LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 1, 1997 TO: Honorable John T. Smithee, Chair IN RE: Senate Bill No. 382, As Engrossed Committee on Insurance By: Madla/et al. House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB382 ( Relating to the regulation of health maintenance organizations.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB382-As Engrossed Implementing the provisions of the bill would result in a net impact of $0 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. Fiscal Analysis The bill provides authority for a Health Maintenance Organization (HMO) licensed under the Texas HMO Act to offer a limited health care service plan as defined by the bill. This bill allows the Commissioner of the Texas Department of Insurance (TDI) to determine whether or not an HMO provides basic, single, or limited health care services and to issue a certificate of authority accordingly. TDI estimates that there would be 37 applications for limited health care service plan certificates of authority. To administer these certificates, TDI would need to hire three additional FTEs: two Insurance Technician IIIs and a Nurse V. The two Technicians would: handle the increased form filings created by the increased number of applications for certificate of authority, assist with licensing and monitor the solvency of these entities. In the event that TDI would continue to conduct quality assurance examinations, the Nurse V would be needed to handle the workload created by the 37 new HMOs requiring an examination. Additionally an increase in travel funds would be needed to conduct the examinations of the 37 new HMOs, including qualifying exams, service area expansion site visits, complaint exams, and triennial quality of care examinations. Triennial quality of care examinations would start in fiscal year 2001, and would require contracted out for physician consulting time totaling $177,600 per year. Total costs for salaries, benefits, overhead, travel, and physician consultant fees would be: $164,890 for fiscal year 1998, $149,452 for fiscal years 1999 and 2000, and $327,052 for fiscal years 2001 and 2002. This bill would create revenue gains for TDI as follows: $277,500 in fiscal year 1998 for 37 initial license requests, and $69,375 in all fiscal years thereafter, for evidence of coverage filings and information only filings. Methodolgy TDI estimates that there would be 37 applications for certificates of authority: 25 mental health/chemical dependency entities would be required to submit applications under the provisions of this bill and 12 hospitals, physician entities and long-term care facilities have expressed an interest in becoming licensed to provide a limited health care plan. TDI estimates that the 37 initial license requests would cost $7,500 per application; TDI also estimated that each HMO would submit an estimated 22.5 form filings subsequent to issuance of the initial license - 15 evidence of coverage filings ($100 per filing) and 7.5 information only filings ($50 per filing). For fiscal years 2001 and 2002, TDI estimates that there would be a decrease in the demand for qualifying exams and service area expansion site visits and an increase in the demand for triennial examinations. Consulting time for the triennial examinations would be $4,800 per exam, totaling $177,600 per year. Five Year Impact: Fiscal Year Probable Probable Revenue Change in Number Savings/(Cost) Gain/(Loss) from of State from Texas Texas Department Employees from Department of of Insurance FY 1997 Insurance Operating Operating Account/ Account/ GR-Dedicated GR-Dedicated 0036 0036 1998 ($164,890) $277,500 3.0 1998 (149,452) 69,375 3.0 2000 (149,452) 69,375 3.0 2001 (327,052) 69,375 3.0 2002 (327,052) 69,375 3.0 Net Impact on General Revenue Related Funds: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 $0 1999 0 2000 0 2001 0 2002 0 Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: LBB Staff: JK ,TH