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InsuranceNews Texas Department of Insurance


  • pg 1
									                                                                                                                                         July 2002


                                               Bundling, Downcoding Rules Proposed
                                               TDImaking “bundling,”twoforalternative rule-
                                                         HAS PROPOSED

                                               information about
                                                                 approaches    disclosure of
                                                                           “downcoding” and
                                                                                                      June 3, 2002. The Department complied with that
                                                                                                      Montemayor noted after Cornyn issued his opin-
                                               other payment procedures to physicians and pro-
I N S I D E                                    viders that contract with HMOs and insurers offer-
                                                                                                      ion that TDI staff had been addressing the disclo-
                                                                                                      sure issue with the Texas Medical Association, the
TDI Issues New Data                       2    ing preferred provider benefit plans.
                                                                                                      Texas Hospital Association and Texas Association
  on Mold Claims
                                               For the purposes of brevity, this article will refer   of Health Plans and other parties that participate
HMOs Report First Quarterly               3    to HMOs and insurers offering preferred provider       in the Department’s Clean Claims Working Group.
 Profit Since 1996                              plans as “carriers.”
                                                                                                      The proposed rules would amend 28 TAC §
USAA’s National HO Policy                 5    The Department published proposals to amend            3.3703 with respect to preferred provider plans
  Approved for Texas Use
                                               TDI rules on preferred provider plan and HMO           and 28 TAC § 11.901 with respect to HMOs.
                                               contracts in the June 14, 2002, issue of the Texas
                                                                                                      Following is a description of the alternative dis-
                                               Register. The proposals also can be accessed on
                                                                                                      closure rules proposed by TDI staff:
                                               TDI’s Web site, www.tdi.state.tx.us. Each
TexasInsuranceNews                             proposal includes the two alternative approaches.      Alternative One
is published each month. For a one-year                                                               Physician and provider contracts would be requir-
subscription (12 issues), contact TDI’s        One approach would require that all physician
Publications Division at:                      and provider contracts entered into or renewed         ed to contain information in sufficient detail to en-
                                               after the effective date of the rule contain the re-   able a reasonable person with sufficient training,
 Texas Department of Insurance
 Texas Insurance News⁄MC-9999                  quired payment procedure information. Carriers         experience and competence in claim processing
 P O.Box 149104
                                               would be required to provide the same informa-         to determine the payments to be made under those
 Austin, TX 78714-9104                                                                                contracts. This information would have to explain
                                               tion to physicians or providers with existing con-
Enclose a check for $30 made out to the
                                               tracts no later than 90 days after the proposal        all the methodologies the carrier would use to
Texas Department of Insurance.                                                                        process and pay claims, including a fee schedule,
If you have questions about subscribing,       takes effect. The alternative approach would re-
call Publications at (512) 322-4283.           quire disclosure of this information only to physi-    any non-standard coding methodologies, bundling
Direct questions or suggestions about          cians and providers with contracts entered into or     processes and downcoding policies.
content to (512) 463-6425 or write:
                                               renewed after the proposal takes effect and only       In addition, a carrier would have to provide any
 Texas Insurance News, MC-113-1A,              upon request.                                          addendum, schedule, exhibit or policy that is nec-
 P O.Box 149104
 Austin, TX 78714-9104                         TDI’s Texas Register filing states that Commis-         essary to provide a reasonable understanding of
The staff that prepares this newsletter        sioner Jose Montemayor will adopt one of the two       the information being disclosed. For instance, a
has no role in proposing, drafting, editing,
                                               alternatives, possibly with changes from the pro-      schedule indicating that the carrier will reimburse
or approving TDI rules or policies or inter-                                                          certain claims at a “usual and customary rate”
preting statutes. Texas Insurance News         posed version.
should not be construed to represent the                                                              would have to explain how that rate is determined
policy, endorsement or opinion of the          Montemayor will hold a hearing on the proposals        for a particular service.
Commissioner of Insurance or the Texas         at 9:30 a.m., July 19, 2002, in Room 100 of the
Department of Insurance.
                                               William P. Hobby Jr. State Office Building, 333         A carrier could provide any required information
By necessity, summaries of proposed
                                               Guadalupe, Austin. The deadline for submitting         in a document or manual separate from the con-
and adopted rules cannot explain their                                                                tract if the contract itself identifies the document
full complexity. Readers interested in         written comments is 5 p.m., July 15, 2002.
complete information about administra-                                                                or manual as the source of the information. In
tive rules should consult the versions         In an opinion issued on May 8, 2002, Attorney          this case, the carrier would have to present the
published in the Texas Register.               General John Cornyn held that the Commissioner         document or manual to the physician or provider
To the best of the staff’s ability, infor-     of Insurance has legal authority to issue rules
mation presented in this newsletter is
                                                                                                      no later than the date the contract is executed.
correct as of the publication date, but        requiring carriers to disclose their fee schedules,
scheduled dates and proposed rules             bundling processes and downcoding policies to          If copyright laws or a licensing agreement prevent
and amendments may change as the               contracting physicians and providers. Governor         the carrier from providing the required informa-
adoption process goes forward.
                                               Rick Perry immediately asked the Department to         tion, the carrier could satisfy the disclosure re-
                                               submit proposed rules to the Texas Register by                             Please see Bundling on page 5
2             TexasInsuranceNews                        July 2002

