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H.B. No. 2678
AN ACT
relating to underwriting of and ratemaking for professional
liability insurance for physicians and health care providers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 3, Article 5.15-1, Insurance Code, is
amended to read as follows:
Sec. 3. RATE STANDARDS. Rates shall be made in accordance
with the following provisions:
(a) Consideration shall be given to past and
prospective loss and expense experience for all professional
liability insurance for physicians and health care providers
written in this state, unless the department [State Board of
Insurance] shall find that the group or risk to be insured is not of
sufficient size to be deemed credible, in which event, past and
prospective loss and expense experience for all professional
liability insurance for physicians and health care providers
written outside this state shall also be considered, to a
reasonable margin for underwriting profit and contingencies, to
investment income, to dividends or savings allowed or returned by
insurers to their policyholders or members.
(b) The department [State Board of Insurance] shall
consider the impact of risk management courses taken by physicians
and health care providers in this state in approving rates under
this article.
(c) For the establishment of rates, risks may be
grouped by classifications, by rating schedules, or by any other
reasonable methods. Classification rates may be modified to
produce rates for individual risks in accordance with rating plans
which establish standards for measuring variations in hazards or
expense provisions, or both. Those standards may measure any
difference among risks that can be demonstrated to have a probable
effect upon losses or expenses.
(d) Rates shall be reasonable and shall not be
excessive or inadequate, as defined in this subsection, nor shall
they be unfairly discriminatory. No rate shall be held to be
excessive unless the rate is unreasonably high for the insurance
coverage provided [and a reasonable degree of competition does not
exist in the area with respect to the classification to which the
rate is applicable]. No rate shall be held to be inadequate unless
the rate is unreasonably low for the insurance coverage provided
and is insufficient to sustain projected losses and expenses; or
unless the rate is unreasonably low for the insurance coverage
provided and the use of the rate has or, if continued, will have the
effect of destroying competition or creating a monopoly.
SECTION 2. Article 5.15-1, Insurance Code, is amended by
adding Sections 12 and 13 to read as follows:
Sec. 12. PROHIBITION OF USE OF CERTAIN INFORMATION FOR
PHYSICIAN OR HEALTH CARE PROVIDER. (a) For the purpose of writing
professional liability insurance for physicians and health care
providers, an insurer may not consider whether, or the extent to
which, a physician or health care provider provides services in
this state to individuals who are recipients of Medicaid or covered
by the state child health plan program established by Chapter 62,
Health and Safety Code, including any consideration resulting in:
(1) denial of coverage;
(2) refusal to renew coverage;
(3) cancellation of coverage;
(4) limitation of the amount, extent, or kind of
coverage available; or
(5) a determination of the rate or premium to be paid.
(b) The commissioner may adopt rules as necessary to
implement this section.
Sec. 13. USE IN UNDERWRITING OF CERTAIN INFORMATION RELATED
TO LAWSUITS; REFUND. (a) Notwithstanding any other provision of
this code, an insurer may not consider for the purpose of setting
premiums or reducing a claims-free discount for a particular
insured physician's professional liability insurance a lawsuit
filed against the physician if:
(1) before trial, the lawsuit was dismissed by the
claimant or nonsuited; and
(2) no payment was made to the claimant under a
settlement agreement.
(b) An insurer that, in setting premiums or reducing a
claims-free discount for a physician's professional liability
insurance, considers a lawsuit filed against the physician shall
refund to the physician any increase in premiums paid by the
physician that is attributable to that lawsuit or reinstate the
claims-free discount if the lawsuit is dismissed by the claimant or
nonsuited without payment to the claimant under a settlement
agreement. The insurer shall issue the refund or reinstate the
discount on or before the 30th day after the date the insurer
receives written evidence that the lawsuit was dismissed or
nonsuited without payment to the claimant under a settlement
agreement.
(c) This section does not prohibit an insurer from
considering and using aggregate historical loss and expense
experience applicable generally to a classification of physicians'
professional liability insurance to set rates for that
classification to the extent authorized by Article 5.13-2 of this
code. Notwithstanding Section 4(c), Article 5.13-2, of this code,
an insurer may not assign a physician to a particular
classification based on a factor described by Subsection (a) of
this section.
SECTION 3. The change in law made by this Act applies only
to policies of professional liability insurance for physicians and
health care providers delivered, issued for delivery, or renewed on
or after January 1, 2006. A policy delivered, issued for delivery,
or renewed before January 1, 2006, is governed by the law in effect
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 4. This Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2678 was passed by the House on May 9,
2005, by a non-record vote; that the House refused to concur in
Senate amendments to H.B. No. 2678 on May 24, 2005, and requested
the appointment of a conference committee to consider the
differences between the two houses; and that the House adopted the
conference committee report on H.B. No. 2678 on May 28, 2005, by a
non-record vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2678 was passed by the Senate, with
amendments, on May 23, 2005, by the following vote: Yeas 31, Nays
0; at the request of the House, the Senate appointed a conference
committee to consider the differences between the two houses; and
that the Senate adopted the conference committee report on H.B. No.
2678 on May 28, 2005, by a viva-voce vote.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor