C.S.H.B. 3
By: Berlanga
Committee Report (Substituted)


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
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. 


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


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). 


Subtitle E, Title 2, Health and Safety Code, as follows: 


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

Sections 109.005- 109.030 reserved for expansion.


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.


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

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

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.


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

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

(Sections 109.104 - 109.150 reserved for expansion.)


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

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

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.  


In CSHB 3, the following changes from the original bill are made:


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

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

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.