S.B. No. 1171
 
 
 
 
  relating to the suspension and reactivation of the operation of the
  Texas Health Reinsurance System.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 1501.302, Insurance Code, is amended to
  read as follows:
         Sec. 1501.302.  TEXAS HEALTH REINSURANCE SYSTEM. (a)  The
  Texas Health Reinsurance System is a nonprofit entity administered
  by a board of directors and subject to the supervision and control
  of the commissioner.
         (b)  The system may operate only during the period an order
  authorizing operation of the system under Section 1501.3021 is in
  effect. The system may not operate after the effective date of an
  order of suspension of operation of the system under Section
  1501.3022 until a subsequent order authorizing the operation of the
  system under Section 1501.3021, if any, is effective.
         SECTION 2.  Subchapter G, Chapter 1501, Insurance Code, is
  amended by adding Sections 1501.3021 and 1501.3022 to read as
  follows:
         Sec. 1501.3021.  AUTHORIZATION OF OPERATION. (a)  The
  commissioner shall hold a hearing if:
               (1)  the commissioner believes small employer health
  benefit plan issuers in this state are threatened with the
  inability to secure reinsurance coverage in the open market; or
               (2)  the commissioner receives a petition requesting
  the hearing from an association of health benefit plan issuers in
  this state or a group of at least 15 small employer health benefit
  plan issuers operating in this state.
         (b)  If, after a hearing under Subsection (a), the
  commissioner finds that the operation of the system is in the public
  interest, the commissioner by order shall:
               (1)  authorize the operation of the system;
               (2)  appoint a board of directors under Section
  1501.303; and
               (3)  direct the board to develop a plan of operation
  under Section 1501.306 to ensure the system is fully implemented on
  a date specified in the order that is not later than the 60th day
  after the effective date of the order.
         (c)  Sections 1501.307-1501.326 apply to the operation of
  the system after the date the system is implemented as described by
  Subsection (b)(3).
         Sec. 1501.3022.  SUSPENSION OF OPERATION. (a)  The
  commissioner shall hold a hearing if the system is operating or is
  authorized to operate and:
               (1)  the commissioner believes small employer health
  benefit plan issuers in this state are not threatened with the
  inability to secure reinsurance coverage in the open market; or
               (2)  the commissioner receives a petition requesting
  the hearing from an association of health benefit plan issuers in
  this state or a group of at least 15 small employer health benefit
  plan issuers operating in this state.
         (b)  If, after a hearing under Subsection (a), the
  commissioner finds that suspension of the operation of the system
  is in the public interest, the commissioner by order shall direct
  the board to submit to the commissioner for approval, not later than
  the 60th day after the date of the order, a plan of suspension of
  operation of the system.
         (c)  A plan of suspension under Subsection (b) must:
               (1)  specify the date after which a health benefit plan
  issuer that is a risk-assuming health benefit plan issuer on the
  effective date of the plan of suspension may not:
                     (A)  become a reinsured health benefit plan issuer
  under Sections 1501.310, 1501.311, and 1501.312; and
                     (B)  reinsure with the system a small employer
  group, or any risk, covered under any small employer health benefit
  plan;
               (2)  specify the date after which a health benefit plan
  issuer that is a reinsured health benefit plan issuer on the
  effective date of the plan of suspension may not:
                     (A)  reinsure with the system additional small
  employer groups in accordance with Section 1501.314; or
                     (B)  cede additional eligible lives to the system
  in accordance with Section 1501.314;
               (3)  provide for:
                     (A)  the filing, receipt, processing, and payment
  of all claims against and debts of the system, and extinguishment of
  all liabilities of the system, including balances on any lines of
  credit that may have been established by or on behalf of the system;
                     (B)  the collection and receipt of all assessments
  made with respect to reinsured health benefit plan issuers,
  including any deferred assessments and any final assessment made
  under Subsection (f); and
                     (C)  a final audit of the system by the state
  auditor as provided by Subsection (g);
               (4)  specify that the transactions required by the plan
  of suspension and addressed in Subdivisions (1)-(3) must be closed
  not later than the effective date of the suspension of the operation
  of the system as specified under Subdivision (5);
               (5)  state the effective date of the suspension of the
  operation of the system; and
               (6)  provide for the proportionate distribution of any
  surplus assets of the system that remain after the date specified
  under Subdivision (5).
         (d)  The effective date of the suspension of the operation of
  the system as specified under Subsection (c)(5) may not be later
  than the 270th day after the date the commissioner by order approves
  the plan of suspension.
         (e)  If the board fails to submit a suitable plan of
  suspension, the commissioner, after notice and hearing, shall adopt
  a plan in accordance with Subsection (c).
         (f)  The board may make a final assessment of the small
  employer health benefit plan issuers that, for any portion of the
  last year in which the system operated, were reinsured health
  benefit plan issuers.  An assessment under this subsection may be
  made only if the board determines the assessment is necessary to
  recover net losses of the system, as provided in Sections
  1501.319-1501.326, including administrative expenses for
  transactions essential to complete execution of the plan of
  suspension, and the cost of the final audit by the state auditor.
         (g)  The transactions necessary to complete execution of the
  plan of suspension are subject to audit by the state auditor under
  Chapter 321, Government Code. The state auditor shall report the
  cost of the final audit conducted under this section to the board
  and the comptroller, and the board shall remit that amount to the
  comptroller for deposit to the general revenue fund.
         (h)  The board serving immediately before the effective date
  of the suspension of the operation of the system is discharged on
  the effective date of the suspension of the operation of the system
  as specified under Subsection (c)(5).
         (i)  After the effective date of the suspension of the
  operation of the system as specified under Subsection (c)(5), the
  commissioner shall take any action necessary under Subsection
  (c)(6) to distribute the surplus assets of the system until all
  remaining assets are distributed.
         (j)  During a period in which the operation of the system is
  suspended, Sections 1501.307-1501.326 have no effect.
         SECTION 3.  The board of directors of the Texas Health
  Reinsurance System serving on the effective date of this Act shall
  submit to the commissioner of insurance a plan of suspension of the
  operation of the Texas Health Reinsurance System, as described by
  Section 1501.3022(c), Insurance Code, as added by this Act, not
  later than the 90th day after the effective date of this Act. If the
  board fails to timely submit the plan, the commissioner of
  insurance shall adopt a plan in accordance with Sections
  1501.3022(c)-(i), Insurance Code, as added by this Act.
         SECTION 4.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2017.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1171 passed the Senate on
  April 19, 2017, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1171 passed the House on
  May 12, 2017, by the following vote:  Yeas 142, Nays 0, one
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor