LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 31, 1997
TO: Honorable Bob Bullock Honorable James E. "Pete" Laney
Lieutenant Governor Speaker of the House
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB385 ( relating
to the regulation of health maintenance organizations.) this
office has detemined the following:
Biennial Net Impact to General Revenue Funds by SB385-Conference Committee Report
Implementing the provisions of the bill would result in a net
positive impact of $231,680 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
This bill would amend the Texas Insurance Code to specify, require,
limit, and authorize various acts of a Health Maintenance Organization
(HMO) under the HMO Act, and transfer the "quality of care"
function from the Department of Health (TDH) to the Department
of Insurance (TDI).
Article 20A.03 of the Insurance Code
would be amended to require any person, physician, or provider
who performs the acts of an HMO to obtain a certificate of authority
from the TDI. Article 20A.04 of the Insurance Code would be
amended to expand the requirements for an application for a
certificate of authority.
Article 20A.01 of the Insurance
Code would be modified to add Section 12A which would allow
persons to file complaints with TDI after attempting to resolve
complaints through an internal HMO complaint system. The Commissioner
of TDI would be required to investigate the complaint against
the HMO to determine compliance with this act. Medical review
may be required for individual complaint cases. Article 20A.17
of the Insurance Code would be modified to allow the TDI Commissioner
to make an examination concerning the quality of health care
services or the affairs of any applicant for a certificate of
authority as often as the Commissioner deems necessary, but
not less frequently than once every three years.
Article
20A.20 of the Insurance Code would be modified to allow the
Commissioner of TDI to impose sanctions under Section 7, Article
1,10 of the Insurance Code, impose administrative penalties
under Article 1.10E of the Insurance Code, or issue a cease
and desist order under Article 1.10A of the Insurance Code.
Article
20A.32 of the Insurance Code would be modified to increase fees
that the Commissioner of TDI could charge for a certificate
of authority by $3,000, from $15,000 to $18,000. The article
would be amended to allow the Commissioner to charge for certain
expenses of examinations under Section 17(a) of the Texas Health
Maintenance Organization Act.
TDI based the fiscal impacts
of the bill on the number of quality assurance examinations
to be administered, which would include: complaints examinations,
qualifying examinations, service area expansion reviews, and
triennial examinations. In order to implement the mandates
of this legislation, five Nurse V Examiners and one Supervising
Nurse V would be needed at a cost of $238,140 in salaries for
each fiscal year. Additional funding would be needed to convert
technician positions to nurse positions since medical expertise
in the form of nurses would eventually be required in the complaints
unit. Through attrition, technical positions at lower pay grades
would be replaced by nurses at pay group 20. $17,016 per fiscal
year would be needed for this upgrade. Per TDI, equipment
and operating expenses for these FTEs would be $25,950 in fiscal
year 1998, $8,700 in fiscal years 1999 and 2000, and $9,900
in fiscal years 2000 and 2001.
Travel would be required
for in-house staff to perform forty qualifying examinations,
twenty-five service area expansion examinations, and twenty-five
complaint examinations per fiscal year. The average time for
an on-site examination would be two days. Costs associated
with travel would be $58,310 per fiscal year.
Additional
TDI fiscal impacts include costs for professional fees for contracted
physician services as follows:
For FY 1998, medically complex
physician review costs are estimated based on thirty-six triennial
examinations at $4,800 each, two targeted complaint examinations
at $15,000 each, and medical review for twelve complaint examinations
at $1,200 each. Total outside contracting (professional fees)
for FY 1998 would be $217,200.
For FY 1999, medically complex
physician review costs are estimated based on twenty-six triennial
examinations at $4,800 each, two targeted complaint examinations
at $15,000 each, and medical review for twelve complaint examinations
at $1,200 each. Total outside contracting (professional fees)
for FY 1999 would be $169,200.
For FY 2000, medically complex
physician review costs are estimated based on twenty triennial
examinations at $4,800 each, two targeted complaint examinations
at $15,000 each, and medical review for twelve complaint examinations
at $1,200 each. Total outside contracting (professional fees)
for FY 2000 would be $140,400.
For FY 2001, medically complex
physician review costs are estimated based on forty-three triennial
examinations at $4,800 each, two targeted complaint examinations
at $15,000 each, and medical review for twelve complaint examinations
at $1,200 each. Total outside contracting (professional fees)
for FY 2001 would be $250,800.
For FY 2002, medically complex
physician review costs are estimated based on fifty-nine triennial
examinations at $4,800 each, two targeted complaint examinations
at $15,000 each, and medical review for twelve complaint examinations
at $1,200 each. Total outside contracting (professional fees)
for FY 2002 would be $327,600.
