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Third Party Administrator Proposed Rules

October 20, 2008                                                    Bulletin 2008-No. 05



Third Party Administrator (and Others) Proposed Rules


The Texas Department of Insurance has proposed draft rules to regulate Third Party Administrators (and Others in the opinion of the author of this Bulletin).  These draft rules are not at present being published in the Texas Register.  Kevin Brady with the Texas Department of Insurance has indicated that any comments on these proposed rules must be filed by 3:00 p.m., on October 27, 2008.


It has been my experience that the best chance and time to affect the final version of the rules which will be adopted is to comment on the proposed draft rules.


The proposed rules are quite broad and in some cases vague.  Rule 7.1601(a), Scope, states the rules will apply to a person acting as or holding itself out as an administrator in any capacity, regardless of whether the person holds another authorization from the department or the division of workers' compensation.  (Emphasis added).


Subsection (c) of proposed Rule 7.1601 provides a person acting as or holding itself out as an administrator must meet the requirements of the Insurance Code Chapter 4151 and this subchapter in addition to any other requirements applicable to that person under the Insurance Code Chapters 1272 or 1305 or the Labor Code Chapters 407 or 407A and any rules adopted there under. (Emphasis added).


Proposed Rule 7.1602(1), Definitions, defines an Administrator as that term is defined in the Texas Insurance Code Section 4151.001(1).  The term includes administrator contractors and administrator subcontractors.  (Emphasis added).


Proposed Rule 7.1602(4), defines administrator subcontractor as one who contracts or enters into an agreement with an administrator contractor for the performance of all or a portion of the administrative services the administrator contractor previously agreed to perform on behalf of an insurer, HMO, plan sponsor, or group.  (Emphasis added).  The author of this Bulletin did not see a requirement that the contract or agreement between an administrator contractor and administrator subcontractor be in writing.


Proposed Rule 7.1603(b), Certificate of Authority Required, requires an administrator subcontractor to hold a certificate of authority under the Insurance Code Chapter 4151.


Proposed Rule 7.1604(a), Application for Certificate of Authority, provides an applicant who seeks a certificate of authority under the Insurance Code Chapter 4151 must file an application with the department, accompanied by a non-refundable fee of $1,000. (Emphasis added).


Proposed Rule 7.1613, Written Agreements Between Administrators and Insurers, sets out some of the requirements of the contract between insurers and administrators.   


Proposed Rule 7.1614(a)(6), Prohibited Acts, provides an Administrator is prohibited from improperly attempting to influence the delivery of benefits to an injured employee, including through the making of improper threats, if the administrator performs administrative services on behalf of a person who is a participant in the workers’ compensation system of this state.  (Emphasis added).


The informal draft rules can be found at:


The author urges all persons who might be affected by these draft Rules to comment upon them.  Comments on the informal rules  should be sent to Kevin Brady at: Mr. Brady is the Texas Department of Insurance’s Deputy Commissioner of the Financial Division.



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