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The House Committee on Business and Industry met on July 25 to hear invited testimony on employee protections, including paid sick leave and protections for emergency responders, and consumer protections, including against zombie debt and surprise balance billing.

 

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing, but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Opening Remarks

  • Only taking invited testimony
  • Noted city of Austin has passed a city ordinance requiring Paid Sick Leave, to which business organizations have filed lawsuits against; similar efforts have been made in San Antonio and in Dallas

 

Charge 2: Review all existing law concerning consumer rights and protections, including but not limited to statutes that address deceptive practices, landlord/tenant agreements, and homeowner/contractor disputes. Determine whether the provisions offer adequate guidance and protections in disaster and recovery situations: Earned Paid leave/Sick leave, Ban the Box, State office of Risk Management (SORM) Division of Workers’ Compensation (DWC) and Firefighters/EMS, Zombie debt, Adverse Possession, Surprise balance billing

 

Earned Paid Sick Leave/Sick Leave

 

Steve Adler, Mayor of Austin

  • February 15 – Austin passed mandatory sick leave ordinance
    • Part of 142-day process with stakeholder input
    • 424 people came in person to the council meeting in which the measure was passed
    • Roughly 90% of those people were in favor of the ordinance
  • Oliveira – what does the ordinance actually do?
    • Requires companies in Austin to offer earned sick leave at a rate of 1 hour for every 30 hours worked
    • The ordinance would not be effective for the first 2 years for small companies (5 employees or less)
    • Does not apply to employees in their first 60 days
  • Did this because of large amount of community support
  • Intended to bolster public health in the community
  • 40 cities in 10 states have already done this – data driven decisions led to the final ordinance
  • Initial estimates showed it would cost the city $1.4 million dollars to implement this – refined estimates show no more than $300,000 cost to the city
  • Austin has a strong economy; the big challenge is cost of living in the city; this would help middle and lower income be able to stay and be involved in the city
  • Austin was just honored by the US Army by bringing the Futures Command to the city
    • Army chose Austin over other cities because of Austin’s culture of innovation
  • It is very important for the state to allow cities to try new and different ideas to see what works best
  • Shine – can you specify the 5 reasons again why this measure was brought?
    • Support for the idea
    • Public Health/Safety
    • Does not have the economic impact on businesses that people fear
    • It is important in helping to affect the most challenging issues for the city
    • Enables Austin to provide an innovative economy which is important for the state to preserve
  • Shine – related to portability, if it will drive the cost of business up, how will that effect portability?
    • Evidence shows that it will not drive the cost of business up
  • Shine – discussed various examples of how cost of business would be affected
    • Work performance would be lower for sick people
    • Could spread illness to other employees
    • Having a healthy workforce is a bigger driver for the economy
    • Utilization is not as high as many think it would be – currently 70% of businesses do this and 30% do not
  • Shine – why do we think it is an issue that needs to be addressed if most already do it?
    • Because not enough do it and they are a health risk to those that do participate
  • Workman – was there any discussion related to this time being treated as vacation time?
    • That is a concern, but data does not indicate that utilization rises to that level
  • Workman – how did the council become aware of the support for this?
    • There was a council resolution
  • Workman – was there a city vote?
    • There was not a city vote, but there were 6 months of civic engagement
    • There were public hearings
  • Workman – how many people responded to that?
    • About 1,000 people
    • Believes there was overwhelming citizen engagement relative to this issue
  • Workman – how many people opposed the issue?
    • About 10% of those that came to the council meeting expressed opposition to the measure
  • Workman – summarized the numbers: 1 million people in the city, 1,000 people attended council meetings, 100 people were against the measure
  • Oliveira – was there any polling done?
    • Not aware of any polling done
  • Oliveira – how does it deal with those who work on tips?
    • They are not exempt, the adopted policy said that a person in that situation gets paid what they would have been paid, but not including tip as long as they get paid minimum wage
  • Oliveira – feel as a taxpayer that this is wrong, because we are already paying for those folks when they are dropped off at the hospital, will this exacerbate the problem?
    • This particular ordinance intended to remain neutral on that issue
  • Stickland – was this something that you personally take ownership or your initiative?
    • Lead sponsor was Greg Casar, but am here representing the city and I do support this
  • Stickland – there is a tiered system for large and small businesses, do you support a tiered system?
    • I do
  • Stickland – isn’t that tiering an acknowledgment that this is a burden on businesses?
    • Do not believe so
  • Stickland – why would you treat a small business different than a large business if it is irrelevant?
    • Both capacity and practical reasons. Larger businesses would more likely have the ability to implement this
  • Stickland – it sounds like there is an acknowledgement that there is a burden on business
    • Any kind of new rule is a burden, but it is not a financial burden
  • Stickland – isn’t time a financial implication?
    • There was an intent for large businesses that may have an HR or be nimbler could more quickly implement this
  • Stickland – could you let us know what 40 cities in 10 other states are doing this?
    • Connecticut, Massachusetts, Oregon, Vermont, California, Etc.
    • New York City, Seattle, Tacoma, Berkley, etc.
  • Stickland – were there any businesses that said they wanted to do this?
    • There were businesses that said it was good policy and wanted to pass this
    • There were some businesses that came in and did not want this passed
  • Stickland – how does this effect businesses with 1099 contract employees/
    • It does not apply to independent contractors
  • Stickland – this seems like an incentive to move people working for a business to 1099 status, is that a concern?
    • That did not show up as a concern based on other cities that have done this
  • Stickland – if that trend showed up in Austin would you then not support this?
    • If that was the only factor, then yes
    • There are other issues though, like health issues, etc.
  • Stickland – is Austin facing a health problem that the rest of the state is not?
    • Had a flu outbreak that 45 people died
  • Stickland – is that high compared to the metroplex?
    • It is higher than the data shows that it would be if we had a policy like this
  • Stickland – how is this going to effect companies that work in Austin an are not based in Austin?
    • The ordinance only covers employees that do material work in Austin – more than 80 hours
  • Stickland – per employee or business?
    • For each employee
  • Stickland – this would impact businesses across the state, correct?
    • Minimally
  • Stickland – what is the penalty for noncompliance?
    • No penalty for the first year, $500 after that
  • Stickland – the city would be pursuing violators across the state?
    • It would do what it could to assess violators
    • Related to mandates – the city pays the cost of those externalized costs from those who do not participate in this
  • Stickland – is this a policy that should be implemented at the state level as opposed to a patchwork among municipalities?
    • The state should want cities to innovate and try new ideas to see what works before implementing at the state level
  • Austin is a hub of innovation and should be promoted by the state to implement Austin specific ordinances
  • Stickland – the problem is that innovation to the point of self-destruction – and the state is on the hook for that failure
  • Oliveira – you estimated originally was $1.4 million and was reduced to $300,000, correct?
    • Those were preliminary numbers, will be able to provide the exact numbers when the budget comes out
  • Oliveira – does that include potential savings of other workers not being sick?
    • No, believe that is the out of pocket expense by the city, lowered based on the expected utilization rate
  • Oliveira – it is possible that dies to other factors it could be a net gain?
    • Would argue that it will be
  • Romero – not a large burden as a business owner, what did the businesses that support the idea say?
    • Said it was a net benefit to them, and that it was the right thing to do
    • Did have one concern – is that people offer different types of programs, and that the ordinance would layer something on top of what a business was already doing and the policy was carefully crafted to avoid that
  • Romero – was the news coverage positive?
    • Getting a ranking of the top healthiest cities has a huge positive benefit
  • Romero – do you know what the fine for misclassification of an employee is?
    • Do not know
  • Romero – thanked the Mayor for his efforts to be innovative for the state of Texas
  • Collier – noted that she had drafted a similar policy last session. Is the sick time able to be used for any purposes or just for sicknesses?
    • Just for illness or to assist a victim of sexual assault or abuse
  • Collier – what is the cost of losing employees or for sick employees?
    • Think it is an opportunity to save and well as ancillary benefits to the companies
  • Collier – noted a potential boost to the economy to have those people with the funds to go and spend
    • Believe that is a benefit
  • Collier – this does not apply to independent contractors correct?
    • That is correct
  • Collier – should be aware that not all 1099 workers are independent contractors. Does have concern with multiple cities with different types of ordinances affecting this, and that a statewide initiative would be better

