Senate Business & Commerce Releases Interim Report

The Senate Committee on Business & Commerce has released its interim report to the 86th Legislature.

The report focuses on multiple issues, energy restoration post disaster, mortgage requirements in floodplain areas, local government regulations with a view to Hurricane Harvey, home equity rules, free energy markets, health insurance market stability, occupational licenses and fees, social media, electric grid reliability, and monitoring the effect of legislation from the 85th Session. For full details including analysis and conclusions by the committee, please see the complete report.

Spotlight on Recommendations

Charge 1. Study infrastructure security and energy restoration post weather events. Identify ways state government entities can help utilities more effectively stage pre- hurricane mobilization crews for managing resources before an event.

• Utilities would benefit from greater access to spare transformers and substations, due to the impact of flooding on electrical devices. In addition, communications between utilities and federal, state & local leaders is critical, and it is appropriate to reassess the nomenclature used among all agencies to ensure those communications are accurate.
• The Texas Department of Emergency Management should develop a standardized credential for essential utility service providers to cross jurisdictional boundaries in federal and state declared disaster areas to speed essential service recovery efforts.
• The Legislature should consider expansion of the “Texas Move Over / Slow Down” Law to include operating utility trucks that would require drivers to vacate the lane closest to the applicable vehicles, or slow down.

Charge 2. Examine state mortgage requirements regarding the notification of homebuyers on their need for flood insurance in flood plains and flood pool areas and make recommendations on how to better inform consumers.

• The Committee recommends urging FEMA to update SFHA maps so that an expanded consumer segment would be eligible to participate in the NFIP, thus spreading risk mitigation costs over a larger population.
• The Committee recommends promoting flood risk resilience while minimizing fiscal exposure to the federal government.
• The Committee also recommends continued encouragement of consumer participation in the private flood insurance market which could help drive down premiums.
• The Texas Finance Code does not address requirements to notify borrowers about flood insurance. The Committee notes that to do so would be duplicative of federal law and could be burdensome and inconsistent.

Charge 3. Examine local government regulations, including occupational licenses, as related to Hurricane Harvey and determine if any are a detriment to rebuilding efforts.

• The Committee recommends the creation of Regional Recovery Directors to coordinate with the Texas Department of Emergency Management for essential service remediation (e.g. – debris & waste removal) during a federal or state-declared state of emergency.
• The Committee recommends changing state law to allow automatic suspension of local Homeowners Association covenants and restrictive bylaws during the period of a federally or state declared state of emergency and continuing through a recovery period of 1 year post-declaration.
• The Committee recommends revisions to state law offering Good Samaritan protections to members of response teams requested by a local official following a disaster, without regard to the status of the declaration. This would increase recovery team membership, aiding reconstruction in the event of a natural disaster.

Charge 4. Examine and make recommendations on the need for changes to the Texas Constitution for home equity lenders to offer various forms of relief to Texas homeowners affected by natural disasters including, among others, the authority to enter into deferment agreements. This examination should include a study of home equity rules regarding negotiation, modification and refinancing and whether constitutionally established time periods can be waived in times of disasters.

• The Committee believes it to be in the state’s best interested to monitor how Texans use these new home equity lending options afforded to them through SJR 60/Proposition 2, specifically how these new options are utilized by Texans accessing their home’s equity to help rebuild from Hurricane Harvey.
• The Committee encourages the Finance Commission to assess and issue opinions on the flexibility of current Texas home equity lending standards.

Charge 5. Free Market Electricity: Examine the competitive nature of the Texas retail electric system and what government competitive intrusions in the free energy markets may have in distorting those markets. Review the impact of competitive versus noncompetitive retail electricity markets across the state in terms of price and reliability. Consider the projected impact of establishing competitive electric retail markets statewide.

• The State of Texas should not be in the business of competing against private markets. Extenuating circumstances dictating a deviation from this policy can always be justified for a time, but a return to open markets free of government interventions should always a be a goal that guides state policy. As such, the Committee recommends that the State Power Program (SPP) administered by the General Land Office of Texas be phased out over time dependent on the conditions and terms of contracts already entered into by the state and its counterparties.
• Furthermore, to hold the children of Texas harmless as the result of any policy decision made in regards to the SPP, the Committee recommends that all schools be exempted from paying the Gross Receipts Tax when contracting for retail power within the ERCOT areas of Texas.
• To advance the accountability and transparency of Texas’ largest municipal utilities who operate under the direct control of their city governments, a competitive threshold should be established in PURA for those municipal utilities reaching a service threshold of 200,000 customers or more. These customers should have a mechanism for appeal to the PUC for review of their bundled (fuel cost, transmission and distribution, and retail) rates.

Charge 6. Health Insurance Market Stability: Study the factors affecting health insurance markets in Texas, particularly the individual market, including federal and state law. Make recommendations that would result in increased stability in the markets and enhance value and affordability for individual consumers and businesses. Examine what steps the state needs to take to allow out-of-state health insurance sales. In developing its recommendations, the committee should consider the flexibility afforded to states by 1332 “state innovation” waivers, which allow states to modify or eliminate tax penalties associated with individual and employer coverage mandates; modify requirements for benefits and subsidies; and find alternative ways to provide benefit plan choices, determine eligibility for subsidies, and enroll consumers.

