HBA-JEK H.B. 3446 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3446 By: Gallego Teacher Health Insurance, Select 3/23/2001 Introduced BACKGROUND AND PURPOSE School districts, especially rural districts, face an increasingly difficult task of providing health insurance to teachers and employees. The health insurance costs of many rural school districts have increased to the extent that funds for pay raises have been utilized to pay increased premium costs. Better health insurance benefits might help Texas attract and retain qualified teachers. House Bill 3446 creates the Texas school employees group insurance program. 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 Teacher Retirement System of Texas in SECTION 1.01 (Articles 3A.051, 3A.053, 3A.102, 3A.105, 3A.106, and 3A.107, Insurance Code) and to the commissioner of education in SECTION 2.01 (Section 42.253, Education Code) of this bill. ANALYSIS House Bill 3446 amends the Insurance, Education, and Tax codes to establish the Texas school employees group insurance program (group program), and requires the group program to be paid by the state, the district, and the employees in the manner set forth in the portion of this bill entitled the Texas School Employees Uniform Group Insurance Benefits Act. Administering the Group Program H.B. 3446 requires the board of trustees of the Teacher Retirement System of Texas (TRS) to administer the group program, act as trustee for the group program, and adopt rules, plans, procedures, and orders reasonably necessary to implement the Texas School Employees Uniform Group Insurance Benefits Act. The bill requires the board of trustees to determine whether employees and retirees should be treated as one risk pool or as separate risk pools and to administer the group program in the manner that results in the greater cost savings to the state (Art. 3A.051, Insurance Code and Sec. 22.004, Education Code). H.B. 3446 requires the board of trustees to adopt rules to maximize any available cost savings from the use of generic or mail-order prescription drugs unless the use of those drugs would cause an undue burden on or adversely affect the health of an individual (Art. 3A.053, Insurance Code). The bill authorizes the board of trustees to contract on a competitive bid basis with a qualified and experienced firm of group insurance specialists or an administering firm to act for the board of trustees in the capacity of an independent administrator and plan manager. The bill also authorizes the board of trustees to enter into interagency contracts with any state agency including the Employees Retirement System of Texas for assistance in implementing or administering the group program (Art. 3A.054, Insurance Code). The bill authorizes the board of trustees to employ persons to assist the board of trustees in administering the Texas School Employees Uniform Group Insurance Benefits Act (Art. 3A.052, Insurance Code). The bill also authorizes the board of trustees to appoint advisory committees to advise TRS in the implementation or administration of the group program (Art. 3A.055, Insurance Code). The Group Program H.B. 3446 requires the board of trustees to establish plans of group coverage for plan participants and their dependents, and provides that the plans must include at least two tiers of group health coverage with different benefits levels ranging from the first tier catastrophic coverage plan to the primary health plan. The bill requires the primary health plan to be comparable in scope and, to the extent possible, in cost to the health benefit plan coverage provided under the Texas Employees Uniform Group Insurance Benefits Act. The bill provides that a school district must select the same tier group coverage plan for all district employees. A school district that selects a coverage plan other than a primary health plan or that does not levy a tax under this bill specifically for the group program is not entitled to state contributions for employee health benefits coverage other than the foundation school program funds (Art. 3A.101, Insurance Code). H.B. 3446 authorizes a school district to elect to participate in the group insurance program beginning September 1, 2001 unless the district is participating in a group insurance program under the Texas Employees Uniform Group Insurance Benefits Act. The bill requires a school district that elects to participate in the group program to do so for a minimum of two years. The bill authorizes the board by rule to establish a biennial deadline for notifying the board of an election to begin participation in the group program. The bill sets forth provisions regarding the discontinuance of a school district's participation in the group program (Arts. 3A.102 and 3A.109, Insurance Code). A district that elects not to participate is required to make group health coverage available to its employees as provided in current law (Sec. 22.004, Education Code). H.B. 3446 provides that each full-time employee or retiree of a participating school district is automatically covered by the primary health plan for employees or retirees unless the employing school district does not select the primary health plan or the employee or retiree specifically waives coverage or is expelled from the group program. The bill provides that each part-time employee of a participating school district is eligible for the health plan on application in the manner provided by the board of trustees unless the employee has been expelled from the group program (Art. 3A.103, Insurance Code). H.B. 3446 specifies that a program participant is entitled to obtain coverage for a dependent as determined by the board of trustees (Art. 3A.104). The bill authorizes a surviving spouse, a surviving spouse's dependents, and a surviving dependent child to retain or obtain coverage upon payment of applicable contributions in the manner established by board of trustees rules (Arts. 3A.105 and 3A.106, Insurance Code). Provisions regarding the confidentiality of information about members, retirees, annuitants, beneficiaries, or alternate payees apply to an individual under the group program. The bill authorizes TRS to disclose to a health or benefit provider information in the individual's records that TRS determines is necessary to administer the group program (Art. 3A.251, Insurance Code). The bill sets forth provisions regarding the adjudication and appeal of a claim denial or an expulsion from the group program, and authorizes the board of trustees to delegate its authority to adjudicate claims and expulsions to a qualified hearing examiner (Arts. 3A.252-3A.254, Insurance Code). Optional Coverage The bill requires the board of trustees to contract with a qualified plan provider to offer program participants optional permanent life insurance coverage, long-term care insurance that provides coverage for home, community, and institutional care, insurance for short or long-term loss of salary because of disability, and any other insurance coverage considered advisable by the board of trustees. The bill provides that competitive bidding is required in contracting for any optional coverage. The bill requires the board of trustees by rule to prescribe the procedure for conducting the bidding. The bill establishes criteria for selecting the bids and sets forth provisions regarding enrollment