HBA-NRS C.S.S.B. 712 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.S.B. 712
By: Sibley
Insurance
5/14/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Congress enacted the Gramm-Leach-Bliley Act (GLBA) in part to require state
insurance authorities to adopt requirements on privacy and disclosure of
nonpublic personal financial information applicable to the insurance
industry. The National Association of Insurance Commissioners (NAIC)
developed a privacy model in an effort to aid states in adopting consistent
privacy requirements for insurers. C.S.S.B. 712 requires insurers and other
entities regulated by the Texas Department of Insurance to comply with
requirements of GLBA and requires the commissioner of insurance to adopt
rules consistent with GLBA based on the NAIC privacy model. 

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 1 (Article 28A.51, Insurance Code) and SECTION 2 of this bill. 

ANALYSIS

C.S.S.B. 712 amends the Insurance Code to require a covered entity to
comply with federal provisions relating to obligations with respect to the
disclosure of personal information and the disclosure of a privacy policy
in the same manner as a financial institution. The bill requires an entity
that is a nonaffiliated third party in relation to a covered entity  to
comply with federal limits on the reuse of information obtained from a
financial institution. The disclosure of such information does not apply to
a covered entity to the extent that the entity is acting solely as an
insurance agent or other authorized representative for another covered
entity. The bill provides that provisions relating to privacy do not affect
the authority of the Texas Department of Insurance (TDI) or another state
agency to adopt stricter rules governing the treatment of health
information by a covered entity, if another law gives TDI or an agency that
authority, including any laws or rules of this state related to the privacy
of individually identifiable health information under the federal Health
Insurance Portability and Accountability Act of 1996. 

The bill requires the commissioner of insurance (commissioner) to adopt
rules to implement the provisions and any other rules necessary to carry
out federal provisions relating to the disclosure of nonpublic personal
information to make this state eligible to override federal regulations not
later than 30 days after the effective date of this bill. The bill also
requires the commissioner to ensure that state privacy requirements are
consistent with and not more strict than federal regulations. The bill
authorizes the commissioner to adopt these initial rules on an emergency
basis.  

The bill requires TDI to implement standards for insurers and other
entities as they apply to federal institutions and requires TDI to enforce
provisions relating to the disclosure of nonpublic personal information.
The bill authorizes the attorney general to institute an action for
injunctive or declaratory relief to restrain a violation of the enforcement
of the disclosure of nonpublic personal information. The bill authorizes
the attorney general to institute an action for civil penalties against a
covered entity or a nonaffiliated third party for a violation of the
enforcement of the disclosure of nonpublic personal information. The bill
prohibits a civil penalty from exceeding $3,000 for each violation except
if a court finds that the violations have occurred with a frequency as to
constitute a pattern or practice, the court may  assess a civil penalty not
to exceed $250,000.  

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.S.B. 712 modifies the original bill to include other authorized
representatives under the exemption from provisions relating to the
disclosure of information obtained from a financial institution. The
substitute requires the commissioner of insurance to ensure, rather than
attempt to ensure, that state privacy requirements are consistent with and
not more strict than federal regulations relating to the disclosure of
nonpublic personal information.