 

Annie Spilman, National Federation of Independent Business

  • Many different definitions of small businesses, Austin’s definition is not based on any of the standard definitions
  • Austin did not go through the legislative process, and properly vet the issue
  • The state decided it is not time to implement a policy like this after last session
  • Need to include the other costs in determination of this: giving bonuses, insurance, etc.
  • Small businesses are subject to hundreds of mandates already
  • There is a give and take between making money and spending money
  • There will be costs to the business associated with this
  • City of Austin has not given good information to the businesses
  • Benefits are benefits: they are good things on top of the standard
    • Should not mandate benefits
  • Often small business owners are the last ones to take a check, and adding something like this would be negative
  • This has become a highly politicized issue which is unfortunate and has moved very quickly through the process
  • Noted that this would take the decision out of the workers hands with situations like choice over additional wages versus paid sick leave
  • Does not believe that the business community was truly involved
  • Shine – how many of your member businesses are located in Austin?
    • About 1,300 Austin based businesses
  • Shine – how many of the businesses attended the council hearings?
    • Several members did participate, and NFIB did send out notifications, but still not sure exactly how many were even aware
  • Shine – what determines NFIB eligibility?
    • They have to be independently owned and operated
    • Majority have 40 or fewer employees
  • Collier – discussed specific example of NFIB member spending $30,000 on implementing conforming changes to follow the new Austin ordinance and associated expenses as specified in testimony – Collier does not agree with the amounts described
  • Romero – believe that the number would actually be much smaller, and it is a worthwhile and reasonable mandate to provide for the health and safety of the workers
    • Even if it is it should not be mandated
  • Shine – clarified the additional expected expense of paying for coverage on top of a sick employee
  • Collier – described articles and policy editorials from California regarding the low cost and benefits of policies like this

 

Tina Grider-Cannon, Austin Chamber of Commerce

  • Members are 85% small businesses
  • Requested the City council ‘pause’ and gather Austin-specific information before moving forward
  • All of the evidence involves using national facts and figures applied locally
  • If this is about public health, why are we exempting so many categories of businesses
  • Need to use real impact data and not estimates

 

Ryan Garret, Stubbs Restaurant

  • Participated in drafting the ordinance
  • Believes the ordinance is good policy
  • Noticed low turnover at Stubbs
  • Collier – how many employees are at Stubbs?
    • 50 full time employees and 50 seasonal/part time
  • Collier – are the part time/seasonal employees eligible for the paid time off?
    • Yes
  • Collier – how long has Stubbs had this policy?
    • Believe it began in 2002
  • Collier – have you always had 50 employees?
    • It has been right around that
  • Sees the paid sick leave ordinance as a positive economic impact
  • It fosters environment of greater customer service and quality performance
  • Positive service experience brings customers back as repeat business
  • Collier – have you had issues with shifts switches and missed shifts due to that time off?
    • First, we determine if the employee can work from home, then shift trading is considered, paid sick day is the last option but it is available
  • Longevity is very high because of additional benefits given to employees like paid sick leave and 401K
  • Collier – so it is possible to have a shift swapping option with a paid sick leave ordinance
  • Workman – you do this voluntarily, correct?
    • That is correct
  • Workman – you do this because you think the market requires you to do it?
    • It does work for us
  • Workman – and you are ok with the government forcing your competitors to do this?
    • There is no asset greater to the workforce than the employee, and when you extend a benefit like paid sick leave, the positives far outweigh the cost of extending that benefit
  • Workman – you want your competitors to have that same positive impact?
    • Yes, for the benefit of the public health and the overall positive economic impact I do want this ordinance
  • Workman – what will you think when the city of Austin limits workers hours to 30 per week?
    • Believe that it would go through the same public forum to be discussed and determined the best compromise
  • Workman – what if they said that you could not fire anybody without due process that the city is going to manage?
    • Do not foresee it being implemented
  • Workman – it is not the role of government to mandate the practice of private business
  • Collier – noted that the witness was speaking to his experience and that of his business not for everybody and that the policy works for him and his business

 

Jodi Mozeika, Black Star Co-op

  • Offers many benefits to employees including paid sick leave
  • Important that the staff should be able to care for themselves and their family
  • Healthy workers and safe food handling are very important responsibilities of the business
  • Was engaged in the public process which created this ordinance
  • Ordinance reflects the values of the city
  • There are costs associated with the mandate, but they are worth it for the health of the city and wellbeing of the workforce
  • Stickland – you are in support of this?
    • Yes
  • Stickland – have you already been doing this and more before the ordinance?
    • Yes
  • Stickland – are your competitors? Why do you want to mandate that other people do it?
    • The health of the workforce as well as our responsibility to the employees
  • Stickland – have other businesses chosen not to do this?
    • Yes, in some instances
  • Stickland – and you want to make them do this?
    • This is a small part of what is owed to workers
  • Stickland – are you aware of any ordinance that requires people to work in places they do want to?
    • No
  • Would a worker have the option to work at your business or another place?
    • If we are hiring, yes

 

Robert Delp, Workers Defense Project

  • Paid sick leave promotes healthy employees and workplaces
  • Stickland – what is more freeing to a worker than protecting their right not to work somewhere they do not want to?
    • Referencing the construction industry in a vital industry that lacks many benefits for the workers like paid sick leave
  • Stickland – do you think the government can do a better job than the free market in growing our economy and culture?
    • If the market was to determine that paid sick time was essential it would have already happened
  • Stickland – can you give an example of a government that created utopia through rules and regulations?
    • Made a decision to take children out of the workforce, which cost businesses money, we decided it was the right thing to do
  • Stickland – safe to sat that you do not trust businesses to do the right thing?
    • Like other minimum standards this would be a floor but they are able to create additional standards for themselves
  • Stickland – have you been a business owner?
    • No

 

Mia Ibarra, Center for Public Policy Priorities

  • Believes paid sick days can help achieve goals of improving health and financial security of the workforce
  • Paid sick days have been shown to change the behavior of workers to stay home when they are sick
  • Costs are offset by reduced turnover
  • Workman – would you agree that this type of policy is vesting control in the means of productions in the hands of government?
    • Believes this provides a standard for workers similar to workplace safety does
  • Romero – what kind of data is there in relation to restaurant workers going to work sick?
    • There is a lot of data related to illness in restaurant settings
  • Romero – is the flu contagious through contact?
    • Not qualified to answer that question
  • Stickland – lets say this is an economic driver, why did we stop at 1 hour per 8 accrued? Would you support tripling this?
    • Believe that the number was intentional
  • Stickland – without any political considerations, what is the end goal?
    • With policies that provide a better standard of living of workers and works for businesses
  • Stickland – who should get to decide that standard?
    • Should be compromised between workers and businesses
  • Collier – do you agree that public health has a relationship to business and government interest?
    • Yes, I do

 

“Ban the Box”

 

Steve Adler, Mayor of Austin

  • City Council voted in March of 2016 for Fair Chance Hiring ordinance
    • Should be called fair chance interview because it concerns the interview process
  • Ordinance does not affect an employer’s ability to hire or fire and employee
  • Does say that you do not ask questions regarding criminal background at the onset of the interview process
  • Intended to address affordability issue in Austin
  • Finding that those with criminal records are the ones that the city ends up subsidizing
  • Went through community involvement before passage of the ordinance
    • Was pending for 1 year
    • Had numerous amendments before passage
  • Shine – this is currently being enforced?
    • it is being enforced
  • Stickland – do you think it is your responsibility to help navigate where culture should be?
    • No, the culture in Austin has been consistent
  • Stickland – do you believe the government has a role in protecting the minority?
    • It does, among other things
  • Stickland – Do you think that those who do not like this are being sacrificed for the benefit of the minority?
    • That may be the case if we were requiring employers to hire or fire people, but we are not
  • Stickland – what is the purpose of the ordinance then?
    • To not summarily reject someone based on criminal record
  • Stickland – are you doing what the legislature should be doing by taking on some of the bigger sweeping issues like this?
    • It is an important city level issue
  • Stickland – you do not think that business owners should be able to ask what ever questions they want to?
    • They should and can, but not at first
  • Stickland – are you trying to change behavior?
    • Just trying to get people to work
  • Stickland – do you believe city of Austin is engaging in social engineering?
    • Do not believe so

 

Annie Spilman, National Federation of Independent Business

  • Believes this ordinance can actually hurt the applicant as well as the employer
  • Would like to leave this up to the state and does not believe that the city has any right to get into this
  • Romero – do you think employers should be able to have the position that they do not want anybody with a criminal record if it is not applicable to the work?
    • Would encourage businesses to consider those who are trying to better their lives, but that is a very case by case situation
  • Businesses want the ability to hire people the way that best fits their situation

 

 

State office of Risk Management (SORM)

 

Steven Volbrect, State Office of Risk Management

  • Stickland – looking at the overall picture of Harvey, the state response was better than other states and other disasters, but what did we learn for next time?
    • There are a number of after action reports and lessons learned
    • Most agencies are responding to their lessons learned as we begin to move toward next session
  • Mission of SORM is: enterprise risk management, risk retention, risk transfer and continuity of operations for state of Texas agencies
  • Workers compensation is the only program that is fully retained by the state and during Harvey had: 177 workers compensation injuries, total cost is just above $600,000 – mostly related to response and disaster
  • activities by the Texas military
    • Have $168,000 reserved for future costs included in that $600,000
  • Do have exposures on the property side – total exposure was $1.3 billion worth of state properties
    • Actual loss was about $13 million
    • Rest was paid by insurance
  • Lessons learned after previous weather events include immediate remediation and mitigation that prevented additional damage and cost
    • Pre-positioned over $1 million for remediation to be immediately available
    • University of Houston was back up and running after 48 hours as a result of continuity efforts and remediation efforts after last storm
  • Stickland – so one thing we learned was positioning fund before hand helped eliminate additional costs down the road
    • Every dollar spent on mitigation and avoidance, $6 saved on the back end
  • Most people define risk as a hazard
    • Actually threat of harm but it is also avoidance of that risk
  • Workman – auditor found medium rating issues related to staff travel and approval, can you speak to that?
    • Attached to the Secretary of state’s office in terms of travel approvals, which has been rectified now
  • Workman – auditor had issues regarding contracting and other issues
    • Those were all brought to them by us and are working through or have already changed those procedures
    • Needed additional documentation of processes
  • Workman – what was the financial dollar amount of damage to state property as a result of Harvey?
    • Those under our program (only insured entities) had $13.8 million dollars of damage
  • Workman – has all of that property been repaired?
    • We are in process, with rebuilding ongoing
  • Discussion of insurance rate increases – end result at 11% rate increase after negotiation
  • If a state agency defers risk through insurance, they must go through SORM to ensure amount and costs are appropriate for their exposure – office only advises the agency does not make decisions for the agency
  • Insurance is pooled for state agencies to better the purchasing power and limit risk
  • Stickland – why wouldn’t every state asset be included in that?
    • There are not different pools, there is an option to participate or not
  • Stickland – overall there was $13 million is what the state agencies are on the hook for?
    • It could go up but that is what it is not
  • Shine – the written documentation provided shows what each agency is paying and covered

 

Division of Workers’ Compensation (DWC) and Firefighters/EMS

 

Cassidy Brown, TDI: Division of Workers’ Compensation

  • 146 first responder cancer claims
    • 127 have been denied by insurance carriers
  • Only 28 disputes filed with the division since 2012
    • Division has sided with the worker 13 times of the 28
    • Denials were typically due to length of time filed after incident and/or prior medical conditions
  • Have addressed several issues to ensure that denials meet statutory definition
  • Division has conducted thorough review of 127 denials identified
    • Evaluated for compliance with government code
    • Evaluation is ongoing
  • Creating stronger methods of data collection like new complaint code to help better identify complaints coming from first responders
    • Additionally, monthly reports on cancer claims will be run
  • Injured employee homepage has been revamped to include injured first responders link as well as uploaded list of FAQs
  • Division will continue to focus on the issue of outreach to first responders
  • Workman – clarified 146 first responder claims, the disputed claims are ones that the firefighters raised?
    • Correct, there are 8 that are still pending and 13 that have been reviewed and decided on the side of the firefighter
  • Workman – and you are reviewing all of the 147 claims?
    • Correct, the carrier has to have substantial evidence that the cancer was not caused by firefighting activities in order to deny the claim
  • Workman – have you taken a position on the IARC white paper?
    • Have taken a wide interpretation of which cancers fall into the statutory classification of cancers
  • Oliveira – when do you think you will complete the review?
    • Have already completed that but some warranted additional review and are in process
  • Oliveira – would like to have that information to be a part of the committee report before the session
  • Oliveira – are you looking at additional denial letters?
    • That is part of the review process

 

Nick Canaday, TDI: Division of Workers’ Compensation

  • Romero – noticed many firefighters that the claims were denied and many reversals after disputes, what would cause that?
    • Believe the disputes regard interpretation of the government code and the decisions reflect a specific interpretation, and a further review may show a different interpretation
  • Romero – in terms of which cancers where included, it seems like there is a lot of grey area, has there been a review of which cancers are more likely for firefighters?
    • How to read the monograph and the interpretation there in are the parts at question
  • Romero – are both sections 5 and 2 considered?
    • The initial decision is made by the carrier based on the initial clam provided by the worker
    • We do not get involved until a worker’s compensation claim is filed
  • Romero – have you seen that cancers in section 2 are the ones that get reviewed and change the ultimate decision
    • That is an are under review by judges across Texas right now
  • Oliveira – do you know when we might get a judgment on that from the courts?
    • Brown – the report to the committee does include the status of the three court cases that are under review

 

David Reagan, Texas Municipal League

  • Oliveira – what is your interpretation and what do you think of our reliance on the IARC monograph?
  • Described history of the presumption bill – involved input from firefighters
    • Firefighters position was that there are many diseases that cannot be proven to be caused or not by fire fighting activities
    • Decided that the claim has to have a minimum showing that it was related to fire fighting
    • IARC Monograph was used to get that initial presumption
  • Claim must show that the cancer is present, have been employed as a firefighter for 5 or more years, and that the cancer originated while employed as a firefighter
  • Must be shown that the person regular responded to the scene where firefighting activities were ongoing, or regularly responded a documented release of radiation
  • The presumption does not apply if the fire fighter was a user of tobacco
  • Monograph 98:
    • section 1 deals with exposure
    • section 2 is a review of all of the other studies related to firefighting and claims of cancer
    • section 3 deals with cancer in animals that fight fire – blank as none do
    • section 4 discusses how toxins enter the body
    • section 5 summary of the data reports including IARC’s conclusions as well as the relational of those conclusions
  • medical science has not caught up with where we need to be today
  • Stickland – do you know where we are with the Bedford firefighter?
    • Still in process
  • Stickland – have been very disappointed by the lack of professionalism with TML. Regarding risk pool, are there other entities that are in another risk pool other than the TML risk pool?
    • Yes there are a handful in Texas
  • Stickland – yet TML is the only one named in statute?
    • TML is not named in statute
  • Stickland – what percentage do you think TML holds in Texas?
    • Close to 90%
    • Total of 2800 governmental entities
  • Stickland – who is your biggest competition?
    • Texas Mutual as well as other pools
    • Not a large competition at this time
  • Romero – when was the LeMasters report written?
    • Not sure, but it is listed in the monograph
  • Romero – problem is that these report that are 10 years old or more have limited the number of cancers down to three, when as you said we do not have the science to back that up
    • Do not believe the monograph says there are only three, it does say that we can only identify 3 at this time
  • Oliveira – have worked with the risk pool for decades, the IARC says clearly that occupational exposure to firefighting is possibly connected to carcinogens and does not say that there are not others, remembering that it is rebuttable. Do not believe that the statute limits the number of cancers to 3. It is a complicated legal issue, but progress needs to be made.

 

Zombie debt

 

Representative Collier

  • Described zombie debt and the issue with 3rd party debt collectors reviving debt that the creditor has no right to collect on after the statute of limitations
  • A large part of this issue is educating the public

 

Mary Spector, Consumer Advocacy Project

  • There is a difference between imposter debt and zombie debt – debt that never existed versus debt that is past the statute of limitations
  • Most debts in Texas are subject to a 4-year statute of limitations on contracts
  • Texas is second in the country with adults with debt reported in collection at 44%
    • Data collected by county
  • Zombie debt shows up on credit report which has associated repercussions
  • One area of confusion concerns collectors offering to settle a debt – if the consumer is unaware of their rights may open up the consumer to the whole debt
  • Some considerations may be the use of the term settlement by collectors as a deceptive practice
    • There has been some disagreement in the courts related to this
    • Cited specific Dallas county court case
  • Collier – does a default mean that somebody doesn’t show up to a court case?
    • It often does
    • Majority of 131,000 cases filed in 2016 have been filed by collectors – the thought is that many of them are filed without sufficient proof and the collector is expecting a default judgement
    • there was a 30% default rate
    • Jury cases in 2016 – 60, in 2017 there were 35
  • Suggests that when there was an answer by the consumer, the plaintiff dismissed the case
  • Workman – these are legitimate debts?
    • Some are not, they may be have been discharged in bankruptcy
  • Workman – if it was from bankruptcy there is no case
    • There may be if the debt was sold
  • Workman – how many debt buyers that operate in Texas
    • There are thousands
  • Workman – what does the debt get sold for?
    • Less than 10 cents on the dollar
  • Workman – do you have any idea what the percentage of collection is?
    • Do not have that data
  • Workman – you mentioned judgements, are you seeing a lot of judgements on this debt?
    • Yes
  • Shine – why do you think so many Texan’s have debt in collection?
    • Unsure, the most common reason is that there was a significant life event like a medical condition, etc.
  • Shine – do you believe that after 4 years the debt should not be collected?
    • That is the amount of time that the legislature put in statute – believes the policy reasons were that memories and evidence fade making it difficult to prove or defend a debt after that amount of time passes
  • Shine – does the limit relate to filing a lawsuit or any collecting effort?
    • Current law does not relate to lawsuit
  • Shine – somebody that has purchased that debt cannot file suit but can send letters or call them? And is that wrong?
    • Believe that most consumers do not know who they are talking to
    • In many cases they legitimately do not know who they are talking to and if that debt truly exists
  • Shine – so collectors are not sending them anything describing the scenario?
    • They do but without much information or clarification
  • Shine – with respect to lawsuits, you are saying that some lawsuits are filed after that 4-year statute of limitations? And why doesn’t that automatically get thrown out?
    • Yes, it doesn’t because the court is not obligated to make that kind of examination
  • Shine – if the judge is just there to hear the evidence, wouldn’t that include the date of original debt and the current date?
    • The allegation may be in a petition but there may not be sufficient evidence in the form of documentation or calculation showing that the debt is not what the plaintiff says it is
  • Shine – it sounds like we may need to do something to help limit the lawsuit from being filed after the statute of limitations
    • That would be a good thing
  • Shine – regarding default, there is a 30% default rate?
    • Correct, at minimum
  • Shine – so the collectors are not ensuring that the defendant knows that they have to appear?
    • Some justices believe that the cases are not being served appropriately, but do not have any evidence of that
  • Collier – more than likely they are being served but the people do not associate their debt with a company they do not know
  • Shine – are we also saying that these companies are filing lawsuits before any other collection attempt has been made?
    • Collier – they may have sent notices, but not that it was from a known debt
  • Collier – previous legislation attempted to ensure that collectors had to notify the person regarding the status of the statute of limitations to give greater clarity regarding this issue
  • Complaints from consumers include collectors attempting to collect debt that does not belong to that consumer
  • Stickland – do we need to do more with education students in public school related to personal finance?
    • Absolutely

 

