Frequently Asked Questions about Administrator (TPA) Requirements under HB 472

The 80th Texas Legislature passed HB 472, which amended Chapter 4151 of the Texas Insurance Code, and requires TPAs performing administrative services in connection with workers' compensation benefits to obtain a certificate of authority (COA) from the Texas Department of Insurance. Additionally, HB 472 prescribes certain contracting and reporting requirements for TPAs and certain insurers. The provisions of HB 472 became effective September 1, 2007. Also, the current administrator rules that implement HB 472 are available for viewing and printing at Texas Administrative Code, 28 TAC §§ 7.1601-7.1618 and establish the licensing, contracting, auditing, reporting, and other requirements of the Insurance Code Chapter 4151, as amended by HB 472, for all administrators, including administrators with delegated duties in the workers' compensation system. The Commissioner of Insurance's order adopting these current administrator rules (28 TAC §§ 7.1601-7.1618) was filed with the Texas Register on June 5, 2009, and can be found at our Proposed and Adopted Rules for 2008 website.

Please Note: These FAQs are intended to provide helpful guidance and information. They are not intended to replace or supplement the rules issued by the Department, nor are they intended to limit the applicability of the rules in any way.

Who is subject to HB 472 and the current administrator rules?

Any person (as defined in §4151.001 (3)) who collects premiums or contributions from or adjusts or settles claims for residents of this state in connection with annuities or life, health, accident, pharmacy, or workers' compensation benefits is subject to the provisions of HB 472 and the current administrator rules. Additionally, certain insurers are also subject to some of the provisions of the bill and the current administrator rules.

Are any entities exempt from HB 472 and the current administrator rules?

HB 472 excludes governmental entities, workers' compensation self-insurance groups, and processing agents meeting certain conditions. Twenty exemptions are specifically listed in §4151.002. A person meeting any of these named exemptions is not required to comply with the provisions of HB 472 and the current administrator rules.

(Note: Chapter 4151 exempts certain specified parties from its provisions. However, if these exempt parties contract with a person for the performance of services that require a COA under Chapter 4151, then that person will generally be required to be licensed as an administrator.)

Can workers' compensation certified networks be TPAs? What about workers' compensation voluntary or informal networks and other delegated entities?

Anyone collecting premiums or contributions from, or adjusting or settling claims for, residents of this state in connection with annuities or life, health, accident, pharmacy, or workers' compensation benefits is acting as a TPA and is subject to HB 472's provisions and the current administrator rules. This is true regardless of whether the entity is also acting as a certified network, voluntary or informal network, or delegated entity. In cases in which one entity is acting as both a TPA and a certified network or as both a TPA and a voluntary or informal network, that entity is required to obtain a TPA COA from the Department under the bill and the current administrator rules.

Are pharmacy benefit managers (PBMs) or processing agents subject to HB 472 and the current administrator rules?

Any PBM collecting premiums or contributions from or adjusting or settling claims for residents of this state in connection with annuities or life, health, accident, pharmacy, or workers' compensation benefits is acting as a TPA and is subject to provisions of HB 472 and the current administrator rules. HB 472 and the current administrator rules provide a separate exemption for workers' compensation pharmacy processing agents meeting certain conditions (see section 4151.0021 of the Texas Insurance Code).

What effect does HB 472 and the current administrator rules have on insurers?

While HB 472 and the current administrator rules primarily prescribe requirements for TPAs, they also prescribe a few requirements applicable to insurers. For example, HB 472 and the current administrator rules require an insurer to first ascertain whether a TPA holds the appropriate COA before referring a claim or loss for administration to that TPA. HB 472 and the current administrator rules also prescribe certain contracting, audit, and reporting requirements applicable to insurers.

Does HB 472 govern payment arrangements between TPAs and insurers, plan sponsors, or employers?

HB 472 amends section 4151.117 to prohibit an insurer or plan sponsor from providing compensation to a TPA that is based on the savings accruing to the insurer or plan sponsor because of adverse determinations regarding claims for benefits or reductions of benefits that are made or taken by the TPA.

What about workers' compensation qualified claims servicing contractors, administrators, and service companies under Chapters 407 and 407A of the Texas Labor Code (relating to certified self-insured employers and certified self-insurance groups)?

Qualified claims servicing contractors are required to obtain a TPA COA from the Department and are subject to the provisions of HB 472 and the current administrator rules. HB 472 and the current administrator rules also affect administrators and service companies under Chapter 407A of the Texas Labor Code.

Does HB 472 and the current administrator rules affect employers who do not have workers' compensation coverage (i.e. nonsubscribing employers)? What about TPAs administering plans for non-subscribers?

