By: Cole (Senate Sponsor - Zaffirini) H.B. No. 4389
(In the Senate - Received from the House May 8, 2023;
May 10, 2023, read first time and referred to Committee on Business &
Commerce; May 22, 2023, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 9, Nays 2;
May 22, 2023, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR H.B. No. 4389 By: Zaffirini
A BILL TO BE ENTITLED
AN ACT
relating to the funding mechanism for the regulation of workers'
compensation and workers' compensation insurance; authorizing
surcharges.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Title 3, Insurance Code, is
amended to read as follows:
TITLE 3. DEPARTMENT FUNDS, FEES, SURCHARGES, AND TAXES
SECTION 2. The heading to Subtitle C, Title 3, Insurance
Code, is amended to read as follows:
SUBTITLE C. INSURANCE MAINTENANCE TAXES AND SURCHARGES
SECTION 3. Section 251.001(a), Insurance Code, is amended
to read as follows:
(a) The commissioner shall annually determine the rate of
assessment of each maintenance tax or workers' compensation
surcharge imposed under this subtitle.
SECTION 4. The heading to Section 251.004, Insurance Code,
is amended to read as follows:
Sec. 251.004. DEPOSIT OF MAINTENANCE TAXES AND SURCHARGES.
SECTION 5. Section 251.004(a), Insurance Code, is amended
to read as follows:
(a) Except as provided by Subsection (b), maintenance taxes
collected under this subtitle and surcharges collected under
Chapter 255 shall be deposited in the general revenue fund and
reallocated to the Texas Department of Insurance operating account.
SECTION 6. Chapter 255, Insurance Code, is amended to read
as follows:
CHAPTER 255. WORKERS' COMPENSATION INSURANCE
Sec. 255.001. SURCHARGE [MAINTENANCE TAX] IMPOSED. (a) A
surcharge [maintenance tax] is imposed on each authorized insurer
with gross premiums subject to the surcharge [taxation] under
Section 255.003, including a:
(1) stock insurance company;
(2) mutual insurance company;
(3) reciprocal or interinsurance exchange; and
(4) Lloyd's plan.
(b) The surcharge [tax] required by this chapter is in
addition to [other] taxes or other surcharges imposed that are not
in conflict with this chapter.
Sec. 255.002. MAXIMUM RATE; ANNUAL ADJUSTMENT. (a) The
sum of the rates [rate] of assessment for the surcharge imposed by
this chapter and the surcharges imposed by Chapters 403 and 405,
Labor Code, set by the commissioner, may not exceed 2.7 [0.6]
percent of the gross premiums subject to surcharges [taxation under
Section 255.003].
(b) The commissioner shall annually adjust the rate of
assessment of the surcharge [maintenance tax] so that the surcharge
[tax] imposed that year, together with any unexpended funds
produced by the surcharge [tax], produces the amount the
commissioner determines is necessary to pay the expenses during the
succeeding year of regulating workers' compensation insurance.
Sec. 255.003. PREMIUMS SUBJECT TO SURCHARGE [TAXATION].
(a) An insurer shall pay the surcharge [maintenance taxes] under
this chapter on the correctly reported gross workers' compensation
insurance premiums from writing workers' compensation insurance in
this state, including the modified annual premium of a policyholder
that purchases an optional deductible plan under Subchapter E,
Chapter 2053.
(b) The rate of assessment for a surcharge shall be applied
to the modified annual premium before application of a deductible
premium credit.
Sec. 255.004. SURCHARGE [MAINTENANCE TAX] DUE DATES. (a)
The insurer shall pay the surcharge [maintenance tax] annually or
semiannually.
(b) The comptroller may require semiannual payment only
from an insurer whose surcharge [maintenance tax] liability under
this chapter for the previous tax year was at least $2,000.
Sec. 255.005. RECOVERY OF SURCHARGE. An insurer may
recover a surcharge under this chapter by:
(1) reflecting the surcharge as an expense in a rate
filing required under this code; or
(2) charging the insurer's policyholders.
SECTION 7. Section 403.001(a), Labor Code, is amended to
read as follows:
(a) Except as provided by Sections 403.006, 403.007, and
403.008, or as otherwise provided by law, money collected under
this subtitle, including surcharges and advance deposits for
purchase of services, shall be deposited in the general revenue
fund of the state treasury to the credit of the Texas Department of
Insurance operating account.
SECTION 8. Section 403.002, Labor Code, is amended to read
as follows:
Sec. 403.002. SURCHARGES [MAINTENANCE TAXES]. (a) Each
insurance carrier, other than a governmental entity, shall pay an
annual surcharge [maintenance tax] to pay the costs of
administering this subtitle and to support the prosecution of
workers' compensation insurance fraud in this state.
(b) The rate of assessment is applied to [may not exceed an
amount equal to two percent of] the correctly reported gross
workers' compensation insurance premiums, including the modified
annual premium of a policyholder that purchases an optional
deductible plan under Subchapter E, Chapter 2053 [Article 5.55C],
Insurance Code. The rate of assessment shall be applied to the
modified annual premium before application of a deductible premium
credit.