TDI Issues Instructions                                 water claims in which the presence of mold is           connection with the purchase of insurance. The
on National HO Policies                                 known or alleged and include payment of costs           program must set forth customer identity verifica-
                                                        not related to mold such as underlying non-mold         tion and documentation procedures as well as
                          insurers that they may
           use the recently adopted State Farm
and USAA national residential property insurance
                                                        water damage, slab damage and other repairs not
                                                        directly resulting from mold itself.
                                                                                                                procedures for notifying customers about this re-
                                                                                                                quirement and to determine whether a customer
                                                                                                                appears on government lists of known or suspect-
forms if they comply with certain conditions.           The number of mold-related claims jumped from
                                                                                                                ed terrorists or terrorist organizations.
                                                        7,083 in 2000 to 37,202 in 2001.
The Department issued a bulletin (B-0029-02)
                                                                                                                The full text of the bulletin may be accessed on
on June 5, 2002, informing companies of the             The quarterly claim count multiplied almost geo-
                                                                                                                TDI’s Web site, www.tdi.state.tx.us. ★
State Farm and USAA adoptions and describing            metrically, from 1,050 in the first quarter of 2000
what a company must do to use the forms. The            to 14,706 in the fourth quarter of 2001. ★
bulletin can be accessed on TDI’s Web site,                                                                     Annual Statements
www.tdi.state.tx.us.                                                                                            Available On-Line
                                                        TDI Advises Insurers
According to the bulletin, a company that elects to
use the State Farm or USAA forms must file for
                                                        of U.S. PATRIOT Act                                                       filed electronically
                                                                                                                Athe NAIC can now be accessed onlinewith
                                                                                                                     NNUAL STATEMENTS
and receive TDI’s approval. In the filing, the com-
pany must agree to abide by conditions and re-
                                                        Totherthem licenseeshasanti-moneyinsurers and
                                                           HE DEPARTMENT

                                                                TDI           that a new federal law will
                                                                    to establish             laundering
                                                                                                                panySearch. The information also can be
quirements laid out in the Commissioner’s orders                                                                reached through TDI’s Web site. Go to the Forms/
                                                        programs later this year.
adopting those forms. These conditions include:                                                                 Databases/Lists menu and click on “Annual State-
• Rate reductions to reflect changes in coverage.        The requirement is contained in the “Uniting and        ments.” An application that reads PDF files, such
• The filing of rate information with TDI for two        Strengthening America by Providing Appropriate          as the Adobe Acrobat Reader, is needed to view
  years after a company starts using the State          Tools Required to Intercept and Obstruct Terror-        the annual statements. The NAIC advises that in-
  Farm or USAA forms.                                   ism (USA PATRIOT) Act of 2001.”                         formation in the statements is presented “as is”
• Disclosure to existing policyholders how the                                                                  with “no guarantee of the truth, accuracy or com-
                                                        TDI issued a bulletin (B-0025-02) on May 22,
  State Farm and USAA forms differ from the po-                                                                 pleteness of the information.” ★
                                                        2002, calling attention to this statute. The bulletin
  licies the customers currently have.                  notes that the U. S. Department of the Treasury
• Giving policyholders the option to buy en-            has been examining the money laundering risks           Fraud Unit Prosecutions
  dorsements providing water damage, slab               associated with insurance products and will soon
  foundation and mold coverage similar to the                                                                   Indictments
                                                        issue proposed rules governing the establishment
  coverage provided in the Texas standard HO-B                                                                  Ortega, Gwenna, indicted in Austin on
                                                        of anti-money laundering programs by insurance
  policy that most homeowners now have. ★                                                                       charges of making a false statement in a
                                                                                                                written instrument, a third-degree felony.
                                                        “The Texas Department of Insurance encourages           Catland, Barbara Elaine, indicted in Austin
TDI Tabulates Latest                                     all insurance companies to be alert for the issu-      on charges of making a false statement in a
Mold Data Call Results                                   ance of the proposed rule,” the bulletin said. It      written instrument, a third-degree felony.
    HE FIVE LARGEST homeowners writers, with             notes that the Treasury had temporarily exempt-
T75 percent hadthe44,285 mold-related water
reported they
              of    state’s total market, have           ed insurers from the money laundering provi-
                                                         sions. The exemption applies for no more than
                                                                                                                Harmel, Don, indicted in Austin on charges
                                                                                                                of misapplication of fiduciary property, a
                                                                                                                first-degree felony.
claims in Texas over the past two years, with esti-      six months, or no later than October 24, 2002.
mated incurred losses and ALAE totaling more                                                                    Montgomery, Latisha Renee, indicted in
                                                        Anti-money laundering provisions of the USA             Beaumont on charges of insurance fraud,
than $1 billion.
                                                        PATRIOT Act require financial institutions, at min-      a state jail felony.
State Farm, Allstate, Farmers, USAA and Travelers       imum, to:
                                                                                                                Rice, Kevin, indicted in Dallas on charges
provided the statistics in response to a TDI call for   • Develop internal policies, procedures and con-
                                                                                                                of securing the execution of a document by
data on results in the third and fourth quarters of       trols.
                                                                                                                deception, a third-degree felony.
2001. USAA and Travelers data was added to              • Designate a compliance officer with access to
numbers previously collected from the other               senior management and with appropriate train-         Case Dispositions
three carriers for 2000 and the first half of 2001.        ing and background to execute his or her re-          Harris, Shann Hydrick, received two years’
                                                          sponsibilities.                                       deferred adjudication and 200 hours of commu-
The revised and updated numbers are on the
                                                        • Establish an employee training program.               nity service in Belton for insurance fraud, a state
Mold Resource page of TDI’s Web site, www.
                                                        • Have an independent audit function to test the        jail felony.
                                                          financial institution’s anti-money laundering          King, Kenneth Day, received 36 months’ de-
According to the data, the five carriers paid and          programs.                                             ferred adjudication in Dallas for misapplication
reserved $152.7 million in mold-related water                                                                   of fiduciary property, a third-degree felony. ★
                                                        Under the federal statute, the Treasury must
claims and ALAE in 2000 but $854.4 million in
                                                        establish minimum standards for financial institu-
2001. The figures represent the total amount of
                                                        tions regarding the identity of their customers in
                                                                                July 2002           TexasInsuranceNews                                3


