LSL C.S.H.B. 3 75(R) BILL ANALYSIS PUBLIC HEALTH C.S.H.B. 3 By: Berlanga 3-5-97 Committee Report (Substituted) BACKGROUND One out of four children in Texas, or 1.3 million children under age 18, have no health insurance. The number is growing. Between 1980 and 1990, employer coverage for dependents in Texas declined from 50 percent to 33 percent. Contrary to common assumptions, many children without health care coverage live in working families. Parents and employers are finding health insurance increasingly expensive, harder to obtain, and more restrictive in scope of coverage. Most families without dependent coverage are selfemployed, work for employers who cannot or chose not to offer affordable health insurance for dependents, or work in the growing number of temporary positions. The primary funding source for health care services delivered to uninsured children is the taxpayer. A significant proportion of health care funds come from local property taxes that support public hospital districts. Uninsured children in Texas are five times as likely as insured children to use costly emergency rooms as their chief source of care. In 1993, the 12 large hospital districts in Texas spent over $100 million for in-patient care for uninsured children. The price of providing care for the uninsured is also built into hospital, physician service and other health care delivery expenses. These health care costs are passed on to businesses and individuals. They affect property taxes and cause higher insurance premiums. In fact, every two people purchasing insurance pay for the care of one person who is uninsured. Increased premium costs cause some employers to drop health benefits or shift the burden to employees through higher deductibles and copayments. This may cause employees to drop coverage on themselves, their dependents, or both. Good health is a prerequisite to learning. Statistics show that uninsured children are 25 percent more likely to miss school than those who have insurance. Conservative estimates show that absenteeism cost local school districts over $4 million per day in state funding last year. In 1994, Texas businesses lost approximately 550,000 productive work days due to a parent remaining home to care for a sick child. The consequences of limited access and affordability of health care services for working families are serious and far-reaching. The overall effect on the entire health care system in increasingly detrimental as the insured population shrinks while continuing to support the cost burden of the uninsured. The high number of uninsured children in Texas affects employee recruitment and retention, worker productivity, the development of a skilled workforce, local property taxes, and the overall expense of health care services. In 1995, the 74th Legislature passed H.B. 997, which required the establishment of a pilot health insurance program for children. Results from the pilot project, established in November 1996 in Laredo, Texas, show that it has successfully increased access to affordable health insurance for previously uninsured children. Contributions from the private sector, including an insurance company and local businesses, helped make the premium more affordable for working families. PURPOSE C.S.H.B. 3 will allow private insurance companies to sell low-cost health insurance for uninsured children. This coverage will be made available through the establishment of the private, nonprofit "Texas Healthy Kids Corporation." RULEMAKING AUTHORITY It is the committee's opinion that this bill expressly grants additional rulemaking authority to a the Texas Comptroller of Public Accounts in SECTION 1, Subchapter E, Sec. 109.153(b). SECTION BY SECTION ANALYSIS SECTION 1. Adds Chapter 109, "TEXAS HEALTHY KIDS CORPORATION," to Subtitle E, Title 2, Health and Safety Code, as follows: SUBCHAPTER A. GENERAL PROVISIONS. Sec. 109.001. Defines board, child, corporation, eligible coverage provider, executive director, program and Title IV-D agency. Sec. 109.002. Texas Healthy Kids Fund. Subsection (a) provides that this fund is outside the state treasury and held by the Texas Treasury Safekeeping Trust Company. Establishes that the fund is composed of money appropriated to the fund and of money appropriated to or deposited in the premium stabilization revolving account. Requires that the comptroller transfer these appropriated funds from the state treasury. Subsection (b) allows the comptroller to invest money in the fund in the same manner the comptroller may invest money in the state treasury. Subsection (c) requires that the board file with the comptroller a verified copy of a board resolution that designates the authorized representatives of the corporation who have authority to spend money in the fund. Sec. 109.003. Biennial Report. Requires that corporation submit a written report to the governor, the lieutenant governor, the speaker of the house of representatives and the commissioner of insurance no later than January 1 of each odd-numbered year. Requires the report to state the program's status and to include a financial conditions statement and an accounting for administrative expenses for the