 of
  LHL084.
  
• Date and sign form
• Report any changes in contact information on the
  back
  
• Provide updates to the narrative on file with
  TDI
  
• Provide a photo COPY of the completed maintenance
  tax form (see line 12) filed with Texas
  Comptrollers Office www.window.state.tx.us/taxinf
  o/taxforms/25-102.pdf

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QUESTIONS???

• Elaine.Cabrera_at_tdi.state.tx.us
• Jena.Abel_at_tdi.state.tx.us
• David.Moskowitz_at_tdi.state.tx.us
• Kevin.Brady_at_tdi.state.tx.us