HMOs Report Profit
in First Quarter of ‘02
                                              American Benefit Plans Fined $4.15 Million
                                              Sof Austin has placedinsurer, intoBenefitJenkins
                                                   TATE DISTRICT COURT JUDGE

                                              (ABP), an unauthorized

                                              $4.15 million in civil penalties.
                                              receivership and entered a judgment imposing

                                              Judge Jenkins also ordered ABP and other defen-
                                                                                                    appointed by Commissioner Jose Montemayor, to
                                                                                                    take control of ABP’s money, books and records.
                                                                                                    Loiseau testified that $2.5 million in assets had
                                                                                                    been recovered so far, and that an additional $1.5
                                                                                                    million held by entities not named as defendants
                                                                                                    had been identified. Judge Jenkins’ order direct-
                                                                                                    ed those entities to turn the funds over to the SDR.
                                              dants to reimburse TDI $74,192 for investigative
     NAUDITED FINANCIAL REPORTS                                                                     Health plan members’ claims will take prece-
Uthat the first quarter of 2002 indi-a
         basic service HMOs, taken as
                                                                                                    dence over the civil penalties in the distribution of
                                              Approximately 30,000 persons in 41 states, in-        assets recovered by the SDR.
whole, made a profit on their Texas-only       cluding 8,000 in Texas, were insured by ABP, pri-
                                                                                                    Among other defendants, the court order names
business for the first time in six years.      marily under contracts with employers.
                                                                                                    ABP officers Robert David Neal of Fort Worth and
The reports indicated combined after-         ABP was placed in temporary receivership on           Robert Neal Pointer of Dallas and the National As-
tax net income of $595,567. This con-         March 6. That order froze ABP’s assets and en-        sociation of Working Americans. ★
trasts with an after-tax loss of $56.5 mil-   abled Robert Loiseau, the special deputy receiver
lion in the first quarter of 2001.
Twenty of the 36 licensed basic service
                                              Tyler Agent Arrested in Fraud Unit Case
HMOs showed an after-tax profit on
their unaudited quarterly financial re-
ports. Thirteen lost money, one broke
                                              Ahas Tesseyman III and oftheTylerinvestigation
                                                   N UNAUTHORIZED INSURANCE

                                                      led to the arrest         agent John
                                                                            issuance of an
                                                                                                    Tesseyman’s actions may have left more than 100
                                                                                                    Fourth of July fireworks displays and hundreds of
                                                                                                    trucks transporting petroleum products without
even and two were inactive.                   emergency cease-and-desist order against the          valid insurance.
“I welcome the first quarter’s apparent        Tesher Corp., his unlicensed corporate insurance
                                                                                                    Commissioner Jose Montemayor issued an emer-
 profitability as a sign that the HMO re-      agency.
                                                                                                    gency cease-and-desist order on June 6, 2002,
 forms of the past few years may be get-      Tyler police on June 10, 2002, executed an arrest     directing Tesher Corp. and Tesseyman to stop
 ting the results we intended,” Com-          warrant issued by State District Judge Julie          selling insurance products without the necessary
 missioner Jose Montemayor said.              Kocurek of Austin. The warrant listed charges of      licenses.
 “These reforms included more accu-           misapplication of fiduciary property over
 rate accounting of an HMO’s true net                                                               Tesseyman sold the policies through the Tesher
                                              $200,000, theft over $200,000 and securing exe-
 worth and a requirement that HMOs                                                                  Corp., Southwest Pyro Consortium and Southwest
                                              cution of a document by deception over $200,000
 post special cash reserves when they                                                               Property and Casualty in Tyler. While Tesseyman is
                                              and unauthorized insurance. Kocurek set
 know their premiums are insufficient                                                                individually licensed to sell life/health and P&C
                                              Tesseyman’s bond at $400,000.
 to cover claims and expenses.”                                                                     insurance, Tesher Corp. is not licensed as a cor-
                                              The charges followed an investigation conducted       porate P&C agency or corporate surplus lines
The last industrywide profit on Texas-         by TDI’s Insurance Fraud Unit and the Travis          agency. ★
only business occurred in the first            County District Attorney’s office.
quarter of 1996. After that, the basic
service HMO industry posted after-tax         Judge Issues TRO Against Bogus Policies
losses in 23 consecutive quarters.
Basic service HMO enrollment report-
ed for the first quarter was 3,402,099,
                                              Sthestop sellingtwo TexasPete Lowry hasdirected
                                                   TATE DISTRICT JUDGE

                                              them to
                                                      assets of           agents and

