80R6484 PB-D
	By: Solomons	H.B. No. 472
	Substitute the following for H.B. No. 472:
	By:  Zedler	C.S.H.B. No. 472

	A BILL TO BE ENTITLED
	AN ACT
	relating to the regulation of third-party administrators,
	including administrators with delegated duties in the workers'
	compensation system of this state; providing penalties.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	ARTICLE 1. THIRD-PARTY ADMINISTRATORS
	SECTION 1.01.  Section 4151.001, Insurance Code, is amended
	by amending Subdivisions (1) and (2) and adding Subdivisions (6),
	(7), and (8) to read as follows:
	(1)  "Administrator" means a person who, in connection
	with annuities or life, health, and accident benefits, [including]
	pharmacy benefits, or workers' compensation benefits, collects
	premiums or contributions from or adjusts or settles claims for
	residents of this state. The term includes a workers' compensation
	health care network under Chapter 1305 that administers a workers'
	compensation claim for an insurer other than the insurance carrier
	that establishes or contracts with the network.  The term does not
	include a person described by Section 4151.002.
	(2)  "Insurer" means a person who engages in the
	business of life, health, or accident insurance or workers'
	compensation insurance under the law of this state.  The term
	includes an "insurance carrier," as defined by Section 401.011(27),
	Labor Code, other than a governmental entity.
	(6)  "Workers' compensation benefits" means benefits
	provided under Title 5, Labor Code, or services provided through a
	certified workers' compensation health care network authorized
	under Chapter 1305.
	(7)  "Workers' compensation insurance coverage" means
	coverage subject to Subtitle E, Title 10.  The term includes
	coverage described by Sections 401.011(44)(A) and (B), Labor Code.
	(8)  "Workers' compensation self-insurer" means a legal
	entity subject to regulation under Chapter 407 or 407A, Labor Code.
	SECTION 1.02.  Section 4151.002, Insurance Code, is amended
	to read as follows:
	Sec. 4151.002.  EXEMPTIONS. A person is not an
	administrator if the person is:
	(1)  an employer administering an employee benefit plan
	or the plan of an affiliated employer under common management and
	control [acting on behalf of its employees or the employees of one
	or more subsidiaries or affiliated corporations of the employer];
	(2)  a union administering a benefit plan [acting] on
	behalf of its members;
	(3)  an insurer or a group hospital service corporation
	subject to Chapter 842 acting with respect to a policy lawfully
	issued and delivered by the insurer or corporation in and under the
	law of a state in which the insurer or corporation was authorized to
	engage in the business of insurance;
	(4)  a health maintenance organization that is
	authorized to operate in this state under Chapter 843 with respect
	to any activity that is specifically regulated under that chapter,
	Chapter 1271, 1272, or 1367, Subchapter A, Chapter 1452, or
	Subchapter B, Chapter 1507;
	(5)  an agent licensed under Subchapter B, Chapter
	4051, Subchapter B, Chapter 4053, or Subchapter B, Chapter 4054,
	who receives commissions as an agent and is acting:
	(A)  under appointment on behalf of an insurer
	authorized to engage in the business of insurance in this state; and
	(B)  in the customary scope and duties of the
	person's authority as an agent;
	(6)  a creditor acting on behalf of its debtor with
	respect to insurance that covers a debt between the creditor and its
	debtor, if the creditor performs only the functions of a group
	policyholder or a creditor;
	(7)  a trust established in conformity with 29 U.S.C.
	Section 186 or a trustee or employee who is acting under the trust;
	(8)  a trust that is exempt from taxation under Section
	501(a), Internal Revenue Code of 1986, or a trustee or employee
	acting under the trust;
	(9)  a custodian or a custodian's agent or employee who
	is acting under a custodian account that complies with Section
	401(f), Internal Revenue Code of 1986;
	(10)  a bank, credit union, savings and loan
	association, or other financial institution that is subject to
	supervision or examination under federal or state law by a federal
	or state regulatory authority, if the institution is performing
	only those functions for which the institution holds a license
	under federal or state law;
	(11)  a company that advances and collects a premium or
	charge from its credit card holders on their authorization, if the
	company does not adjust or settle claims and acts only in the
	company's debtor-creditor relationship with its credit card
	holders;
	(12)  a person who adjusts or settles claims in the
	normal course of the person's practice or employment as a licensed
	attorney and who does not collect any premium or charge in
	connection with insurance coverage [annuities or with life, health,
	or accident benefits, including pharmacy benefits];
	(13)  an adjuster licensed under Subtitle C by the
	department who is engaged in the performance of the individual's
	[person's] powers and duties as an adjuster in the scope of the
	individual's [person's] license;
	(14)  a person who provides technical, advisory,
	utilization review, precertification, or consulting services to an
	insurer, plan, or plan sponsor but does not make any management or
	discretionary decisions on behalf of the insurer, plan, or plan
	sponsor;
	(15)  an attorney in fact for a Lloyd's plan operating
	under Chapter 941 or for a reciprocal or interinsurance exchange
	operating under Chapter 942 who is acting in the capacity of
	attorney in fact under the applicable chapter;
	(16)  a joint fund, risk management pool, or
	self-insurance pool composed of political subdivisions of this
	state that participate in a fund or pool through interlocal
	agreements, any nonprofit administrative agency or governing body