previous 2 years. Sec. 109.004. Immunity From Liability. Provides that Chapter 84, Civil Practices and Remedies Code, regarding charitable immunity and liability, applies to the corporation and an employee or volunteer of the corporation. Sections 109.005- 109.030 reserved for expansion. SUBCHAPTER B. CORPORATE STRUCTURE. Sec. 109.031. Texas Healthy Kids Corporation. Subsection (a) creates the Texas Healthy Kids Corporation and establishes that it has the necessary and proper powers to carry out its duties. Provides that the corporation is nonprofit and shall comply with the Texas Non-Profit Corporation Act. Subsection (b) provides that the corporation is not subject to the franchise tax imposed by Chapter 171, Tax Code. Subsection (c) requires the board to take any step necessary to maintain an exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1986 by being listed as an exempt organization under specified sections of that code or another similar law. Sec. 109.032. Board of Directors; Presiding Officer. Subsection (a) requires that the corporation operate subject to the general supervision of a board of directors. Provides that the board, not withstanding the Texas Non-Profit Corporation Act, be composed of six members appointed by the governor with the advice and consent of the senate. The board composition additionally includes the commissioner of health and human services, the commissioner of insurance, and the chief executive officer of the Title IV-D agency, or their respective designees, who each serve as non-voting ex officio members. Subsection (b) provides that, notwithstanding the Texas Non-Profit Corporation Act, the appointed members of the board serve staggered six-year terms, and that the terms of two appointed members expire on February 1 of each odd-numbered year. Subsection (c) requires the governor-appointed members of the board to annually elect a governor-appointed member to serve as presiding officer. Subsection (d) specifies that a member of the board may not serve more than two terms. Subsection (e) clarifies that members of the board serve without compensation, but are entitled to reimbursement of their travel expenses, as provided for state board or commission members in the General Appropriations Act. Allows the ex officio members of the board to spend money appropriated to the Texas Department of Insurance (TDI), to the Health and Human Services Commission, or to the Title IV-D agency, in connection with their work or expenses. Subsection (f) prohibits a person from eligibility for appointment to the board if that person or person's spouse is employed by, represents, owns, or controls ownership interest in a business or organization that may obtain a pecuniary or other favorable interest in the course of business with the corporation, or from whom the corporation receives funds. Subsection (g) stipulates that a person who is or has been an adverse party in litigation against the board or corporation is not eligible for appointment to the board. Sec. 109.033. Powers and Duties of the Board. Oversight of Commissioner of Insurance. Subsection (a) provides that the board, subject to subsection (d), is the oversight and governing entity of the corporation and has any necessary and proper power to carry out its duties, including the power to adopt bylaws governing the operations of the corporation and the board. Establishes that the board has responsibility for all corporate operations and complete fiscal control over the corporation. Subsection (b) allows the board to request and accept grants and gifts of money, property, or services. Allows the corporation to use a grant or gift for any purpose of the corporation, including paying business expenses and salaries of the corporation's employees, subject to subsection (c). Subsection (c) allows the corporation to use a donation made as community benefits by a hospital or hospital system, under Sec. 171.063(a), Tax Code, only to purchase health benefits for children with a family income of less than 200 percent of federal poverty level who reside in certain local geographic areas. Subsection (d) requires the board to submit and receive approval from the commissioner of insurance for the corporation's bylaws, plan of operation, any other adopted standards and established health benefit program and health benefit plans before implementation. Sec. 109.034. Executive Director. Subsection (a) requires that the board employ an executive director, who is required to act on behalf of and subject to the authorization and supervision of the board, to carry out the purposes of the corporation. Subsection (b) requires that the corporation pay the executive director a salary in an amount established by the board. Subsection (c) requires that the executive director make and file a surety bond in an amount determined by the board for the faithful performance of the executive director's duties and the proper safekeeping and disbursement of corporate money. Sec. 109.035. Employees; Consultants. Allows the executive director to hire employees and retain consultants, as necessary. Sec. 109.036. Public Input. Requires that the board develop and implement policies