Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  May 9, 1997
      TO: Honorable James E. "Pete" Laney            IN RE:  House Bill No. 3, As Passed 2nd House
          Speaker of the House                Berlanga
          House of Representatives
          Austin, Texas
         FROM:  John Keel, Director    
In response to your request for a Fiscal Note on HB3 ( relating 
to establishing the Texas Healthy Kids Corporation and other 
health benefit coverage to increase access to health care for 
children.) this office has detemined the following:
         Biennial Net Impact to General Revenue Funds by HB3-As Passed 2nd House
Implementing the provisions of the bill would result in a net 
positive impact of $207,500 to General Revenue Related Funds 
through the biennium ending August 31, 1999.
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 Health and Safety Code 
to establish the Texas Healthy Kids Corporation, a non-profit 
corporation to increase access to health insurance for children. 
 The bill would establish a new, dedicated Texas Healthy Kids 
Fund outside the state treasury held by the Texas Treasury Safekeeping 
Trust Company.  The bill would establish a new, dedicated Premium 
Stabilization Revolving Account within the fund.  The fund would 
include money contributed by the provisions of the bill, money 
appropriated by the Legislature, and any gifts accepted by the 
corporation's board of directors. The Comptroller would be required 
to transfer the appropriated amounts to the fund from the State 
Treasury and would be authorized to invest money in the fund. 

The account would be used to pay a premium for a covered 
child for whom a premium was not paid.  The corporation would 
determine the period for which premiums could be paid from the 
fund and the circumstances under which the premium could be 
paid.  The corporation would charge parents a reasonable Premium 
Stabilization Revolving Account fee to defray expenses.

bill would authorize the board of directors to request the Comptroller 
to transfer the balance of the fund to one or more depositories 
the board has selected in the first fiscal year for which the 
fund did not receive a direct state appropriation of state money. 
 On the date of the transfer, the Texas Healthy Kids Fund would 
be abolished.

During the time when either the Texas Healthy 
Kids Corporation received state money under a direct appropriation 
or a person appointed by the Governor was serving as a member 
of the board, the corporation would be required to submit a 
written report to the Governor, Lieutenant Governor, Speaker 
of the House of Representatives, and Commissioner of Insurance 
not later than January 1 of each odd year. The report would 
state the program's status, include a statement of the corporation s 
financial condition, and provide an accounting of the corporation s 
administrative expenses for the two years preceding the date 
of the report.  The corporation would be subject to open records 
and open meetings requirements and a state audit only during 
the time the corporation received state money under a direct 
state appropriation or a person appointed by the Governor is 
serving as a member of the board.

Initially, the bill would 
require the appointment of a six-member board by the Governor 
with the consent of the Senate.  The director of the Title IV-D 
agency and commissioners of insurance and health and human services 
would serve on the board as voting ex-officio members.  On expiration 
of the terms of the initially appointed members of the board, 
the Governor would reappoint four of the six members for terms 
expiring September 1, 2001 and on expiration of the terms of 
the four members the Governor would reappoint only two to serve 
terms expiring September 1, 2003.  After September 1, 2003, 
all members of the board of directors would be selected as provided 
by the Texas Non-Profit Corporation Act.

The bill would require 
the Commissioner of Insurance to take initial steps to create 
the corporation by November 1, 1997 and employ an acting executive 
director by December 1, 1997 or until the board is appointed. 

The bill would authorize the Texas Healthy Kids Corporation 
to provide health benefits for primary and preventive health 
care for children.  The bill would authorize the corporation 
to establish a program to provide, through eligible providers, 
health benefits for children in this state who:

*  are not 
covered by insurance or another type of health benefit plan;
 are not covered by insurance or another type of health benefit 
plan for a specified medical condition; or
*  are not covered 
by insurance or another type of health benefit plan that provides 
benefits for primary and  preventive care.

The bill would 
authorize the corporation to:

*  develop the design, actuarial 
information, and benefits of the insurance plan for kids
 determine eligibility criteria that children and their families 
must meet
*  develop participation criteria for authorized 
insurers, HMOs, etc.
*  develop and implement a public awareness 
program to educate the public about the insurance program
 develop participation objectives for the insurance program 
and develop a plan to require any participating provider to 
market the program
*  negotiate premiums for coverage, applicable 
copayments, coinsurance, or deductibles
*  contract for the 
provision of health benefits coverage under the program

bill would authorize the Department of Health to use appropriated 
funds to purchase coverage through the corporation for children 
in the Chronically Ill and Disabled Children's program or another 
federally funded or state funded program, other than Medicaid, 
if it is more cost effective and would not reduce benefits or 

The bill would require the Texas Healthy Kids Corporation 
to notify the parent or guardian of a child applying for coverage 
through the corporation of the availability of coverage through 
the risk pool.