	or other nonprofit entity that acts solely on behalf of a fund,
	pool, agency, or body, or any other fund, pool, agency, or body
	established under or for the purpose of implementing an interlocal
	governmental agreement;
	(17)  a self-insured political subdivision;
	(18)  a plan under which insurance benefits are
	provided exclusively by an insurer authorized to engage in the
	business of insurance in this state and the administrator of which
	is:
	(A)  a full-time employee of the plan's organizing
	or sponsoring association, trust, or other entity; or
	(B)  a trustee of the organizing or sponsoring
	trust; [or]
	(19)  a parent of a wholly owned direct or indirect
	subsidiary insurer authorized to engage in the business of
	insurance in this state or a wholly owned direct or indirect
	subsidiary insurer that is a part of the parent's holding company
	system that, under an agreement regulated and approved under
	Chapter 823 or a similar statute of the domiciliary state if the
	parent or subsidiary insurer is a foreign insurer engaged in
	business in this state, on behalf of only itself or an affiliated
	insurer:
	(A)  collects premiums or contributions, if the
	parent or subsidiary insurer:
	(i)  prepares only billing statements and
	places those statements in the United States mail; and
	(ii)  causes all collected premiums to be
	deposited directly in a depository account of the particular
	affiliated insurer; or
	(B)  furnishes proof-of-loss forms, reviews
	claims, determines the amount of the liability for those claims,
	and negotiates settlements, if the parent or subsidiary insurer
	pays claims only from the funds of the particular subsidiary by
	checks or drafts of that subsidiary; or
	(20)  a workers' compensation self-insurer
	administering the self-insurer's workers' compensation benefit
	obligations.
	SECTION 1.03.  Subchapter A, Chapter 4151, Insurance Code,
	is amended by adding Sections 4151.0021, 4151.0031, and 4151.0051
	to read as follows:
	Sec. 4151.0021.  APPLICABILITY TO CERTAIN PROCESSING
	AGENTS. (a) In this section, "processing agent" means a person
	described by Section 413.0111, Labor Code.
	(b)  A processing agent is not an administrator for purposes
	of this chapter if the processing agent operates only in the manner
	authorized by rules adopted by the commissioner of workers'
	compensation as an agent or assignee for a pharmacy providing
	pharmaceutical benefits in conjunction with a workers'
	compensation claim. A person who operates as a processing agent and
	also performs the functions of an administrator for an insurer,
	plan, or plan sponsor is required to hold a certificate of authority
	under this chapter.
	Sec. 4151.0031.  MARKET ANALYSIS. The commissioner may
	conduct market analyses and examinations of an administrator under
	Chapter 751.
	Sec. 4151.0051.  REFERRAL TO ADJUSTER BY ADMINISTRATOR. (a)
	An administrator may not knowingly refer a claim or loss for
	adjustment in this state to an individual purporting to be or acting
	as an adjuster unless the individual holds a license under Chapter
	4101.
	(b)  Before referring a claim or loss for adjustment, an
	administrator must ascertain from the commissioner whether the
	individual selected to perform the adjustment holds a license under
	Chapter 4101. After receipt of information from the department
	that the individual does hold an adjuster license, the
	administrator may refer claims or losses to the individual for
	adjustment until the administrator has actual knowledge or receives
	information from the department that the individual no longer holds
	an adjuster license under Chapter 4101.
	SECTION 1.04.  Section 4151.006, Insurance Code, is amended
	to read as follows:
	Sec. 4151.006.  RULES. The commissioner may adopt, in the
	manner prescribed by Subchapter A, Chapter 36, rules that are fair,
	[and] reasonable, and appropriate [rules, minimum standards, or
	limitations as appropriate] to augment and implement this chapter,
	including rules establishing financial standards, reporting
	requirements, and required contract provisions.
	SECTION 1.05.  Section 4151.052, Insurance Code, is amended
	to read as follows:
	Sec. 4151.052.  APPLICATION. (a) An application for a
	certificate of authority to engage in business as an administrator
	must be in a form prescribed by the commissioner and must include
	the following:
	(1)  a copy of each basic organizational document of
	the applicant, including the articles of incorporation, bylaws,
	articles of association, trade name certificate, and any other
	similar document and a copy of any amendment to any of those
	documents;
	(2)  a description of the applicant and the applicant's
	services, facilities, and personnel;
	(3)  if the applicant is not domiciled in this state, a
	power of attorney executed by the applicant appointing the
	commissioner, the commissioner's successors in office, or the
	commissioner's appointed designee as the applicant's attorney in
	this state on whom process may be served in any legal action or
	proceeding based on a cause of action arising in this state against
	the applicant;
	(4)  an audited financial statement of the applicant
	covering the preceding three calendar years or any lesser period
	that the applicant and any predecessors of the applicant have been
	in existence, or if an audited financial statement is not
	available, an unaudited financial statement as of a date not
	earlier than the 120th day before the date the application is filed,
	accompanied by an affidavit or certification of the applicant that:
	(A)  the unaudited financial statement is true and
	correct, as of its date; and
	(B)  a material change in financial condition has
	not occurred from the date of the financial statement to the
	execution date of the affidavit or certification; and
	(5)  any other information the commissioner reasonably
	requires.