that provide the public with a reasonable opportunity to appear before the board and to speak on any related issue. Sec. 109.037. Open Meetings; Open Records. Provides that the board and the corporation are subject to the open meetings law and to the open records law. Sec. 109.038. Cooperation of State Agencies. Subsection (a) requires a health and human services agency, the TDI, the Title IV-D agency and the comptroller to cooperate with the corporation to assist it in performing its duties. Subsection (b) requires the corporation to work with the Title IV-D agency, the Texas Department of Human Services (DHS), and the Texas Department of Health (TDH) to facilitate the electronic exchange of information among the corporation and the agencies that relate to individuals covered under the program who are the subject of a medical child support order or are or may be eligible for a federal or state program administered by TDH or DHS. Sec. 109.039. Audit by the State Auditor. Establishes that the corporation is subject to audit by the state auditor, and allows this to include a financial, economy and efficiency audit. Sections 109.040 - 109.060 reserved for expansion. SUBCHAPTER C. HEALTH BENEFIT PROGRAM. Sec. 109.061. Health Benefit Program. Subsection (a)(1) requires that the corporation establish a program through eligible coverage providers to provide health benefits for eligible children who are not covered, not covered for a specified medical condition, or in the opinion of the board, inadequately covered; (2) develop the design and benefits structure of the program; (3) determine eligibility criteria for children and their family members; (4) develop participation criteria for eligible coverage providers; (5) develop and implement a public awareness program; (6) establish participation objectives; (7) negotiate premiums and applicable copayments, coinsurance, or deductibles; and (8) contract for the provision of health benefit coverage. Subsection (b) allows the board to contract for or otherwise obtain third-party administration services. Subsection (c) allows the corporation to consult with the TDH, appropriate professional organizations, coverage providers, agency officials and consultants in developing the program. Requires the corporation to consult with the Title IV-D agency regarding coverage for children who are subjects of medical child support orders. Subsection (d) allows the corporation to establish group coverage plans, notwithstanding Article 3.51-6, Insurance Code, for children in specified regions of the state or based on other criteria approved by the commissioner of insurance. Subsection (e) provides that the parent, managing conservator, guardian of a child, or person sponsoring coverage for the child, is responsible for the premiums and applicable copayments, coinsurance, or deductibles. Allows the corporation to develop a sliding scale premium structure and allows the corporation to require payment of full cost. Subsection (f) allows the corporation to set and require payment of a reasonable enrollment fee. Subsection (g) establishes that the health benefit coverage provided under the corporation's program is secondary to any other available private coverage. Requires that the corporation ensure that the benefits provided by the program are the payor of last resort, with respect to private coverage. Subsection (h) allows the corporation to consider the impact of the eligibility criteria on the availability of other health coverage when developing eligibility criteria for the corporation. Allows the corporation to restrict eligibility or impose a waiting period to minimize any adverse impact on availability. Subsection (i) allows the board to develop a marketing plan under which each participating provider is required to market the program. Allows the corporation or eligible coverage providers to publicize the corporation and the general nature of the program. Requires that the direct sale or solicitation of a health benefit plan offered through the program be done in accordance with the Insurance Code and other state insurance laws. Sec. 109.062. Corporate Operations; Licensing Requirements. Subsection (a) establishes that the corporation is not an insurer and prohibits the corporation from selfinsuring or self-funding coverage provided through the program. Establishes that the board and employees of the corporation are not agents of insurers, and that the corporation, the board, and the employees of the corporation are not subject to Insurance Code licensing requirements or other state insurance laws. Subsection (b) requires that the corporation use prudent business practices in the procurement of goods and services. Establishes that a law governing the procurement of goods and services by a state agency does not apply to the corporation, even if the goods or services are procured with money provided to the corporation under a state grant or appropriation. Sec. 109.063. Operations of Eligible Coverage Providers. Subsection (a) requires eligible coverage providers to hold a certificate of authority or other appropriate authorizing license issued by TDI to provide the type of coverage