Neil Sobol, Self – Professor

  • Debt Collection is the largest source of complaints in the FTC data of consumer complaints
  • Recent study shows Texas ranked 6th in complaints filed
  • Over $1 billion worth of debt is purchased each year
  • Common complaint is that they attempt to collect dead debt
  • Reviewed the ways time-barred debt (dead debt) can be brought back (zombie debt)
    • Collectors can get a partial payment – restarting the payment clock
    • consumer can enter into a new settlement agreement
    • lawsuit can be filed to get a judgement which would replace the debt
  • Many lawsuits are default judgements through many reasons why the defendant may not show up
  • Once that judgement in entered, many ways for the collector to garnish those funds
    • in addition, the judgement extends an additional 10 years
  • Typically, debt buyers do not receive the original loan documents or transactions
    • also, do not get information on the quality of the debt or the collection history of that sold debt
  • Some states including New York and California have disclosure requirements at the prelitigation stage
  • Some states a limitation on revival so debt cannot become zombie debt
  • Romero – why is dead debt allowed to be sold in Texas?
    • Because there are no restrictions against it
  • Romero – would buyers still buy it if they had to declare that this debt is dead?
    • It might change the price
  • Romero – is there a time period in which debt can no longer be sold?
    • Not that I am aware of
  • Romero – so debt never stops being debt regardless of the statute of limitations?
    • Correct, there are two states in which debt cannot become zombie debt
  • Romero – what is the average amount of debt that is being litigated?
    • Do not know that, but that should be investigated
  • Romero – is there typically court costs associated with those cases?
    • There are
  • Romero – what would a minimum debt be that a debt collector would buy and take to court?
    • It can be in any amount
  • Romero – how long would the proceedings take in court?
    • They are the normal proceedings – maybe 6 months
  • Romero – the court costs are added to the debt?
    • The plaintiff would pay a filing fee, but not sure how the remaining costs would get paid
  • Workman – you are a professor at A&M?
    • Yes, but these are my views not those of the university
  • Workman – you are tenured?
    • That is correct

 

Holly Vu-Fulkerson, American Collectors Association of Texas

  • Most of the businesses represented are small businesses
  • This is a highly regulated industry – primarily regulated by the FTC and Bureau of Consumer Protections
  • Debt collectors have a difficult job and bad actors should be taken out of the industry
  • Regarding default judgements, when the collectors have reached out to consumers in multiple ways, filing a lawsuit is the last resort
    • Lawsuits are expensive for the original creditor
  • Oliveira – are you speaking to the original credit or the person that owns the debt?
    • Speaking to the current owner of the debt

 

Donald Maurice, Receivable Management Association

  • RMA has zero tolerance for bad actors and bad acts of zombie debt
    • Hurts creditors, collectors and consumers
  • Created program to certify collectors
  • Debt protections in Texas far exceed most other states
  • Noted there is no legal definition of Zombie debt
  • The type that is simply made up should involve law enforcement not changing consumer protection laws
  • Debt that is passed the limitations period – members do attempt to collect that debt
    • Members do not sue to collect that debt, and if a consumer makes a payment, it does not revive that debt – that is for certified companies only
  • Oliveira – you are saying that agencies that are certified through you will not use that collections method, but you cannot speak for all others, correct?
    • That is correct
  • Workman – one factor is how it affects the consumers credit rating, and if the debt is still out there and it is unpaid it still effects the credit score
    • That is correct, it certainly has a long-lasting effect
  • If lawsuits are a concern, it must be noted that communications with between collectors and consumers is critical, with out it they will just sue
  • Related to default rates – the best option is for the consumer to be in court because the judgement is more enforceable if they were there

 

Surprise Balance Billing

 

Jeremy Finkelstein, Texas Medical Association

  • Surprise balance billing may occur when a patient receives services out of network
    • It is a difference between usual and customary charges and what is actually charged by the provider for the services
    • May happen for numerous reasons
  • Legislation regarding a mediation process between the provider, plan and patient was put in place in 2009 and updated in 2015 to include emergency providers
    • Lowered mediation threshold from $1,000 to $500 allowing more patients to have mediation opportunities
  • As networks continue to narrow, mediation processes continue to be very valuable to consumers
  • Consumer expectations are not always in line with the plan design
    • One way to combat that is to hold insurance accountable for education the consumer
  • Balanced billing only occurs when services are received out of network
    • Critical that plans offer adequate networks to avoid balanced billing
  • TDI is not required to perform network examinations for PPO products – the products which create risk for balanced billing
  • One allegation is that the doctors want to be out of network, in reality physicians want to be in network
  • Often if a physician is not in a network it is because they do not have a choice or because they do not have bargaining power
  • Price transparency – health plans need to be more proactive in educating the patients
  • Stickland – is there any requirement on cash pricing? Or are there any best practices?
    • That has been embraced, the difficulty would be the uncertainty of procedures necessary to come to a final diagnosis
  • Stickland – are there any requirements on emergency room billing in terms of timeline?
    • Not really
  • Stickland – how hard would it be to tell people how many entities they should expect bills from?
    • That is required for the hospital setting
  • Workman – are there companies that deal with delayed billing in a timelier manner or is there an issue within the industry related to that?
    • There is legislative requirement on that – usually within 30 days
  • Noted potential issue at Blue Cross Blue Shield issue that may affect balanced billing regarding release diagnoses

 

Doug Danseizer, Texas Department of Insurance

  • Do not regulate any plans offered by self-funded employers or government plans
    • Majority of people do not have coverage that is regulated by TDI
  • Texas statutes and rules seek to reduce balanced billing
  • Mediation has been in existence since 2010 and focuses on those who are fully insured through preferred provider plans as well as self-funded teacher plans
    • Only the consumer can initiate mediation
    • Once initiated the consumer does not have to participate in the process
    • Described the mediation process steps: phone conference, mediation, referral to special judge
  • Are expecting the numbers of requests for mediation to go up in the next few years
  • In total for the program there have been 7,500 requests for mediation and only 569 have had to be referred to SOWA – most of which were settled before a mediator was assigned to the case (only 19 have had to be mediated)

 

Blake Hutson, AARP Texas

  • Described a specific example of member experience with balanced billing
  • Large issue with insurance literacy
  • Mediation has proven to sort out issues but should be given to the doctors and insurers to sort out
  • This will continue to be a priority in the coming session
  • Oliveira – mentioned that land and air are not included in mediation?
    • Correct, they are currently not included in the mediation process and it is an issue for many rural Texans
  • Described specific member experience

 

David West, GPA

  • Majority of Texans are covered under self-insured plans
  • Many issues related to where and how to get access
    • If the plan selects PPO they cannot add a specific doctor even if the employer wants to
  • Seeing many surgical bills that come in along with the assistant surgeon’s bill that is nearly as much as the surgeon’s cost without documentation of the services provided
  • Described personal experience with balanced billing and available information before a procedure
  • Many factors make it very difficult for common people to figure out how to solve the problem
  • High costs are a huge part of this problem especially when there is not an out of pocket limitation
  • Average markup in a hospital is roughly 400% – do not know average reimbursement
  • To solve the problem right now we need to eliminate the assignment of benefits
  • Questions the definition of “customary” should be fair and reasonable
  • Oliveira – requested written testimony

 

Jason Baxter, Texas Association of Health Plans

  • Balanced billing is predominately an emergency care problem in Texas
  • Almost half of emergency room claims were out of network
  • Most of these issues occur at free-standing emergency care facilities
  • Fast rising ER fees are also part of the problem
  • Oliveira – why do so many hospitals have out of network ER physicians?
    • Believes there is an incentive because ER costs are reimbursed at close to 80% which is significantly higher than Medicare reimbursements
  • Finkelstein – it is a current trend that physicians are seeking employment with hospitals for cost effectiveness
  • Stickland – is it fair to say that most doctors do not understand the billing situation?
    • Finkelstein – Some are likely not familiar
  • Recommends: studying facility and operation fees, legislation to prohibit inaccurate advertising by freestanding ERs

 

Adverse Possession

 

Vice-Chair Shine

  • Described adverse possession as well as “squatter’s rights”
  • Common law recognizes squatter’s rights given certain circumstances

 

Daniel Paz, Attorney

  • Was asked by Representative R. Anderson to discuss the pervasive issue of serial squatters
    • People who abuse squatter’s rights
  • Law provides civil remedies for those who have been adversely affected, but usually not enough can be done for the egregious abuse of squatter’s rights
  • Described specific example of egregious abuse by squatters
  • Shine – so they are professional squatters?
    • That is correct, they often provide misinformation for background checks and other documents, making it very difficult to know who a land owner is dealing with
  • Stickland – is it illegal to provide false information on forms like that?
    • It is civil fraud for sure, but not under penalty of perjury
  • Stickland – is that not identity fraud?
    • It has been convicted in certain cases
  • Eviction is intended to be a speedy way to get somebody off a property, but if a person knows the rules, they could drag it out into a very lengthy process
    • They could get a second trial date by asking for a jury, using appeal processes, etc.
  • There are remedies in the property code that allow landlords to contest the affidavit, but it is not as good as it seems because the justice court is not a court of record, allowing the renter to again appeal and contest that while still residing in the residence
    • Often causing damage to the residence while in the property that the landowner will have to repair at cost
  • Workman – what is the end game, to get free rent?
    • Typically to just get free rent, moving from property to property
  • Oliveira – noted that this didn’t even describe the time it would take once it gets into county court
  • Workman – what is the remedy?
    • Potential criminal penalty for intentionally doing this
    • This is just an attempt to clean this up
  • Adverse possession refers more to obtaining title to property, which is another issue altogether
  • Shine – but the original property owner is paying the property tax through all of that right?
    • That is one factor that a court would consider
  • Adverse possession is more of a situation that came up during times of foreclosures
  • Paz notes that during his work with Rep. Rodney Anderson, Anderson wanted a criminal penalty to resolve this issue

 

Closing Remarks

Oliveira – expect one more hearing at the end of august or early September