	(b)  An applicant for a certificate of authority under this
	chapter shall notify the department in the manner prescribed by
	commissioner rule of any material change in the applicant's
	ownership or control not later than the 30th day after the effective
	date of the change and shall notify the department of any other fact
	or circumstance affecting the applicant's qualifications for a
	certificate of authority in this state as required by commissioner
	rule.
	SECTION 1.06.  Section 4151.056, Insurance Code, is amended
	to read as follows:
	Sec. 4151.056.  DURATION OF CERTIFICATE OF AUTHORITY.  A
	certificate of authority issued to an administrator under this
	chapter is effective until it is suspended, canceled, or revoked.
	The issuance, denial, suspension, cancellation, or revocation of a
	certificate of authority to act as an administrator is subject to:
	(1)  Subchapter G [Subchapters B and C, Chapter 4005];
	and
	(2)  Chapter 82.
	SECTION 1.07.  The heading to Subchapter C, Chapter 4151,
	Insurance Code, is amended to read as follows:
	SUBCHAPTER C. POWERS AND DUTIES OF [THIRD-PARTY] ADMINISTRATORS AND
	INSURERS
	SECTION 1.08.  Section 4151.101, Insurance Code, is amended
	to read as follows:
	Sec. 4151.101.  WRITTEN AGREEMENT WITH INSURER OR PLAN
	SPONSOR REQUIRED. (a) An administrator may provide services only
	under a written agreement with an insurer or plan sponsor.
	(b)  The commissioner by rule may prescribe provisions that
	must be included in the written agreement.
	SECTION 1.09.  Section 4151.102, Insurance Code, is amended
	by adding Subsection (a-1) to read as follows:
	(a-1)  The written agreement must include a statement of the
	duties that the administrator is expected to perform on behalf of
	the insurer, and the lines, classes, or types of insurance that the
	administrator is authorized to administer. The agreement must
	include, as applicable, provisions regarding claims handling and
	other standards relating to the business underwritten by the
	insurer.
	SECTION 1.10.  Section 4151.103(a), Insurance Code, is
	amended to read as follows:
	(a)  The [During the term of the written agreement, the]
	administrator and the insurer, plan, or plan sponsor shall retain a
	copy of the written agreement as part of their official records:
	(1)  during the term of the agreement; and
	(2)  until the fifth anniversary of the date on which
	the agreement expires.
	SECTION 1.11.  Section 4151.104, Insurance Code, is amended
	to read as follows:
	Sec. 4151.104.  NOTICE OF USE OF ADMINISTRATOR'S SERVICES.
	(a) If an insurer, plan, or plan sponsor uses the services of an
	administrator, the administrator shall give written notice to each
	insured, covered individual, or plan participant of the
	administrator's identity and the relationship among the
	administrator and the insurer, plan, or plan sponsor and the
	insured, covered individual, or plan participant. The insurer,
	plan, or plan sponsor must approve the notice before the notice is
	distributed.
	(b)  An administrator who fails to provide notice as required
	by Subsection (a) is subject to an administrative penalty in the
	manner provided by Chapter 84.
	SECTION 1.12.  Subchapter C, Chapter 4151, Insurance Code,
	is amended by adding Sections 4151.1041 and 4151.1042 to read as
	follows:
	Sec. 4151.1041.  REFERRAL BY INSURER. (a)  An insurer may
	not knowingly refer a claim or loss for administration in this state
	to an individual or entity purporting to be or acting as an
	administrator unless the individual or entity holds a certificate
	of authority under this chapter.
	(b)  Before referring a claim or loss for administration, an
	insurer must ascertain from the commissioner whether the individual
	or entity performing the administration holds a certificate of
	authority under this chapter. Once the insurer has ascertained
	that the individual or entity holds a certification of authority,
	the insurer may refer a claim to the individual or entity for
	administration and may continue to refer claims to the individual
	or entity until the insurer has knowledge or receives information
	from the commissioner that the individual or entity no longer holds
	a certificate of authority.
	Sec. 4151.1042.  RESPONSIBILITIES OF INSURER; SEMIANNUAL
	AUDIT. (a) If an insurer uses the services of an administrator,
	the insurer is responsible for determining the benefits, premium
	rates, reimbursement procedures, and claims payment procedures
	applicable to the coverage and for securing reinsurance, if any.