(c) A workers' compensation insurance company is assessed
[taxed] at the rate established under Section 403.003 and as
limited by Section 255.002(a), Insurance Code. The surcharge [tax]
shall be collected in the manner provided for collection of other
surcharges [taxes] on gross premiums from a workers' compensation
insurance company as provided in Chapter 255, Insurance Code.
(d) Each certified self-insurer shall pay a fee and
maintenance taxes as provided by Subchapter F, Chapter 407.
SECTION 9. The heading to Section 403.003, Labor Code, is
amended to read as follows:
Sec. 403.003. RATE OF SURCHARGE [ASSESSMENT].
SECTION 10. Section 403.003(a), Labor Code, is amended to
read as follows:
(a) The commissioner of insurance shall set and certify to
the comptroller the rate of the surcharge, [maintenance tax
assessment] taking into account:
(1) any expenditure projected as necessary for the
division and the office of injured employee counsel to:
(A) administer this subtitle during the fiscal
year for which the rate of assessment is set; and
(B) reimburse the general revenue fund as
provided by Section 201.052, Insurance Code;
(2) projected employee benefits paid from general
revenues;
(3) a surplus or deficit produced by the surcharge
[tax] in the preceding year;
(4) revenue recovered from other sources, including
reappropriated receipts, grants, payments, fees, gifts, and
penalties recovered under this subtitle; and
(5) expenditures projected as necessary to support the
prosecution of workers' compensation insurance fraud.
SECTION 11. Section 403.004, Labor Code, is amended to read
as follows:
Sec. 403.004. COLLECTION OF SURCHARGE [TAX] AFTER
WITHDRAWAL FROM BUSINESS. The commissioner or the commissioner of
insurance immediately shall proceed to collect surcharges [taxes]
due under this chapter from an insurance carrier that withdraws
from business in this state, using legal process as necessary.
SECTION 12. Section 403.005, Labor Code, is amended to read
as follows:
Sec. 403.005. SURCHARGE [TAX] RATE. The commissioner of
insurance shall annually adjust the rate of assessment of the
surcharge [maintenance tax] imposed under Section 403.003 so that
the surcharge [tax] imposed that year, together with any unexpended
funds produced by the surcharge [tax], produces the amount the
commissioner of insurance determines is necessary to pay the
expenses of administering this subtitle.
SECTION 13. Chapter 403, Labor Code, is amended by adding
Section 403.0055 to read as follows:
Sec. 403.0055. RECOVERY OF SURCHARGE. An insurer may
recover a surcharge under this chapter by:
(1) reflecting the surcharge as an expense in a rate
filing required under the Insurance Code; or
(2) charging the insurer's policyholders.
SECTION 14. The heading to Section 405.003, Labor Code, is
amended to read as follows:
Sec. 405.003. FUNDING; SURCHARGE AND RECOVERY OF SURCHARGE
BY INSURERS [MAINTENANCE TAX].
SECTION 15. Section 405.003, Labor Code, is amended by
amending Subsections (a), (b), (c), and (d) and adding Subsection
(g) to read as follows:
(a) The group's duties under this chapter are funded through
the assessment of a surcharge [maintenance tax] collected annually
from all insurance carriers, and self-insurance groups that hold
certificates of approval under Chapter 407A, except governmental
entities.
(b) The department shall set the rate of the surcharge
[maintenance tax] based on the expenditures authorized and the
receipts anticipated in legislative appropriations. The surcharge
[tax] rate for insurance companies may not exceed the limitation in
Section 255.002(a), Insurance Code. The surcharge rate is applied
to [may not exceed one-tenth of one percent of] the correctly
reported gross workers' compensation insurance premiums. The
surcharge [tax] rate for certified self-insurers may not exceed the
limitation in Section 255.002(a), Insurance Code. The surcharge
rate is applied to [may not exceed one-tenth of one percent of] the
total tax base of all certified self-insurers, as computed under
Section 407.103(b). The surcharge [tax] rate for self-insurance
groups described by Subsection (a) may not exceed the limitation in
Section 255.002(a), Insurance Code. The surcharge rate is applied
to [may not exceed one-tenth of one percent of] the group's gross
premium for the group's retention, excluding premium collected by
the group for excess insurance.
(c) The surcharge [tax] imposed under Subsection (a) is in
addition to all [other] taxes or other surcharges imposed on those
insurance carriers for workers' compensation purposes.
(d) The surcharge [tax] on insurance companies and on
self-insurance groups described by Subsection (a) shall be
assessed, collected, and paid in the same manner and at the same
time as the surcharge [maintenance tax] established for the support
of the department under Chapter 255, Insurance Code. The surcharge
[tax] on certified self-insurers shall be assessed, collected, and
paid in the same manner and at the same time as the self-insurer
maintenance tax collected under Section 407.104.
(g) An insurer may recover a surcharge under this section
by:
(1) reflecting the surcharge as an expense in a rate
filing required under the Insurance Code; or
(2) charging the insurer's policyholders.
SECTION 16. The changes in law made by this Act relating to
surcharges on gross workers' compensation premiums apply only to
the gross annual premiums reported for an annual period beginning
on or after the effective date of this Act. Maintenance taxes
imposed on gross annual workers' compensation premiums before the
effective date of this Act are governed by the law as it existed
before the effective date of this Act, and the former law is
continued in effect for that purpose.
SECTION 17. This Act takes effect January 1, 2024.
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