The provisions of HB 472 and the current administrator rules do not affect employers electing not to obtain workers' compensation coverage (non-subscribers). A TPA administering a plan for a non-subscriber would also not be subject to the provisions of HB 472 and the current administrator rules, provided that the plan does not provide benefits for a work related injury in connection with a life, accident, health, pharmacy, or workers' compensation policy. Additionally, a TPA administering a plan under the federal Employee Retirement Income Security Act (ERISA) for a non-subscriber that provides benefits for a work-related injury is not subject to the provisions of HB 472 and the current administrator rules for that plan.

What if a person already holds a TPA COA?

A person already holding a TPA COA issued by the Department is not required to re-apply for another COA. Such persons must only comply with the provisions of HB 472 and any rules adopted thereunder.

If a person already holds a TPA COA to administer life and health insurance benefits, does that person need to submit another application to administer workers' compensation benefits?

No. A single TPA COA authorizes the administration of life, health, accident, pharmacy, annuity, and workers' compensation benefits.

When does a person have to obtain a new COA?

HB 472 became effective September 1, 2007. The Department was required to issue TPA COAs beginning September 1, 2007. HB 472 required persons to hold a TPA COA starting January 1, 2008.

How can a person apply now for a TPA COA?

Persons who are not exempted from HB 472 and who are not currently licensed as a TPA in this state may apply for a TPA COA by using the standard TPA application available from the Department's website.

When is the earliest that a person administering workers' compensation benefits may make application for a COA as a TPA?

The TPA application on the Department's website is available and can currently be downloaded, completed, and submitted for consideration at any time. If your company is not currently licensed, but it is currently performing functions that require a COA under Chapter 4151 and the current administrator rules, it is suggested that you submit a COA application as soon as reasonably possible to avoid potential sanctions. The link to the application is located at: www.tdi.texas.gov/forms/form5tpa.html.

What is the latest date that a person currently administering workers' compensation benefits may make application for a COA as a TPA?

HB 472 required a person currently administering workers' compensation benefits to obtain a COA no later than January 1, 2008, to avoid possible sanctions. After that date, a person must obtain a TPA COA prior to administering workers' compensation benefits. Staff suggests submitting COA applications as early as possible because there will be some delay between the filing of the COA and the issuance of the COA.

Has the Department adopted new rules pursuant to HB 472?

HB 472 provides the Department with rulemaking authority. The Department adopted rules implementing the provisions of HB 472 in June 2009. The Department alerted stakeholders when it began its rulemaking process so that all stakeholders may be involved in the rulemaking process. The Department also held a stakeholder meeting and invited informal comments on draft rules.

Can a TPA contract with a policyholder for workers' compensation claims administration services?

If an insurer or plan sponsor chooses to utilize the services of a TPA, HB 472 and the current administrator rules require the insurer or plan sponsor to enter into a contract with the TPA for those administrative services. HB 472 and the current administrator rules also prescribe certain provisions that must be contained within the contract. For policyholders who wish to utilize the services of a TPA, HB 472 and the current administrator rules permit the policyholder to contract with the TPA for administrative services as well, provided that certain conditions are met.

Can a TPA use out-of-state adjusters?

HB 472 and the current administrator rules prohibit a TPA from referring a claim or loss for adjustment in this state to an individual until the TPA ascertains that the individual holds the appropriate license. The bill and the current administrator rules require an adjuster investigating, adjusting, supervising, or settling workers' compensation claims to hold an adjuster's license issued by the Department. An adjuster may hold an appropriate non-resident adjuster's license.

Does a person have to hold an adjuster's license to administer or adjust life, accident, or health insurance claims?

A person administering or adjusting life, accident, or health insurance claims is not required to hold an adjuster's license.

What chapter in the Insurance Code does HB 472 amend? Where can I obtain a copy of HB 472 or the chapter?

HB 472 amends the Texas Insurance Code (TIC), Chapter 4151. A copy of the TIC, Chapter 4151 is available for viewing and printing at Texas Insurance Code. A copy of HB 472 is available for viewing and printing at HB 472.

Where can I find the current rules affecting TPAs?

The sections of the Texas Administrative Code (TAC) outlining the administration and enforcement of Chapter 4151 are available for viewing and printing at Texas Administrative Code, 28 TAC §§ 7.1601-7.1618. Please note, however, that although the Department makes every attempt to ensure the currency of the code references, they should be used only as guides. The TAC is subject to change as needed and will change as the Department adopts new rules implementing HB 472.

What about taxes?

TPAs are subject to the TPA maintenance tax collected by the Office of the Comptroller of Public Accounts.

For more information contact Kevin Brady, Deputy Commissioner of the Financial Program, at 512-322-6788.