RS H.B. 3027 75(R) BILL ANALYSIS INSURANCE H.B. 3027 By: Smithee 4-20-97 Committee Report (Unamended) BACKGROUND In 1989, the Texas Legislature passed H.B. 18 which added Article 5.15-4 to the Insurance Code. This article was designed to encourage physicians and other health care professionals to provide services to low income patients, and it established a program that offered eligible health care professionals reduced rates on malpractice insurance. In exchange for the reduced rate, the State of Texas would indemnify the first $25,000 on most medical malpractice claims and $100,000 on obstetrical claims against eligible physicians. For the 1994-1995 biennium, the Legislature appropriated $2,000,000 for the indemnification program, and these funds were exhausted within weeks on pending claims. In 1995, in H.B. 1362, the Legislature repealed the physician indemnification discount program to be effective on September 1, 1995. The amount of claims pending payment by the State of Texas at the present time is $2,635,351.41, which represents claims that have been approved by the Attorney General's Office and filed with the Office of the Comptroller of Public Accounts for payment. An additional amount is pending review by the Attorney General's Office, and in Gaining Ground, Comptroller of Public Accounts, John Sharp, estimated that the indemnification claims may total as much as $24,000,000 over the next five years. The amount of discounts insurers have given to physicians is approximately $17,000,000. PURPOSE As proposed, H.B. 3027 authorizes companies that filed and issued discounts to eligible health care professionals to elect to recoup future reimbursements from the State of Texas in the form of tax credits in lieu of reimbursements under Chapter 110, Civil Practice and Remedies Code. The tax credit would be the total amount of premium discounts provided less any reimbursements received prior to January 1, 1999. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. - Amends Article 5.15-1, Insurance Code by adding Sec. 10 as follows: Sec. 10. PREMIUM DISCOUNT RECOUPMENT. (a) Eligibility. Effective January 1, 1999, an insurer that has filed and issued premium discounts to health care professionals pursuant to Art. 5.15-4, Insurance Code, shall be eligible to receive a premium tax credit in lieu of indemnification for claims filed with the Attorney General under Chapter 110, Civil Practices and Remedies Code. (b) AMOUNT OF TAX CREDIT. An eligible company may elect to recoup premium discounts issued to eligible health care professionals in lieu of indemnification for claims filed under Chapter 110, Civil Practices and Remedies Code. The election shall be made as a credit that is part of an annual premium tax return filed on or before March 1, 1999. An insurer may credit the total amount of any discounts issued minus any reimbursements received prior to January 1, 1999 by the insurer for claims filed under the Civil Practices Code, against its premium tax under Art. 4.10 of this code. The credit shall not exceed 20% of the credit per year for five or more successive years following the initial election made in March 1999. The balance of the amount due the insurer and not claimed as a tax credit may be reflected in the records as an asset including annual statements pursuant to Art. 6.12 of the Insurance Code. The credit in any one year may not exceed the premium tax due in that year. (c) An eligible insurer that elects to receive the tax credit shall not be eligible to file claims for indemnity under Chapter 110, Civil Practices and Remedies Code after January 1, 1999. Any claims of an eligible insurer filed with the Attorney General prior to January 1, 1999 that have not been reimbursed shall be deemed as being waived by the insurer for making its election. An insurer that elects not to recoup its discount through tax credit will remain eligible for indemnification of claims under Chapter 110, Civil Practices and Remedies Code. (d) Elections provided shall not effect the right of a self insurance trust under Art. 21.494, Insurance Code, from seeking indemnification for eligible claims. (e) Provisions of Art. 21.46 of the Insurance Code shall not apply to credits authorized herein. SECTION 2. Effective Date September 1, 1997. SECTION 3. Emergency Clause