offered, and to satisfy any applicable requirement of the Insurance Code or state insurance law, except as provided by this section. Subsection (b) stipulates that a health benefits plan provider under the program is not subject to a law that requires coverage or the offer of coverage of a health care service or benefit. Subsection (c) exempts an eligible coverage provider under this chapter from the premium tax imposed by Article 4.11 of the Insurance Code, and the tax on revenues under Section 33 of the Texas Health Maintenance Organization Act. Sec. 109.064. Access to Records; Confidentiality. Subsection (a) allows the corporation, notwithstanding any other law, to obtain the medical records of a covered child, or a child applying for coverage, on receipt of informed written consent. Subsection (b) establishes that information in the possession of the corporation that identifies an individual is confidential and exempt from disclosure and discovery in a civil action. Prohibits the corporation or an employee or agent from releasing confidential information without written consent, subject to Sec. 109.038(b) of this bill, and any requirement of federal law. Sec. 109.065. Grievances and Appeals. Requires that the corporation develop a plan for the receipt of and disposition of complaints regarding eligible coverage providers to ensure appropriate delivery of health care services and to ensure that eligible coverage providers comply with applicable complaint procedures. Sec. 109.066. Texas Department of Health Programs. Subsection (a) allows TDH to use appropriated funds to purchase health coverage through the program for eligible children if (1) the children receive health care benefits under the chronically ill and disabled children's program (CIDC) or another federally or state-funded program, other than Medicaid, that is administered by TDH; (2) the provision of benefits under the program are a more cost-effective means of providing some or all of the benefits; and (3) no benefit or service provided to the child is eliminated or adversely affected as a result of the provision of benefits through the program. Subsection (b) prohibits the reduction or elimination of services provided under TDH federally or state-funded programs, including CIDC, due to the services provided through the establishment of the corporation. Sections 109.067 - 109.100 reserved for expansion. SUBCHAPTER D. COVERAGE UNDER ORDER OF MEDICAL SUPPORT FOR A CHILD Sec. 109.101. Application. Requires a party who has been ordered to apply for coverage under Chapter 154, Family Code, to provide a copy of the order and the name and address of the obligor's employer to the corporation. Sec. 109.102. Duties of Corporation or Designee of Corporation. Subsection (a) requires that the corporation or designee review an application, issue coverage, and notify the obligor's employer, if the child is found to be eligible. Subsection (b) requires that this notice (1) explain the employer's obligations; (2) state the amount of premium and premium stabilization revolving account fee to be paid, whether to pay the premium to the corporation or designee, and the address to which the payment is to be sent; and (3) include a copy of the medical support order. Subsection (c) requires that the corporation or designee notify the employer of any increase in the premium. Sec. 109.103. Duty of Employer. Subsection (a) requires an employer receiving notice under Sec. 109.102 to withhold an appropriate amount from the obligor's earnings and remit this payment as instructed on the notice. Subsection (b) stipulates that an employer who fails to withhold or remit payments as required, or who discriminates in hiring or employment on the basis of a medical support order, is subject to specified penalties and fines. (Sections 109.104 - 109.150 reserved for expansion.) SUBCHAPTER E. ELIGIBILITY OF CERTAIN CHILDREN; STABILIZATION FUND. Sec. 109.151. Termination for Failure to Pay Premiums. Requires the corporation to terminate coverage for failure to pay a required premium, except as provided by this subchapter. Sec. 109.152. Premium Stabilization Revolving Account. Subsections (a) and (b) stipulate that the premium stabilization revolving account is an account within the Texas healthy kids fund, composed of contributed and appropriated funds, and any gift of money accepted by the board for the account. Sec. 109.153. Fee; Deposit to Account. Subsection (a) requires the corporation to charge a reasonable premium stabilization revolving account fee, not to exceed $5/month for each covered child. Subsection (b) requires the corporation to remit money collected under this section to the comptroller, in accordance with rules adopted by the comptroller, for deposit to the credit of the account. Sec. 109.154. Use of Money in Account. Subsection (a) permits the money in the account to be used by the corporation only for premium payments for a child for whom a premium is not paid in accordance with Sec. 109.061(e). Subsection (b) prohibits premium payment for a child covered by a health benefit plan other than the plan offered through the corporation. Subsection (c) requires the corporation