Austin, Texas
                                   FISCAL NOTE
                               75th Regular Session
                                  February 18, 1997
      TO: Honorable Hugo Berlanga, Chair            IN RE:  House Bill No. 3
          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-As Introduced
Implementing the provisions of the bill would result in a net 
negative impact of $(4,782,385) 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 in the Comptroller's Office.  The fund would include money 
appropriated to the fund.  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 Comptroller would be authorized to draw warrants from the 
fund on receipt of a voucher signed by an authorized representative 
of the corporation.

The bill would require the appointment 
of a six-member board by the Governor with the consent of the 
Senate.  The commissioners of insurance and health and human 
services would also serve on the board as nonvoting ex-officio 
members.  The board and corporation would not be subject to 
open records or open meetings laws.

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 corporation would be required to develop the health 
benefit program, including its design, actuarial, and benefits 
structure.  In addition, the corporation would be responsible 
for all aspects of the insurance structure, including specifying 
eligibility criteria, negotiating premiums, contracting for 
the provision of coverage, and collecting from parents and absent 
parents the premium for the children covered.  The corporation 
and its employees would have statutory immunity from liability 
for good faith acts or errors by coverage providers or medical 
providers.  The corporation would act as a clearinghouse matching 
eligible children with insurance companies, and providing payment 
or partial payment of premiums under guidelines to be established. 
 The bill provides for withholding orders in child support cases 
to fund premiums where appropriate. 

The bill authorizes 
the corporation to receive state funds but does not specify 
appropriation amounts.  The bill also authorizes the non-profit 
corporation to accept grants and gifts of money, property, or 
Fiscal Analysis
The bill would partially 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, the 
mechanism for collection and distribution of medical support 
does not use the existing administrative structure and would 
establish another payment system.  In addition, the lack of 
a requirement to exchange information with the Medicaid operating 
agencies makes third-party recoveries less certain and cannot 
be estimated.  

The state would incur costs initially to 
adapt the Office of the Attorney General's computer system, 
to cover start up costs for the corporation, and to pay for 
administrative staff.  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 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.

implications for the Office of the Attorney General:
The Child Support Division would make changes to its electronically 
generated forms to create an optional page that would include 
language for the obligor to purchase health insurance through 
  2)  Management reports would be created to measure 
the number of Title IV-D (AFDC related) children referred to 
THKC for insurance coverage.
  3)  The financial component 
of the new child support computer system would be modified by 
adding a unique THKC description in the support order detail 
screens and to create additional edits to the obligation entry 
  4)  It is assumed that the costs to modify the OAG 
system would be incurred in fiscal year 1997.

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.
 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 
The probable fiscal implications of implementing the provisions 
of the bill during each of the first  five years following passage 
is estimated as follows:
Six Year Impact:
Fiscal Year Probable           Probable           Probable Revenue   Probable           Change in Number   
            Savings/(Cost)     Savings/(Cost)     Gain/(Loss) from   Savings/(Cost)     of State          
            from Texas         from General       Other -            from Federal Funds Employees from    
            Department of      Revenue Fund       Administrative                        FY 1997           
            Insurance                             Fees                                                    
            0036               0001               OTHER-OTH          0555                                  
       1997                $0                $0                $0         ($23,070)               0.0
       1997         (159,116)       (3,020,500)                 0               3.0
       1999       (1,750,000)           562,608               0.0
       2000       (1,500,000)         1,589,768               0.0
       2001       (1,500,000)         2,110,480               0.0
       2002                 0         2,701,739
Fiscal Year Probable           
            from General                                                                                  
            Revenue Fund :                                                                                
            Retained Child                                                                                
         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
               1997            ($11,885)
               1998          (3,020,500)
               1999          (1,750,000)
               2000          (1,500,000)
               2001          (1,500,000)
               2002                    0
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:   454   Department of Insurance
                                         501   Department of Health
                                         529   Health and Human Services Commission
                                         324   Department of Human Services
                                         302   Office of the Attorney General
                                         324   Department of Human Services
                                         304   Comptroller of Public Accounts
                      LBB Staff:   JK ,BB ,AZ