The corporation would be required to offer 
a health benefit plan no later than one year after the effective 
date of this bill.   In the interim, if health insurance was 
not available for a child and the child s right to medical support 
was assigned to the state because the child received benefits 
under the state Medicaid program, the court would be required 
to order the non-custodial parent to buy a monthly medical support 
payment, to be withheld from earnings.  Under the provisions 
of the bill, the court would assume $38 each month to be a reasonable 
amount, but the court could order a larger or smaller amount 
as it deemed appropriate under the circumstances.  The bill 
would require the Title IV-D agency, as soon as is practicable, 
to seek modification of child support orders for relevant cases.

corporation would be allowed to use a donation made as community 
benefits by a hospital or hospital system only to purchase health 
benefits for children if the child resides in the area served 
by the hospital (or district) and if the child s family income 
is less than 200 percent of the federal poverty limit.

bill would exempt premiums received for coverage under a children's 
health benefit plan from the insurance premium tax.  The provisions 
of the bill relating to the franchise tax exemption would take 
effect January 1, 1998 and would apply to a report originally 
due on or after that date.
Fiscal Analysis
The bill would implement the Texas Performance Review (TPR) 
recommendation HHS1 in Disturbing the Peace:  The Challenge 
of Change in Texas Government by requiring a parent of a child 
under a child support order to apply for health coverage through 
the benefit plan the corporation would provide.  However, this 
bill would allow the corporation to set eligibility requirements 
that children and families would be required to meet to participate 
in the program, while the TPR recommendations would limit coverage 
to those children whose non-custodial parent had an income under 
250 percent of the federal poverty level and would require the 
entity to limit health plan benefits to ensure the affordability 
of the plan.  The bill would allow participation in the Stabilization 
Revolving Fund to all children eligible for coverage under the 
Texas Healthy Kids Corporation rules while the TPR recommendations 
would have limited health insurance premium payments to only 
those children whose non-custodial parent is unable to make 
child-support payments for a short period of time.  The estimate 
assumes that the Child Support Retained Collections Account 
in the General Revenue Fund would provide startup money for 
the Stabilization Revolving Fund Account to pay for insurance 
costs for Title IV-D children.  In this estimate the cost to 
the Child Support Retained Collection Account was based on the 
amount needed to cover missed health insurance premiums of children 
on medical support orders under the Title IV-D program.  The 
additional costs to pay insurance for children determined to 
be eligible by the corporation cannot be estimated at this time.

bill would not require a health benefit plan to be in place 
until one year after the bill s effective date.  In the interim, 
the bill would require employers to withhold monthly medical 
support payments to cover insurance premiums for children whose 
non-custodial parents have no health insurance for the child. 
 This estimate assumes that the court would order a $38 monthly 
payment per child.  The estimate of Medicaid savings to the 
state and federal government is based on the number of paying 
cases and children that the Office of the Attorney General estimates 
would be established monthly, beginning October 1997.

state would incur costs related to the start up of the corporation 
and to pay for administrative staff.  Although certain requirements 
of the bill would affect the Department of Health, Department 
of Human Services, Health and Human Services Commission, and 
the Office of the Attorney General, it is assumed that these 
responsibilities can be accomplished within existing resources. 
 It is anticipated that by 2002 the corporation will generate 
enough revenue to no longer need state funds.
The bill will have fiscal implications for the Department of 
Insurance in the first year of the corporation.  The estimates 
are built upon these assumptions:

1) The board of directors 
for the Texas Healthy Kids Corporation would employ a permanent 
executive director no later than August 31, 1998.  Funding for 
an acting director would be no longer required in fiscal year 
1999.  (If a permanent executive director is not in place by 
August 31, 1998, additional funding for that salary would be 
2) The Commissioner of Insurance would allocate 
existing TDI office space and other equipment such as personal 
computers, printers, and desks for use by the acting executive 
director and support staff for a period of one year or until 
permanent staff is hired (whichever comes first).
3) The Texas 
Healthy Kids Corporation would be fully operational and adequately 
funded by September 1, 1998.  Therefore, salaries for the acting 
director, insurance technician and administrative technician 
would not be funded by TDI after fiscal year 1998.

up funding for the Texas Healthy Kids Corporation:

1) It 
was assumed that start up funding would be needed in the 1998-99 
biennium for the design of a cash system; design of an enrollment 
system; staffing; overhead costs; advertising and marketing; 
and actuarial/legal expertise.  The fiscal note assumes that 
the state would provide funding for these initial costs.
2) In 
the subsequent years of 2000 and 2001, it was assumed that the 
state would continue to fund costs of $1.5 million each year 
for staff, overhead, advertising/ marketing, and actuarial/legal 
3) It was assumed that the corporation would externalize 
some of the costs to the vendors as well as begin earning income 
from administrative fees related to the premiums in 1999.  By 
2002, the corporation would not receive state support for its 
Savings Estimated by the Comptroller of 
Public Accounts:

1) According to estimates provided by the 
Comptroller of Public Accounts, the stabilization fund is initiated 
in fiscal year 1999 with approximately 39,000 children.  Subsequent 
years add about 15,000 children in fiscal year 2000 and 10,000 
each year thereafter.  The Comptroller notes that the number 
of children is lower than the Attorney General estimates for 
additional nonpaying cases.
2) The Comptroller estimates of 
savings to the Medicaid program in general revenue funds and 
matching federal funds are based upon the Office of Attorney 
General estimates of 1,350 paying child support cases per month 
with 1.25 Medicaid eligible children per case to be worked each 
3) Estimates of savings provided by the Comptroller of 
Public Accounts are for Title IV-D children only.

The bill 
could reduce the amount of insurance premium tax collected if 
some children covered by health insurance plans are not exempt 
from the tax become eligible under a children's health benefit 
plan.  However, it is likely that most of the children eligible 
for such coverage are not currently by any plan.  According 
to the Comptroller, the cost of exempting the issuer of a children's 
health benefit from the insurance premium tax cannot be estimated 
because it is unknown how many insurers would offer a children's 
health benefit plan and how many families with existing coverage 
might change coverage.
The probable fiscal implications of implementing the provisions 
of the bill during each of the first five years following passage 
is estimated as follows:
Five Year Impact:
Fiscal Year Probable (Cost)    Probable (Cost)    Probable           Probable Revenue   Change in Number   
            from Texas         from General       Savings/(Cost)     Gain/(Loss) from   of State          
            Department of      Revenue Fund       from General       Other Funds:       Employees from    
            Insurance                             Revenue Fund:      Administrative     FY 1997           
            Operating                             Child Support      Fees                                 
            Account/                              Retained                                                
            GR-Dedicated                          Collections                                             
            0036               0001               0001               8042                                  
       1998        ($159,116)      ($3,020,500)                $0                $0               3.0
       1998                 0       (1,750,000)       (1,747,000)           562,608               0.0
       2000                 0       (1,500,000)         (701,500)         1,589,768               0.0
       2001                 0       (1,500,000)         (481,750)         2,110,480               0.0
       2002                 0                 0         (492,000)         2,701,739               0.0
Fiscal Year Probable Savings   Probable Savings   
            from General       from Federal Funds                                                         
            Revenue Fund                                                                                  
            0001               0555                                                                        
       1998        $1,608,000        $2,623,000                                                      
       1999         5,117,000         8,349,000                                                      
       2000         8,626,000        14,074,000                                                      
       2001        12,135,000        19,799,000                                                      
       2002        15,644,000        25,524,000                                                      
         Net Impact on General Revenue Related Funds:

              Fiscal Year      Probable Net Postive/(Negative)
                               General Revenue Related Funds
               1998         ($1,412,500)
               1999            1,620,000
               2000            6,424,500
               2001           10,153,250
               2002           15,152,000
Similar annual fiscal implications would continue as long as 
the provisions of the bill are in effect.
No significant fiscal implication to units of local government 
is anticipated. However, some local governments may choose to 
purchase health care coverage through the corporation.
   Source:            Agencies:   304   Comptroller of Public Accounts
                      LBB Staff:   JK ,TH ,AZ ,BB