HBA-MSH C.S.S.B. 415 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 415 By: Carona Insurance 4/1/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Escalating liability insurance costs are making it difficult for nursing homes to obtain coverage. In addition, the number of underwriters for nursing home liability insurance has decreased over the past two years. While the commissioner of insurance took action this interim to allow nonprofit nursing homes to purchase insurance from the Texas Medical Liability Insurance Underwriting Association, commonly referred to as the Joint Underwriting Association (JUA), law prohibits for-profit nursing homes from joining JUA to purchase liability insurance. C.S.S.B. 415 authorizes for-profit nursing homes to purchase liability insurance from JUA. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 2 (Section 3A, Article 21.49-3, Insurance Code) of this bill. ANALYSIS C.S.S.B. 415 amends the Insurance Code to modify the operation of the Texas Medical Liability Insurance Underwriting Association, commonly referred to as the Joint Underwriting Association (JUA), and the participation of nursing homes in JUA. The bill adds for-profit nursing homes to the definition of health care provider under the Texas Medical Liability Insurance Underwriting Association Act. The bill requires the commissioner by rule and in consultation with the Texas Department of Human Services to adopt minimum underwriting standards for for-profit nursing homes that must be met before a for-profit nursing home is authorized to obtain coverage through JUA. The bill requires these standards to ensure the highest practical level of care for resident of for-profit nursing homes. The bill provides that the commissioner of insurance (commissioner) rather than the State Board of Insurance may require any other information to be given due consideration by JUA for applicability to the insurance written by JUA. The bill subjects the rates for forprofit nursing homes to the same requirements as not-for-profit nursing homes. The bill prohibits the inclusion of coverage for punitive damages assessed against a physician or health care provider in a policy of medical liability insurance issued to or renewed for a physician or health care provider by JUA. The bill provides that if in any fiscal year the incurred losses and defense and cost containment expenses from physicians or any single category of health care provider result in a net underwriting loss and exceed 25 percent of the stabilization reserve fund as valued for that year, the commissioner is authorized to direct the initiation or continuation of the stabilization reserve fund charge for physicians or that category of health care provider until the fund recovers the amount by which those losses and cost-containment expenses exceed 25 percent of the fund. EFFECTIVE DATE September 1, 2001. The Act applies only to an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2002. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 415 modifies the original by requiring the commissioner by rule to adopt minimum underwriting standards for for-profit nursing homes that must be met before a for-profit nursing home is authorized to obtain coverage through the Joint Underwriting Association (JUA). The substitute requires these standards to ensure the highest practical level of care for residents of for-profit nursing homes. The substitute prohibits the inclusion of coverage for punitive damages assessed against a physician or healthcare provider in a policy of medical liability insurance issued to or renewed for a physician or healthcare provider by JUA. The substitute removes provisions that require the directors of JUA to determine whether a deficit sustained by JUA is attributable solely to the activities of physicians and to levy an assessment on certain policyholders.