                                                                allegedly fraudulent commer-
                                                                                                    Judge Lowry issued a temporary restraining order
                                                                                                    on May 31, 2002, and followed it with a tempo-
                                                                                                    rary injunction on June 13, 2002. The injunction
a reduction from the 3,611,072 re-            cial property policies.                               took the restraining order a step further by pro-
ported as of the close of 2001.                                                                     hibiting the agents from replacing or attempting
                                              TDI investigators alleged that agents Robert S.
                                                                                                    to replace the allegedly fraudulent policies, ex-
The 16 single-service HMOs reported           Harrison of Richmond and Pete F. Ballard of San
                                                                                                    cept with the written approval of the receiver.
after-tax net income of $8.2 million in       Antonio, operating as Harrison Insurance Agency,
the first quarter. Their enrollment in         collected millions of dollars for worthless cover-    The judge appointed San Antonio CPA Edward L.
Texas was 3,401,233.                          age on as many as 73 apartment complexes.             Rishebarger as receiver of Harrison, Ballard,
                                                                                                    Harrison Insurance Agency, HB Insurance
The three limited service HMOs, with          The investigators determined that Harrison and
                                                                                                    Management Inc. and HB Insurance Services Inc.
183,780 enrollees, reported they lost         Ballard continued to add properties to a Lloyd’s of
                                                                                                    Assets seized will be used to provide restitution to
$2.6 million. ★                               London policy despite Lloyd’s cancellation of their
                                                                                                    individuals who have outstanding claims. ★
                                              appointment and placed $1.4 billion of exposure
                                              on an $850 million policy by adding risks after
                                              policy limits were reached.
4             TexasInsuranceNews                     July 2002

AUTOMOBILE                                              In its proposal, TDI states that there is a need     Publication: 27TexReg5059, June 14, 2002
                                                                                                             Earliest possible adoption: July 14, 2002
                                                        to approve assumption reinsurance agree-
Exempt Adoption                                         ments in limited situations other than conser-
                                                                                                             Further information: 512 463-6327

Underinsured Vehicle Definition                          vatorship or receivership. In general, these li-     HMO Disclosures
■ Commissioner Jose Montemayor has amend-               mited situations are tied to the best interests of   ■ The Department has proposed amendments
  ed the Texas Automobile Rules and Rating              the affected policyholders when a transaction          to 28 TAC § 11.901, concerning required
  Manual with respect to the definitions of an           such as a related dissolution, sale or hazar-          provisions in HMO contracts with physicians
  underinsured vehicle in Endorsements 578,             dous financial condition, or other financial             and providers. The changes address disclo-
  Named Non-Owner Coverage, and 579,                    condition of the ceding insurer, indicates an          sure of information of fee schedules and cod-
  Named Operator-Government Employees.                  assumption of the policies would be in the             ing procedures that affect the payment pro-
    The changes conform the definition of an un-         best interest of the policyholders. Each situa-        cess. For details, please see the cover article
    derinsured motor vehicle in the endorse-            tion would be determined on a case-by-case             in this issue of TexasInsuranceNews.
    ments to the definition contained in the Texas       review.                                              Publication: 27TexReg5071, June 14, 2002
    Personal Auto Policy. The inconsistency be-      Publication: 27TexReg5063, June 14, 2002
                                                                                                             Earliest possible adoption: July 14, 2002
                                                                                                             Further information: 512 463-6327 ★
    tween the definitions recently was brought to     Earliest possible adoption: July 14, 2002
    staff’s attention.                               Further information: 512 463-6327

    Effective August 13, 2002, the definition will    2002 Annual and Quarterly                               Brown to Head Combined
    read as follows in all applicable automobile     Statements
                                                                                                             Complaints Resolution
    insurance forms:                                 ■ The Department has proposed new 28 TAC §
                                                                                                                HE PROPERTY   and Casualty and Life, Accident
       An underinsured motor vehicle is one
       to which a liability bond or policy ap-
                                                       7.65 concerning the requirements for filing
                                                       2002 annual and quarterly statements.                 Tand Health Complaints Resolution sections ofa
                                                                                                             Consumer Protection have been merged into
       plies but its limit of liability:                The proposed rule incorporates annual and            single unit headed by Valerie Brown, who had
       a. is not enough to pay the full                 quarterly filing updates from the prior period.       been director of the P&C section.
          amount the covered person is                  The instructions and forms required are es-
                                                        sentially the same as the 2001annual and             Brown has been with TDI for 18 years, the past
          legally entitled to recover as
                                                        quarterly statement filings except for the addi-      eight as director of Property and Casualty Com-
          damages; or
                                                        tion of:                                             plaints Resolution. She previously was an insur-
       b. has been reduced by the payment
                                                        • A new NAIC form for life companies to file          ance specialist in that section. She joined the
          of claims to an amount which is
                                                           a Worker’s Compensation Carve-out Sup-            agency in 1984 and worked briefly in Legal and
          not enough to pay the full amount
                                                           plement. This form reflects information on         Compliance before transferring to Consumer
          the covered person is legally enti-
                                                           reinsurance assumed by life and health in-        Protection.
          tled to receive as damages.
                                                           surers on certain business originally writen      Audrey Selden, senior associate commissioner of
    In addition, the rule change redesignates the          as workers’ compensation. The applicable          Consumer Protection, said she merged the two
    endorsements as 578A and 579A.                         exposures are occupational illness and ac-        units to increase efficiency and improve service.
Publication: 27TexReg 5257, June 14, 2002                  cident but not employers liability.
Reference No. A-0402-13-I                               • A “Supplemental Investment Risks Interro-          “Combining our complaints resolution functions
Further information: 512 463-6327                                                                             into one unit allows us to devote more resources
                                                           gatories” supplement. This supplement is
                                                           designed to improve disclosures regarding          to reviewing complaints and eliminate some du-
FINANCIAL                                                  diversification and valuation of assets.            plicative functions,” Selden said. ★
APA Proposals                                        Publication: 27TexReg5064, June 14, 2002
Auto Insurance Assumptions                           Earliest possible adoption: July 14, 2002               Robinson to Manage
■ The Department has proposed an amend-              Further information: 512 463-6327
                                                                                                             Consumer Help Line
  ment to 28 TAC § 5.11, concerning assump-
  tion certificates related to automobile insur-
  ance policies.
                                                     HEALTH CARE
                                                     APA Proposals
                                                                                                             JdirectorProtection.has accepted the to requests
                                                                                                                                                   position of
                                                                                                                OHN ROBINSON