to determine the period for which premiums may be paid from the fund, and the circumstances under which the premiums may be paid. Subsection (d) establishes that the parent, managing conservator, guardian or person sponsoring coverage of the child remain responsible for reimbursing the account for the premium paid. As required by this subsection, coverage is subject to termination without reimbursement, in accordance with board adopted criteria. Requires the corporation to remit money collected under this subsection to the comptroller for deposit to the credit of the account. SECTION 2. Amends Section 154.182, Family Code, as follows: Subsection (b) is amended by adding a requirement that the court order the obligor to apply for coverage through the Texas Healthy Kids Foundation, if health insurance is not available as specified under this section. Requires the court to order the obligor to pay the obligee a reasonable amount each month for medical support, in addition to any amount ordered for child support, if health coverage is not available through the Texas Healthy Kids Corporation or as otherwise specified under this section. Subsection (c) is added to require the court to presume that $38/month is a reasonable amount for a child's medical support, but allows the court to order a greater or lesser amount as appropriate. Allows the Health and Human Services Commission to promulgate guidelines for the dollar amounts of medical child support that the court may apply when the obligor is responsible for more than one child. SECTION 3. Amends Section 171.063(a)(4), Tax Code, to expand the determination of nonprofit status to include specified hospitals donating money to the Texas Healthy Kids Corporation as a "community benefit," thereby exempting them from the franchise tax. Specifies that this is to be used for the purpose described under Sec. 109.033(c), Health and Safety Code. SECTION 4. Requires the governor to appoint the initial board of directors of the corporation as soon as practicable after the effective date of this Act. SECTION 5. Subsection (a) requires the commissioner of insurance to take the steps necessary to create the corporation as a non-profit no later than the 60th day after the effective date of this Act. Subsection (b) requires the commissioner of insurance to employ an acting director for the corporation no later than the 90th day after the effective date of this Act. Allows the acting director to develop a business plan, solicit alternative funding, and develop a proposed health benefit plan program. Subsection (c) allows the commissioner of insurance to assist the executive director and accept grants and gifts of money, property or services on behalf of the corporation. Establishes that the commissioner's authority under this section expires on the date all of the appointed board members have qualified for office. Subsection (d) provides that the acting director serves until dismissed by the commissioner of insurance, the board of directors, or the date the board employs an executive director. Subsection (e) prohibits the commissioner of insurance from employing an acting director on or after the date all of the appointed board of directors have been appointed and have qualified for office. SECTION 6. Subsection (a) requires the corporation to offer a health benefit plan not later than the first anniversary after the effective date of the Act. Subsection (b) requires that the board establish general administrative and accounting procedures for the corporation; develop the design, actuarial, and benefits structure of the coverage being offered; and develop a plan for the receipt and disposition of complaints, not later than the date specified under Subsection (a). Subsection (c) requires that the board determine whether it is feasible to initially offer the plan in each region of the state. If a determination is made that statewide implementation is not initially feasible, the board is required to develop and the corporation is required to implement a staggered implementation schedule. SECTION 7. Prohibits a court from ordering that coverage be provided to a child through the corporation before the date that the corporation first offers coverage. SECTION 8. Requires the Title IV-D agency to seek the modification of specified child support orders as soon as practicable after the effective date of this Act. SECTION 9. Provides that this Act takes effect immediately, except that SECTION 3 takes effect on January 1, 1998 and applies to a report due on or after that date. SECTION 10. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In CSHB 3, the following changes from the original bill are made: SECTION 1. SUBCHAPTER A. Title IV-D agency is added to the definitions. The Texas Healthy Kids Fund is clarified. The commissioner of insurance is added to the list of those receiving a biennial report. An accounting for the corporation's administrative expenses is added to the requirements of the report. The immunity from liability section is changed to reference Chapter 84 of the Civil Practices and Remedies Code. SUBCHAPTER B. The director of the Title IV-D agency is added as a non-voting exofficio member of the board. Language regarding an annual election of the presiding officer by the governor-appointed members of the board is added. Specifications regarding the use of "community benefits" charity care donations by a hospital or hospital system are added. Approval by the commissioner of insurance of the corporation's standards and health benefit plans and programs is added. The board and corporation are now subject to the open meetings and open records laws. Cooperation requirements between the Title IV-D agency, the Department of Human Services and the Department of Health regarding individuals subject to medical support orders are added. The corporation is now subject to state audit. SUBCHAPTER C. Language requiring the corporation to develop a plan to require eligible coverage providers to market the program is made permissive, and the aspects to be marketed are specified. A provision is added to require the corporation to establish participation objectives for the program. The Texas Department of Health is specified in the substitute as an entity the corporation may consult with in developing the program. Language requiring full pay if the child is Medicaid eligible is removed. The provision allowing the corporation to terminate a child's coverage if the premium payment is not made is moved to Subchapter E. A requirement that the corporation consult with the Title IV-D agency regarding children subject to medical support orders is added. A provision allowing the corporation to establish group coverage plans in specified geographic regions is added. Language requiring that the benefits under the corporation are the payor of last resort is clarified to apply only to private coverage. Language concerning eligibility criteria, including the option to impose a waiting period or other restriction, is added. Clarifications are added to emphasize that the corporation is not an insurer. An eligible coverage provider now must be licensed under state insurance laws. The provision regarding written consent for confidential information is strengthened to specify informed written consent. Clarification is added to the grievance and appeal provision to ensure that eligible coverage providers comply with complaint procedures. A section is added to allow the Texas Department of Health to use specified appropriated funds to purchase coverage through the program for children, only under certain conditions, and an emphasis on no reduction or elimination of services as a result of this, is added. SUBCHAPTER D. Clarifications are added to this subchapter on coverage under order of medical support for a child so that it is clear that the court will order coverage through the corporation. Permissive language in the original bill is changed to require that the obligor provide certain information to the corporation. Requirements that the corporation notify the employer of the employer's obligations, the amount to be remitted for the premium stabilization revolving account, and include a copy of the medical support order are added. A section concerning the duty of the employer is added. The original Sections 3 and 4 are removed from the substitute to conform with these changes. SUBCHAPTER E. This subchapter, regarding the eligibility of certain children and the stabilization fund, is added to the substitute. The language regarding termination of coverage for failure to pay a premium is moved to this subchapter from Subchapter C in the original bill. The premium stabilization revolving account is established, including it's composition and the fee to be charged for each child. The use of the funds in this account are established, including a provision for termination of coverage if a parent fails to reimburse the account. SECTION 2. Language is added to the Family Code to require that the court order an obligor to apply for coverage through the corporation if other specified coverage is not available, and to require that an obligor pay reasonable medical support to the obligee if coverage under the corporation is also not available. Provisions are added regarding reasonable medical support amounts and to allow the Health and Human Services Commission to promulgate guidelines on this amount if there is more than one child. SECTION 3. This section is the same as Section 5 of the original bill, except that the language allowing community benefits donations to be used for any purpose of the corporation is changed to specify that they be used for children from a certain federal poverty level and a residing in a certain area. SECTIONS 4, 5 and 6. These sections are the same as the original bill, except are renumbered to conform, and the effective dates are changed to make CSHB 3 effective upon passage. SECTION 7. This section is added to ensure that a court does not order coverage through the corporation before coverage is available through the corporation. SECTION 8. This section is added to require that the Title IV-D agency seek modification of medical support orders as soon as practicable. SECTION 9. The effective date is changed to make this Act effective immediately, and make Section 3 take effect on January 1, 1998.