	The insurer shall provide a copy of the written requirements
	relating to those matters to the administrator. The
	responsibilities of the administrator as to any of those matters
	must be set forth in the written agreement between the
	administrator and the insurer.
	(b)  An insurer shall ensure competent administration of its
	programs.
	(c)  If an administrator administers benefits for more than
	100 certificate holders, subscribers, claimants, or policyholders
	on behalf of an insurer, the insurer shall, at least semiannually,
	conduct a review of the operations of the administrator. At least
	one of the reviews must include an on-site audit of the operations
	of the administrator.
	SECTION 1.13.  Section 4151.111, Insurance Code, is amended
	by adding Subsection (c) to read as follows:
	(c)  In the event of a conflict between this section and a
	provision of the Labor Code relating to time periods for
	adjudication and payment of workers' compensation claims, the Labor
	Code provision prevails.
	SECTION 1.14.  Section 4151.113(b), Insurance Code, is
	amended to read as follows:
	(b)  A trade secret, including the identity and address of a
	policyholder, [or] certificate holder, or subscriber is
	confidential, except the commissioner may use that information in a
	proceeding against the administrator.
	SECTION 1.15.  Section 4151.117, Insurance Code, is amended
	to read as follows:
	Sec. 4151.117.  COMPENSATION OF ADMINISTRATOR.  (a) An
	administrator's compensation may be determined:
	(1)  as a percentage of the premiums or charges the
	administrator collects or the amount of claims the administrator
	pays or processes; or
	(2)  except as provided by Subsection (b), on another
	basis as specified in the written agreement.
	(b)  An insurer or plan sponsor may not permit or provide
	compensation or another thing of value to an administrator who
	enters into a written agreement with the insurer or plan sponsor
	under Section 4151.101 that is based on the savings accruing to the
	insurer or plan sponsor because of adverse determinations regarding
	claims for benefits, reductions of or limitations on benefits, or
	other analogous actions inconsistent with this chapter, that are
	made or taken by the administrator.
	SECTION 1.16.  The heading to Subchapter E, Chapter 4151,
	Insurance Code, is amended to read as follows:
	SUBCHAPTER E.  DEPARTMENT REGULATION OF [THIRD-PARTY]
	ADMINISTRATORS
	SECTION 1.17.  Section 4151.205, Insurance Code, is amended
	by amending Subsection (a) and adding Subsections (c), (d), (e),
	and (f) to read as follows:
	(a)  An administrator shall annually, not later than March 1,
	file with the commissioner a report on a form prescribed by the
	commissioner. The report must contain any information required by
	the commissioner and must be verified by at least two officers of
	the administrator.
	(c)  Except as provided by Subsection (f), the annual report
	must include an audited financial statement performed by an
	independent certified public accountant. An audited financial
	statement prepared on a consolidated basis must include a columnar
	consolidating or combining worksheet that shall be filed with the
	annual report and must comply with the following:
	(1)  amounts shown on the consolidated audited
	financial report must be shown on the worksheet;
	(2)  amounts for each entity must be stated separately;
	and
	(3)  explanations of consolidating and eliminating
	entries must be included.
	(d)  The annual report must include the complete name and
	address of each insurer engaged in the business of workers'
	compensation in this state with which the administrator had an
	agreement during the preceding fiscal year.
	(e)  Information derived from an audited financial statement
	contained in an annual report under this section is confidential
	and is not subject to disclosure under Chapter 552, Government
	Code.
	(f)  An administrator who receives less than $10 million
	annually under written agreements subject to this chapter with
	insurers or plan sponsors in this state is not required to file an
	audited financial statement under Subsection (c), but must file a
	financial statement certified in the manner prescribed by
	commissioner rule.
	SECTION 1.18.  Section 4151.206(a), Insurance Code, is
	amended to read as follows:
	(a)  The commissioner shall collect and an applicant or
	administrator shall pay to the commissioner fees in an amount to be
	determined by the commissioner as follows:
	(1)  a filing fee not to exceed $1,000 for processing an
	original application for a certificate of authority for an
	administrator;
	(2)  a fee not to exceed $500 for an examination under
	Section 4151.201 [4201.201]; and
	(3)  a filing fee not to exceed $200 for an annual
	report.
	SECTION 1.19.  Subchapter E, Chapter 4151, Insurance Code,
	is amended by adding Sections 4151.210, 4151.211, and 4151.212 to
	read as follows:
	Sec. 4151.210.  EFFECT OF REVOCATION OF OTHER CERTIFICATES.
	An officer, director, or shareholder of an entity whose certificate
	of authority to engage in the business of insurance or other
	analogous authorization has been revoked in this state or in any
	other state may not act as an officer, director, member, manager, or
	partner, or as a shareholder with a controlling interest, of an
	entity that holds a certificate of authority issued under this
	chapter unless the commissioner determines, for good cause shown,
	that it is in the public interest to permit the individual to act in
	that capacity.