                                                                                                                        of Information Assistance (IA) in
                                                                                                                                  IA staff respond
    The change would eliminate the present re-       Preferred Provider Plan Disclosures                     for information and assistance made through the
    striction that an assumption certificate may be   ■ The Department has proposed amendments                agency’s toll-free Consumer Help Line.
    attached only when the ceding carrier is in        to 28 TAC § 3.3703 concerning required pro-
    receivership or conservatorship and only           visions in preferred provider plan contracts          Robinson is a graduate of Southwest Texas State
    when a court has approved a reinsurance            with physicians and providers. The changes            University with a degree in geography. He worked
    agreement. Instead, a certificate could be at-      address disclosure of certain information             at USAA in San Antonio for 19 years, including
    tached to an auto policy when a reinsurance        about fee schedules and coding procedures             nearly 51⁄2 years as manager of USAA’s policy ser-
    assumption agreement has been approved by          that affect the payment process. For details,         vices call center. Most recently, he served as a bu-
    a Commissioner’s order.                            please see the cover article in this issue of         siness projects manager at USAA. ★
                                                                                           July 2002           TexasInsuranceNews                                     5

Montemayor Adopts USAA’s HO Policy                                                                             Data Call Reminders
     OMMISSIONER JOSE MONTEMAYOR         has is-        those resulting from covered water losses. The         (Failure to comply with TDI’s reporting requirements
C    sued an order adopting USAA’s national resi-
dential property forms for use in Texas.
                                                        HO-B covers such losses to some extent but does
                                                        not pay for mold “remediation,” including detec-
                                                                                                                may result in disciplinary action)

                                                                                                               Quarterly Closed Claim Reports
                                                        tion, inspection, isolation, etc.                      Reports (Long/Short Forms) for claims closed
USAA has indicated it will start using its national
                                                                                                               during the second quarter of 2002 are due July
forms in lieu of Texas standard forms on both new       USAA’s package includes “buy-back” endorse-
                                                                                                               10, 2002. The forms may be downloaded from
and renewal business starting January 1, 2003.          ments that will enable policyholders to add:
                                                                                                               TDI’s Web site located at http://www.tdi.
Other companies may apply to TDI for authoriza-         • Up to $15,000 in coverage for slab or founda-
tion to use the USAA forms.                               tion damage resulting from accidental water
                                                                                                               TDI contact is Vicky Knox, 512 475-1879.
                                                          discharges, including constant and repeated
Preliminary numbers from USAA indicate the                                                                     E-mail address: vicky.knox@tdi.state.
                                                          seepage. The $15,000 limit of liability would
company’s average rate for a brick veneer house                                                                tx.us
                                                          include tear-out costs.
insured for $80,000 will drop from $1,645 for a
                                                        • Coverage for direct physical loss caused by          Call for Quarterly Experience
Texas standard HO-B policy with full mold reme-
                                                          constant or repeated seepage or leakage of           The Call for Second Quarter 2002 Experience will
diation coverage to $779 for the basic USAA poli-
                                                          water, including the cost of tearing out and re-     be due August 15, 2002. The bulletin and forms
cy. If a policyholder elects to buy water coverage
                                                          placing any part of the building necessary to        may be downloaded from TDI’s Web site located
similar to that provided by the HO-B, with full
                                                          access the system or appliance from which the        at      http://www.tdi.state.tx.us/
mold remediation, the average premium would
                                                          seepage or leakage occurred.                         company/indexpc.html TDI contact is
be $1,617.
                                                        • Coverage to remediate mold resulting from a          Julie Jones, 512 475-3030. E-mail address:
As with the State Farm national policies adopted          covered water loss, with limits of $25,000,          julie.jones@tdi.state.tx.us
by Montemayor in March, the primary differences           $50,000, $75,000 or 100 percent of the Cover-
between the USAA national forms and the Texas             age A-Dwelling limit of liability. The endorse-      Call for Quarterly Experience, Work-
                                                                                                               ers’ Compensation Deductible Plans
standard forms are in coverage of water-related           ment would include additional living expenses.
                                                                                                               The Call for First Quarter 2002 Experience will be
damage. The basic USAA policy covers damage
                                                        USAA will offer slab or foundation coverage, water     due August 15, 2002. The bulletin and forms may
from sudden and accidental water discharges but
                                                        damage coverage and mold coverage endorse-             be downloaded from TDI’s Web site located at
excludes losses, including slab foundation dam-
                                                        ments to all applicants for new policies and to        http://www.tdi.state.tx.us/
age, caused by constant or repeated seepage or
                                                        current policyholders when their HO-B policies         company/indexpc.html TDI contact is
leakage of water or by sewer backup.
                                                        are converted to the new forms. The endorse-           Julie Jones, 512 475-3030. E-mail address:
The basic USAA policies exclude losses caused by        ments also will be available for purchase at a later   julie.jones@tdi.state.tx.us
mold and other microbial organisms, including           date, subject to underwriting review. ★
                                                                                                               Texas Title Insurance
                                                                                                               Agent Statistical Report
                                                                                                               The call was issued April 16, 2002, and was due
Bundling…           from page 1                         schedules applicable to specific procedures. A          May 27, 2002, for hard copy reports and June 10,
quirement by supplying a summary of this infor-         carrier would have to furnish the information          2002, for electronic submissions. The bulletin
mation. However, this summary would have to be          within 30 days after receiving a request.              and forms may be downloaded from TDI’s Web
sufficient to enable the physician or provider to                                                               site located at http://www.tdi.state.
                                                        A carrier would be required to provide 60 days’
determine the payment to be made under the                                                                     tx.us/company/indexpc.html                  TDI
                                                        advance notice of material changes in its coding
contract.                                                                                                      contact is Data Services, 512 475-1878. E-
                                                        guidelines and fee schedules and could not make
                                                                                                               mail address: TitleCall@tdi.state.tx.us
A carrier would have to give physicians or pro-         retroactive changes in the guidelines and sched-
viders at least 60 calendar days’ notice before         ules.
changing or replacing any of the required infor-        Physicians and providers that receive this infor-
mation.                                                 mation could use or disclose it only for the pur-
Physicians and providers receiving the required         pose of practice management, billing activities or
information could not use or disclose it for pur-       other business operations. The rules would not
poses other than practice management, billing           be subject to any interpretation that would re-
activities or other business operations. They also      quire a carrier to violate copyright or other law by   Texas Title Insurance
would be prohibited from using the information          disclosing proprietary software licensed to it.        Company Statistical Report
to misrepresent the level of services actually per-     Upon request from a physician or provider, a car-      The call was issued June 13, 2002, and is due July
formed when submitting a claim.                         rier would be required to furnish the name, edi-       26, 2002. The bulletin and forms may be down-
                                                        tion and model version of software used to deter-      loaded from TDI’s Web site located at http:/
Alternative Two
Physicians and providers would have a contractu-        mine the bundling and unbundling of claims. ★
                                                                                                               dexpc.html . TDI contact is Clare Pramuk,
al right to request a description of a carrier’s cod-
                                                                                                               512 475-3015. E-mail address: clare.
ing guidelines, including any underlying bundl-
                                                                                                               pramuk@tdi.state.tx.us ★
ing, recoding or other payment processes and fee
6            TexasInsuranceNews                          July 2002

