LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 74th Regular Session April 26, 1995 TO: Honorable John Smithee, Chair IN RE: Committee Substitute Committee on Insurance for House of Representatives House Bill Austin, Texas No. 2766 FROM: John Keel, Director In response to your request for a Fiscal Note on House Bill No. 2766 (relating to providing fairness and choice to patient and providers under managed care health benefit plans; providing penalties) this office has determined the following: The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. The bill would amend the Insurance Code to add the "Patient Protection Act" and provide that the Commissioner of Insurance shall promulgate policy rules for managed care entities doing business in Texas, including compliance. Implementation of the provisions of the bill would result in significant fiscal implications for the Department of Insurance. Additional resources would be needed for rule adoption proceedings and compliance enforcement. Additional revenue would be generated from filing fees. The table below reflects only the fiscal implications for the Department of Insurance. The bill would also affect the group insurance programs for general and higher education state employees. These programs utilize managed care networks and are administered by the Employees Retirement System, the University of Texas System and the Texas A&M System. According to the Teachers Retirement System, the bill would not affect the TRS Retired Public School Employees Group Insurance Program. These programs would be affected by the provisions of the bill for health care provider certification and decertification for participation in a managed care network. The process used under current law may vary substantially from the provisions of the bill. The bill would increase the cost of the Employee Retirement System (ERS) group insurance program substantially. Actuarial analysis indicates that the bill would "increase the complexity and resulting costs of administration" of managed care plans that are not self-funded (for example, health maintenance organizations). The ERS anticipates that ERS group insurance costs would increase in the range of 1 percent to 1.5 percent. ADDITIONAL COSTS TO THE STATE OF $7 MILLION TO $10 MILLION PER YEAR ARE PROJECTED. The Texas A&M University System estimates indicate that implementation of the provisions of the bill would increase health plan costs by 10 percent to 15 percent. Basic health plan costs are projected to increase $3 million to $4.5 million in 1996. If the cost of HMO plans are included, THE PROJECTED TOTAL HEALTH PLAN COST INCREASE WOULD BE $8 MILLION TO $12 MILLION. The University of Texas System estimates indicate that implementation of the provisions of the bill would result in an INCREASE TO THE STATE FOR TOTAL HEALTH PLAN COST OF $4 MILLION IN FY1996 INCREASING TO $38 MILLION IN FY2000. The probable fiscal implication to the Department of Insurance of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Fiscal Probable Cost Out Probable Revenue Change in Year of Department of Gain to Department Number of State Insurance of Insurance Employees from Operating Operating FY 1995 Fund 036 Fund 036 GR Consolidated GR Consolidated 1996 $1,109,703 $110,000 16.0 1997 1,051,595 190,000 16.0 1998 808,730 80,000 10.0 1999 808,730 50,000 10.0 2000 808,730 30,000 10.0 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. The fiscal implication to units of local government cannot be determined. Source: Employee Retirement System, University of Texas System, Texas A&M System, Department of Insurance LBB Staff: JK, RM, RN