Board Members Martha Rider (Chairman), Tom Pace, Ronald Beals, and Gerald Lavey were present. Micaela Alvarez was absent. Ron Josselet, Executive Director, and Jonathan Bow, General Counsel were also in attendance.

Item 1. Chairman Rider called the public meeting to order at 9:35 a.m. on December 17, 2003. Chairman Rider recognized the members present and that a quorum was established.

Item 2. Board Member Pace moved for approval of the Minutes of the September 3, 2003 meeting. Board Member Beals seconded the motion which carried without objection (4-0 vote).

Item 3. The board heard testimony on the Statewide Insurance Purchasing Program. Sally Becker, Insurance Specialist, updated the board on the status of the insurance program, surety bonds, increased insurance purchases, and requests for approval from our agency. Mrs. Becker went into detail on various coverages approved by SORM. The short-term special event general liability program is in place and will be ready approximately January 1, 2004. This was awarded to Governmental Risk Solutions, carrier is Nationwide Insurance Company. The automobile program proposal have been sent to Texas Building and Procurement Commission. Board Member Beals moved that the Board ratify all actions which were identified and referenced in the board packet. Board Member Pace seconded the motion which carried without objection (4-0 vote).

Item 4. The Board considered a request for a Blanket Exemption waiver for UNT and UNTHSC. Jonathan Bow, General Counsel, informed the board about the request resubmitted to our office, received on August 25, 2003, to grant a blanket exemption to the requirements of the insurance program to UNT and UNTHSC. The Board heard testimony relating to UNT’s D&O purchase for this year and received comments from Doug Welch, University of North Texas. There was discussion from the board of the action taken on this item in previous board meetings. Board Member Pace made the comment that Chairman Rider was quite eloquent when she said that the board had been charged by the legislature to review insurance purchases to promote and protect the interests of the state and that the Board lacked the authority to abrogate that responsibility. Board Member Pace moved to deny the blanket exemption from Chapter 412 for UNT. Board Member Beals seconded the motion which carried without objection (4-0 vote).

Item 5. Waiver of subrogation for workers compensation. Jonathan Bow, General Counsel, explained the request to waive subrogation to facilitate the donation of a mobile medical clinic from the Ronald McDonald House. Mr. Bow advised the board of the that the requested waiver appeared to present little risk to the state and advised the board of possible legal aspects involved in granting a waiver. Board Member Lavey moved to approve the waiver of subrogation for the Texas Tech University. Board Member Pace seconded the motion which carried without objection (4-0 vote). Board Member Lavey would like the staff to put together a standard under which the board can grant waivers of subrogation in cases such as this. This proposal will be prepared for consideration at a future board meeting.

Item 6. Executive Director’s Report. Mr. Josselet presented the board with his executive director’s report and bound copies of the divisions’ goals & objectives. He indicated that there are thirteen vacant positions and indicated staff movement. The management span of control, introduced in House Bill 3442, stated a management to staff ratio of one supervisor/director to eight employees by March 31, 2004, which we are compliant. This ratio increases from one to nine by August 31, 2004 and annually there after until the agency reaches the one to eleven ratio requested. There was comment that this is too high for claims adjusters and Mr. Josselet stated we have collected data from various risk pools and that information can be put in an exemption to be considered by the Legislative Budget Board and the Governor’s Office. House Bill 3208 created a retirement incentive for state employees who are eligible to retire on or after August 31, 2003 through the biennium. Mr. Josselet explained the costs involved with our agency and indicated we have had two employees retire. The legislature enacted a portion of the general appropriations act and encourages the board and commissions to schedule their board meetings and commission meetings at a time and location to facilitate reductions in travel expenditures to meet a 90% limit. The legislature also passed legislation to reduce the amount of space allocated per employee from 153 square feet to 135 square feet. SORM could potentially loose space. Rupert & Associates, our internal auditor, will present a draft of their findings in the Medical Cost Containment division, including an audit of Argus Services Corporation. TWCC initiated an internal pay desk audit. Their findings of deficiencies in our process was addressed in a letter back. We were not fined nor had any issued administrative penalties. The annual cost containment report identified over $52.6 million in cost containment savings or expenditure avoidances. We are in our fifth year of our five year cost containment contract with Argus Services Corporation. This contract expires on August 31, 2004 and the legislature has appropriated funds to negotiate a contract in Fiscal Year 2005. We are developing a request for proposa. Our Fiscal Year 2004 Operating Budget has been submitted timely to the Governor’s’s Office of Budget Planning & Policy and to the Legislative Budget Board. The Risk Allocation Workers’ Compensation Assessments were submitted to client agencies by mid September. As of December 9, 2003, a total of 103 client agencies have paid (assessments totaling $40.5 million) and 56 state agencies and 122 CSCD’s are unpaid (totaling $34.4 million unpaid balance). Options for collections include the Comptroller’s Office taking the assessments from the agency’s budgets or to provide a list of the delinquent agencies to the Legislature when they come back into regular session. Chairman Rider would like a recommendation taken to the Legislature to address automatically deducting after a certain length of time. The administrative expenses for Fiscal Year 2003 meet the Legislature’s requests. The fiscal year end expenditures included an expense of $69 million as of August 30, 2003, whereas our budget was set at $72.5 million. Mr. Josselet gave updates to the Information Resources department including our claims management system redesign. We are receiving TWCC forms (TWCC 1S, 6, and 3) and the SORM 200 annual report online from approximately 60-65% of our client agencies. Our Workers’ Compensation Program issues include the medical cost containment vendor, Argus Services Corporation. There have been several periods of time that Argus has exceeded their time limit for the processing of claims. The board granted Argus a four month waiver in May or June of 2002 to get caught up and take care of the problem. This has been a problem and Argus has occurred significant performance discounts that are deducted on our monthly bill. The Healthcare Network Advisory Committee met and is coming up with a request for proposal that would solicit proposal from qualified vendors to select a network administrator. Negotiations will take place between this administrator and the four state agency insurance carriers to implement the regional workers’ compensation networks.

Item 7. No public comment.

Item 8. Future meeting dates. Jonathan Bow indicated that the annual review of the executive director will be due. It was decided that February 18th would be set as the tentative date for the next meeting.

Item 9. Board Member Lavey moved to adjourn at 11:03 a.m. Board Member Pace seconded the motion, which carried without objection (4-0 vote).

I certify that the above minutes were approved by the State Office of Risk Management Board Members at the public meeting on February 18, 2004.

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Martha Rider
Chairman