Editor’s Note: Copies of individual orders may be obtained by calling TDI’s Public Information Office, 512 463-6425.
AGENTS & AGENCIES                 NAME     CITY                   ACTION TAKEN                   VIOLATION                          ORDER          DATE

                      Acosta, Augustin     Laredo                 County Mutual License and      Failure to Pay Fine                02-0445        4/29/02
                                                                  General Life, Accident and
                                                                  Health License Revoked
           Cervantes, Ramon Vasquez        Lubbock                Agent License Application      Fraudulent or                      02-0512        5/16/02
                                                                  Denied                         Dishonest Acts
                  Cochran, Riley Chad      Arlington              $3,000 Fine                    Fraudulent or Dishonest            02-0479        5/6/02
                                                                                                 Acts or Practices
       Hernandez, Eduardo Hernandez        Pasadena               General Life, Accident,        Felony Conviction                  02-0420        4/23/02
                                                                  Health and HMO License
                                                                  and General Property and
                                                                  Casualty License Revoked
                Lamb-Young, Cheri Jan      Abilene                Credit Insurance Agent’s       Material Misstatements             02-0486        5/8/02
                                                                  License Revoked                on License Application
                       Parfait, Enrique    Lufkin                 General Life, Accident,        Fraudulent or Dishonest            02-0403        4/18/02
                                                                  Health and HMO License         Acts or Practices
               Rienstra, Hendrik, dba      Geneva, Switzerland    Cease-and-Desist Order         Unauthorized Insurance             02-0530        5/22/02
 New England International Surety Co.      Brussels, Belgium      and $200,000 Fine
                      Sullivan, Clair V.   Boston, MA             $5,000 Fine, $10,000           Unauthorized Insurance             02-0399        4/17/02
                                                                  Restitution and Cease-
                                                                  and-Desist Order
COMPANIES                         NAME     CITY                   ACTION TAKEN                   VIOLATION                          ORDER          DATE

American Bankers Insurance Group Inc. Miami, FL                   $3 Million Multi-State Fine,   Failure to Comply with             02-0559        5/31/02
                                                                  Including $150,883 of Texas    Previous Multi-State
                                                                                                 Consent Order
                Chrysler Insurance Co.     Southfield, MO          $1,500 Fine                    Late Payment of Workers’           02-0485        5/8/02
                                                                                                 Compensation Maintenance
                                                                                                 Tax Surcharge Refunds
    Life Insurance Company of Georgia      Atlanta, GA            $1,000 Fine and Order          Consent Order; Alleged             02-0558        5/31/02
      and Southland Life Insurance Co.     Plano                  Requiring Compliance           Race-Based Pricing of
                                                                  with National Regulatory       Life Insurance
                                                                  Settlement Agreement
                                                                  Requiring Restitution to
    Office and Professional Employees       New York, NY           Emergency Cease-and-           Unauthorized Insurance             02-0487        5/9/02
              International Union et al                           Desist Order
       Southland Lloyds Insurance Co.      Dallas                 $3,000 Fine                    Errors in Data Submitted           02-0510        5/15/02
                                                                                                 to TDI’s Statistical Agent
                                                                                                 for Private Passenger Auto
     Union National Life Insurance Co.     Baton Rouge, LA    $225,205 Fine and Order            Consent Order; Alleged             02-0480        5/6/02
United Insurance Company of America        Chicago, IL        Requiring Restitution and          Race-Based Pricing of
       and Reliable Life Insurance Co.     Webster Groves, MO Remediation for Consumers          Life Insurance.

