HBA-JEK C.S.H.B. 3343 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3343 By: Sadler Teacher Health Insurance, Select 4/26/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Since 1991, school districts have been required to provide health insurance to school district employees that is comparable to the insurance offered under the Texas Employees Uniform Group Insurance Program. Health insurance costs for public school employees vary from district to district, and small and rural districts, in particular, struggle with rising premium costs and limited access. School districts that pay little to none of the coverage costs may find it more difficult to attract and retain qualified employees. Individually, school districts, employees, and the state have limited resources with which to fund the rising costs of health insurance for school employees; however, contributions from a combination of these sources may lead to a stronger health insurance plan. C.S.H.B. 3343 establishes a uniform group coverage program for school district employees with funds from state, district, and employee contributions. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Teacher Retirement System of Texas in SECTION 1.01 (Sections 3, 4, 5, 6, 7, and 9, Article 3.50-7, Insurance Code) and SECTION 1.02 (Section 4, Article 3.50-8, Insurance Code) and to the commissioner of education in SECTION 1.05 (Section 42.253, Education Code) of this bill. ANALYSIS C.S.H.B. 3343 amends the Insurance, Education, Tax, Health and Safety, and Government codes to create the Texas School Employees Uniform Group Health Coverage Act and to establish the uniform group coverage program (program) for Texas school district employees to be funded by state, district, and employee contributions. Uniform Group Coverage Program C.S.H.B. 3343 amends the Insurance Code to require the Teacher Retirement System of Texas (TRS), as trustee, to implement and administer the program. The bill requires TRS to develop the enrollment requirements for the program during the 2001-2002 school year, with coverage beginning September 1, 2002. The bill authorizes TRS to hire and compensate employees, contract with a qualified firm to act in the capacity of independent administrators and managers of the program, and enter into interagency contracts with any agency of the state. The bill provides that TRS has the powers with regard to the program that the Employees Retirement System of Texas (ERS) has in administering the Texas Employees Uniform Group Insurance Benefits Act, including the power to adjudicate claims, expel participants from the program for cause, and adopt rules to administer the program (SECTION 1.01, Sec. 3, Art. 3.50-7 and SECTION 3.01). Group Coverages C.S.H.B. 3343 requires TRS by rule to establish plans of group coverages for employees participating in the program beginning September 1, 2001. The bill provides that the plans must include at least two tiers of group coverage, ranging from the catastrophic care coverage plan to the primary care coverage plan. The bill requires TRS by rule to define the requirements of each coverage plan and tier of coverage and to prescribe by rule the coverage provided under the catastrophic care coverage plan. The bill provides that the coverage under the catastrophic care plan must be at least as extensive as the coverage provided under the TRS-Care 2 plan and that the primary care coverage plan must be comparable in scope and, to the greatest extent possible, in cost to the coverage provided by ERS to state employees. The bill provides that comparable coverage plans of each tier of coverage must be offered to employees of all participating entities and prohibits coverage under the program from being subject to a preexisting condition limitation. The bill authorizes TRS to provide a cafeteria plan for employees of participating entities (SECTION 1.01, Sec. 4, Art. 3.50-7 and SECTION 3.01). Participation C.S.H.B. 3343 requires each school district with 500 or fewer employees and each regional education service center to participate in the program as of September 1, 2002. The bill authorizes a school district with more than 500 but not more than 1,000 employees to elect to participate in the program as of September 1, 2002. Such a district must notify TRS of the election not later than September 30, 2001. The bill authorizes any school district with more than 500 employees to elect to participate in the program as of September 1, 2005. Such a district must notify TRS of the election not later than January 1, 2005, and is required to apply for participation in the manner prescribed by TRS by rule (SECTION 1.01, Sec. 5, Art. 3.50-7 and SECTION 3.02). The bill provides that a charter school is eligible to participate in the program if the school agrees to the open records requirements regarding the program and to an audit of its accounts relating to the program. A charter school must notify TRS of its intent to participate in the program in the manner and within the time required by TRS rule (SECTION 1.01, Sec. 6, Art. 3.50-7). C.S.H.B. 3343 provides that participation in the program is limited to employees of participating entities who are full-time employees and to part-time employees who are participating members in TRS. Such an employee who applies for coverage during an open enrollment period prescribed by TRS is automatically covered by the catastrophic care coverage plan unless the employee specifically waives coverage, selects a higher tier coverage plan, or is expelled from the program. The bill provides that a part-time employee of a participating entity who is not a participating member in TRS is eligible to participate in the program only if the employee pays all of the premiums and other costs associated with the health coverage plan the employee selects (SECTION 1.01, Sec. 7, Art. 3.50-7). Fund C.S.H.B. 3343 establishes the Texas school employees uniform group coverage trust fund (fund) with the comptroller of public accounts. The fund consists of all contributions made from employees, participating entities, and the state for coverage under the program, as well as contributions made by employees or participating entities for optional coverages, investment income, any additional amounts appropriated by the legislature, and any other money required or authorized to be paid into the fund. The bill authorizes TRS to invest assets of the fund as assets are invested for each statewide benefit system, and authorizes TRS to use amounts in the fund only to provide group coverages and to pay the administrative expenses of the program (SECTION 1.01, Sec. 8, Art. 3.50-7). Health Coverage Contributions C.S.H.B. 3343 requires the state to contribute $75 a month for each employee of a covered entity who participates in a group health coverage plan provided by or through the covered