	Sec. 4151.211.  RESTRICTIONS ON ACQUISITION OF OWNERSHIP
	INTEREST. (a) An individual may not acquire an ownership interest
	in an entity that holds a certificate of authority under this
	chapter if the individual is, or after the acquisition would be,
	directly or indirectly in control of the certificate holder, or
	otherwise acquire control of or exercise any control over the
	certificate holder, unless the individual has filed with the
	department under oath:
	(1)  a biographical form for each individual by whom or
	on whose behalf the acquisition of control is to be effected;
	(2)  a statement certifying that no individual who is
	acquiring an ownership interest in or control of the certificate
	holder has been the subject of a disciplinary action taken by a
	financial or insurance regulator of this state, another state, or
	the United States;
	(3)  a statement certifying that, immediately on the
	change of control, the certificate holder will be able to satisfy
	the requirements for the issuance of a certificate of authority;
	and
	(4)  any additional information that the commissioner
	by rule may prescribe as necessary or appropriate to the public
	interest and the protection of the insurance consumers of this
	state.
	(b)  The department may require a partnership, syndicate, or
	other group that is required to file a statement under Subsection
	(a) to provide the information required under that subsection for
	each partner of the partnership, each member of the syndicate or
	group, and each person who controls the partner or member. If the
	partner, member, or person is a corporation or the person required
	to file the statement under Subsection (a) is a corporation, the
	department may require that the information required under that
	subsection be provided regarding:
	(1)  the corporation;
	(2)  each individual who is an executive officer or
	director of the corporation; and
	(3)  each person who is directly or indirectly the
	beneficial owner of more than 10 percent of the outstanding voting
	securities of the corporation.
	(c)  The department may disapprove an acquisition of control
	if, after notice and opportunity for hearing, the commissioner
	determines that:
	(1)  immediately on the change of control the
	certificate holder would not be able to satisfy the requirements
	for the certificate of authority;
	(2)  the competence, trustworthiness, experience, and
	integrity of the individuals who would control the operation of the
	certificate holder are such that it would not be in the interest of
	the insurance consumers of this state to permit the acquisition of
	control; or
	(3)  the acquisition of control would violate this code
	or another law of this state, another state, or the United States.
	(d)  Notwithstanding Subsection (c), a change in control is
	considered approved if the commissioner does not disapprove the
	requested change before the 61st day after the date on which the
	department receives all information required by this section.
	Sec. 4151.212.  MAINTENANCE OF QUALIFICATIONS REQUIRED. The
	department may, in the manner prescribed by Subchapter G, revoke,
	suspend, or refuse to renew the certificate of authority of a
	certificate holder who does not maintain the qualifications
	necessary to obtain a certificate of authority issued under this
	chapter.
	SECTION 1.20.  Chapter 4151, Insurance Code, is amended by
	adding Subchapter F to read as follows:
	SUBCHAPTER F. WORKERS' COMPENSATION BENEFIT PLANS
	Sec. 4151.251.  APPLICATION. (a) This subchapter applies
	to the administration of workers' compensation insurance coverage
	for:
	(1)  an insurer; and
	(2)  an employer that enters into an agreement with an
	insurer for a large deductible policy under Section 2053.202(b).
	(b)  This subchapter does not apply to an employer that does
	not elect to obtain workers' compensation insurance coverage under
	Subchapter A, Chapter 406, Labor Code.
	Sec. 4151.252.  AGREEMENT WITH AFFILIATED ADMINISTRATOR;
	COMMISSIONER APPROVAL REQUIRED. An insurer that holds a
	certificate of authority to engage in the business of workers'
	compensation insurance in this state may not enter into an
	agreement with an administrator, or permit an agent, including a
	managing general agent, to enter into such an agreement on the
	insurer's behalf, to adjust or handle claims for employees of the
	administrator or of any other employer affiliated with the
	administrator without the approval of the commissioner.
	Sec. 4151.253.  AGREEMENTS BETWEEN EMPLOYERS AND
	ADMINISTRATORS. (a) An administrator may enter into an agreement
	with an insurer for the adjustment or handling of workers'
	compensation claims for residents of this state only with the
	insurer responsible for those claims.
	(b)  An administrator may accept compensation of any kind for
	the adjustment or handling of workers' compensation claims for
	residents of this state only from the insurer responsible for those
	claims.
	(c)  Notwithstanding Subsections (a) and (b), an employer
	that is approved as a workers' compensation self-insurer in another
	state, but that is not approved as a workers' compensation
	self-insurer in this state, may, if in compliance with all
	provisions of this chapter and subject to Subsection (d), agree
	with its workers' compensation insurer in this state that the
	workers' compensation insurer will use the same administrator in
	this state for the adjustment and handling of workers' compensation
	claims as the employer uses in the state in which it has been
	approved as a self-insurer. The agreement may include coordination
	of claims reports, premium payments, and loss reimbursements under
	deductible insurance between this state and other states in which
	the same administrator handles and adjusts workers' compensation
	claims on behalf of the employer.
	(d)  An administrator described by Subsection (c) must hold a
	certificate of authority under this chapter.
	Sec. 4151.254.  LARGE DEDUCTIBLE POLICIES. An employer who
	enters into an agreement with an insurer under Section 2053.202(b)
	may not use an administrator to handle workers' compensation claims
	unless the administrator has entered into a written agreement with
	the insurer under Subchapter C under which the insurer is
	responsible for:
	(1)  setting standards used in the handling of claims;
	and
	(2)  paying the administrative costs incurred by the
	administrator.
	SECTION 1.21.  Chapter 4151, Insurance Code, is amended by
	adding Subchapter G to read as follows:
	SUBCHAPTER G. DISCIPLINARY ACTIONS; PENALTIES
	Sec. 4151.301.  GROUNDS FOR DENIAL, SUSPENSION, OR
	REVOCATION OF CERTIFICATE OF AUTHORITY. The department may deny an
	application for a certificate of authority or discipline the holder
	of a certificate of authority under this subchapter if the
	department determines that the applicant or holder, individually,
	or through an officer, director, or shareholder:
	(1)  has wilfully violated an insurance law of this
	state;
	(2)  has intentionally made a material misstatement in
	the application for a certificate of authority;
	(3)  has obtained or attempted to obtain a certificate
	of authority by fraud or misrepresentation;
	(4)  has misappropriated, converted to the applicant's
	or holder's own use, or illegally withheld money belonging to:
	(A)  an insurance carrier, as that term is
	defined by Section 401.011, Labor Code;
	(B)  an insurer, as that term is defined by
	Section 4001.003;
	(C)  a health maintenance organization; or
	(D)  an insured, enrollee, or beneficiary;
	(5)  has engaged in fraudulent or dishonest acts or
	practices;
	(6)  has materially misrepresented the terms and
	conditions of an insurance policy, certificate, evidence of
	coverage, or contract;
	(7)  has been convicted of a felony;
	(8)  is in a financial condition, or is operating or
	conducting business in a manner, that would render further
	transaction of business in this state hazardous or injurious to
	insured persons or the public;
	(9)  has failed to comply with any judgment rendered
	against the applicant or holder before the 60th day after the date
	on which the judgment becomes final;
	(10)  has wilfully violated a commissioner rule;
	(11)  has refused to be examined or to produce
	accounts, records, and files for examination as required by this
	chapter or commissioner rule;
	(12)  at any time fails to meet a qualification for
	which issuance of the certificate of authority could have been
	denied had the failure then existed and been known to the
	commissioner;
	(13)  has had a certificate of authority, license, or
	other authority issued by this state, another state, or the United
	States suspended or revoked; or
	(14)  has failed to timely file the annual report
	required by Section 4151.205.
	Sec. 4151.302.  REMEDIES FOR VIOLATION OF INSURANCE LAWS OR
	COMMISSIONER RULES. In addition to any other remedy available
	under Chapter 82 for a violation of this code, another insurance law
	of this state, or a commissioner rule, the department may:
	(1)  deny an application for a certificate of
	authority;
	(2)  suspend or revoke a certificate of authority;
	(3)  place on probation a person whose certificate of
	authority has been suspended;
	(4)  assess an administrative penalty; or
	(5)  reprimand a certificate of authority holder.
	Sec. 4151.303.  PROBATED SUSPENSION. If the suspension of a
	certificate of authority is probated, the commissioner may require
	the holder to:
	(1)  report regularly to the department on any matter
	that is the basis of the probation; or
	(2)  limit the holder's practice to the areas
	prescribed by the department.
	Sec. 4151.304.  HEARING. If the department proposes to deny
	an application for a certificate of authority, or to suspend or
	revoke a certificate of authority, the applicant or holder is
	entitled to notice and a hearing conducted by the State Office of
	Administrative Hearings as provided by Chapter 40.
	Sec. 4151.305.  APPLICATION FOR CERTIFICATE OF AUTHORITY
	AFTER DENIAL OR REVOCATION. (a)  A person, or officer, director, or
	shareholder of a person, whose application has been denied or whose
	certificate of authority has been revoked under this subchapter may
	not apply for a certificate of authority before the fifth
	anniversary of:
	(1)  the effective date of the denial or revocation; or
	(2)  the date of a final court order affirming the
	denial or revocation if judicial review was sought.
	(b)  An application filed after the period required by
	Subsection (a) may be denied by the commissioner if the applicant
	fails to show good cause why the denial or revocation should not be
	a bar to the issuance of a new certificate.
	(c)  Subsection (b) does not apply to an applicant whose
	application was denied for failure by the applicant to submit a
	properly completed application for a certificate of authority.
