LEGISLATIVE BUDGET BOARD
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.
The
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
The
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
services.
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.
The
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.
The
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.
The
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.
The
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.
Methodolgy
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
necessary.)
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.
Start
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
expertise.
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
operations.
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
year.
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
Account
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
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