HBA-MPM H.B. 1513 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1513 By: Delisi Teacher Health Insurance, Select 2/19/2001 Introduced BACKGROUND AND PURPOSE Teacher recruitment and retention is a major issue in Texas. One contributing factor may be the lack of adequate health insurance for public school employees. The Teacher Retirement System of Texas (TRS) reports that over 50 percent of all public school districts do not offer health benefits coverage that is comparable to that provided to state employees through the Employees Retirement System of Texas (ERS), as mandated by current law. These factors suggest the need for the state to create affordable health benefits program in order to attract and retain public school employees. Defined contribution benefits packages have traditionally been applied to retirement programs, but have recently been applied to health benefits programs as well. Under the defined contribution model, known as defined care, an employee participates in the selection of benefits plans, shares costs with the employer, and ultimately decides the level of coverage the employee receives. Defined care is able to adapt in structure and in financing and benefits offered, thus improving the array of health insurance benefits options available to the employees. House Bill 1513 establishes the Texas Public School Employees Defined Contribution Program, coupled with regional risk pools, to provide health benefits to public school employees and their dependents. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the board of trustees of the Employees Retirement System of Texas in SECTION 1.01 (Articles 3A.052, 3A.103, and 3A.105, Insurance Code) and to the Employees Retirement System of Texas in SECTION 3.03 of this bill. ANALYSIS House Bill 1513 amends the Insurance Code to establish the Texas public school employees defined contribution program(program) to provide group health coverage and benefit options to public school employees through the use of regional risk pools and to establish defined district and state contributions to defray the cost of premiums (Art. 3A.051, Insurance Code). Administration of the Program The bill requires the board of trustees (board) of the Employees Retirement System of Texas (ERS) to administer the program and adopt rules as necessary to implement the program, and authorizes the board to adopt necessary rules, plans, procedures, and orders to implement the program. The bill establishes the powers and duties of the board in administering the program (Arts. 3A.052-3A.056). H.B. 1513 authorizes the board to contract with an administering firm and insurance firms or specialists. The bill requires the board to appoint advisory committees (committees) and provides for the composition and duties of the committees. The bill specifies that the committees are not subject to existing provisions relating to state agency advisory committees (Arts. 3A.352-3A.357). Required Participation by School Districts H.B. 1513 requires the board, on creation of the program, to establish at least 10 regional risk pools that combine potential participating employees in contiguous geographical areas that are roughly comparable in population. The bill prohibits the number of participating employees in any one regional pool from exceeding 10 percent of the total statewide eligible public school employee population (Art. 3A.201). H.B. 1513 requires each school district to participate in its respective regional risk pool, which includes providing notice to each employee about the program (Art. 3A.101). Coverage Plans The bill requires the program to provide, through regional pools, group health benefits plan coverage to eligible employees and the employee's dependents (Art. 3A.102). The bill requires the board to administer open-enrollment primary health coverage plans through the regional pools for participating employees and dependents and to administer the plans with different levels of benefits, as outlined in the bill. The board is required to administer at least one primary health coverage plan that is comparable in scope and, to the greatest extent possible, in cost, to that offered to state employees under the Texas Employees Uniform Group Insurance Benefits Act (Art. 3A.103). The bill requires the board, in addition to the plans described above, to administer a medical savings account program (Art. 3A.103). The board is required to administer through each regional pool a menu of benefit options for program participants (Art. 3A.104). The bill requires the board to adopt rules, plans, and procedures for the administration of the medical savings account program and to ensure that the program qualifies for a federal tax exemption. The bill requires the board to solicit bids for the development and establishment of the savings account program and provide information to participating employees regarding the program. The bill requires the board to establish an annual deductible between $2,000 and $4,000 for catastrophic care health coverage provided in conjunction with the savings account program (Art. 3A.105). Employee Participation H.B. 1513 provides that each school district employee is eligible to participate in the program, and requires an employee who elects to participate to be enrolled in a primary health coverage plan, unless the employee elects in writing to participate in the medical savings account program or provides proof of outside-program coverage to the board. The bill authorizes the employee to select