	Sec. 4151.306.  DISCIPLINARY PROCEEDING FOR CONDUCT
	COMMITTED BEFORE SURRENDER OR FORFEITURE OF CERTIFICATE. (a)  The
	department may institute a disciplinary proceeding against a former
	certificate holder, or officer, director, or shareholder of a
	former certificate holder, for conduct committed before the
	effective date of a voluntary surrender or automatic forfeiture of
	the certificate of authority.
	(b)  In a proceeding under this section, the fact that the
	certificate holder, or officer, director, or shareholder of a
	certificate holder, has surrendered or forfeited the certificate
	does not affect the former certificate holder's, or officer,
	director, or shareholder of a former certificate holder's,
	culpability for the conduct that is the subject of the proceeding.
	Sec. 4151.307.  EMERGENCY CERTIFICATE SUSPENSION.  (a)  The
	commissioner may suspend the certificate of an administrator
	without notice or hearing if the commissioner determines that:
	(1)  the administrator is insolvent or impaired;
	(2)  an order for receivership, conservatorship,
	rehabilitation, or any other delinquency regarding the
	administrator has been entered in any state; or
	(3)  the financial condition or business practices of
	the administrator otherwise pose an imminent threat to the public
	health, safety, or welfare of the residents of this state.
	(b)  On determining that grounds exist under Subsection (a)
	to suspend the administrator's certificate of authority, the
	commissioner may issue an order suspending the certificate. The
	commissioner shall immediately serve notice of the suspension on
	the holder.
	(c)  The notice required by Subsection (b) must:
	(1)  be personally served on the holder or be sent by
	registered or certified mail, return receipt requested, to the
	holder's last known address according to the department's records;
	(2)  state the grounds for the suspension; and
	(3)  inform the holder of the right to a hearing on the
	suspension order.
	(d)  An administrator whose certificate of authority is
	suspended under this section is entitled to request a hearing on the
	suspension not later than the 30th day after the date of receipt of
	notice of the suspension. Not later than the 10th day after the
	date a hearing is requested, the commissioner shall issue a notice
	of hearing.
	(e)  The hearing must be held not later than the 10th day
	after the date notice of hearing is issued, unless the parties agree
	to a later date.
	(f)  A hearing on a suspension order under this section is
	subject to Chapter 2001, Government Code, and to Subchapter A,
	Chapter 40. After the hearing, the administrative law judge shall
	recommend to the commissioner whether to uphold, vacate, or modify
	the suspension order.
	(g)  A suspension order issued under this section remains in
	effect until further action is taken by the commissioner.
	SECTION 1.22.  Section 4151.207, Insurance Code, is
	transferred to Subchapter G, Chapter 4151, Insurance Code, as added
	by this Act, renumbered as Section 4151.308, and amended to read as
	follows:
	Sec. 4151.308 [4151.207]. GENERAL ADMINISTRATIVE SANCTIONS.
	An administrator or other person who violates this chapter is
	subject to the sanctions provided by Chapter 82.
	SECTION 1.23.  Section 4151.208, Insurance Code, is
	transferred to Subchapter G, Chapter 4151, Insurance Code, as added
	by this Act, renumbered as Section 4151.309, and amended to read as
	follows:
	Sec. 4151.309 [4151.208].  CRIMINAL PENALTY [OFFENSE]. (a)
	An administrator commits an offense if the administrator knowingly
	violates this chapter or a rule of the commissioner adopted under
	this chapter.
	(b)  An offense under this section is a misdemeanor
	punishable by a fine of not less than $500 or more than $5,000.
	ARTICLE 2. CONFORMING AMENDMENTS--INSURANCE CODE
	SECTION 2.01.  Section 1305.004(a), Insurance Code, is
	amended by adding Subdivision (1-a) to read as follows:
	(1-a)  "Administrator" has the meaning assigned by
	Section 4151.001.
	SECTION 2.02.  Subchapter A, Chapter 1305, Insurance Code,
	is amended by adding Section 1305.008 to read as follows:
	Sec. 1305.008.  ADMINISTRATOR CERTIFICATE OF AUTHORITY
	REQUIRED.  A third party that performs the functions of an
	administrator under Chapter 4151 must hold a certificate of
	authority issued under that chapter to provide those functions
	under this chapter for an insurance carrier.
	SECTION 2.03.  Sections 1305.1545(a) and (c), Insurance
	Code, are amended to read as follows:
	(a)  An insurance carrier or [third-party] administrator may
	not reimburse a doctor or other health care provider, an
	institutional provider, or an organization of doctors and health
	care providers on a discounted fee basis for services that are
	provided to an injured employee unless:
	(1)  the carrier or [third-party] administrator has
	contracted with either:
	(A)  the doctor or other health care provider,
	institutional provider, or organization of doctors and health care
	providers; or
	(B)  a network that has contracted with the doctor
	or other health care provider, institutional provider, or
	organization of doctors and health care providers; and
	(2)  the doctor or other health care provider,
	institutional provider, or organization of doctors and health care
	providers has agreed to the contract and has agreed to provide
	health care services under the terms of the contract.
