BILL ANALYSIS Office of House Bill AnalysisH.B. 575 By: Green Teacher Health Insurance, Select 2/5/2001 Introduced BACKGROUND AND PURPOSE A major financial obstacle for school districts in Texas is providing affordable health insurance to teachers and other employees. Another issue is that the cost of health care benefits varies between school districts. For example, smaller district employees may be charged a per person premium of $500 to $600 a month, while larger district employees may be charged as low as $200 per premium. House Bill 575 creates a statewide insurance risk pool fund to provide health benefits to active public school employees, thereby increasing the buying power though a larger group of purchasers and generally lowering the cost of individual premiums. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Articles 3B.006 and 3B.058, Insurance Code) and SECTION 20 and to the board of directors of the school districts health benefits risk pool in SECTION 1 (Article 3B.201, Insurance Code) of this bill. ANALYSIS House Bill 575 amends the Local Government Code and the Education Code to create the School Districts Health Benefits Risk Pool (pool) to provide school district employees access to health benefits coverage. School Districts Health Benefits Risk Pool; Board of Directors HBA-MPM H.B. 575 77(R)H.B. 575 amends the Insurance Code to provide that the pool is governed by a board of nine directors (board) appointed by the commissioner of insurance (commissioner) no later than December 1, 2001. The bill establishes administration, operation, duties, and financial reporting requirements of the board and pool (Art. 3B.051-3B.057 and 3B.102). The commissioner is authorized to adopt rules necessary to implement the pool no later than December 31, 2001, and, by rule, to establish the additional powers and duties of the board (Art. 3B.006, Art. 3B.058, and SECTION 20). The bill authorizes the state auditor to conduct annual financial, economic, and efficiency audits of the pool and report the cost of each audit to the board and the comptroller of public accounts. The board is required to remit that amount to the comptroller (Art. 3B.005). The bill requires each school district to provide its employees access to health benefit plan coverage, and notice relating to the existence of the pool (Art. 3B.101). The bill entitles an applicant for or participant in the pool to have complaints against the pool reviewed by a grievance committee appointed by the board. The bill establishes a required protocol for the committee to handle complaint (Art. 3B.007). Powers and Duties of Pool H.B. 575 requires the pool to provide health benefit plan coverage to a school district employee who works at least 20 hours a week during the school year and to the employee's dependents, and to adopt necessary forms to implement coverage (Art. 3B.002, 3B.103, and 3B.104). The pool is authorized to establish appropriate rates, rate schedules, rate adjustments, expense allowances, agents' referral fees, and claim reserve formulas, and to perform actuarial functions appropriate to the operation of the pool (Art. 3B.104). The bill prohibits the pool from charging unreasonable premium rates and authorizes the pool to adjust premium rates and rate schedules for appropriate risk factors. The bill requires the pool to establish rates using reasonable actuarial techniques and considering the premium rates charged by other health benefit plan providers. The bill provides that the rate must reflect anticipated experience and expenses for health benefit coverage. The bill requires the pool to submit each rate and rate schedule to the commissioner for approval prior to implementation (Art. 3B.105). The bill authorizes the pool to purchase excess loss coverage or reinsurance to insure the pool against financial loss (Art. 3B.106). The pool is authorized to enter into contracts to provide health benefit coverage (Art. 3B.107). The bill authorizes the pool to sue or be sued, and to take necessary legal action to avoid payment of improper claims or recover or collect amounts due to the pool (Art. 3B.108). The bill authorizes the pool to design, use, contract for, or otherwise arrange for the delivery of costeffective health care services. The bill authorizes the pool to provide for and use containment measures and requirements, including preadmission screening, the requirement of a second surgical opinion, and concurrent utilization review subject to existing state law (Art. 3B.109). The pool is authorized to borrow money as necessary to implement the purposes of the pool (Art. 3B.110). In addition to the other powers granted to the pool, the bill authorizes the pool to exercise any of the authority that an authorized health benefit plan provider may exercise under state law (Art. 3B.111). Pool Coverage and Benefits H.B. 575 requires the pool to offer coverage providing benefits consistent with major medical expenses to each eligible employee. The bill requires the board to establish, with the commissioner's approval, coverage to be provided, schedules of benefits, and any exclusions or limitations to coverage. The bill specifies the information required to be included in the benefits provisions of the pool's coverage (Art. 3B.151). The bill requires each employee to be covered by the pool unless the employee rejects coverage in a signed statement made to the governing body of a school district. An eligible employee's dependents are also eligible for coverage from the pool. The bill authorizes a school district to contribute all or part of the premium and to require the employee to pay 100 percent of the cost for coverage not covered by the school district (Art. 3B.152). The bill provides that an employee is ineligible for coverage if the employee's prior coverage with the pool was terminated for nonpayment of premiums or fraud (Art. 3B.153). The bill sets forth provisions regarding circumstances under which expenses for a preexisting condition are or are not covered by the pool (Art. 3B.154). The bill authorizes the pool to reduce benefits otherwise payable under pool coverage by the total amount paid or payable through any other health benefit plan. The bill requires the pool to reduce benefits by the total amount of hospital and medical expense benefits paid or payable under workers' compensation coverage, automobile insurance coverage, or a state or federal law or program (Art. 3B.155). The bill provides that the pool has a cause of action against an employee for the recovery of the amount of benefits paid that are not for covered expenses. The bill provides that benefits due from the pool may be reduced or refused as an offset against the recoverable amount (Art. 3B.156). The bill sets forth provisions for the termination of pool coverage. The bill authorizes an individual to maintain coverage through the pool for the period the individual is satisfying a preexisting condition period or waiting period under another health plan that is intended to replace the pool coverage (Art. 3B.157). Operation of Pool The bill provides that the management of the pool is governed by a plan of operation which is to include the articles, bylaws, and operating rules of the pool, adopted by the board no later than March 1, 2002 and approved by the commissioner (Art. 3B.201 and SECTION 17). The bill provides that the plan must ensure the fair, reasonable, and equitable administration of the pool and sets forth procedures that must be included in the plan of operation. The bill requires the board to amend the plan of operation as necessary. The bill provides that an amendment to the plan of operation must be first approved by the commissioner (Art. 3B.201). H.B. 575 authorizes the board to select by competitive bidding one or more health benefit plan providers or a third party administrator certified by the Texas Department of Insurance to administer the pool and requires the board to establish criteria for evaluating bids submitted (Art. 3B.202). The bill sets forth a three-year term for the administrator, and establishes requirements for determining a successive administrator when the administrator's term expires. The board is required to invite all health benefit plan providers, including the pool administrator, to submit bids for the succeeding administration within a specified deadline (Art. 3B.203). The bill requires the pool administrator to perform assigned functions relating to the pool which are authorized to include performing eligibility and administrative claims payment functions, establishing a billing procedure for collection of premiums, performing functions to ensure timely payment of benefits to individuals covered by the pool, submitting reports to the board regarding pool operation, and determining and reporting financial information to the board and commissioner each calendar year. The bill requires the board to determine the form, content, and time of submission for reports relating to the operation of the pool. The bill requires the commissioner to prescribe the form to be used for financial reports. The bill requires the board to determine the times at which a pool administrator is to perform billing functions for the pool (Art. 3B.204). The pool is require to pay a pool administrator for expenses incurred in performing duties and functions (Art. 3B.205). Funding The bill creates the Texas school districts health benefits risk pool fund outside of the state treasury. The bill provides that the fund is a trust fund composed of premiums paid by school district employees for pool coverage, contributions and other money received by the pool from school districts and the state, investments and money earned from investments of the fund, and any other money the pool receives. The bill requires that money in the fund is paid from the fund, without legislative appropriation, on vouchers approved by the board and prohibits fund money from being used or appropriated for any other purpose. The bill requires the pool administrator to manage the fund under the board's supervision, and authorizes administrative expenses to be paid from the fund. The bill prohibits payment for administrative expenses from exceeding 10 percent of the total amount of money in the fund during the fiscal year, and also prohibits the fund from being used to pay punitive damages, fines, or penalties imposed for the violation of a rule of a state agency or ordinance of a local government. The bill authorizes the board to select one or more banks to serve as a depository for the fund and specifies that a depository bank must provide security from loss for fund money that exceeds the amount secure by the Federal Deposit Insurance Corporation before the deposit of the fund money. The board shall require an annual audit conducted by a recognized actuary of the capital, surplus, and reserves of the pool in the fund (Art. 3B.251). The bill requires the pool administrator to manage and invest the fund according to the plan of operation. Money earned by the investment is required to be deposited in the fund or reinvested for the fund (Art. 3B.252). The bill requires each school district to pay an assessment, as determined by the board, for the initial expenses of the pool. The bill provides that the provisions for a fee for initial expenses expire September 1, 2003 (Art. 3B.253). Implementation Provisions The bill requires the Teacher Retirement System of Texas to transfer all coverage provided by the Texas Public School Employees Group Care Insurance Program (existing program) to active employees, as well as records relating to the existing program to the board of directors of the pool by September 1, 2002. The comptroller is required to transfer the assets and liabilities of the Texas public school employees group insurance fund to the fund established for the risk pool. The bill provides that on transfer of this property, the existing program is terminated (SECTION 18). The bill requires a school district that established a health care fund under district-level risk pool provisions to abolish the fund no later September 1, 2002, and to distribute the balance of the fund attributable to deductions made from employees' salaries to the employees in proportionate shares no later to December 1, 2002. The bill requires a school district that participated in a risk pool under the Texas Political Subdivision Employees Uniform Group Benefits Act to terminate participation on expiration of the term of the existing benefits contract, but no later than September 1, 2002 (SECTION 19). The bill amends the Education Code to repeal provisions for district-level risk pools for group health insurance (SECTION 16). EFFECTIVE DATE September 1, 2001. Coverage shall begin with the 2002-2003 school year, but not later than September 1, 2002.