URA                               NAME     CITY                   ACTION TAKEN                   VIOLATION                          ORDER          DATE

    Health Administration Services Inc.    Houston                $10,000 Fine                   Consent Order; Alleged             02-0511        5/15/02
                                                                                                 Violations of Utilization
                                                                                                 Review Agent Requirements

Applications Pending
For admission to do business in Texas
                                                         COMPANY NAME                                        LINE                    HOME OFFICE
                                                         Acadia Insurance Co.                                Fire and/or Casualty    Westbrook, ME
                                                         BeniComp Inc.                                       TPA                     Fort Wayne, IN
                                                         Encompass Home and Auto Insurance Co.               Fire and/or Casualty    Chicago, IL
                                                         Encompass Independent Insurance Co.                 Fire and/or Casualty    Chicago, IL

                                                                                                                                            Continued on page 7
                                                                                  July 2002   TexasInsuranceNews                          7

                                                                                                          Applications Pending
                                                                                                  For admission to do business in Texas
                                               COMPANY NAME                                   LINE                   HOME OFFICE
                                               FBD Consulting Inc.                            TPA                    Kansas City, MO
                                               Integrated Disability Resources Inc.           TPA                    Bloomfield, CT
                                               Stonebridge Casualty Insurance Co.             Fire and/or Casualty   Columbus, OH
                                               Synergence Group Inc.                          TPA                    Chicago, IL
                                               United Life Agency Services, LLC               TPA                    Garden City, NY
                                               (using the assumed name of Paylogix)
                                               Usplate Glass Insurance Co.                    Fire and/or Casualty   Westchester, IL
                                                                                                                         For incorporation
                                               COMPANY NAME                                   LINE                   HOME OFFICE
                                               Heartland Security Insurance Co.               Fire and/or Casualty   Tyler, TX
                                               RMS Texas, L.L.C.                              TPA                    Beaumont, TX
                                               (using the assumed Name of
                                               Risk Management Services)
                                                                                                                For certificate of authority
                                               COMPANY NAME                                   LINE                   HOME OFFICE
                                               PSO Health Services L.L.C.                     Provider Sponsored     San Antonio, TX
                                               under the assumed name                         Organization
                                               Physicians Health Choice

                                                                                                                For name change in Texas
FROM                                           TO                                             LINE                   LOCATION
J. C. Penney Life Insurance Co.                Stonebridge Life Insurance Co.                 Life, Accident and/or Health Rutland, VT

                                                                                                        Applications Approved
                                                                                                  For admission to do business in Texas
                                               COMPANY NAME                                   LINE                   HOME OFFICE
                                               Computer Health Network Inc.                   TPA                    Schaumburg, IL
                                               Eldorado Claims Services Inc.                  TPA                    Phoenix, AZ
                                               Florida Select Insurance Co.                   Fire & Casualty        Sarasota, FL
                                               Forte’ Information Services Inc.               TPA                    Riverside, CA
                                               National Land Title Insurance Co.              Title                  Barrington, IL
                                               Starmount Financial Corp. Inc.                 TPA                    Baton Rouge, LA
                                                                                                                         For incorporation
                                               COMPANY NAME                                   LINE                   HOME OFFICE
                                               Health Plan Administrators Inc.,               TPA                    San Antonio, TX
                                               dba HP Management Services
                                               Quorum Administrators Inc.                     TPA                    Dallas, TX

                                                                                                                For name change in Texas
FROM                                           TO                                             LINE                   LOCATION
Aetna Insurance Company of America             ING Insurance Company of America               Life                   Tampa, FL
Aetna U.S. Healthcare Dental Plan Inc.         Aetna Dental Inc.                              HMO                    Houston, TX
Aetna U.S. Healthcare Inc.                     Aetna Health Inc                               HMO                    Houston, TX
Aetna U.S. Healthcare of North Texas Inc.      Aetna Health of North Texas Inc.               HMO                    Dallas, TX
EOShealth Inc., dba GEOS                       EOSouthsource Inc., dba GEOS                   TPA                    Tempe, AZ
First ING Life Insurance Company of New York   National Security Life and Annuity Co.         Life                   Binghamton, NY
Foundation Health Systems Life                 Health Net Life Insurance Co.                  Life                   Woodland Hills, CA
& Health Insurance Co.
Sorema North America Reinsurance Co.           General Security National Insurance Co.        Fire & Casualty        New York, NY
Travelers Indemnity Company of Missouri, The   Travelers Commercial Casualty Co.              Fire & Casualty        Hartford, CT
Virginia Surety Co. Inc.                       Combined Specialty Insurance Co.               Fire & Casualty        Glenview, IL
ZC Insurance Co.                               Converium Insurance (North America) Inc.       Fire & Casualty        Fort Lee, NJ
Zurich Reinsurance (North America) Inc.        Converium Reinsurance (North America) Inc.     Fire & Casualty        Stamford, CT
TexasInsuranceNews                                    July 2002