	(c)  An insurance carrier or [third-party] administrator who
	violates this section:
	(1)  commits an unfair claim settlement practice in
	violation of Subchapter A, Chapter 542, Insurance Code; and
	(2)  is subject to administrative penalties under
	Chapters 82 and 84, Insurance Code.
	SECTION 2.04.  Section 4101.002, Insurance Code, is amended
	by amending Subsection (a) and adding Subsection (c) to read as
	follows:
	(a)  This chapter does not apply to:
	(1)  an attorney who:
	(A)  adjusts insurance losses periodically and
	incidentally to the practice of law; and
	(B)  does not represent that the attorney is an
	adjuster;
	(2)  a salaried employee of an insurer who is not
	regularly engaged in the adjustment, investigation, or supervision
	of insurance claims;
	(3)  a person employed only to furnish technical
	assistance to a licensed adjuster, including:
	(A)  an attorney;
	(B)  an engineer;
	(C)  an estimator;
	(D)  a handwriting expert;
	(E)  a photographer; and
	(F)  a private detective;
	(4)  an agent or general agent of an authorized insurer
	who processes an undisputed or uncontested loss for the insurer
	under a policy issued by the agent or general agent;
	(5)  a person who performs clerical duties and does not
	negotiate with parties to disputed or contested claims;
	(6)  a person who handles claims arising under life,
	accident, and health insurance policies;
	(7)  a person:
	(A)  who is employed principally as:
	(i)  a right-of-way agent; or
	(ii)  a right-of-way and claims agent;
	(B)  whose primary responsibility is the
	acquisition of easements, leases, permits, or other real property
	rights; and
	(C)  who handles only claims arising out of
	operations under those easements, leases, permits, or other
	contracts or contractual obligations;
	(8)  an individual who is employed to investigate
	suspected fraudulent insurance claims but who does not adjust
	losses or determine claims payments; [or]
	(9)  a public insurance adjuster licensed under Chapter
	4102; or
	(10)  an individual who investigates or settles only
	workers' compensation claims.
	(c)  For purposes of Subsection (a)(6), claims arising under
	workers' compensation insurance policies, including claims
	relating to services provided through a certified workers'
	compensation health care network authorized under Chapter 1305, do
	not constitute claims arising under life, accident, or health
	insurance policies.
	ARTICLE 3. CONFORMING AMENDMENTS--LABOR CODE
	SECTION 3.01.  Section 407.001(5), Labor Code, is amended to
	read as follows:
	(5)  "Qualified claims servicing contractor" means a
	person who provides claims service for a certified self-insurer,
	who is a separate business entity from the affected certified
	self-insurer, and who is:
	(A)  an insurance company authorized by the Texas
	Department of Insurance to write workers' compensation insurance;
	(B)  a subsidiary of an insurance company that
	provides claims service under contract; or
	(C)  an [a third-party] administrator who holds a
	certificate of authority [that has on its staff an individual
	licensed] under Chapter 4151 [4101], Insurance Code.
	SECTION 3.02.  Section 407A.001(a), Labor Code, is amended
	by adding Subdivision (9) to read as follows:
	(9)  "Third-party administrator" means a person who
	holds a certificate of authority as an administrator under Chapter
	4151, Insurance Code.
	SECTION 3.03.  Subchapter A, Chapter 407A, Labor Code, is
	amended by adding Section 407A.009 to read as follows:
	Sec. 407A.009.  CERTIFICATE OF AUTHORITY REQUIRED FOR
	CERTAIN SERVICE COMPANIES. A service company that adjusts or
	settles claims for the group must hold a certificate of authority as
	an administrator under Chapter 4151, Insurance Code.
	ARTICLE 4. TRANSITION; EFFECTIVE DATE
	SECTION 4.01.  A person is not required to hold a certificate
	of authority under Chapter 4151, Insurance Code, as amended by this
	Act, to comply with Section 1305.008, Insurance Code, as added by
	this Act, before January 1, 2008.
	SECTION 4.02.  A service company that adjusts or settles
	claims for a workers' compensation self-insurance group under
	Chapter 407A, Labor Code, is not required to hold a certificate of
	authority under Chapter 4151, Insurance Code, as amended by this
	Act, to comply with Section 407A.009, Labor Code, as added by this
	Act, before January 1, 2008.
	SECTION 4.03.  The Texas Department of Insurance shall issue
	certificates of authority to applicants under Section 4151.052,
	Insurance Code, as amended by this Act, beginning September 1,
	2007.
	SECTION 4.04.  (a) Except as provided by Subsections (b) and
	(c) of this section, this Act takes effect September 1, 2007.
	(b)  A person is not required to hold a certificate of
	authority under Chapter 4151, Insurance Code, as amended by this
	Act, to administer workers' compensation benefits for an insurer
	before January 1, 2008.
	(c)  Subchapter G, Chapter 4151, Insurance Code, as added by
	this Act, applies to a disciplinary action commenced on or after
	January 1, 2008.