entity. The bill requires the state contributions to be deposited in the fund or another fund established for the payment of school employee health coverages. The bill requires a charter school or regional education service center to make contributions for the program as provided by TRS rule (SECTION 1.01, Sec. 9, Art. 3.50-7 and SECTION 1.03, Sec. 2, Art. 3.50-9). The bill requires a school district to make health coverage contributions, for each fiscal year, in an amount that is equal to $1,800 for each of its participating employees. The bill authorizes a school district to use specified funds received under the foundation school program to meet the district's contribution requirements (SECTION 1.01, Sec. 9, Art. 3.50-7 and SECTION 1.04, Sec. 3, Art. 3.50-10). The bill requires a school district that shared with its employees the cost of coverage under a group benefits plan for the 2000-2001 school year to deposit in the appropriate fund for each of its employees, for each fiscal year, an amount at least equal to the average amount that the district paid for each employee during the 2001-2002 school year (SECTION 1.04, Sec. 2, Art. 3.50-10). The bill provides that, for any state fiscal year, a school district that imposes maintenance and operations taxes at the maximum rate permitted is entitled to state funds in an amount equal to the difference between $1,800 per employee and the amount based on the average amount per employee the district paid in 2001-2002. For the state fiscal years beginning September 1, 2002, through September 1, 2007, school districts are entitled to state assistance to meet contribution requirements in the amounts set forth in the bill (SECTION 1.04, Sec. 4, Art. 3.5010). If the amount a school district is required to use to provide health coverage for a fiscal year exceeds the $1,800 minimum for each employee, the bill authorizes the district to use the difference only to provide employee compensation, benefits, or both (SECTION 1.04, Sec. 5, Art. 3.50-10). The bill requires an employee covered by the program to pay the portion of the cost of the coverage selected by the employee not paid by the state or the school district (SECTION 1.01, Sec. 9, Art. 3.50-7). Health Coverage or Compensation Supplementation C.S.H.B. 3343 requires TRS to deliver to each school district, eligible charter school, and regional education service center each year state funds in an amount equal to the product of the amount provided by appropriation multiplied by the number of district, school, or regional education service center employees. These supplemental funds are to be held in trust for the benefit of each employee and to be distributed to each employee in equal monthly installments. The bill requires each employee to elect whether the supplemental funds are to be placed into a health care reimbursement account, paid to the employee as supplemental compensation, used by the district, school, or regional education service center to pay for optional health care coverage for the employee or the employee's dependents, or divided among the options. Each state fiscal year, the bill requires a school district, eligible charter school, or regional education service center to prepare and distribute to each employee a written explanation of the options the employee may elect. The bill sets forth deadlines for the distribution of the written explanation and election form and for the election by an employee. The bill authorizes TRS to adopt rules to implement the provisions regarding supplementation (SECTION 1.02, Secs. 2-4, Art. 3.50-8). The bill amends the Government Code to provide that funds the employee elects to receive as supplemental compensation are excluded from salary and wages for the purposes of determining a TRS member's contribution and benefits (SECTION 2.17, Sec. 822.201). CHIP Coverage C.S.H.B. 3343 amends the Health and Safety Code to authorize a child of an employee of an eligible charter school, school district, or regional education service center to be enrolled in health benefits coverage under the child health plan (CHIP), and to require the cost of health benefits coverage for such children to be paid by the state as provided in the General Appropriations Act. The bill prohibits expenditures made to provide health benefits coverage for such children under CHIP from being included for the purpose of determining the state CHIP expenditures as defined by federal law (SECTION 1.07, Sec. 62.1015). Tax Rates For any school year beginning with the 2003-2004 school year and ending with the 2008-2009 school year, C.S.H.B. 3343 amends the Education Code to authorize a school district to increase its maintenance and operations tax rate above the cap as necessary to comply with the contribution requirements of this bill. The bill authorizes the commissioner of education to adopt rules necessary to administer this provision and specifies that this provision expires September 1, 2009 (SECTION 1.05, Sec. 42.253). The bill amends the Tax Code to set forth provisions regarding the rollback tax rate of a school district that is required to increase its maintenance and operations tax rate in any of the tax years between 2003 and 2008 to comply with the bill's minimum contribution requirements (SECTION 1.06, Sec. 26.08). Transition Provisions C.S.H.B. 3343 amends the Insurance and Education codes to prohibit entities participating in the program from procuring or renewing health insurance contracts, participating in the small employer market, or purchasing additional group health coverage (SECTION 2.14, Sec. 3, Art. 3.51, Insurance Code and SECTION 2.15, Art. 26.036, Insurance Code and SECTION 2.16, Sec. 22.004, Education Code). C.S.H.B. 3343 amends the Insurance Code to repeal provisions authorizing participation by active employees in the Texas public school employees group insurance program (group program) for retirees (SECTION 2.18). The bill provides for the transfer of records relating to active employees from the group program for retirees to the program established under the bill (SECTION 2.01, Sec. 3A, Art. 3.50-4). EFFECTIVE DATE September 1, 2001. SECTIONS 2.02-2.13, 2.17, and 2.18 of the Act take effect September 1, 2002. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3343 differs from the original bill by removing the Texas School Employees Uniform Group Benefits Act, which created a statewide plan to cover all public school employees and retirees through increased taxes. The substitute adds the Texas School Employees Uniform Group Health Coverage Act, which creates a plan to cover the employees of small school districts, eligible charter schools, and regional education service centers with state, district, and employee contributions, and sets forth a schedule for the phasing in of larger school districts that choose to participate in the program.