Montemayor to Consider ISO Homeowner Policies
                      notice that ISO’s six resi-         premises, while the HO-B does. ISO has pro-              valuable documents to $1,500. The HO-B has a
        dential property policy forms, plus 95
endorsements, are under consideration for use in
                                                          posed an endorsement to add this coverage for
                                                          an additional premium.                               •
                                                                                                                   $500 limit.
                                                                                                                   The ISO policy provides $1,500 in coverage for
Texas.                                                •   ISO’s policy excludes damage to foundations,             boats and other watercraft away from the resi-
                                                          etc., as an ensuing loss caused by a covered             dence premises, while the HO-B totally ex-
Commissioner Jose Montemayor will consider
                                                          water discharge, while the HO-B provides cov-            cludes coverage when a loss occurs off the
adoption of the forms after the July 1, 2002, dead-
                                                          erage. This coverage could be added to the ISO           premises.
line for submission of written comments. Notice
                                                          policy by means of an endorsement, with a            •   ISO’s limit for theft of jewelry, watches and furs
was published at 27TexReg4731 on May 31, 2002.
                                                          limit of 15 percent of Coverage A-Dwelling.              is $1,500, while the HO-B contains a $500
ISO’s policy forms are commonly used in most          •   The ISO policy does not cover losses caused by           limit.
other states by insurers that do not have their own       fungi or microbes, including mold. The HO-B          •   ISO provides $500 in coverage for business
national forms.                                           covers removal of mold from an area directly             property away from the residence, while the
                                                          affected by a covered water loss but does not            HO-B offers no such coverage.
ISO filed its Homeowners 2-Broad Form, Home-
                                                          cover “remediation,” including detection, in-        •   The ISO policy provides an additional 5 per-
owners 3-Special Form, Homeowners 4-Contents
                                                          spection and isolation. A policyholder could             cent of policy limits for debris removal if the
Broad Form, Homeowners 5-Comprehensive
                                                          buy an endorsement to the ISO policy covering            total cost of covered damage and debris re-
Form, Homeowners 6-Unit Owners Form and
                                                          remediation of mold resulting from a sudden              moval exceed the limit of liability for the dam-
Homeowners 8-Modified Coverage Form, along
                                                          and accidental water discharge.                          aged property. The HO-B covers debris remov-
with the endorsements for use in Texas.
                                                      •   ISO’s policy contains an exclusion not in the            al within policy limits and does not provide ad-
The Homeowners 3-Special Form is analogous to             HO-B policy for losses to business data.                 ditional coverage.
the Texas standard HO-B policy form, which is the     •   ISO’s policy provides coverage of boats and          •   ISO provides up to $500 for covered damage
form most commonly sold to Texas consumers.               other water craft up to $1,500 for named per-            to any one tree, shrub or plant. The HO-B limit
The Homeowners 2-Broad Form is analogous to               ils, regardless of where the loss occurs but             is $250.
the less comprehensive HO-A with the Additional           with an exclusion for theft away from the resi-      •   ISO’s policy provides up to $5,000 in coverage
Extended Coverage Endorsement (HO-170) at-                dence premises. The HO-B provides coverage               for grave markers, including mausoleums, for
tached. The Homeowners 5-Comprehensive Form               up to the limits of Coverage B (Personal Pro-            losses caused by perils insured against. The
is analogous to the Texas standard HO-C.                  perty) for boats located on the residence pre-           HO-B does not provide similar coverage.
                                                          mises for all perils insured against.
Differences between the ISO Homeowners 3 and                                                                   Insurers proposing to use the ISO forms would be
                                                      •   The ISO policy limits coverage of stolen
the Texas standard HO-B include, but are not lim-                                                              required to apply for TDI’s prior approval. One
                                                          firearms, goldware and silverware to $2,500,
ited to, the following:                                                                                        condition would be to offer the ISO endorsements
                                                          while the HO-B provides coverage up to the
                                                                                                               providing coverage for constant or repeated seep-
Restrictions                                              limits of Coverage B.
                                                                                                               age or leakage, foundation damage and mold re-
• ISO’s policy does not cover losses caused by        •   ISO’s policy covers golf carts only if used exclu-
                                                                                                               mediation coverage, subject to underwriting.
  constant or repeated seepage or leakage of              sively to service the residence premises. The
                                                                                                               Other conditions include disclosure of coverage
  water from plumbing, appliances, etc., while            HO-B covers golf carts for all perils insured
                                                                                                               changes to existing customers, rate reductions to
  the HO-B does. A policyholder could add this            against up to the limits of Coverage B.
                                                                                                               reflect coverage changes, and the filing of rate in-
  coverage by purchasing an endorsement.                                                                       formation with TDI for two years after a company
• ISO’s policy does not cover losses from sewer                                                                starts using the ISO forms. ★
                                                      • ISO limits coverage of stamps, tickets, person-
  or drain back-up or from accidental dis-
                                                        al records, passports, deeds and certain other
  charges or overflow from off the residence

                Texas Department of Insurance                                                                                            Presorted Standard
                P O.Box 149104                                                                                                           U. S. Postage Paid
                Austin, Texas 78714-9104                                                                                                 A u s t i n, T e x a s
                                                                                                                                         P e r m i t No. 16 13

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