the primary health coverage plan in which the employee participates. The bill provides that a participating employee is qualified to receive a defined contribution. (Art. 3A.106). H.B. 1513 entitles an employee participating in the program to obtain coverage for a dependent in a manner determined by the board. The bill requires the employee to make any required contribution for the dependent's coverage to the appropriate regional pool. (Art. 3A.151). The bill authorizes surviving spouses and retired public school employees to elect to retain or obtain primary health coverage for themselves and dependents at the applicable rate. The bill authorizes the state to provide a defined contribution for the benefit of the surviving spouse to the appropriate regional pool trust fund (Arts. 3A.152 and 3A.152). Regional Risk Pools; Trust Funds The bill requires the regional pool funds to be established as trust funds with the comptroller of public accounts as custodian, and requires the board to administer the funds. The bill sets forth specified contributions, investment and depository income, premiums or other contributions, and other money required to be deposited into the trust fund. The bill specifies that money in the trust fund may be used only to provide benefits authorized under the program to participating members and for administration expenses (Art. 3A.202). District Contribution H.B. 1513 requires each school district to contribute for each participating employee a calculated amount based on the cost of employee-only coverage for the different primary health coverage plans outlined in the bill. The bill requires the district to remit contributions to the appropriate regional pool trust fund according to procedures adopted by the board (Art. 3A.251). State Contribution H.B. 1513 requires the state to contribute $325 annually, on behalf of each participating employee, and $1,300 annually per eligible dependent, on behalf of each participating employee. The bill provides that the state contribution is required to be used first to defray the cost of the health coverage plan chosen by the participating employee, and then, upon the employee's authorization to cover the costs of premiums for supplemental coverage or other benefit options. If the employee is not participating in the plan, the bill authorizes the employee to designate that the state contribution be used to cover the costs of premiums for outside-program or supplemental coverage or other health benefit options available to the employee, or deposited into a medical savings account established for the employee. The bill requires state contributions to be paid directly to the health coverage provider for outside-program premiums incurred by an employee, or if the employee has paid the premiums, to the employee as reimbursement (Arts. 3A.252 and 3A.301). The bill establishes the state contribution fund upon creation of the program, and requires the comptroller of public accounts to serve as custodian of the fund. The bill requires state appropriations and other authorized or required money to be deposited into the fund. The bill specifies that money in the fund may only be used to pay the state's contribution (Art. 3A.302). The bill authorizes the state, after covering the cost of all obligated defined contributions, to distribute any remaining amounts to the appropriate regional risk pool trust funds on a pro-rata basis, to be used on behalf of retirees and surviving spouses of employees (Art.3A.252). Participant Contribution H.B. 1513 requires each participating employee to pay the portion of the primary health coverage plan selected that exceeds the amount of the state and district contributions and to remit the contribution to the appropriate regional risk pool trust fund (Art.3A.253). Records H.B. 1513 provides that existing confidentiality provisions for the Teacher Retirement System of Texas (TRS) apply to information in records relating to an employee, retiree, or other participant under the program. The bill authorizes the program to disclose to a health benefits plan provider information in an individual's records that the board determines necessary to administer the program (Art.3A.351). Conforming Provisions The bill repeals provisions authorizing the participation of active employees in the Texas Public School Employees Group Insurance Program and removes references to active employees from the Texas Public School Employees Group Insurance Act and renames the Act the Texas Public School Retired Employees Group Insurance Act (Art.3.50-4, Insurance Code). The bill repeals law in the Education Code requiring each school district to make available to its employees group health coverage (SECTION 2.14). Implementation Provisions H.B. 1513 requires ERS, during the 2001-2002 school year, to develop the plans to be implemented under the program. The bill requires ERS to adopt rules as necessary for the implementation of the plans no later than March 1, 2002 (SECTION 3.03). Coverage under the plans is required to begin with the 2002-2003 school year, but no later than September 1, 2002. The bill requires TRS, no later than September 2002, to transfer from the Texas Public School Employees Group Insurance Program all coverages and records for active employees to ERS. The bill requires the comptroller of public accounts, no later than September 1, 2002, to transfer from the school employees group insurance2/19/2001 contribution fund (SECTIONS 3.01 and 3.02) EFFECTIVE DATE September 1, 2001.