Texas Bar Journal • September 2025

The Legislative Update

Insurance Law

Written by Ryan Brannan

The 89th Texas Legislature delivered a substantial set of insurance-related bills. Shaped by familiar themes of accessibility and affordability, lawmakers focused much of their effort on rising insurance and health care costs, administrative transparency, and structural adjustments in market oversight, both in Medicaid and the private market. The Legislature advanced legislation in preauthorization, health plan flexibility, pharmacy benefit oversight, and insurance market regulation. All bills are effective September 1, 2025, unless otherwise noted.

Medicaid and Medicaid Fraud

Efforts to add mandatory coverages and expansion generally failed, with the exception of a few around maternity and newborn coverage. However, fraud prevention emerged as a priority, with lawmakers considering many proposals and passing SB 1038, which increases penalties and expands definitions of Medicaid fraud and enhancing administrative enforcement tools.

Health Insurance

Access to Care
Accessibility was considered in several ways and most notably hinged on how best to address Texas’ provider shortage: relaxing restrictions for various providers or relaxing restrictions for physicians outside of Texas or medical students. SB 1318 restricts the enforceability of covenants not to compete for physicians and certain health care practitioners in Texas, setting specific limitations on duration, geographic scope, and buyout provisions, which protects a physician’s ability to practice and promotes continuity of care. HB 2038 creates a new “physician graduate” license for recent medical school graduates to practice under supervision, expanding clinical capacity in underserved areas. Insurers must recognize these licensees for covered services.

HB 4099 extends the window for physical therapists to treat patients without referral—from 10 business days to 30 calendar days—preventing patients from needing a referral in the middle of most treatment plans.

Affordability
Affordability was addressed in several ways, including legislation on flexibility, transparency, pharmacy reform, utilization review, and preauthorization.
HB 2517 expands eligibility for small employer health program participation and streamlines enrollment, broadening coverage options for employees of certain organizations.

HB 721 clarifies the applicability of laws requiring health care cost disclosures by health benefit plan issuers and administrators. SB 1151 requires insurers to conduct more frequent reviews and audits of third-party administrators managing benefits for their policyholders. The bill aims to enhance oversight of third-party administrators to ensure compliance and proper management of benefits.

SB 493 prohibits pharmacy benefit managers (PBMs) from enforcing gag clauses that prevent pharmacists from disclosing drug price alternatives to patients. SB 1236 regulates PBM-pharmacy contracts by requiring transparency, restricting fee practices, and prohibiting adverse changes without consent.

HB 3812 reforms the preauthorization exemption process. It sets specific exemption windows, limits retrospective reviews, and mandates annual reporting by plans and health maintenance organizations (HMOs). The bill also enhances independent review protections for providers.

HB 138 creates the Health Impact, Cost, and CoverageAnalysis Program at the UT Health Science Center at Houston to evaluate proposed mandates under Medicaid and commercial plans. HB 138 became effective June 20, 2025.

Property and Casualty Insurance

Rising premiums, litigation exposure, and coverage access—especially in catastrophe-prone or rural areas—drove a number of incremental property and casualty reforms this session. While large-scale market restructuring efforts stalled,
the Legislature enacted multiple consumer protection measures and operational reforms.

Consumer Protections

HB 2067 mandates insurers to provide written reasons for declining, canceling, or nonrenewing insurance policies and requires quarterly reporting of these reasons to the insurance department, which will publish aggregated data by zip code.

It also establishes specific notice requirements for commercial lines and liability or commercial property insurance policies, including electronic delivery options, to increase transparency and accountability in insurance policy decisions. HB 2067 is effective January 1, 2026.

Dispute Resolution

SB 458 mandates inclusion of appraisal clauses in all personal automobile and residential property insurance policies. This bill standardizes claim resolution rights and may affect existing policy forms. SB 455 requires that arbitration clauses in surplus lines policies designate Texas as the venue.

Workers’ Compensation

SB 1455 relates to the Division of Workers’ Compensation’s funding structure, moving from a maintenance tax on carriers to a surcharge. This bill, which is effective January 1, 2026, frees up funding for the Division of Workers’ Compensation (DWC), provides more transparency, and prevents Texas insurers from being subject to retaliatory taxes in other states where the tax rates differ. HB 2488, which became effective June 20, 2025, allows DWC to conduct a contested case hearing by teleconference or videoconference when the parties mutually agree or the division finds good cause, and mandates rulemaking for notices, technology, and procedural guidelines.

Windstorm Insurance

The Texas Windstorm Insurance Association (TWIA) was the subject of concentrated legislative attention during the 89th session.

HB 3689 addresses TWIA’s overall funding structure. It allows TWIA to borrow up to $1 billion from the Economic Stabilization Fund (ESF) to pay for catastrophic storm losses. The loan is structured as a revolving credit facility to be repaid through policyholder surcharges. Though not a permanent funding fix, the measure reduces reliance on high-interest bonds and may lower premium volatility in the short term. The bill is effective September 1, 2025, with some sections becoming effective September 1, 2027.

HB 2517 exempts TWIA and the Texas Fair Access to Insurance Requirements Plan (Texas FAIR Plan) from paying premium and maintenance taxes. This will allow both entities to have additional funds to pay for catastrophic losses and could reduce the need for rate increases. HB 2518 prohibits premium financing arrangements in the wake of efforts to expand payment options for policyholders. Previous legislation allowed policyholders additional installment payment options reducing the need for policyholders to rely on premium financing companies that can charge a fee for their services.

Insurance Pools

This session saw pools come and go. HB 2563 creates a liability insurance pool for certified insured prescribed burn managers, administered by the Texas A&M Forest Service. The program, set to expire in 2040, is funded through participant fees and state appropriations and is limited to general liability coverage. SB 264 prohibits new certificates of approval for group self-insurance coverage under the Texas Workers’ Compensation Act after September 1, 2025, and dissolves the Texas self-insurance group guaranty fund and trust fund.

Market Regulation

There were several introduced bills and committee discussions aimed at overhauling the regulatory structure in Texas. While these proposals did not pass, these conversations signaled a growing legislative interest in oversight. These conversations will likely continue in the near future, particularly if the current hard market does not soften during the interim.

Artificial Intelligence

Artificial intelligence was a focal point across industries this session, and insurance-related AI bills were filed as well. One example, SB 815, did pass, highlighting a growing interest in artificial intelligence (AI) regulation as those uses expand. The bill prohibits the sole reliance on AI algorithms by utilization review agents to make adverse determination. While few of these measures passed in the insurance world, lawmakers have signaled they will continue to look into this issue.

Cybersecurity

Cyber insurance policy growth continues, but Texas law remains piecemeal. Though no sweeping bills passed, the Legislature considered proposals requiring standardized breach notification timelines, mandatory cyber policy disclosures, and expanded underwriting authority for standalone cyber lines.

Conclusion

The 89th Texas Legislature produced focused but material changes across Texas insurance law, particularly in access to care, PBM transparency, utilization review, TWIA financing, and specialized risk pooling. Broader reforms—including rate oversight, liability limits, and digital regulation—remain pending. As interim studies develop, practitioners should anticipate further legislative activity shaping the regulatory perimeter of Texas insurance markets.

RYAN BRANNAN is the principal attorney and a registered lobbyist with the Austin firm of W.R. Brannan & Associates. He was previously appointed by Gov. Greg Abbott and Gov. Rick Perry to serve as the commissioner of Workers’ Compensation at the Texas Department of Insurance and served as an adviser to Perry. Brannan currently represents businesses, associations, nonprofits, and other entities at the Texas Capitol.