periods for such coverage (Art. 3A.107, Insurance Code). The bill requires the board of trustees to offer optional insurance coverage to employees through the districts and retirees through TRS, and requires the board of trustees to offer longterm care insurance to a program participant and certain other persons. The bill specifies that each program participant who participates in optional insurance coverage is responsible for the full cost of that coverage to be paid by payroll or retirement annuity deduction (Art. 3A.108, Insurance Code). Funding H.B. 3446 requires the state to contribute the amount provided by the General Appropriations Act for each program participant. The bill requires the board of trustees to pay from state contributions, school district contributions, and other amounts deposited in the primary health fund: _100 percent of the cost of the plan selected by a participating school district for district employees participating in the group program and for retirees who retired with at least 10 years of actual service credit with TRS; and _50 percent of the cost of the plan selected by a participating school district for dependents of employees and of retirees who retired with at least 10 years of actual service credit with TRS. The bill requires the portion of the cost of health coverage selected by the program participant that exceeds the amount of state contributions to be paid by the employee or retiree or the employee's school district in accordance with the employee's employment contract (Art. 3A.151, Insurance Code). H.B. 3446 requires each employee of a participating school district to contribute a non-refundable amount equal to 0.25 percent of the employee's salary to the primary health fund each fiscal year through payroll deduction, and sets forth interest payments for an employer that fails to remit the employee's contribution. The bill requires the state to contribute at least 0.5 percent of the salary of each employee of a participating school district to the primary health fund each fiscal year, and provides that the ratio between the state's contribution and the employees' contributions must be maintained at two to one if the above percentages are changed in the future. The bill requires the board of trustees to certify to the Legislative Budget Board (LBB) and the governor's budget office before November 1 of each even-numbered year the amounts necessary to pay the contributions of the state to the primary health fund, and sets forth provisions for the payment of the state's contribution (Art. 3A.152, Insurance Code). The bill creates the school employees primary health coverage fund (primary health fund) to be administered by the board of trustees and used only to pay for primary health coverage. The bill also establishes a public school employees optional insurance fund (optional insurance fund) to be administered by the board of trustees and used only for the optional insurance program. The bill sets forth the source of the funds (Arts. 3A.201 and 3A.202, Insurance Code). The bill authorizes the board of trustees to invest assets of the primary health or optional insurance funds (Art. 3A.203, Insurance Code). H.B. 3446 amends the Education Code to provide that for the first school year in which a school district levies a tax for the group program, the rate is reduced by an amount equal to the portion of the district's maintenance and operations tax rate for the final year of the preceding biennium necessary for the district to pay its group health coverage expenditures for its employees for that year. The bill authorizes the commissioner to adopt rules to administer this provision (Sec. 42.253, Education Code). H.B. 3446 includes all money derived from the lease or sale of permanent school fund (PSF) land as well as interest and dividends arising from any PSF securities, funds, or proceeds from the sale of land in the PSF. The bill provides that the available school fund (ASF) includes distributions from the PSF (Sec. 43.001, Education Code). The bill requires the comptroller to transfer distributions from the PSF to the ASF and the primary health fund as required by the constitution and the General Appropriations Act (Secs. 43.002 and 43.0021, Education Code). H.B. 3446 authorizes the submission of a proposition to district voters to authorize the levy of additional maintenance taxes that may exceed the $1.50 cap for the specific purpose of receiving state equalization aid to allow the district or county to participate in the group program. The bill specifies that the tax rate must be sufficient to permit the district to participate in the group program but prohibits the rate from exceeding what is stated in the proposition. The bill requires the legislature in the General Appropriations Act to set aside for each year of the state fiscal biennium the effective tax rate that school districts must levy to receive state equalization aid to permit the districts to participate in the group program (Secs. 45.003 and 45.0031, Education Code). H.B. 3446 requires the comptroller to certify the effective tax rate, the amount of revenue the district must provide to participate in the group program, and the actual cost of coverage as determined by the board of trustees of TRS for each full-time employee. The bill requires each school district that will levy taxes to determine the nominal rate the district must levy to collect the amount of revenue certified by the comptroller and to remit this amount to the comptroller for deposit in the primary health fund. The bill sets forth provisions regarding the procedures for a school district that levies less than the certified amount, more than the certified amount, or that does not levy a tax for the group program. The bill sets forth penalties for a school district that fails to remit required revenue for participation in the group plan. The employees of a district that levies the required effective tax rate and remits the required revenue are entitled to receive the primary health plan coverage under the group program without any further expenditure by the district (Secs. 45.0031 and 45.0032, Education Code). H.B. 3446 amends the Tax Code to reduce for the first tax year that a school district levies a tax for the group program the rollback rate by an amount equal to the portion of the district maintenance and operations tax rate for which state aid will not be provided under the Foundation School Fund (Sec. 26.08, Tax Code). The bill amends the Insurance Code to repeal the Texas Public School Employees Group Insurance Act, the Texas Public School Employees Group Long-Term Insurance Program article, and the Insurance for School District Employees and Retirees article. The bill amends the Education Code to repeal provisions related to premiums and discounts from the PSF (SECTIONS 4.01 and 4.02). EFFECTIVE DATE The Act takes effect January 1, 2002, but only if the constitutional amendment relating to the provision of group health benefits for active and retired public school employees, distributions from the permanent school fund, and the school employees primary health coverage fund is approved by the voters. The repealers regarding insurance for public school employees take effect on September 1, 2001. If the proposed constitutional amendment is not approved by the voters, this Act has no effect.