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  In 1995, in H.B. 1362, the Legislature repealed the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