• During the 86th Regular Legislative Session, the Committee recommends continuing to monitor efforts at the federal level on efforts to “repeal and replace” the Affordable Care Act. Texas would need to adequately adjust its health insurance measures at the state level should federal legislation pass and take steps to potentially establish a high risk reinsurance pool if federal funding is provided.
• Additionally, the Committee recognizes the need to work with the Texas Department of Insurance and monitor the implementation of the recently released federal rules for association health insurance and short term plans.
• Texans would benefit from finding ways to increase transparency in both healthcare services and insurance products to ensure that consumers are protected and know what healthcare services and insurance they receive and/or purchase.
• The Committee sees the potential consumer benefits in “right to shop” proposals and should work to determine if forming compacts with similarly regulated states would encourage health plans to offer health insurance products across state lines.

Charge 7. Review licensing requirements and fees imposed on entities within the committee’s jurisdiction. Make recommendations for state licenses and fees that should be reduced, repealed or transitioned to private-sector enforcement.

• Utilizing federal funds made available through passage of the New HOPE Act as well as the Comptroller’s forthcoming comprehensive report on study on state-regulated occupational licensure, every license must undergo a Sunrise Review by the Sunset Commission.
• The Legislature reexamine and, if found prudent, introduce legislation to eliminate, the stipulation in Texas law which revokes/refuses licensure to individuals in default of federal student loans.
• The Legislature recommission the forthcoming Comptroller study on state-regulated occupational licensure on a bi-annual basis due November 1st of every even numbered year ahead of the legislative session. The study will assess: the current number of state-regulated occupational licenses, the total number of Texas licensees, the percentage of Texans who work under a state regulated occupational license, highlight the ten-year trend of state-regulated occupational licensure in Texas, and compare these findings with current employment and population numbers from the Bureau of Labor Statistics.

Charge 8. Social Media Access: Study access issues regarding digital assets of decedents. Study social media privacy laws and whether job applicants and students’ privacy is jeopardized under current law.

• Texas is an at-will employment state and, in order to preserve that doctrine, there is no need to adopt the Uniform Law Commission’s Employee and Student Online Privacy Protection Act or any other social media privacy statute at this time. Employers are developing best practices such as disclosing to employees how they are being monitored and the free market is incentivizing employers to monitor employees in a reasonable manner. The federal Stored Communication Act already governs social media privacy in a reasonable manner. Adding more regulation in this area of law will incentivize businesses not to investigate or monitor matters that need attention and can hinder employers from protecting their other employees and consumers.

Charge 9. Grid Reliability: Examine the 2018 electric reliability forecasts announced by ERCOT and review how expected diminished reserve markets will impact the rates of residential and business consumers. Monitor current mechanisms available to ERCOT to ensure grid reliability, identify trends in the wholesale electric market, and make recommendations to maintain grid reliability moving forward.

• The State of Texas needs a reliable source of power. The market grows in complexity by the day with the introduction of new and innovative technologies. The industry may not be best suited to adapt our market to incorporate the numerous disruptions that they face. The Legislature needs to continue to actively monitor and engage in public dialogue about the regulations necessary to ensure our electric services are maintained and enhanced. The PUC should continue to provide a space where ideas can be debated about how to achieve the goal of providing reliable and cost effective resources for Texas consumers.

Charge 10-A. Monitor the implementation of legislation to deregulate occupational Licensing

• The Committee recommends the continued monitoring of occupational licensing deregulation from legislation passed in the 85th Legislative session to its completion. Building off the success of this historic effort, the Committee recommends the continued coordination of efforts with the Texas Department of Licensing & Regulation to craft legislation deregulate additional licenses and eliminate licensure redundancies ahead of the 86th Legislative session.

Charge 10-B. Monitor The settlement of out-of-network health benefit claims involving balance billing and patient’s explanation of benefits statements; and make recommendations regarding any additional legislation needed to improve, enhance, and/or complete implementation.

• The Committee understands that mediation is working for consumers, provider and insurers. According to TDI data, mediation has saved Texas consumers over $15 million dollars as of June 2018.
• As national attention around surprise medical billing or balance billing builds, so has the focus on the loophole in state laws that provide consumers with protections against balance billing.309 The loophole is that state laws do not apply to self-funded plans regulated under ERISA, the Employee Retirement Income Security Act. “Self-funded” health plans are plans that a company funds itself and pays claims out of those funds. Those claims may be administered by a major insurer.
• In Texas, ERISA regulated plans make up about 40 percent of the commercial insurance market. Although ERISA plans are federally regulated, at the state level Texas healthcare consumers, providers and insurers would benefit from allowing self-funded plans to opt into the mediation process. There has been no action at the federal level on this issue, so Texas can act to further protect its consumers and help create a model that other states can adopt.