Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  March 11, 1997
      TO: Honorable Hugo Berlanga, Chair            IN RE:  House Bill No. 3, Committee Report 1st House, Substituted
          Committee on Public Health                              By: Berlanga
          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 to increase 
access to health care for children.) this office has detemined 
the following:
         Biennial Net Impact to General Revenue Funds by HB3-Committee Report 1st House, Substituted
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 this 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.

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 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 nonvoting ex-officio members.

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 establish an insurance plan for 
children that:

*  are not otherwise covered by health insurance 
*  are not adequately covered by health insurance or
 are not covered by insurance for a specified medical condition.

bill would authorize the corporation to:

*  develop the design, 
actuarial, 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, 
*  develop and implement a public awareness program to 
educate the public about the insurance
*  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

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.

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 Collection 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.  (Note: 
The Comptroller revised this estimate on March 5, 1997.) 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 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 (Cost)    Probable Revenue   Change in Number   
            from Texas         from General       from General       Gain from Other    of State          
            Department of      Revenue Fund       Revenue Fund:      - Administrative   Employees from    
            Insurance                             Child Support      Fees               FY 1997           
            Operating                             Retained                                                
            Account/                              Collection Account                                      
            0036               0001               0001               OTHER-OTH                             
       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:
The probable fiscal implication to General Revenue related funds 
during each of the first five years is estimated as follows:
              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
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:   
                                         302   Office of the Attorney General
                                         304   Comptroller of Public Accounts
                                         324   Department of Human Services
                                         454   Department of Insurance
                                         501   Department of Health
                                         529   Health and Human Services Commission
                      LBB Staff:   JK ,BB