Costs associated with the
bill would be recovered primarily by Overhead Assessment and
Examination billings.
Since this bill would transfer quality
of care requirements to TDI from TDH, TDH would save $61,752
per fiscal year, which is the yearly amount in its current budget
for oversight of HMO "quality of care", and require one less
FTE.
Floor amendment #3 would add subsection (e) to Article
1.35A of the Insurance Code to authorize the Office of the Public
Insurance Counsel (OPIC) to create a rating system to compare
and evaluate the quality of health care provided by health maintenance
organizations (HMOs).
This bill would authorize OPIC to
develop a consumer report card that identifies and compares
HMOs. This report card would be updated annually and OPIC would
be authorized to charge a reasonable fee for the report card.
Implementing the provisions of this article would result in
costs to OPIC of $304,412 in fiscal year 1998, and $257,412
in fiscal years 1999 through 2002. This includes $68,412 for
the salaries and benefits of two research specialists, and $191,000
for professional fees for contracting with vendors to administer
surveys. Printing and postage would cost $45,000 per fiscal
year; since these costs would be recouped at the time a person
requests a report, there would be a one year lag between accruing
and recouping these costs. Therefore, the $45,000 is shown
as a cost for fiscal year 1998 only.
Article 1.35B(a) of
the Insurance Code would be amended to allow costs associated
with the administration of OPIC's duties under Article 1.35A
to be covered by the assessment currently collected by the Comptroller
to defray the costs of operating OPIC. Article 1.35B(a) would
be amended to increase the assessment from 3.0 cents to 5.7
cents per initial life, accident, health, and HMO policy written.
This would create a gain to General Revenue of $328,000 in
fiscal year 1998, $342,000 in fiscal year 1999, $357,000 in
fiscal year 2000, $372,000 in fiscal year 2001, and $389,000
in fiscal year 2002.
Methodolgy
Per TDI, fiscal impacts and estimates were based on the anticipated
increase in workload required to implement quality of care examinations
mandated by this bill. Cost was based on the number of quality
assurance examinations that would be administered which includes:
complaints examinations, qualifying examinations, service area
expansions, and triennial examinations. For targeted complaint
examinations and medical review for complaint examinations,
cost estimates are based on contracted physician time for two
examinations per year, and twelve per year, respectively. Cost
estimates for the level of involvement of a physician were developed
from discussions with two organizations specializing in this
kind of quality of care review.
Costs associated with the
bill would be recovered primarily by Overhead Assessment and
Examination billings.
Fiscal impact associated with the
cost of producing the managed care report card were estimated
based on the assumption that OPIC would complete the first report
card by September 1, 1998. OPIC based professional fees on
the cost of administering surveys to 62 managed care providers
at approximately $2,000 each. Printing costs were estimated
based on the costs associated with producing 50,000 copies of
a 25 page document; postage costs were estimated based on distributing
15,000 reports by mail.
Gains to the General Revenue fund
were based on the fiscal impact of raising the OPIC assessment
to 5.7 cents from 3.0 cents per initial life, accident, health,
and HMO policies. These gains were calculated by applying the
amount of assessment increase times the projected number of
initial policies, based on historical data and the Comptroller's
1998-99 Biennial Revenue Estimate. Because the act takes effect
September 1, 1997, these gains were based on the assumption
that the assessment increase would apply to calendar year 1997
policies, whose assessment would fall due March 1, 1998. If
the intent of the bill is to have the assessment apply only
to policies with the initial premium paid after January 1, 1998,
the impact for fiscal 1998 would be reduced to zero. The fiscal
impact for succeeding years would remain as calculated.
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 Probable Revenue Probable Probable Revenue Change in Number
Savings/(Cost) Gain/(Loss) from Savings/(Cost) Gain/(Loss) from of State
from General General Revenue from Texas Texas Department Employees from
Revenue Fund Fund Department of of Insurance FY 1997
Insurance Operating
Operating Account/
Account/ GR-Dedicated
GR-Dedicated
0001 0001 0036 0036
1998 ($242,660) $328,000 ($627,859) $627,859 7.0
1998 (195,660) 342,000 (562,609) 562,609 7.0
2000 (195,660) 357,000 (533,809) 533,809 7.0
2001 (195,660) 372,000 (645,409) 645,409 7.0
2002 (195,660) 389,000 (722,209) 722,209 7.0
Net Impact on General Revenue Related Funds:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 $85,340
1999 146,340
2000 161,340
2001 176,340
2002 193,340
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 ,BK